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EXHIBIT 10.20

                               SHOPKO STORES, INC.

                               SHARED SAVINGS PLAN
                               (2002 RESTATEMENT)

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SECTION 1              INTRODUCTION..............................................................................1

         1.1.          Definitions...............................................................................1
         1.1.1.        Accounts..................................................................................1
                         (a)    Total Account....................................................................1
                         (b)    401(k) Account...................................................................1
                         (c)    Employer Matching Account........................................................1
                         (d)    Profit Sharing Account...........................................................1
                         (e)    Rollover Account.................................................................2
                         (f)    Voluntary Account................................................................2
                         (g)    Suspense Account.................................................................2
                         (h)    Transfer Account.................................................................2
                         (i)    Additional Contributions Account.................................................2
         1.1.2.        Administrative Delegate...................................................................2
         1.1.3.        Affiliate.................................................................................2
         1.1.4.        Annual Valuation Date.....................................................................2
         1.1.5.        Beneficiary...............................................................................3
         1.1.6.        Code......................................................................................3
         1.1.7.        Disability................................................................................3
         1.1.8.        Effective Date............................................................................3
         1.1.9.        Eligibility Service.......................................................................3
                         (a)    Computation Periods..............................................................3
                         (b)    Completion.......................................................................3
                         (c)    Pre-Effective Date Service.......................................................3
                         (d)    Special Short Plan Year Rule.....................................................3
         1.1.10.       Employer..................................................................................3
         1.1.11.       Enrollment Date...........................................................................4
         1.1.12.       ERISA.....................................................................................4
         1.1.13.       Event of Maturity.........................................................................4
         1.1.14.       Fund......................................................................................4
         1.1.15.       Hours of Service..........................................................................4
                         (a)    Paid Duty........................................................................4
                         (b)    Paid Nonduty.....................................................................4
                         (c)    Back Pay.........................................................................5
                         (d)    Unpaid Absences..................................................................5
                         (e)    Special Rules....................................................................6
                         (f)    Equivalency for Exempt Employees.................................................6
                         (g)    Equivalency for Non-Exempt Truck Drivers.........................................6
         1.1.16.       Investment Manager........................................................................6
         1.1.17.       Normal Retirement Age.....................................................................7
         1.1.18.       One-Year Break in Service.................................................................7
         1.1.19.       Participant...............................................................................7
         1.1.20.       Plan......................................................................................7
         1.1.21.       Plan Statement............................................................................7
         1.1.22.       Plan Year and Short Plan Year.............................................................7
         1.1.23.       Pooled Investment Account.................................................................7
         1.1.24.       Principal Sponsor.........................................................................7
         1.1.25.       Prior Plan Statement......................................................................7

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         1.1.26.       Recognized Compensation...................................................................7
                         (a)    Included Items...................................................................7
                         (b)    Excluded Items...................................................................8
                         (c)    Pre-Participation Employment.....................................................8
                         (d)    Non-Recognized Employment........................................................8
                         (e)    Attribution to Periods...........................................................8
                         (f)    Excluded Periods.................................................................8
                         (g)    Multiple Employers...............................................................8
                         (h)    Annual Maximum...................................................................8
         1.1.27.       Recognized Employment.....................................................................8
         1.1.28.       Retirement Committee......................................................................9
         1.1.29.       Subfund...................................................................................9
         1.1.30.       401(k) Agreement..........................................................................9
         1.1.31.       Trustee...................................................................................9
         1.1.32.       Valuation Date............................................................................9
         1.1.33.       Vested....................................................................................9
         1.1.34.       Vesting Service...........................................................................9
                         (a)    Computation Periods.............................................................10
                         (b)    Completion......................................................................10
                         (c)    Pre-Effective Date Service......................................................10
                         (d)    Breaks in Service...............................................................10
                         (e)    Vesting in Pre-Break Accounts...................................................10
                         (f)    Special Short Plan Year Rule....................................................10
                         (g)    Prior Service with Pamida, Inc. and P.M. Place Stores Company...................10

         1.2.          Rules of Interpretation..................................................................10

         1.3.          Transitional Rules.......................................................................11

SECTION 2              ELIGIBILITY AND PARTICIPATION............................................................11

         2.1.          Eligibility Rules........................................................................11
         2.1.1.        General Rule.............................................................................11
         2.1.2.        Transitional Rule........................................................................11
         2.1.3.        Special Rule for Early Participation in Elective Retirement Savings Only.................11

         2.2.          Special Rule for Former Participants.....................................................12

         2.3.          Enrollment...............................................................................12

         2.4.          401(k) Agreement.........................................................................12

         2.5.          Modifications of 401(k) Agreement........................................................12
         2.5.1.        Increase or Decrease.....................................................................13
         2.5.2.        Cancellation of 401(k) Agreement.........................................................13
         2.5.3.        Termination of Recognized Employment.....................................................13
         2.5.4.        Form of Agreement........................................................................13

         2.6.          Section 401(k) Compliance................................................................13
         2.6.1.        Special Definitions......................................................................13
                         (a)    Eligible employee...............................................................13
                         (b)    Highly compensated eligible employees...........................................13

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                         (c)    Deferral percentage.............................................................13
                         (d)    Compensation....................................................................13
                         (e)    Average deferral percentage.....................................................13
         2.6.2.        Special Rules............................................................................14
                         (a)    Rounding........................................................................14
                         (b)    Highly Compensated Employees....................................................14
                         (c)    Permissive Aggregation..........................................................14
         2.6.3.        The Tests................................................................................14
         2.6.4.        Remedial Action..........................................................................14
         2.6.5.        Safe Harbor After January 1, 2001........................................................15

SECTION 3              CONTRIBUTIONS AND ALLOCATION THEREOF.....................................................15

         3.1.          Employer Contributions...................................................................15
         3.1.1.        Source of Employer Contributions.........................................................15
         3.1.2.        Limitation...............................................................................15
         3.1.3.        Form of Payment..........................................................................15

         3.2.          Retirement Savings Contributions.........................................................15
         3.2.1.        Amount...................................................................................15
         3.2.2.        Allocation...............................................................................15

         3.3.          Discretionary Contributions..............................................................15
         3.3.1.        General..................................................................................15
         3.3.2.        Section 401(k) Curative Allocation.......................................................15
         3.3.3.        Section 401(m) Curative Allocation.......................................................16
         3.3.4.        Discretionary Profit Sharing Contributions...............................................16

         3.4.          Eligible Participants....................................................................16

         3.5.          Matching Employer Contributions Prior to January 1, 2001.................................17
         3.5.1.        Amount and Eligibility...................................................................17
         3.5.2.        Allocation...............................................................................17

         3.6.          Section 401(m) Compliance................................................................17
         3.6.1.        Special Definitions......................................................................17
                         (a)    Eligible employee...............................................................17
                         (b)    Highly compensated eligible employees...........................................17
                         (c)    Contribution percentage.........................................................18
                         (d)    Average contribution percentage.................................................18
         3.6.2.        Special Rules............................................................................18
                         (a)    Rounding........................................................................18
                         (b)    Highly Compensated Employees....................................................18
                         (c)    Permissive Aggregation..........................................................18
         3.6.3.        The Tests................................................................................18
         3.6.4.        Remedial Action..........................................................................19

         3.7.          Safe Harbor Matching Employer Contributions From and After January 1, 2001...............19
         3.7.1.        Amount and Eligibility...................................................................19
         3.7.2.        Full Vesting.............................................................................20
         3.7.3.        Allocation...............................................................................20

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         3.7.4.        Safe Harbor 401(m) Compliance............................................................20

         3.8.          Adjustments..............................................................................20
         3.8.1.        Make-Up Contributions for Omitted Participants...........................................20
         3.8.2.        Mistaken Contributions...................................................................21

         3.9.          Rollover Contributions...................................................................21
         3.9.1.        Contingent Provision.....................................................................21
         3.9.2.        Eligible Contributions...................................................................21
         3.9.3.        Specific Review..........................................................................21
         3.9.4.        Allocation...............................................................................21

         3.10.         Nondeductible Voluntary Contributions....................................................21

         3.11.         Limitation on Annual Additions...........................................................21

         3.12.         Effect of Disallowance of Deduction or Mistake of Fact...................................21

         3.13.         Uniformed Services Employment and Reemployment Rights Act (USERRA).......................22

SECTION 4              INVESTMENT AND ADJUSTMENT OF ACCOUNTS....................................................22

         4.1.          Establishment of Subfunds................................................................22
         4.1.1.        Establishing Subfunds....................................................................22
         4.1.2.        Operational Rules........................................................................22
         4.1.3.        Revising Subfunds........................................................................22
         4.1.4.        ERISA Section 404(c) Compliance..........................................................22

         4.2.          Valuation and Adjustment of Accounts.....................................................23
         4.2.1.        Valuation................................................................................23
         4.2.2.        Additions and Withdrawals................................................................23
         4.2.3.        Pooled Funds.............................................................................24
         4.2.4.        Other Rules..............................................................................24

         4.3.          Management and Investment of Fund........................................................24

SECTION 5              VESTING..................................................................................24

         5.1.          Profit Sharing Account...................................................................24
         5.1.1.        Progressive Vesting......................................................................24
         5.1.2.        Full Vesting.............................................................................24
         5.1.3.        Forfeiture Event.........................................................................25
         5.1.4.        Pre-Effective Date Vesting...............................................................25

         5.2.          Other Accounts...........................................................................25

SECTION 6              MATURITY.................................................................................25

         6.1.          Events of Maturity.......................................................................25

         6.2.          Disposition of Nonvested Portion of Account..............................................26
         6.2.1.        Rehire Before Annual Valuation Date......................................................26
         6.2.2.        Rehire After Annual Valuation Date.......................................................26
         6.2.3.        Forfeitures..............................................................................27
         6.2.4.        Restorations.............................................................................27

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         6.3.          Unclaimed Vested Total Accounts..........................................................27
         6.3.1.        Forfeitures..............................................................................27
         6.3.2.        Restorations.............................................................................27

SECTION 7              DISTRIBUTION..............................................................................28

         7.1.          Application for Distribution.............................................................28
         7.1.1.        Application Required.....................................................................28
         7.1.2.        Exception for Small Amounts..............................................................28
         7.1.3.        Exception for Required Distributions.....................................................28
         7.1.4.        Notices..................................................................................28
         7.1.5.        Direct Rollover..........................................................................28
                         (a)    Eligible rollover distribution and eligible retirement plan.....................29
                         (b)    Direct rollover.................................................................29

         7.2.          Time and Form of Distribution............................................................29
         7.2.1.        Earliest Beginning Date..................................................................29
                         (a)    Participant.....................................................................29
                         (b)    Beneficiary.....................................................................29
         7.2.2.        Required Beginning Date..................................................................29
                         (a)    Participant.....................................................................29
                         (b)    Beneficiary.....................................................................29
         7.2.3.        Form of Distribution of Transfer Accounts from the Penn-Daniels Plan.....................29
         7.2.4.        Required Minimum Distributions...........................................................30

         7.3.          Other Rules..............................................................................30
         7.3.1.        Effect of Reemployment...................................................................30
         7.3.2.        TEFRA Section 242(b) Designations........................................................30

         7.4.          Designation of Beneficiaries.............................................................30
         7.4.1.        Right to Designate.......................................................................30
         7.4.2.        Spousal Consent..........................................................................31
         7.4.3.        Failure of Designation...................................................................31
         7.4.4.        Disclaimers by Beneficiaries.............................................................31
         7.4.5.        Definitions..............................................................................32
         7.4.6.        Special Rules............................................................................32

         7.5.          Death Prior to Full Distribution.........................................................33

         7.6.          Distribution in Cash.....................................................................33

         7.7.          Facility of Payment......................................................................33

         7.8.          Withdrawals from Voluntary and Rollover Accounts.........................................33
         7.8.1.        When Available...........................................................................33
         7.8.2.        Limitation...............................................................................33
         7.8.3.        Sequence of Accounts.....................................................................33
         7.8.4.        Coordination with Section 4.1............................................................34

         7.9.          In-Service Distributions.................................................................34
         7.9.1.        When Available...........................................................................34
         7.9.2.        Purposes.................................................................................34
         7.9.3.        Limitations..............................................................................34

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         7.9.4.        Limit on Distributions from Voluntary Account............................................34
         7.9.5.        Coordination with Section 4.1............................................................34
         7.9.6.        In-Service Withdrawals at 59 1/2.........................................................34

         7.10.         Hardship Distributions...................................................................35
         7.10.1.       When Available...........................................................................35
         7.10.2.       Purposes.................................................................................35
         7.10.3.       Limitations..............................................................................35
         7.10.4.       Coordination with Other Plans............................................................36
         7.10.5.       Coordination with Section 4.1............................................................36
         7.10.6.       Hardship Withdrawals from Transfer Accounts from the Penn-Daniels Plan...................36

         7.11.         Loans....................................................................................36
         7.11.1.       Availability.............................................................................36
         7.11.2.       Administration...........................................................................37
         7.11.3.       Loan Terms...............................................................................37
         7.11.4.       Accounting for the Loan..................................................................37
         7.11.5.       Other Terms Governed by Committee Loan Program Rules.....................................38
         7.11.6.       Reporting and Disclosure.................................................................38
         7.11.7.       Loans from Transfer Accounts from the Penn-Daniels Plan..................................38

         7.12.         Corrective Distributions.................................................................38
         7.12.1.       Excess Elective Deferrals ($7,000 Limit as Adjusted).....................................38
                         (a)    In General......................................................................38
                         (b)    Definitions.....................................................................38
                         (c)    Claims..........................................................................38
                         (d)    Determination of Income or Loss.................................................38
                         (e)    Accounting for Excess Elective Deferrals........................................39
         7.12.2.       Excess Contributions (Section 401(k) Test) ..............................................39
                         (a)    In General......................................................................39
                         (b)    Excess Contributions............................................................39
                         (c)    Determination of Income or Loss.................................................39
                         (d)    Accounting for Excess Contributions.............................................40
         7.12.3.       Excess Aggregate Contributions (Section 401(m) Test) ....................................40
                         (a)    In General......................................................................40
                         (b)    Excess Aggregate Contributions..................................................40
                         (c)    Determination of Income.........................................................40
                         (d)    Accounting for Excess Aggregate Contributions...................................41
         7.12.4.       Priority.................................................................................41
         7.12.5.       Matching Contributions...................................................................41
         7.12.6.       Safe Harbor Compliance...................................................................41
         7.12.7.       Committee Discretion.....................................................................41

SECTION 8              SPENDTHRIFT PROVISIONS...................................................................41

SECTION 9              AMENDMENT AND TERMINATION................................................................42

         9.1.          Amendment................................................................................42

         9.2.          Discontinuance of Contributions and Termination of Plan..................................42

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         9.3.          Merger or Spinoff of Plans...............................................................43
         9.3.1.        In General...............................................................................43
         9.3.2.        Limitations..............................................................................43
         9.3.3.        Beneficiary Designations.................................................................43
         9.3.4.        Pamida Merger............................................................................43

         9.4.          Adoption by Other Employers..............................................................43
         9.4.1.        Adoption by Consent......................................................................43
         9.4.2.        Procedure for Adoption...................................................................44
         9.4.3.        Effect of Adoption.......................................................................44

SECTION 10             CONCERNING THE TRUSTEE...................................................................44

         10.1.         Dealings with Trustee....................................................................44
         10.1.1.       No Duty to Inquire.......................................................................44
         10.1.2.       Assumed Authority........................................................................44
         10.1.3.       Directed Trustee.........................................................................44

         10.2.         Compensation of Trustee..................................................................45

         10.3.         Resignation and Removal of Trustee.......................................................45
         10.3.1.       Resignation, Removal and Appointment.....................................................45
         10.3.2.       Surviving Trustees.......................................................................45
         10.3.3.       Successor Organizations..................................................................45
         10.3.4.       Co-Trustee Responsibility................................................................46
         10.3.5.       Allocation of Responsibility.............................................................46
         10.3.6.       Majority Decisions.......................................................................46

         10.4.         Accountings by Trustee...................................................................46
         10.4.1.       Periodic Reports.........................................................................46
         10.4.2.       Special Reports..........................................................................46

         10.5.         Trustee's Power to Protect Itself on Account of Taxes....................................46

         10.6.         Other Trust Powers.......................................................................47

         10.7.         Investment Managers......................................................................51
         10.7.1.       Appointment and Qualifications...........................................................51
         10.7.2.       Removal..................................................................................51
         10.7.3.       Relation to Other Fiduciaries............................................................51

         10.8.         No Investment in Employer Real Property..................................................51

         10.9.         Investment in Employer Securities........................................................52

         10.10.        Fiduciary Principles.....................................................................52

         10.11.        Prohibited Transactions..................................................................52

         10.12.        Indemnity................................................................................52

SECTION 11             DETERMINATIONS -- RULES AND REGULATIONS..................................................53

         11.1.         Determinations...........................................................................53

         11.2.         Rules and Regulations....................................................................53
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         11.3.         Method of Executing Instruments..........................................................53
         11.3.1.       Employer or Committee....................................................................53
         11.3.2.       Trustee..................................................................................53

         11.4.         Claims Procedure.........................................................................53
         11.4.1.       Original Claim...........................................................................53
         11.4.2.       Claims Review Procedure..................................................................54
         11.4.3.       General Rules............................................................................54

         11.5.         Information Furnished by Participants....................................................54

SECTION 12             PLAN ADMINISTRATION......................................................................55

         12.1.         Principal Sponsor........................................................................55
         12.1.1.       Officers.................................................................................55
         12.1.2.       Chief Executive Officer..................................................................55
         12.1.3.       Board of Directors.......................................................................55

         12.2.         Committee................................................................................55
         12.2.1.       Appointment and Removal..................................................................55
         12.2.2.       Automatic Removal........................................................................55
         12.2.3.       Authority................................................................................55
         12.2.4.       Majority Decisions.......................................................................57

         12.3.         Limitation on Authority..................................................................57
         12.3.1.       Fiduciaries Generally....................................................................57
         12.3.2.       Trustee..................................................................................57

         12.4.         Conflict of Interest.....................................................................57

         12.5.         Dual Capacity............................................................................57

         12.6.         Administrator............................................................................58

         12.7.         Named Fiduciaries........................................................................58

         12.8.         Service of Process.......................................................................58

         12.9.         Administrative Expenses..................................................................58

         12.10.        IRS Qualification........................................................................58

SECTION 13             IN GENERAL...............................................................................58

         13.1.         Disclaimers..............................................................................58
         13.1.1.       Effect on Employment.....................................................................58
         13.1.2.       Sole Source of Benefits..................................................................58
         13.1.3.       Co-Fiduciary Matters.....................................................................58

         13.2.         Reversion of Fund Prohibited.............................................................59

         13.3.         Contingent Top Heavy Plan Rules..........................................................59

         13.4.         Continuity...............................................................................59

         13.5.         Execution in Counterparts................................................................59

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         13.6.         Governing Law............................................................................59

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SECTION 14             EGTRRA PLAN AMENDMENTS...................................................................59

         14.1.         Amendment of the Plan for EGTRRA.........................................................59
         14.1.1.       Adoption and Effective Date of EGTRRA Amendments.........................................59
         14.1.2.       Supersession of Inconsistent Provisions..................................................59

         14.2.         Limitations on Contributions.............................................................59
         14.2.1.       Effective Date...........................................................................59
         14.2.2.       Maximum Annual Addition..................................................................60

         14.3.         Increase in Compensation Limit...........................................................60

         14.4.         Modification of Top-Heavy Rules..........................................................60
         14.4.1.       Effective Date...........................................................................60
         14.4.2.       Determination of top-heavy status........................................................60
                         (a)    Key employee....................................................................60
                         (b)    Determination of present values and amounts.....................................60
                         (c)    Distributions during year ending on the determination date......................60
                         (d)    Employees not performing services during year ending on the
                                determination date..............................................................61
         14.4.3.       Minimum benefits.........................................................................61
                         (a)    Matching contributions..........................................................61
                         (b)    Contributions under other plans.................................................61

         14.5.         Direct Rollovers of Plan Distributions from this Plan....................................61
         14.5.1.       Effective date...........................................................................61
         14.5.2.       Modification of definition of eligible retirement plan...................................61
         14.5.3.       Modification of definition of eligible rollover distribution to exclude hardship
                       distributions............................................................................61
         14.5.4.       Modification of definition of eligible rollover distribution to include after-tax
                       employee contributions...................................................................61

         14.6.         Rollovers Disregarded in Involuntary Cash-Outs...........................................62

         14.7.         Repeal of Multiple Use Test..............................................................62

         14.8.         Modification of Top-Heavy Rules..........................................................62

         14.9.         Elective Deferrals - Contribution Limitation.............................................62

         14.10.        Catch-Up Contributions...................................................................62

         14.11.        Suspension Period Following Hardship Distribution........................................62

         14.12.        Distribution Upon Severance from Employment..............................................62

SCHEDULE I             .........................................................................................64

APPENDIX A             LIMITATION ON ANNUAL ADDITIONS...........................................................65

APPENDIX B             CONTINGENT TOP HEAVY PLAN RULES..........................................................73

APPENDIX C             QUALIFIED DOMESTIC RELATIONS ORDERS......................................................83

APPENDIX D             HIGHLY COMPENSATED EMPLOYEE..............................................................87
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                               SHOPKO STORES, INC.
                               SHARED SAVINGS PLAN
                               (2002 RESTATEMENT)

         THIS AGREEMENT, is made as of ______________, 2002, by and between
SHOPKO STORES, INC., a Wisconsin corporation (the "Principal Sponsor"), and
American Express Trust Company, a Minnesota corporation, as trustee (together
with its successors, the "Trustee").

         WHEREAS, the Principal Sponsor maintains a profit sharing plan (the
"Plan") formerly known as the "PROFIT SHARING AND SHARED SAVER PLAN" and now
known as the SHOPKO STORES, INC. SHARED SAVINGS PLAN (the "Plan") which was last
amended and restated in the form of a single plan document in 1998; and

         WHEREAS, the Principal Sponsor has reserved to itself the power to make
further amendments of the Plan documents; and

         WHEREAS, the Principal Sponsor now wishes to further amend and restate
the Plan to bring it into compliance with various legislative changes and to
make certain other changes;

         NOW, THEREFORE, the Plan documents are hereby amended and restated,
generally effective as of February 23, 1997, unless otherwise stated, to read in
full as follows:

                                    SECTION 1

                                  INTRODUCTION

         1.1. DEFINITIONS. When the following terms are used herein with initial
capital letters, they shall have the following meanings:

                  1.1.1. ACCOUNTS -- the following Accounts will be maintained
         under the Plan for Participants:

                           (a) TOTAL ACCOUNT -- for convenience of reference, a
                  Participant's entire interest in the Fund, including the
                  Participant's 401(k) Account, Profit Sharing Account, Employer
                  Matching Account, Rollover Account, Voluntary Account and
                  Transfer Account (but excluding the Participant's interest in
                  a Suspense Account).

                           (b) 401(K) ACCOUNT -- the Account maintained for each
                  Participant to which are credited the Employer contributions
                  made in consideration of such Participant's earnings
                  reductions pursuant to Section 3.2 (or comparable provisions
                  of the Prior Plan Statement, if any), or Employer
                  contributions made pursuant to Section 3.3.2, together with
                  any increase or decrease thereon.

                           (c) EMPLOYER MATCHING ACCOUNT -- the Account
                  maintained for each Participant to which is credited the
                  Participant's allocable share of the Employer contributions
                  made pursuant to Section 3.10 or made pursuant to Section
                  3.3.3, together with an increase or decrease thereon. A
                  Participant may invest the Employer Matching Account in any of
                  the investment funds designated by the Retirement Committee.

                           (d) PROFIT SHARING ACCOUNT -- the Account maintained
                  for each Participant to which was credited the Participant's
                  allocable share of the Employer contributions made under the
                  provisions of the Prior Plan Statement together with any
                  increase or

<PAGE>

                  decrease thereon. Effective as of January 1, 2001,
                  discretionary profit sharing contributions have been
                  discontinued, but such Account record shall continue to be
                  maintained.

                           (e) ROLLOVER ACCOUNT -- the Account maintained for
                  each Participant to which are credited the Participant's
                  rollover contributions made pursuant to Section 3.6 (or
                  comparable provisions of the Prior Plan Statement, if any),
                  together with any increase or decrease thereon.

                           (f) VOLUNTARY ACCOUNT -- the Account maintained for
                  each Participant to which were credited the nondeductible
                  voluntary contributions made by the Participant to the Plan
                  under the Prior Plan Statement before December 1, 1986,
                  together with any increase or decrease thereon.

                           (g) SUSPENSE ACCOUNT -- the Account maintained for
                  each Participant to which is credited the portion of the
                  Participant's Profit Sharing Account which is not Vested upon
                  the occurrence of an Event of Maturity (pending reemployment
                  or forfeiture pursuant to Section 6.2), together with any
                  increase or decrease thereon. Notwithstanding any other
                  provision of the Plan, effective as of March 1, 1996, no
                  separate Suspense Accounts will be maintained. Instead, all
                  amounts which would have been credited to the Suspense Account
                  shall be maintained in an aggregate forfeiture account and
                  thereafter shall either become a forfeiture or be restored to
                  the Participant's Total Account in accordance with the Plan
                  terms. From and after March 1, 1996, all references to
                  Suspense Accounts shall be deemed to refer to such aggregate
                  forfeiture account.

                           (h) TRANSFER ACCOUNT -- the Account maintained for
                  each Participant to which is credited the Participant's
                  interest, if any, transferred from another qualified plan by
                  the trustee of such other plan pursuant to an agreement made
                  under Section 9.3 and not credited to any other Account
                  pursuant to such agreement (or another provision of this Plan
                  Statement), together with any increase or decrease thereon.

                           (i) ADDITIONAL CONTRIBUTIONS ACCOUNT -- the Account
                  maintained for each Participant to which are credited any
                  special make-up contributions under Section 3.8.1 or other
                  remedial contributions.

                  1.1.2. ADMINISTRATIVE DELEGATE -- one or more persons or
         institutions to whom the Retirement Committee has delegated certain
         administrative functions pursuant to a written agreement.

                  1.1.3. AFFILIATE -- a business entity which is under "common
         control" with the Employer or which is a member of an "affiliated
         service group" that includes the Employer, as those terms are defined
         in Section 414(b), (c) and (m) of the Code. A business entity which is
         a predecessor to the Employer shall be treated as an Affiliate if the
         Employer maintains a plan of such predecessor business entity or if,
         and to the extent that, such treatment is otherwise required by
         regulations under Section 414(a) of the Code. A business entity shall
         also be treated as an Affiliate if, and to the extent that, such
         treatment is required by regulations under Section 414(o) of the Code.
         In addition to said required treatment, the Principal Sponsor may, in
         its discretion, designate as an Affiliate any business entity which is
         not such a "common control," "affiliated service group" or
         "predecessor" business entity but which is otherwise affiliated with
         SHOPKO STORES, INC., subject to such limitations as the Principal
         Sponsor may impose.

                  1.1.4. ANNUAL VALUATION DATE -- effective as of December 31,
         1998, the last day of the Plan Year.

                                       2
<PAGE>

                  1.1.5. BENEFICIARY -- a person designated by a Participant (or
         automatically by operation of this Plan Statement) to receive all or a
         part of the Participant's Vested Total Account in the event of the
         Participant's death prior to full distribution thereof. A person so
         designated shall not be considered a Beneficiary until the death of the
         Participant.

                  1.1.6. CODE -- the Internal Revenue Code of 1986, including
         applicable regulations for the specified section of the Code. Any
         reference in this Plan Statement to a section of the Code, including
         the applicable regulation, shall be considered also to mean and refer
         to any subsequent amendment or replacement of that section or
         regulation.

                  1.1.7. DISABILITY -- a medically determinable physical or
         mental impairment which: (i) renders the individual incapable of
         performing any substantial gainful employment, (ii) can be expected to
         be of long-continued and indefinite duration or result in death, and
         (iii) is evidenced by a certification to this effect by a doctor of
         medicine approved by the Retirement Committee. In lieu of such a
         certification, the Retirement Committee may accept, as proof of
         Disability, the official written determination that the individual will
         be eligible for disability benefits under the federal Social Security
         Act as now enacted or hereinafter amended (when any waiting period
         expires). The Retirement Committee shall determine the date on which
         the Disability shall have occurred if such determination is necessary.

                  1.1.8. EFFECTIVE DATE -- February 23, 1997, subject to Section
         1.3, and other provisions hereof with differing effective date
         provisions.

                  1.1.9. ELIGIBILITY SERVICE -- a measure of an employee's
         service with the Employer and all Affiliates (stated as a number of
         years) which is equal to the number of computation periods for which
         the employee is credited with one thousand (1,000) or more Hours of
         Service; subject, however, to the following rules:

                           (a) COMPUTATION PERIODS. The computation periods for
                  determining Eligibility Service shall be the twelve (12)
                  consecutive month period beginning with the date the employee
                  first performs an Hour of Service and all Plan Years beginning
                  after such date (irrespective of any termination of employment
                  and subsequent reemployment).

                           (b) COMPLETION. A year of Eligibility Service shall
                  be deemed completed only as of the last day of the computation
                  period (irrespective of the date in such period that the
                  employee completed one thousand Hours of Service). (Fractional
                  years of Eligibility Service shall not be credited.)

                           (c) PRE-EFFECTIVE DATE SERVICE. Eligibility Service
                  shall be credited for Hours of Service earned and computation
                  periods completed before the Effective Date as if this Plan
                  Statement were then in effect.

                           (d) SPECIAL SHORT PLAN YEAR RULE. For any employee
                  for whom the Short Plan Year (March 1, 1998 to December 31,
                  1998) is an applicable computation period, such employee shall
                  be credited with one (1) year of Eligibility Service if the
                  employee is either credited with eight hundred and
                  thirty-three (833) or more Hours of Service in the Short Plan
                  Year or alternatively, is credited with one thousand (1,000)
                  or more Hours of Service in the twelve (12) month period
                  beginning on March 1, 1998 and ending February 27, 1999.

                  1.1.10. EMPLOYER -- the Principal Sponsor, each business
         entity listed in Schedule I to the Plan Statement, any business entity
         affiliated with the Principal Sponsor that adopts the Plan pursuant to
         Section 9.4, and any successor thereof that adopts the Plan.

                                       3
<PAGE>

                  1.1.11. ENROLLMENT DATE -- Effective as of April 1, 1998, the
         Enrollment Dates shall be (i) January 1, April 1, July 1 and October 1,
         (ii) the January 1, April 1, July 1 or October 1 next following the
         date upon which an individual who had previously met the age and
         service requirements of Section 2.1 but who was not then in Recognized
         Employment is transferred to Recognized Employment (applicable for such
         individual only), and (iii) the date upon which an individual who had
         previously been a Participant is reemployed in Recognized Employment
         (applicable for such individual only), and (iv) such other dates as the
         Retirement Committee may by rule establish from time to time for the
         commencement of retirement savings under Section 2.3.

                  1.1.12. ERISA -- the Employee Retirement Income Security Act
         of 1974, including applicable regulations for the specified section of
         ERISA. Any reference in this Plan Statement to a section of ERISA,
         including the applicable regulation, shall be considered also to mean
         and refer to any subsequent amendment or replacement of that section or
         regulation.

                  1.1.13. EVENT OF MATURITY -- any of the occurrences described
         in Section 6 by reason of which a Participant or Beneficiary may become
         entitled to a distribution from the Plan.

                  1.1.14. FUND -- the assets of the Plan held by the Trustee
         from time to time, including all contributions and the investments and
         reinvestment, earnings and profits thereon, whether invested under the
         general investment authority of the Trustee or under the terms
         applicable to any Subfund established pursuant to Section 4.1.

                  1.1.15. HOURS OF SERVICE -- a measure of an employee's service
         with the Employer and all Affiliates, determined for a given
         computation period and equal to the number of hours credited to the
         employee according to the following rules:

                           (a) PAID DUTY. An Hour of Service shall be credited
                  for each hour for which the employee is paid, or entitled to
                  payment, for the performance of duties for the Employer or an
                  Affiliate. These hours shall be credited to the employee for
                  the computation period or periods in which the duties are
                  performed.

                           (b) PAID NONDUTY. An Hour of Service shall be
                  credited for each hour for which the employee is paid, or
                  entitled to payment, by the Employer or an Affiliate on
                  account of a period of time during which no duties are
                  performed (irrespective of whether the employment relationship
                  has terminated) due to vacation, holiday, illness, incapacity
                  (including disability), layoff, jury duty, military duty or
                  leave of absence; provided, however, that:

                                    (i) no more than five hundred one (501)
                           Hours of Service shall be credited on account of a
                           single continuous period during which the employee
                           performs no duties (whether or not such period occurs
                           in a single computation period),

                                    (ii) no Hours of Service shall be credited
                           on account of payments made under a plan maintained
                           solely for the purpose of complying with applicable
                           worker's compensation, unemployment compensation or
                           disability insurance laws,

                                    (iii) no Hours of Service shall be credited
                           on account of payments which solely reimburse the
                           employee for medical or medically related expenses
                           incurred by the employee, and

                                       4
<PAGE>

                                    (iv) payments shall be deemed made by or due
                           from the Employer or an Affiliate whether made
                           directly or indirectly from a trust fund or an
                           insurer to which the Employer or an Affiliate
                           contributes or pays premiums.

                  These hours shall be credited to the employee for the
         computation period for which payment is made or, if the payment is not
         computed by reference to units of time, the hours shall be credited to
         the first computation period in which the event, for which any part of
         the payment is made, occurred.

                           (c) BACK PAY. An Hour of Service shall be credited
                  for each hour for which back pay, irrespective of mitigation
                  of damages, has been either awarded or agreed to by the
                  Employer or an Affiliate. The same Hours of Service credited
                  under paragraph (a) or (b) shall not be credited under this
                  paragraph (c). The crediting of Hours of Service under this
                  paragraph (c) for periods and payments described in paragraph
                  (b) shall be subject to all the limitations of that paragraph.
                  These hours shall be credited to the employee for the
                  computation period or periods to which the award or agreement
                  pertains rather than the computation period in which the
                  award, agreement or payment is made.

                           (d) UNPAID ABSENCES.

                                    (i) MILITARY LEAVES. During service in the
                           Armed Forces of the United States, if the employee
                           both entered such service and returned to employment
                           with the Employer or an Affiliate from such service
                           under circumstances entitling the employee to
                           reemployment rights granted veterans under federal
                           law, the employee shall be credited with the number
                           of Hours of Service which otherwise would normally
                           have been credited to such employee but for such
                           absence; provided, however, that if the employee does
                           not return to employment for any reason other than
                           death, Disability or attainment of Normal Retirement
                           Age within the time prescribed by law for the
                           retention of veteran's reemployment rights, such
                           Hours of Service shall not be credited. However,
                           notwithstanding any provision of this Plan, in case
                           of reemployments occurring on or after December 12,
                           1994, veterans rights shall be determined pursuant to
                           Section 3.12.

                                    (ii) LEAVES OF ABSENCE. If (and to the
                           extent that) the Retirement Committee so provides in
                           rules, during each unpaid leave of absence authorized
                           by the Employer or an Affiliate for Plan purposes
                           under such rules, the employee shall be credited with
                           the number of Hours of Service which otherwise would
                           normally have been credited to such employee but for
                           such absence; provided, however, that if the employee
                           does not return to employment for any reason other
                           than death, Disability or attainment of Normal
                           Retirement Age at the expiration of the leave of
                           absence, such Hours of Service shall not be credited.

                                    (iii) PARENTING LEAVES. To the extent not
                           otherwise credited and solely for the purpose of
                           determining whether a One-Year Break in Service has
                           occurred, Hours of Service shall be credited to an
                           employee for any period of absence from work
                           beginning in Plan Years commencing after February 23,
                           1985, due to pregnancy of the employee, the birth of
                           a child of the employee, the placement of a child
                           with the employee in connection with the adoption of
                           such child by the employee or for the purpose of
                           caring for such child for a period beginning
                           immediately following such birth or placement. The
                           employee shall be credited with the number of Hours
                           of Service which otherwise would normally have been
                           credited to such employee but for such absence. If it
                           is

                                       5
<PAGE>

                           impossible to determine the number of Hours of
                           Service which would otherwise normally have been so
                           credited, the employee shall be credited with eight
                           (8) Hours of Service for each day of such absence. In
                           no event, however, shall the number of Hours of
                           Service credited for any such absence exceed five
                           hundred one (501) Hours of Service. Such Hours of
                           Service shall be credited to the computation period
                           in which such absence from work begins if crediting
                           all or any portion of such Hours of Service is
                           necessary to prevent the employee from incurring a
                           One-Year Break in Service in such computation period.
                           If the crediting of such Hours of Service is not
                           necessary to prevent the occurrence of a One-Year
                           Break in Service in that computation period, such
                           Hours of Service shall be credited in the immediately
                           following computation period (even though no part of
                           such absence may have occurred in such subsequent
                           computation period). These Hours of Service shall not
                           be credited until the employee furnishes timely
                           information which may be reasonably required by the
                           Retirement Committee to establish that the absence
                           from work is for a reason for which these Hours of
                           Service may be credited.

                           (e) SPECIAL RULES. For periods prior to March 1,
                  1976, Hours of Service may be determined using whatever
                  records are reasonably accessible and by making whatever
                  calculations are necessary to determine the approximate number
                  of Hours of Service completed during such prior period. To the
                  extent not inconsistent with other provisions hereof,
                  Department of Labor regulations 29 C.F.R.ss. 2530.200b-2(b)
                  and (c) are hereby incorporated by reference herein. To the
                  extent required under Section 414 of the Code, services of
                  leased employees, leased owners, leased managers, shared
                  employees, shared leased employees and other similar
                  classifications by the Employer or an Affiliate shall be taken
                  into account as if such services were performed as a common
                  law employee of the Employer for the purposes of determining
                  Eligibility Service, Vesting Service and One-Year Breaks in
                  Service as applied to Vesting Service.

                           (f) EQUIVALENCY FOR EXEMPT EMPLOYEES. Notwithstanding
                  anything to the contrary in the foregoing, the Hours of
                  Service for any employee for whom the Employer or an Affiliate
                  is not otherwise required by state or federal "wage and hour"
                  or other law to count hours worked shall be credited on the
                  basis that, without regard to the employee's actual hours,
                  such employee shall be credited with one hundred ninety (190)
                  Hours of Service for a calendar month if, under the provisions
                  of this Section (other than this paragraph), such employee
                  would be credited with at least one (1) Hour of Service during
                  that calendar month.

                           (g) EQUIVALENCY FOR NON-EXEMPT TRUCK DRIVERS.
                  Notwithstanding anything to the contrary in the foregoing, the
                  Hours of Service for any truck driver for whom the Employer or
                  an Affiliate is required by state or federal "wage and hour"
                  or other law to count hours worked shall be credited on the
                  basis that, without regard to the employee's actual hours,
                  such employee shall be credited with the number of hours equal
                  to the employee's total earnings for the performance of duties
                  during the computation period divided by the minimum wage as
                  established from time to time under Section 6(a)(1) of the
                  Fair Labor Standards Act of 1938, as amended; provided that
                  750 Hours of Service credited under this paragraph (g) are
                  treated as equivalent to 1,000 Hours of Service and 375 Hours
                  of Service under this paragraph (g) are treated as equivalent
                  to 500 Hours of Service.

                  1.1.16. INVESTMENT MANAGER -- the person or persons, other
         than the Trustee, appointed pursuant to Section 10.7 to manage all or a
         portion of the Fund or any Subfund.

                                       6
<PAGE>

                  1.1.17. NORMAL RETIREMENT AGE -- the date a Participant
         attains age sixty-five (65) years.

                  1.1.18. ONE-YEAR BREAK IN SERVICE -- a Plan Year for which an
         employee is not credited with more than five hundred (500) Hours of
         Service. (A One-Year Break in Service shall be deemed to occur only on
         the last day of such Plan Year.)

                  1.1.19. PARTICIPANT -- an employee of the Employer who becomes
         a Participant in the Plan in accordance with the provisions of Section
         2 or any comparable provision of the Prior Plan Statement. An employee
         who has become a Participant shall be considered to continue as a
         Participant in the Plan until the date of the Participant's death or,
         if earlier, the date when the Participant is no longer employed in
         Recognized Employment and upon which the Participant no longer has any
         Account under the Plan (that is, the Participant has both received a
         distribution of all of the Participant's Vested Total Account, if any,
         and the Participant's Suspense Account, if any, has been forfeited and
         disposed of as provided in Section 6.2).

                  1.1.20. PLAN -- the tax-qualified profit sharing plan of the
         Employer established for the benefit of employees eligible to
         participate therein, as first set forth in the Prior Plan Statement and
         as amended and restated in this Plan Statement. (As used herein, "Plan"
         refers to the legal entity established by the Employer and not to the
         documents pursuant to which the Plan is maintained. Those documents are
         referred to herein as the "Prior Plan Statement" and the "Plan
         Statement.") Effective as of January 1, 2001, the Plan shall be
         referred to as the "SHOPKO STORES, INC. SHARED SAVINGS PLAN." Prior
         thereto, the plan was known as the "PROFIT SHARING AND SUPER SAVER
         PLAN."

                  1.1.21. PLAN STATEMENT -- this document entitled "SHOPKO
         STORES, INC. SHARED SAVINGS PLAN" (2001 Restatement), as adopted by the
         Principal Sponsor generally effective as of February 23, 1997, as the
         same may be amended from time to time thereafter.

                  1.1.22. PLAN YEAR AND SHORT PLAN YEAR -- the period of
         fifty-two (52) or fifty-three (53) consecutive weeks ending on the last
         Saturday in each February, changing as of March 1, 1998 to the calendar
         year (as a result of which a Short Plan Year is created for the period
         from March 1, 1998 to December 31, 1998, sometimes herein referred to
         as the "Short Plan Year").

                  1.1.23. POOLED INVESTMENT ACCOUNT -- an account established
         pursuant to an administrative services agreement between the Principal
         Sponsor and the Trustee.

                  1.1.24. PRINCIPAL SPONSOR -- SHOPKO STORES, INC., a Wisconsin
         corporation.

                  1.1.25. PRIOR PLAN STATEMENT -- the series of documents
         pursuant to which the Plan was established effective as of June 15,
         1965, and operated thereafter until the Effective Date.

                  1.1.26. RECOGNIZED COMPENSATION -- wages within the meaning of
         Section 3401(a) of the Code for purposes of federal income tax
         withholding at the source but determined without regard to any rules
         that limit the remuneration included in wages based on the nature or
         location of the employment or the services performed (such as the
         exception for agricultural labor in Section 3401(a)(2) of the Code) and
         paid to the Participant by the Employer for the applicable period;
         subject, however, to the following:

                           (a) INCLUDED ITEMS. In determining a Participant's
                  Recognized Compensation there shall be included elective
                  contributions made by the Employer on behalf of the
                  Participant that are not includible in gross income under
                  Sections 125, 402(e)(3), 402(h), 403(b), 414(h)(2) and 457 of
                  the Code including elective contributions authorized by the
                  Participant under a 401(k) Agreement, a cafeteria plan or any
                  other

                                       7
<PAGE>

                  qualified cash or deferred arrangement under Section 401(k) of
                  the Code, and from and after January 1, 2002, elective
                  contributions under any qualified transportation fringe
                  benefit under 132(f) of the Code.

                           (b) EXCLUDED ITEMS. A Participant's Recognized
                  Compensation is reduced by all of the following (even if
                  includible in gross income): reimbursements or other expense
                  allowances, fringe benefits (cash and non-cash), moving
                  expenses, deferred compensation, and welfare benefits.

                           (c) PRE-PARTICIPATION EMPLOYMENT. Remuneration paid
                  by the Employer attributable to periods prior to the date the
                  Participant became a Participant in the Plan shall not be
                  taken into account in determining the Participant's Recognized
                  Compensation.

                           (d) NON-RECOGNIZED EMPLOYMENT. Remuneration paid by
                  the Employer for employment that is not Recognized Employment
                  shall not be taken into account in determining a Participant's
                  Recognized Compensation.

                           (e) ATTRIBUTION TO PERIODS. A Participant's
                  Recognized Compensation shall be considered attributable to
                  the period in which it is actually paid and not when earned or
                  accrued; provided, however, that amounts earned but not paid
                  in a Plan Year because of timing of pay periods and pay days
                  may be included in the Plan Year when earned if these amounts
                  are paid during the first few weeks of the next Plan Year, the
                  amounts are included on a uniform and consistent basis with
                  respect to all similarly situated Participants and no amount
                  is included in more than one Plan Year.

                           (f) EXCLUDED PERIODS. Amounts received after the
                  Participant's termination of employment shall not be taken
                  into account in determining a Participant's Recognized
                  Compensation; provided, however, that amounts attributable to
                  severance pay, vacation pay, and stock options earned but not
                  paid or exercised during the Participant's period of
                  Recognized Employment shall be taken into account in
                  determining a Participant's Recognized Compensation if the
                  severance pay or vacation pay is paid, or stock options are
                  exercised, during the first few weeks after termination of
                  Recognized Employment and the amounts are included on a
                  uniform and consistent basis with respect to all similarly
                  situated Participants.

                           (g) MULTIPLE EMPLOYERS. If a Participant is employed
                  by more than one Employer in a Plan Year, a separate amount of
                  Recognized Compensation shall be determined for each Employer.

                           (h) ANNUAL MAXIMUM. A Participant's Recognized
                  Compensation for a Plan Year shall not exceed the annual
                  compensation limit under Section 401(a)(17) of the Code, as
                  adjusted from time to time. For purposes of the foregoing, the
                  annual compensation limit under Section 401(a)(17) of the Code
                  shall be Two Hundred Thousand Dollars ($200,000) (as adjusted
                  under the Code for cost-of-living increases) for Plan Years
                  beginning before January 1, 1994, and shall be One Hundred and
                  Fifty Thousand Dollars ($150,000) (as so adjusted) for Plan
                  Years beginning on or after January 1, 1994. For the Short
                  Plan Year, such compensation limit shall be One Hundred and
                  Thirty-Three Thousand Three Hundred and Thirty-Three Dollars
                  ($133,333).

                  1.1.27. RECOGNIZED EMPLOYMENT -- all employment with the
         Employer, excluding however:

                                       8
<PAGE>

                           (a) employment in a unit of employees whose terms and
                  conditions of employment are subject to a collective
                  bargaining agreement between the Employer and a union
                  representing that unit of employees, unless such collective
                  bargaining agreement provides for the inclusion of those
                  employees in the Plan,

                           (b) employment of a nonresident alien who is not
                  receiving any earned income from the Employer which
                  constitutes income from sources within the United States,

                           (c) employment in a division or facility of the
                  Employer which is not in existence on February 26, 1989 (that
                  is, was acquired, established, founded or produced by the
                  liquidation or similar discontinuation of a separate
                  subsidiary after February 26, 1989) unless and until the
                  Retirement Committee shall declare such employment to be
                  Recognized Employment,

                           (d) employment of a United States citizen outside the
                  United States unless and until the Retirement Committee shall
                  declare such employment to be Recognized Employment,

                           (e) services of a person who is not a common law
                  employee of the Employer including, without limiting the
                  generality of the foregoing, services of a leased employee,
                  leased owner, leased manager, shared employee, shared leased
                  employee or other similar classification, and services of a
                  person who is classified by an Employer as other than an
                  employee, for the entire period of such classification,
                  without regard to any subsequent reclassification which may
                  occur by operation of law or otherwise, and

                           (f) employment of a highly compensated employee (as
                  defined in Appendix D to this Plan Statement) to the extent
                  either agreed to in writing by the employee or specified in
                  the Plan.

                  1.1.28. RETIREMENT COMMITTEE. The committee established in
         accordance with the provisions of Section 12.2, also known as the
         Committee.

                  1.1.29. SUBFUND -- any separate pool of assets of the Fund set
         aside for investment purposes or any separate investment fund selected
         by the Retirement Committee under Section 4.1. Any reference to a
         subfund shall include a separate investment fund and vice versa.

                  1.1.30. 401(K) AGREEMENT -- the agreement which may be entered
         into by a Participant as provided in Section 2.3.

                  1.1.31. TRUSTEE -- the Trustee originally named hereunder and
         its successor or successors in trust. Where the context requires,
         Trustee shall also mean and refer to any one or more co-trustees
         serving hereunder.

                  1.1.32. VALUATION DATE -- any day the New York Stock Exchange
         is open for business or any other date chosen by the Retirement
         Committee.

                  1.1.33. VESTED -- nonforfeitable, i.e., a claim obtained by a
         Participant or the Participant's Beneficiary to that part of an
         immediate or deferred benefit hereunder which arises from the
         Participant's service, which is unconditional and which is legally
         enforceable against the Plan.

                  1.1.34. VESTING SERVICE -- a measure of an employee's service
         with the Employer and all Affiliates (stated as a number of years)
         which is equal to the number of computation periods for

                                       9
<PAGE>

         which the employee is credited with one thousand (1,000) or more Hours
         of Service; subject, however, to the following rules:

                           (a) COMPUTATION PERIODS. The computation periods for
                  determining Vesting Service shall be the Plan Years.

                           (b) COMPLETION. A year of Vesting Service shall be
                  deemed completed as of the date in the computation period that
                  the employee completes one thousand (1,000) Hours of Service.
                  (Fractional years of Vesting Service shall not be credited.)

                           (c) PRE-EFFECTIVE DATE SERVICE. Vesting Service shall
                  be credited for Hours of Service earned and computation
                  periods completed before the Effective Date as if this Plan
                  Statement were then in effect.

                           (d) BREAKS IN SERVICE. Vesting Service canceled
                  before the Effective Date by operation of the Plan's break in
                  service rules as they existed before the Effective Date shall
                  continue to be canceled on and after the Effective Date.

                           (e) VESTING IN PRE-BREAK ACCOUNTS. If an employee who
                  has not attained a Vested interest in his or her Profit
                  Sharing Account has five (5) or more consecutive One-Year
                  Breaks in Service, the employee's service after such One-Year
                  Breaks in Service shall not be counted as years of Vesting
                  Service for the purpose of determining the Vested percentage
                  of that portion of the employee's Profit Sharing Account
                  derived from Employer contributions allocated with respect to
                  the employee's service before such One-Year Breaks in Service.
                  However, any employee who has either attained a Vested
                  interest in such Account (which will be 100% since the Plan
                  does not provide for graduated vesting) or whose consecutive
                  number of One-Year Breaks in Service is less than 5 shall
                  continue to have all of his or her years of Vesting Service
                  counted, whether before or after such One-Year Breaks in
                  Service.

                           (f) SPECIAL SHORT PLAN YEAR RULE. For the Short Plan
                  Year (March 1, 1998 to December 31, 1998), an employee shall
                  be credited with one (1) year of Vesting Service if the
                  employee is either credited with eight hundred and
                  thirty-three (833) or more Hours of Service in the Short Plan
                  Year or, alternatively, is credited with one thousand (1,000)
                  or more Hours of Service in the twelve (12) month period
                  beginning on March 1, 1998 and ending February 27, 1999.

                           (g) PRIOR SERVICE WITH PAMIDA, INC. AND P.M. PLACE
                  STORES COMPANY. Notwithstanding any other provision of the
                  Plan, past service of employees with Pamida, Inc. prior to
                  November 15, 2000, when Pamida, Inc. was acquired by the
                  Principal Sponsor and with P.M. Place Stores Company prior to
                  January 1, 2001, when P.M. Place Stores Company was acquired
                  by the Principal Sponsor shall count as Vesting Service for
                  purposes of the Plan.

         1.2. RULES OF INTERPRETATION. An individual shall be considered to have
attained a given age on the individual's birthday for that age (and not on the
day before). The birthday of any individual born on a February 29 shall be
deemed to be February 28 in any year that is not a leap year. Notwithstanding
any other provision of this Plan Statement or any election or designation made
under the Plan, any individual who feloniously and intentionally kills a
Participant or Beneficiary shall be deemed for all purposes of this Plan and all
elections and designations made under this Plan to have died before such
Participant or Beneficiary. A final judgment of conviction of felonious and
intentional killing is conclusive for the purposes of this Section. In the
absence of a conviction of felonious and intentional killing, the Retirement
Committee shall determine whether the killing was felonious and intentional for
the purposes of this Section. Whenever appropriate, words used herein in the
singular may be read in the

                                       10
<PAGE>

plural, or words used herein in the plural may be read in the singular; the
masculine may include the feminine; and the words "hereof," "herein" or
"hereunder" or other similar compounds of the word "here" shall mean and refer
to this entire Plan Statement and not to any particular paragraph or Section of
this Plan Statement unless the context clearly indicates to the contrary. The
titles given to the various Sections of this Plan Statement are inserted for
convenience of reference only and are not part of this Plan Statement, and they
shall not be considered in determining the purpose, meaning or intent of any
provision hereof. Any reference in this Plan Statement to a statute or
regulation shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation. The term "employee"
shall exclude any person who is classified by an Employer as other than an
employee, for the entire period of such classification, without regard to any
subsequent reclassification which may occur by operation of law or otherwise.
This document has been executed and delivered in the State of Wisconsin and has
been drawn in conformity to the laws of that State and shall, except to the
extent that federal law is controlling, be construed and enforced in accordance
with the laws of the State of Wisconsin.

         1.3. TRANSITIONAL RULES. Notwithstanding the general effective date of
Section 1.1.8, Section 7.11 of the Plan Statement is effective October 19, 1989,
for all loans granted or renewed on and after that date. In addition,
Participants who actually began receiving installment payments before February
26, 1989, shall continue to receive such payments under the rules specified in
the Prior Plan Statement to the extent that such rules are not inconsistent with
current laws and regulations, including, specifically, Section 401(a)(9) and
Section 411(d)(6) of the Code. Only those Participants shall be allowed to
receive installment payments.

                                    SECTION 2

                          ELIGIBILITY AND PARTICIPATION

         2.1. ELIGIBILITY RULES.

                  2.1.1. GENERAL RULE. Subject to Section 2.1.2, each employee
         shall become a Participant on the Enrollment Date coincident with or
         next following the date as of which the employee has both:

                           (a) attained age twenty (20) years, and

                           (b) completed one (1) year of Eligibility Service,

         if the employee is then employed in Recognized Employment. If the
         employee is not then employed in Recognized Employment, the employee
         shall become a Participant on the first date thereafter upon which the
         employee enters Recognized Employment.

                  2.1.2. TRANSITIONAL RULE. Each employee who has attained age
         twenty (20) years before February 26, 1989, and is in Recognized
         Employment on February 26, 1989, shall become a Participant on the
         first date as of which the employee has completed one (1) year of
         Eligibility Service if the employee is then employed in Recognized
         Employment and has completed the one (1) year of Eligibility Service
         within the employee's first twelve (12) month period of employment. If
         the foregoing requirements are not satisfied, the employee shall become
         a Participant as provided in Section 2.1.1.

                  2.1.3. SPECIAL RULE FOR EARLY PARTICIPATION IN ELECTIVE
         RETIREMENT SAVINGS ONLY. Effective as of April 1, 2002, each employee
         who has not as of any Enrollment Date satisfied the conditions of
         Sections 2.1.1 or 2.1.2 above shall nevertheless become an "Early
         Participant," but only with regard to the opportunity to make
         retirement savings as set forth in Section 2.4 below

                                       11
<PAGE>

         and not with regard to any discretionary or matching Employer
         contributions, on the Enrollment Date coincident with or next following
         the date as of which the employee has both:

                           (a) attained age eighteen (18) years, and

                           (b) completed ninety (90) days of service,

         if the employee is then employed in Recognized Employment. If the
         employee is not then in Recognized Employment, the employee shall
         become an Early Participant on the first day thereafter upon which the
         employee enters Recognized Employment. Such Participants shall be
         referred to in the Plan as "Early Participants." The intent of the
         Principal Sponsor is to test the Early Participants for compliance
         under average deferral percentage rules of Section 401(k) of the Code
         as set forth in Section 2.6 below as a separate group of employees
         under Section 410(b)(4)(B) of the Code and to only apply the safe
         harbor matching contributions provided for in Section 3.7 to those
         Participants who have satisfied the requirements of Sections 2.1.1 and
         2.1.2 above and the Plan shall be construed accordingly.

         2.2. SPECIAL RULE FOR FORMER PARTICIPANTS. A Participant whose
employment with the Employer terminates and who subsequently is reemployed by
the Employer shall immediately reenter the Plan as a Participant upon the
Participant's return to Recognized Employment.

         2.3. ENROLLMENT. Each employee who is or will become a Participant as
provided in Section 2.1 or Section 2.2 may enroll for retirement savings by
completing a 401(k) Agreement and delivering it to the Retirement Committee or
its delegate prior to the Enrollment Date as of which the employee desires to
make it effective. If an employee does not enroll when first eligible to do so,
the employee may enroll as of any subsequent Valuation Date by completing a
401(k) Agreement and delivering it to the Retirement Committee or its delegate
prior to that date.

         2.4. 401(K) AGREEMENT. Subject to the following rules, the 401(k)
Agreement which each Participant may execute shall provide for retirement
savings through a reduction of the amount of Recognized Compensation which
otherwise would be paid to the Participant by the Employer each payday either:

                           (a) in even increments of one percent (1%) equal to
                  not less than one percent (1%) nor more than fifteen percent
                  (15%), increasing to eighteen percent (18%) effective as of
                  January 1, 2001, and

                           (b) effective as of February 1, 2002, in even
                  increments of one percent (1%) equal to not less than one
                  percent (1%) nor more than fifty percent (50%).

Such retirement savings, however, shall not exceed the applicable dollar amount
as provided under Section 402(g) of the Code, as adjusted form time to time
($10,500 for 2001) pursuant to the Code under the Plan and any other plan of the
Employer and Affiliates for that Participant's taxable year. The Retirement
Committee may, from time to time under rules, change the minimum and maximum
allowable retirement savings, provided that from and after January 1, 2001,
eligible non-highly compensated employees will be given the opportunity to make
elective deferrals in an amount that is at least sufficient to receive the
maximum amount of Employer Matching Contribution available for a Plan Year,
unless other Code limitations apply, in order to comply with safe harbor rules
of Code Section 401(k)(12). The reductions in earnings for retirement savings
agreed to by the Participant shall be made by the Employer from the
Participant's remuneration each payday on and after the date of the
Participant's enrollment for so long as the 401(k) Agreement remains in effect.

                                       12
<PAGE>

         2.5. MODIFICATIONS OF 401(K) AGREEMENT. The 401(k) Agreement of a
Participant may be modified as follows.

                  2.5.1. INCREASE OR DECREASE. A Participant may, upon giving
         notice to the Retirement Committee or its delegate, by any method
         authorized by the Retirement Committee including, but not limited to,
         telephonic communication, amend the 401(k) Agreement to increase or
         decrease the amount of reduction as soon as administratively feasible
         following such notice.

                  2.5.2. CANCELLATION OF 401(K) AGREEMENT. A Participant who has
         a 401(k) Agreement in effect may, upon giving notice to the Retirement
         Committee or its delegate, completely terminate the 401(k) Agreement
         beginning with the next following payroll period. Thereafter, such
         Participant may, upon notice to the Retirement Committee or its
         delegate, enter into a new 401(k) Agreement if the Participant is
         employed in Recognized Employment.

                  2.5.3. TERMINATION OF RECOGNIZED EMPLOYMENT. The 401(k)
         Agreement of a Participant who ceases to be employed in Recognized
         Employment shall be terminated automatically as of the date he ceases
         to be employed in Recognized Employment. If such Participant returns to
         Recognized Employment, the Participant may enter into a new 401(k)
         Agreement effective as of the date of the Participant's return to
         Recognized Employment or, upon notice to the Retirement Committee or
         its delegate, as of the first payday on or after any subsequent
         Valuation Date.

                  2.5.4. FORM OF AGREEMENT. The Retirement Committee shall
         specify the form of the 401(k) Agreement, the form of any notices
         modifying the 401(k) Agreement and all procedures for the delivery and
         acceptance of forms and notices.

         2.6. SECTION 401(K) COMPLIANCE.

                  2.6.1. SPECIAL DEFINITIONS. For purposes of this Section 2.6,
         the following special definitions shall apply:

                           (a) ELIGIBLE EMPLOYEE means an individual who is
                  entitled to enter into a 401(k) Agreement for all or a part of
                  the Plan Year (whether or not the individual does so).

                           (b) HIGHLY COMPENSATED ELIGIBLE EMPLOYEES means those
                  eligible employees defined as highly compensated employees in
                  Appendix D to this Plan Statement.

                           (c) DEFERRAL PERCENTAGE means the ratio (calculated
                  separately for each eligible employee) of:

                                    (i) the total amount, for the Plan Year, of
                           Employer contributions credited to the eligible
                           employee's 401(k) Account, to

                                    (ii) the eligible employee's compensation,
                           as defined below, for such Plan Year.

                  For this purpose, Employer contributions will be considered
                  made in the Plan Year if they are allocated as of a date
                  during such Plan Year and are delivered to the Trustee within
                  twelve (12) months after the end of such Plan Year.

                           (d) COMPENSATION means Recognized Compensation.

                                       13
<PAGE>

                           (e) AVERAGE DEFERRAL PERCENTAGE means, for a
                  specified group of eligible employees for the Plan Year, the
                  average of the deferral percentages for all eligible employees
                  in such group.

                  2.6.2. SPECIAL RULES. For purposes of this Section 2.6, the
         following special rules apply:

                           (a) ROUNDING. The deferral percentage of each
                  eligible employee and the average deferral percentage for each
                  group of eligible employees shall be calculated to the nearest
                  one-hundredth of one percent.

                           (b) HIGHLY COMPENSATED EMPLOYEES. In the case of a
                  highly compensated eligible employee who participates in any
                  other plan of the Employer to which Employer contributions are
                  made on behalf of the highly compensated eligible employee
                  pursuant to a salary reduction agreement, all such Employer
                  contributions must be aggregated for purposes of determining
                  the highly compensated eligible employee's deferral
                  percentage.

                           (c) PERMISSIVE AGGREGATION. To the extent permitted
                  under the Code, the Retirement Committee may elect to
                  aggregate the Plan with any other plan of the Employer for
                  purposes of determining whether the tests set forth in this
                  Section are satisfied for a Plan Year.

                  2.6.3. THE TESTS. Notwithstanding the foregoing provisions,
         401(k) Agreements in effect for each Plan Year shall be limited and
         modified under rules established by the Retirement Committee and by the
         rules hereinafter provided in order that all such 401(k) Agreements (in
         the aggregate) will satisfy at least one of the following two (2) tests
         for that Plan Year:

                           TEST 1: The average deferral percentage for the group
                  of highly compensated eligible employees is not more than the
                  average deferral percentage of all other eligible employees
                  multiplied by one and twenty-five hundredths (1.25).

                           TEST 2: The excess of the average deferral percentage
                  for the group of highly compensated eligible employees over
                  that of all other eligible employees is not more than two (2)
                  percentage points, and the average deferral percentage for the
                  group of highly compensated eligible employees is not more
                  than the average deferral percentage of all other eligible
                  employees multiplied by two (2).

                  2.6.4. REMEDIAL ACTION. If the Committee determines that
         neither of the tests will be satisfied (or may not be satisfied) for a
         Plan Year, then during such Plan Year, the following actions may be
         taken so that one of the tests will be satisfied or so that the margin
         of failure will be reduced for such Plan Year:

                           (a) The highly compensated eligible employees who
                  have the largest enrollment amount under Section 2.4 shall be
                  deemed for all purposes of the Plan to have elected for that
                  Plan Year a lower enrollment amount (and the amounts credited
                  pursuant to Section 3.2 shall be reduced accordingly).

                           (b) If neither of the tests is satisfied after such
                  adjustment, the enrollment amount under Section 2.4 of the
                  highly compensated eligible employees who then have the
                  largest enrollment amount (including any reduced under (a)
                  above) shall be reduced to a lower enrollment amount (and the
                  amounts credited pursuant to Section 3.2 shall be reduced
                  accordingly).

                                       14
<PAGE>

                           (c) If neither of the tests is satisfied after such
                  adjustment, this method of adjustment shall be repeated one or
                  more additional times until one of the tests is satisfied or
                  the margin of failure is reduced, as determined by the
                  Retirement Committee.

         The Committee shall prescribe rules concerning such adjustments,
         including the frequency of applying the tests and the commencement and
         termination dates for any adjustments.

                  2.6.5. SAFE HARBOR AFTER JANUARY 1, 2001. The Plan is designed
         to be a safe harbor plan under the provisions of Section 401(k)(12) of
         the Code from and after January 1, 2001, by use of a basic matching
         formula as specified in Section 3.6 that will be treated as satisfying
         the special requirements of this Section 2.6 and 3.5 without the need
         for any testing.

                                   SECTION 3

                      CONTRIBUTIONS AND ALLOCATION THEREOF

         3.1. EMPLOYER CONTRIBUTIONS.

                  3.1.1. SOURCE OF EMPLOYER CONTRIBUTIONS. All Employer
         contributions to the Plan may be made without regard to profits.

                  3.1.2. LIMITATION. The contribution of the Employer to the
         Plan for any year, when considered in light of its contribution for
         that year to all other tax-qualified plans it maintains, shall, in no
         event, exceed the maximum amount deductible by it for federal income
         tax purposes as a contribution to a tax-qualified profit sharing plan
         under Section 404 of the Code. Each such contribution to the Plan is
         conditioned upon its deductibility for such purpose.

                  3.1.3. FORM OF PAYMENT. The appropriate contribution of the
         Employer to the Plan, determined as herein provided, shall be paid to
         the Trustee and may be paid either in cash or in common shares of the
         Employer or of any successor or in any combination of the foregoing
         ways.

         3.2. RETIREMENT SAVINGS CONTRIBUTIONS.

                  3.2.1. AMOUNT. Within the time required by regulations of the
         United States Department of Labor, the Employer shall contribute to the
         Trustee for deposit in the Fund the reduction in Recognized
         Compensation which was agreed to by each Participant pursuant to a
         401(k) Agreement.

                  3.2.2. ALLOCATION. The portion of this contribution made with
         respect to each Participant shall be credited to that Participant's
         401(k) Account as of the Valuation Date actually received.

         3.3. DISCRETIONARY CONTRIBUTIONS.

                  3.3.1. GENERAL. The Employer may (but shall not be required
         to) make discretionary contributions from year to year during the
         continuance of the Plan in such amounts as the Board of Directors of
         ShopKo Stores, Inc. (or a committee appointed by the Board of Directors
         of ShopKo Stores, Inc.) shall from time to time determine. Such
         contributions shall be delivered to the Trustee for deposit in the Fund
         not later than the time prescribed by federal law (including
         extensions) for filing the federal income tax return of the Employer
         for the taxable year in which the Plan Year ends. The Employer
         discretionary contribution for a Plan Year, including forfeited

                                       15
<PAGE>

         Suspense Accounts, if any to be included with that contribution or
         reallocated as of the Annual Valuation Date of such Plan Year, shall be
         allocated in the following order.

                  3.3.2. SECTION 401(k) CURATIVE ALLOCATION. If neither of the
         Section 401(k) tests set forth in Section 2 has been satisfied and a
         distribution of "excess contributions" has not been made, then all or a
         portion of the Employer discretionary contribution for that Plan Year
         shall be allocated to meet one of such tests. Forfeited Suspense
         Accounts, however, shall not be included in this allocation. Only those
         Participants who were not "highly compensated eligible employees" (as
         defined in Section 2) for that Plan Year and for whom some contribution
         was made pursuant to Section 3.2 for such Plan Year shall share in such
         allocation. This allocation shall be made first to the Participant with
         the least amount of compensation (as defined in Section 2) and then, in
         ascending order of compensation (as defined in Section 2), to other
         Participants. The amount of the Employer discretionary contribution to
         be so allocated shall be that amount required to cause the Plan to
         satisfy either of the Section 401(k) tests set forth in Section 2 for
         the Plan Year; provided, however, that in no case shall amounts be so
         allocated to cause a Participant's deferral percentage (as defined in
         Section 2) to exceed twenty percent (20%). The Employer discretionary
         contribution so allocated to a Participant shall be credited to that
         Participant's 401(k) Account as of the Annual Valuation Date in the
         Plan Year for which this Employer discretionary contribution is made,
         or if earlier, the Valuation Date coincident with or next following the
         date as of which such contribution is received by the Trustee. For the
         purpose of allocating gains and losses under Section 4, however, the
         contribution shall be credited as of the Valuation Date coincident with
         or next following the date on which the contribution is received by the
         Trustee.

                  3.3.3. SECTION 401(M) CURATIVE ALLOCATION. If neither of the
         Section 401(m) tests set forth in Section 3 has been satisfied and a
         distribution of "excess aggregate contributions" has not been made
         pursuant to Section 7, then any remaining portion of the Employer
         discretionary contribution for that Plan Year shall be allocated to
         meet one of such tests. Forfeited Suspense Accounts, however, shall not
         be included in this allocation. Only those Participants who were not
         "highly compensated eligible employees" (as defined in Section 3) for
         that Plan Year and who were entitled to receive an Employer matching
         contribution shall share in such allocation. This allocation shall be
         made to the Participant with the least amount of compensation (as
         defined in Section 3) and then, in ascending order of compensation (as
         defined in Section 3), to other Participants. The amount of the
         Employer discretionary contribution to be so allocated shall be that
         amount required to cause the Plan to satisfy either of the Section
         401(m) tests set forth in Section 3 for the Plan Year. The Employer
         discretionary contribution so allocated to a Participant shall be
         credited to that Participant's Employer Matching Account as of the
         Annual Valuation Date in the Plan Year for which this Employer
         discretionary contribution is made, or if earlier, the Valuation Date
         coincident with or next following the date as of which such
         contribution is received by the Trustee. For the purpose of allocating
         gains and losses under Section 4, however, the contribution shall be
         credited as of the Valuation Date coincident with or next following the
         date on which the contribution is received by the Trustee.

                  3.3.4. DISCRETIONARY PROFIT SHARING CONTRIBUTIONS. Any
         remaining portion of the Employer discretionary contribution shall be
         allocated to the Profit Sharing Accounts of eligible Participants under
         Section 3.4. The contribution shall be allocated to the Profit Sharing
         Accounts of eligible Participants in the ratio which the Recognized
         Compensation of each such eligible Participant for the Plan Year bears
         to the Recognized Compensation for such Plan Year of all such eligible
         Participants. The amount so allocated to an eligible Participant shall
         be credited to such Participant's Profit Sharing Account as of the
         Annual Valuation Date in the Plan Year for which such contribution is
         made, or if earlier, the Valuation Date coincident with or next
         following the date as of which such contribution is received by the
         Trustee. For the purpose of allocating gains and losses under Section
         4, however, the contribution shall be credited as of the

                                       16
<PAGE>

         Valuation Date coincident with or next following the date on which the
         contribution is received by the Trustee.

         3.4. ELIGIBLE PARTICIPANTS. For purposes of this Section 3, a
Participant shall be an eligible Participant for a Plan Year only if such
Participant satisfies all of the following requirements in either (a) or (b)
below:

                           (a) the Participant:

                                    (i) is credited with at least one thousand
                           (1,000) Hours of Service for such Plan Year (or, for
                           the Short Plan Year, at least eight hundred
                           thirty-three (833) Hours of Service), and

                                    (ii) is on the last day of such Plan Year,
                           an employee of the Employer or an Affiliate (ignoring
                           for this purpose, any period of time represented by
                           final accrued but unused vacation and sick days and
                           periods used in determining severance settlements,
                           but including for this purpose any Participant who
                           then is on temporary layoff or authorized leave of
                           absence or who, during such Plan Year, was inducted
                           into the Armed Forces of the United States from
                           employment with the Employer); or

                           (b) the Participant terminates employment with the
                  Employer within the Plan Year by reason of death, retirement
                  at or after attaining age fifty-five (55) years and completing
                  ten (10) or more years of Vesting Service, retirement at or
                  after the Participant's Normal Retirement Age or Disability.

No other Participant shall be an eligible Participant. Notwithstanding the
foregoing, a Participant who is in Recognized Employment as a licensed
optometrist is not an eligible Participant.

         3.5. MATCHING EMPLOYER CONTRIBUTIONS PRIOR TO JANUARY 1, 2001.

                  3.5.1. AMOUNT AND ELIGIBILITY. For Plan Years prior to January
         1, 2001, the Employer shall contribute to the Trustee for deposit in
         the Fund and for crediting to the Participant's Employer Matching
         Account an amount which will equal fifty-percent (50%) of the amount of
         the first six percent (6%) of reduction in Recognized Compensation for
         each pay period which was agreed to by the Participant pursuant to a
         401(k) Agreement; provided, however, that no Participant who is in
         Recognized Employment as a licensed optometrist shall be eligible to
         receive a matching contribution. Such Employer matching contributions
         shall be delivered to the Trustee for deposit in the Fund not later
         than the time prescribed by federal law (including extensions) for
         filing the federal income tax return of the Employer for the taxable
         year in which the Plan Year ends.

                  3.5.2. ALLOCATION. The Employer matching contribution which is
         made with respect to a Participant shall be credited to that
         Participant's Employer Matching Account as of the Valuation Date
         coincident with or next following the date as of which such
         contribution is received by the trustee.

         3.6. SECTION 401(M) COMPLIANCE.

                  3.6.1. SPECIAL DEFINITIONS. For purposes of this Section, the
         following special definitions shall apply:

                                       17
<PAGE>

                           (a) ELIGIBLE EMPLOYEE means an individual who is
                  eligible to receive an Employer matching contribution for any
                  portion of the Plan Year (whether or not the individual does
                  so).

                           (b) HIGHLY COMPENSATED ELIGIBLE EMPLOYEES means those
                  eligible employees defined as highly compensated employees in
                  Appendix D to this Plan Statement.

                           (c) CONTRIBUTION PERCENTAGE means the ratio
                  (calculated separately for each eligible employee) of:

                                    (i) the total amount, for the Plan Year, of
                           Employer matching contributions credited to the
                           eligible employee's Employer Matching Account (but if
                           the Committee elects to include the Employer matching
                           contributions in the Section 401(k) test in Section
                           2, the Committee may elect to not include the
                           Employer matching contributions in this Section
                           401(m) test), and if the Committee elects all or a
                           portion of the amount, for the Plan Year, of Employer
                           contributions credited to the eligible employee's
                           401(k) Account or Employer Profit Sharing Account, or
                           both, to

                                    (ii) the eligible employee's Recognized
                           Compensation for the portion of such Plan Year that
                           the employee is an eligible employee.

                  For this purpose, Employer contributions will be considered
                  made in the Plan Year if they are allocated as of a date
                  during such Plan Year and are delivered to the Trustee within
                  twelve (12) months after the end of such Plan Year.

                           (d) AVERAGE CONTRIBUTION PERCENTAGE means, for a
                  specified group of eligible employees for the Plan Year, the
                  average of the contribution percentages for all eligible
                  employees in such group.

                  3.6.2. SPECIAL RULES. For purposes of this Section, the
         following special rules apply:

                           (a) ROUNDING. The contribution percentage of each
                  eligible employee and the average contribution percentage for
                  each group of eligible employees shall be calculated to the
                  nearest one-hundredth of one percent.

                           (b) HIGHLY COMPENSATED EMPLOYEES. In the case of a
                  highly compensated eligible employee who participates in any
                  other plan of the Employer and Affiliates (other than an
                  employee stock ownership plan described in Sections 409(a) and
                  4975(e)(7) of the Code) to which Employer matching
                  contributions are made on behalf of the highly compensated
                  eligible employee, all such Employer matching contributions,
                  and if used to determine the contribution percentage of
                  eligible employees, Employer contributions made pursuant to a
                  salary reduction agreement or qualified nonelective
                  contributions (within the meaning of Section 401(m)(4)(C) of
                  the Code), or both, shall be aggregated for purposes of
                  determining the highly compensated eligible employee's
                  contribution percentage; provided, however, that such Employer
                  contributions made under an employee stock ownership plan
                  shall not be aggregated.

                           (c) PERMISSIVE AGGREGATION. To the extent permitted
                  under the Code, the Committee may elect to aggregate the Plan
                  with any other plan of the Employer and Affiliates for
                  purposes of determining whether the tests set forth in this
                  Section are satisfied for a Plan Year.

                                       18
<PAGE>

                  3.6.3. THE TESTS. Notwithstanding the foregoing provisions,
         the Employer matching contributions made for each Plan Year shall be
         limited and modified under rules established by the Committee and by
         the rules hereinafter provided in order that one of the following two
         (2) tests is satisfied for that Plan Year:

                           TEST 1: The average contribution percentage for the
                  group of highly compensated eligible employees is not more
                  than the average contribution percentage of all other eligible
                  employees multiplied by one and twenty-five hundredths (1.25).

                           TEST 2: The excess of the average contribution
                  percentage for the group of highly compensated eligible
                  employees over that of all other eligible employees is not
                  more than two (2) percentage points, and the average
                  contribution percentage for the group of highly compensated
                  eligible employees is not more than the average contribution
                  percentage of all other eligible employees multiplied by two
                  (2).

         For any Plan Year prior to 2002 in which Test 2 is satisfied for the
         purposes of the Section 401(k) test in Section 2, this Plan must
         satisfy either: (i) Test 1 for the purposes of the Section 401(m) test
         in this Section, or (ii) the aggregate limit or multiple use test as
         described in regulations issued by the Secretary of the Treasury which
         are incorporated by reference herein. If corrective distributions under
         Section 7 are required to satisfy the aggregate limit because of excess
         aggregate contributions as defined in Section 401(m)(b)(13) of the
         Code, the amount of such excess aggregate contributions shall first be
         determined by leveling the contribution percentages for the highly
         compensated employees in the order of their contribution percentages
         and once such amount has been calculated, the corrective distributions
         shall be determined by reducing the Employer matching contributions of
         the highly compensated eligible employees in order of the contribution
         amount beginning with the largest such amount until the aggregate limit
         is satisfied.

                  3.6.4. REMEDIAL ACTION. If the Committee determines that
         neither of the tests will be satisfied (or may not be satisfied) for a
         Plan Year, then during such Plan Year, the following actions may be
         taken so that one of the tests will be satisfied or so that the margin
         of failure will be reduced for such Plan Year:

                           (a) The Employer matching contributions for the
                  highly compensated eligible employees who have the largest
                  contribution amount shall be reduced to the extent necessary
                  to reduce their contribution amount to the next lower amount.

                           (b) If neither of the tests is satisfied after such
                  adjustment, the Employer matching contributions for the highly
                  compensated eligible employees who then have the largest
                  contribution amount (including those reduced under (c) above)
                  shall be reduced to the extent necessary to reduce their
                  contribution amount to the next lower amount.

                           (c) If neither of the tests is satisfied after such
                  adjustment, this method of adjustment shall be repeated one or
                  more additional times until one of the tests is satisfied or
                  the margin of failure is reduced, as determined by the
                  Committee.

         The Committee shall prescribe rules concerning such adjustments,
         including the frequency of applying the tests and the commencement and
         termination dates for any adjustments.

         3.7. SAFE HARBOR MATCHING EMPLOYER CONTRIBUTIONS FROM AND AFTER JANUARY
1, 2001.

                  3.7.1. AMOUNT AND ELIGIBILITY. Effective for the Plan Year
         commencing January 1, 2001, and for each Plan Year thereafter for which
         the Employer provides a timely written notice

                                       19
<PAGE>

         containing all information required under Section 401(k)(12)(D) of the
         Code, the Employer shall contribute to the Trustee for deposit in the
         Fund and for crediting to the Participant's Employer Matching Account
         an amount which will equal:

                           (a) One hundred percent (100%) of the first three
                  percent (3%) of the reduction in Recognized Compensation for
                  each pay period which was agreed to by the Participant
                  pursuant to a 401(k) Agreement; plus

                           (b) Fifty percent (50%) of the next two percent (2%)
                  of such reductions in Recognized Compensation

provided that no Participant who is in Recognized Employment as a licensed
optometrist and who is also a Highly Compensated Employee shall be eligible to
receive a matching contribution. Such matching contributions are later referred
to in the Plan as "Safe Harbor Matching Contributions." Effective for the Plan
Year commencing January 1, 2002, Safe Harbor Matching Contributions shall only
be made on behalf of those Participants who have attained both age 20 and
completed 1 year of Eligibility Service as of any Enrollment Date during the
Plan Year and not on behalf of Early Participants. As noted in Section 2.1.3,
the Principal Sponsor has elected pursuant to Section 410(b)(4)(B) of the Code
to treat the Plan as two separate Plans for purposes of Section 401(k) of the
Code and not to provide Safe Harbor matching Contributions to Early
Participants. However, it is recognized that the elective deferral contributions
made by the Early Participants must satisfy the Section 401(k) compliance tests
set forth in Section 2.6, using current year testing, unless otherwise allowed
under applicable rules. Safe Harbor Matching Contributions shall be made on a
payroll period basis, rather than an annual Plan Year basis, and must be
deposited into the Fund no later than the last day of the Plan Year quarter
following the Plan Year quarter for which the applicable contributions were
made. However, the Principal Sponsor reserves the right to amend the Plan during
a Plan Year to reduce or eliminate Safe Harbor Matching Contributions, provided
that a supplemental notice is given to all eligible Participants explaining the
consequences of and effective date of the amendment and that all such
Participants have a reasonable opportunity (including a reasonable period) to
change their 401(k) Agreements prior to such reduction or elimination. The
amendment reducing or eliminating Safe Harbor Matching Contributions may not
become effective earlier than the later of (i) 30 days after such eligible
Participants are given the supplemental notice or (ii) the date the amendment is
adopted. If such an amendment is adopted then the tests provided in Sections 2.6
and 3.6 must again be satisfied, using the current year testing method, for the
entire Plan Year in which such amendment is adopted, and the safe harbor
requirements of Section 401(k)(12) must be satisfied through the effective date
of the amendment.

                  3.7.2. FULL VESTING. Safe Harbor Matching Contributions shall
         at all times be fully 100% Vested and are subject to the withdrawal
         restrictions specified in Section 401(k)(2)(B) and reflected in
         Sections 6.1 and 7.10 of the Plan, which are intended to satisfy all of
         the requirements of Section 401(k)(12) of the Code and shall be so
         construed.

                  3.7.3. ALLOCATION. Safe Harbor Matching Contributions made
         with respect to a Participant shall be credited to that Participant's
         Employer Matching Account as of the Valuation Date coincident with or
         next following the date as of which such contribution is received by
         the Trustee.

                  3.7.4. SAFE HARBOR 401(M) COMPLIANCE. The Plan is designed so
         that from and after January 1, 2001, it will be deemed to satisfy the
         special rules of Sections 2.6 and 3.6 without the need for any testing.

         3.8. ADJUSTMENTS.

                  3.8.1. MAKE-UP CONTRIBUTIONS FOR OMITTED PARTICIPANTS. If,
         after any Employer's contribution for a Plan Year has been made and
         allocated, it should appear that, through oversight

                                       20
<PAGE>

         or a mistake of fact or law, a Participant (or an employee who should
         have been considered a Participant) who should have been entitled to
         share in such contribution received no allocation or received an
         allocation which was less than he should have received, the Retirement
         Committee may, at its election, and in lieu of reallocating such
         contribution if reallocation is relevant (i.e., for prior year
         discretionary Employer Profit Sharing contributions, but not Safe
         Harbor Matching contributions), direct the Employer to make a special
         make-up contribution for the Account of such Participant in an amount
         adequate to provide for him the same addition to the Participant's
         Account for such Plan Year as he should have received.

                  3.8.2. MISTAKEN CONTRIBUTIONS. If, after an Employer
         contribution has been made and allocated, it should appear that,
         through oversight or a mistake of fact or law, a Participant (or an
         individual who was not a Participant) received an allocation which was
         more than the Participant should have received, the Retirement
         Committee may direct that the mistaken contribution, adjusted for its
         pro rata share of any net loss or net gain in the value of the Fund
         which accrued while such mistaken contribution was held therein, shall
         be withdrawn from the Account of such individual and retained in the
         Fund and used to reduce the amount of the next succeeding contribution
         of the Employer to the Fund due after the determination that such
         mistaken contribution has occurred.

         3.9. ROLLOVER CONTRIBUTIONS.

                  3.9.1. CONTINGENT PROVISION. The provisions of this Section
         3.9 shall not be implemented unless and until the Retirement Committee
         shall so determine in its discretion, and, upon being implemented,
         shall be subject to such conditions and limitations as the Retirement
         Committee may prescribe from time to time for administrative
         convenience and to preserve the tax-qualified status of the Plan.

                  3.9.2. ELIGIBLE CONTRIBUTIONS. Each employee in Recognized
         Employment may contribute to the Plan, within such time and in such
         form and manner as may be prescribed by the Retirement Committee in
         accordance with those provisions of federal law relating to rollover
         contributions, cash (or the cash proceeds from distributed property)
         received by the employee in Recognized Employment in an eligible
         rollover distribution from a qualified plan or from an individual
         retirement account or annuity established solely to hold such eligible
         rollover distribution. Also, the Committee may establish rules and
         conditions regarding the acceptance of direct rollovers under Section
         401(a)(31) of the Code from trustees or custodians of other qualified
         pension, profit sharing or stock bonus plans.

                  3.9.3. SPECIFIC REVIEW. The Retirement Committee shall have
         the right to reject, or to direct the Trustee to return, any such
         rollover contribution if, in the opinion of the Retirement Committee,
         the acceptance thereof might jeopardize the tax-qualified status of the
         Plan or unduly complicate its administration, but the acceptance of any
         such rollover contribution shall not be regarded as an opinion or
         guarantee on the part of the Employer, the Retirement Committee, the
         Trustee or the Plan as to the tax consequences which may result to the
         contributing Participant thereby.

                  3.9.4. ALLOCATION. The rollover contribution made by a
         employee in Recognized Employment to the Plan shall be allocated to the
         Participant's Rollover Account and shall be credited to such Account as
         of the Valuation Date coincident with or next following the date on
         which such contribution is received by the Trustee.

         3.10. NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS. Effective December 1,
1986, nondeductible voluntary contributions shall not be accepted by the Plan.
Prior to December 1, 1986, the Plan accepted nondeductible voluntary
contributions. All such contributions held in the Voluntary Account shall

                                       21
<PAGE>

continue to share in any trust earnings or losses and be distributed in
accordance with the provisions of Section 7.

         3.11. LIMITATION ON ANNUAL ADDITIONS. In no event shall amounts be
allocated to the Account of any Participant if, or to the extent, such amounts
would exceed the limitations set forth in Appendix A to this Plan Statement.

         3.12. EFFECT OF DISALLOWANCE OF DEDUCTION OR MISTAKE OF FACT. All
Employer contributions to the Plan are conditioned on their qualification for
deduction for federal income tax purposes under Section 404 of the Code. If any
such deduction should be disallowed, in whole or in part, for any Employer
contribution to the Plan for any year, or if any Employer contribution to the
Plan is made by reason of a mistake of fact, then there shall be calculated the
excess of the amount contributed over the amount that would have been
contributed had there not occurred a mistake in determining the deduction or a
mistake of fact. The Principal Sponsor shall direct the Trustee to return such
excess, adjusted for its pro rata share of any net loss (but not any net gain)
in the value of the Fund which accrued while such excess was held therein, to
the Employer within one (1) year of the disallowance of the deduction or the
mistaken payment of the contribution, as the case may be. If the return of such
amount would cause the balance of any Account of any Participant to be reduced
to less than the balance which would have been in such Account had the mistaken
amount not been contributed, however, the amount to be returned to the Employer
shall be limited so as to avoid such reduction.

         3.13. UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
(USERRA). Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.

                                   SECTION 4

                      INVESTMENT AND ADJUSTMENT OF ACCOUNTS

         4.1. ESTABLISHMENT OF SUBFUNDS.

                  4.1.1. ESTABLISHING SUBFUNDS. At the direction of the
         Retirement Committee, the Trustee shall divide the Fund into two (2) or
         more Subfunds or establish different investment funds, which shall
         serve as vehicles for the investment of Participants' Accounts.

                  4.1.2. OPERATIONAL RULES. In accordance with rules, the
         Retirement Committee shall determine the circumstances under which a
         particular Subfund may be elected, or shall be automatically utilized,
         the minimum or maximum amount or percentage of an Account which may be
         invested in a particular Subfund, the procedures for making or changing
         investment elections, the extent (if any) to which Beneficiaries of
         deceased Participants may make investment elections and the effect of a
         Participant's or Beneficiary's failure to make an effective election
         with respect to all or any portion of an Account.

                  4.1.3. REVISING SUBFUNDS. The Retirement Committee shall have
         the power, from time to time, to dissolve Subfunds, to direct that
         additional Subfunds be established and, under rules, to withdraw or
         limit participation in a particular Subfund. In connection with the
         power to commingle reserved to the Trustee under Section 10.6, the
         Retirement Committee shall also have the power to direct the Trustee to
         consolidate any separate Subfunds hereunder with any other separate
         Subfunds having the same investment objectives which are established
         under any other retirement plan trust fund of the Employer or any
         business entity affiliated in ownership or management with the Employer
         of which the Trustee is trustee and which are managed by the Trustee or
         the same Investment Manager.

                                       22
<PAGE>

                  4.1.4. ERISA SECTION 404(C) COMPLIANCE. If the Committee so
         determines, the Committee may establish investment subfunds and
         operational rules which are intended to satisfy Section 404(c) of ERISA
         and the regulations thereunder. Such investment subfunds shall permit
         Participants and Beneficiaries the opportunity to choose from at least
         three investment alternatives, each of which is diversified, each of
         which present materially different risk and return characteristics, and
         which, in the aggregate, enable Participants and Beneficiaries to
         achieve a portfolio with appropriate risk and return characteristics
         consistent with minimizing risk through diversification. Such
         operational rules shall provide the following, and shall otherwise
         comply with Section 404(c) of ERISA and the regulations and rules
         promulgated thereunder from time to time:

                           (a) Participants and Beneficiaries may give
                  investment instructions to the Trustee at least once every
                  three months;

                           (b) the Trustee must follow the investment
                  instructions of Participants and Beneficiaries that comply
                  with the Plan's operational rules, provided that the Trustee
                  may in any event decline to follow any investment instructions
                  that:

                                    (i) would result in a prohibited transaction
                           described in Section 406 of ERISA or Section 4975 of
                           the Code;

                                    (ii) would result in the acquisition of an
                           asset that might generate income which is taxable to
                           the Plan;

                                    (iii) would not be in accordance with the
                           documents and instruments governing the Plan insofar
                           as they are consistent with Title I of ERISA;

                                    (iv) would cause a fiduciary to maintain
                           indicia of ownership of any assets of the Plan
                           outside of the jurisdiction of the district courts of
                           the United States other than as permitted by Section
                           404(b) of ERISA and Department of Labor regulation
                           Section 2050.404b-1;

                                    (v) would jeopardize the Plan's tax status
                           under the Code;

                                    (vi) could result in a loss in excess of a
                           Participant's or Beneficiary's Account balance;

                           (c) Participants and Beneficiaries shall be
                  periodically informed of actual expenses to their Accounts
                  which are imposed by the Plan and which are related to their
                  Plan investment decisions.

                           (d) with respect to any subfund consisting of
                  Employer securities and intended to satisfy the requirements
                  of Section 404(c) of ERISA, (i) Participants and Beneficiaries
                  shall be entitled to all voting, tender and other rights
                  appurtenant to the ownership of such securities, (ii)
                  procedures shall be established to ensure the confidential
                  exercise of such rights, except to the extent necessary to
                  comply with federal and state laws not preempted by ERISA, and
                  (iii) the Trustee shall ensure the sufficiency of and
                  compliance with such confidentiality procedures.

         4.2. VALUATION AND ADJUSTMENT OF ACCOUNTS. The intent of this Section
is to cause all income of the Trust Fund and changes in the value of the assets
of the Trust Fund to be distributed among each Participant Account in the Trust
Fund. Accordingly, the Trustee shall, following the end of each Valuation Date,
value all assets of the Trust Fund, allocate net gains or losses, and process
additions to and withdrawals from Account balances in the following manner:

                                       23
<PAGE>

                  4.2.1. VALUATION. The Trustee shall first compute the fair
         market value of securities and/or the other assets comprising each
         investment fund designated by the Retirement Committee for direction of
         investment by the Participants of this Plan. Each Account balance shall
         be adjusted each business day by applying the closing market price of
         the investment fund on the current business day to the share/unit
         balance of the investment fund as of the close of business on the
         current business day.

                  4.2.2. ADDITIONS AND WITHDRAWALS. The Trustee shall then
         account for any requests for additions or withdrawals made to or from a
         specific designated investment fund by any Participant, including
         allocations of contributions and forfeitures. In completing the
         valuation procedure described above, such adjustments in the amounts
         credited to such Accounts shall be made on the business day to which
         the investment activity relates. Contributions received by the Trustee
         pursuant to this Plan shall not be taken into account until the
         Valuation Date coinciding with or next following the date such
         contribution was both actually paid to the Trustee and allocated among
         the Accounts of Participants.

                  4.2.3. POOLED FUNDS. Notwithstanding Sections 4.2.1 and 4.2.2
         above, in the event a pooled investment fund is created as a designated
         fund for Participant investment election in this Plan, valuation of the
         pooled investment fund and allocation of earnings of the pooled
         investment fund shall be governed by the Administrative Services
         Agreement for such pooled investment fund. The provisions of any such
         Administrative Services Agreement shall be deemed a part of this Plan.

                  4.2.4. OTHER RULES. Notwithstanding the foregoing, the
         Committee and the Trustee may agree in writing to revised rules or
         additional rules for the adjustment of Accounts including, without
         limiting the generality of the foregoing, the times when contributions
         shall be credited under Section 3 for the purposes of allocating gains
         or losses under this Section 4.

         4.3. MANAGEMENT AND INVESTMENT OF FUND. The Fund in the hands of the
Trustee, together with all additional contributions made thereto and together
with all net income thereof, shall be controlled, managed, invested, reinvested
and ultimately paid and distributed to Participants and Beneficiaries by the
Trustee with all the powers, rights and discretions generally possessed by
trustees, and with all the additional powers, rights and discretions conferred
upon the Trustee under this Plan Statement. Except to the extent that the
Trustee is subject to the authorized and properly given investment directions of
a Participant, a Beneficiary or an Investment Manager, and subject to the
directions of the Retirement Committee with respect to the payment of benefits
hereunder, the Trustee shall have the exclusive authority to manage and control
the assets of the Fund and shall not be subject to the direction of any person
in the discharge of its duties, nor shall its authority be subject to delegation
or modification except by formal amendment of this Plan Statement.

                                    SECTION 5

                                     VESTING

         5.1. PROFIT SHARING ACCOUNT.

                  5.1.1. PROGRESSIVE VESTING. Except as hereinafter provided,
         the Profit Sharing Account of each Participant shall become Vested in
         accordance with the following schedule:

<TABLE>
<CAPTION>
                  When the Participant Has                The Vested Portion of the
                Completed the Following Years            Participant's Profit Sharing
                     of Vesting Service:                       Account Will Be:
                     -------------------                       ----------------
<S>                                                      <C>
                      Less than 3 years                               0%
                      3 years or more                               100%
</TABLE>

                                       24
<PAGE>

         provided, however, that the Vested percentage of any Participant who
         was a Participant in the Plan as of March 1, 1996, shall not be less
         than the percentage the Participant would have earned had the Prior
         Plan Statement continued in effect.

                  5.1.2. FULL VESTING. Notwithstanding any of the foregoing
         provisions for progressive vesting of Profit Sharing Accounts of
         Participants, the entire Profit Sharing Account of each Participant
         shall be fully Vested upon the earliest occurrence of any of the
         following events while in the employment of the Employer or an
         Affiliate:

                           (a) the Participant's death,

                           (b) the Participant's attainment of Normal Retirement
                  Age,

                           (c) the Participant's Disability,

                           (d) a partial termination of the Plan which is
                  effective as to the Participant, or

                           (e) a complete termination of the Plan or a complete
                  discontinuance of Employer contributions hereto.

                  5.1.3. FORFEITURE EVENT. A Participant who is not in the
         employment of the Employer or an Affiliate upon a complete termination
         of the Plan or a complete discontinuance of Employer contributions
         hereto, shall be fully Vested if, on the date of such termination or
         discontinuance, such Participant has not had a forfeiture event as
         described below:

                           (a) the occurrence after an Event of Maturity of five
                  (5) consecutive One-Year Breaks in Service,

                           (b) the Event of Maturity of a Participant who has no
                  Vested interest in the Participant's Total Account,

                           (c) the distribution after an Event of Maturity, to
                  (or with respect to) a Participant of the entire Vested
                  portion of the Total Account of the Participant, or

                           (d) the death of the Participant at a time and under
                  circumstances which do not entitle the Participant to be fully
                  (100%) Vested in the Participant's Total Account.

                  5.1.4. PRE-EFFECTIVE DATE VESTING. For any person who does not
         perform one (1) Hour of Service on or after February 26, 1989, the
         Vesting provisions of the Prior Plan Statement shall continue to apply.

         5.2. OTHER ACCOUNTS. The 401(k) Account, Employer Matching Account,
Rollover Account, Voluntary Account and Transfer Account of each Participant
shall be fully (100%) Vested at all times.

                                       25
<PAGE>

                                    SECTION 6

                                    MATURITY

         6.1. EVENTS OF MATURITY. A Participant's Total Account shall mature and
the Vested portion shall become distributable in accordance with Section 7 upon
the earliest occurrence of any of the following events while in the employment
of the Employer or an Affiliate:

                           (a) the Participant's death,

                           (b) the Participant's separation from service,
                  whether voluntary or involuntary,

                           (c) the Participant's attainment of age seventy and
                  one-half (70 1/2) years, except that such occurrence as an
                  Event of Maturity has been eliminated with regard to
                  Participants who reached age 70 1/2 on or after January 1,
                  1999,

                           (d) the Participant's Disability,

                           (e) termination of the Plan without the establishment
                  or maintenance of another defined contribution plan (other
                  than an employee stock ownership plan as defined in Section
                  4975(e)(7) of the Code) or a partial termination of the Plan
                  effective as to the Participant,

                           (f) the disposition by the Employer to an unrelated
                  organization of substantially all the assets (within the
                  meaning of Section 409(d)(2) of the Code or other guidance
                  issued by the Internal Revenue Service) used by the Employer
                  in a trade or business of the Employer, but only with respect
                  to employees who continue employment with the organization
                  acquiring such assets and only if the purchase and sale
                  agreement specifically authorizes distribution of this Plan's
                  assets in connection with such disposition and the Employer
                  continues to maintain the Plan after disposition, or

                           (g) the disposition by the Employer to an unrelated
                  organization of the Employer's interest in a subsidiary
                  (within the meaning of Section 409(d)(3) of the Code or other
                  guidance issued by the Internal Revenue Service), but only
                  with respect to employees who continue employment with such
                  subsidiary and only if the purchase and sale agreement
                  specifically authorizes distribution of this Plan's assets in
                  connection with such disposition and the Employer continues to
                  maintain the Plan after disposition;

                           (h) effective as of May 30, 2001, the Participant's
                  attainment of age 59 1/2,

provided, however, that a transfer from Recognized Employment to employment with
the Employer that is other than Recognized Employment or a transfer from the
employment of one Employer participating in the Plan to another such Employer or
to any Affiliate shall not constitute an Event of Maturity.

         6.2. DISPOSITION OF NONVESTED PORTION OF ACCOUNT. Upon the occurrence
of a Participant's Event of Maturity, if any portion of the Participant's Profit
Sharing Account is not Vested, such portion shall be transferred to the
Participant's Suspense Account as of the Valuation Date coincident with or next
following such Event of Maturity.

                  6.2.1. REHIRE BEFORE ANNUAL VALUATION DATE. If such
         Participant is reemployed by the Employer or an Affiliate before the
         Annual Valuation Date following the Participant's Event of Maturity,
         the portion of the Participant's Profit Sharing Account which was not
         Vested upon such Event of Maturity (and therefore became the
         Participant's Suspense Account) shall be

                                       26
<PAGE>

         transferred back to and held in the Participant's Profit Sharing
         Account under the Plan as of the Valuation Date coincident with or next
         following the reemployment date and it shall be held there pending the
         occurrence of another Event of Maturity effective as to the
         Participant, during which period of subsequent employment the
         Participant may earn a Vested interest in some or all of such portion
         in accordance with the provisions of Section 5.

                  6.2.2. REHIRE AFTER ANNUAL VALUATION DATE. If such Participant
         is not reemployed by the Employer or an Affiliate before the Annual
         Valuation Date following the Participant's Event of Maturity, the
         portion of the Participant's Profit Sharing Account which was not
         Vested upon such Event of Maturity (and therefore became the
         Participant's Suspense Account):

                           (a) shall be forfeited as of that Annual Valuation
                  Date as provided in Section 6.2.3 and the Plan shall be deemed
                  to have made a distribution of such Participant's vested
                  interest (which shall be zero) as of such date, and

                           (b) shall be restored to the Participant's Profit
                  Sharing Account (without adjustment for gains or losses after
                  such Annual Valuation Date) as provided in Section 6.2.4 if
                  the Participant returns to employment with the Employer or an
                  Affiliate before the Participant has five (5) consecutive
                  One-Year Breaks in Service. This restoration shall occur as of
                  the Annual Valuation Date next following the Participant's
                  return to employment and shall be conditioned upon the
                  Participant's remaining in employment with the Employer or an
                  Affiliate until that Annual Valuation Date.

                  6.2.3. FORFEITURES. Forfeited Suspense Accounts shall be used
         first to restore any forfeited Suspense Accounts for rehired
         Participants of the same Employer as required in Section 6.2.2, and,
         prior to January 1, 2001, any remaining portion shall be added to the
         Employer discretionary contribution, if any, to be allocated as of such
         Annual Valuation Date, to the Profit Sharing Accounts of all
         Participants during the Plan Year, as provided in Section 3.3 of the
         Plan. From and after January 1, 2001, forfeited suspense Accounts shall
         be used to reduce the Safe Harbor Matching Contribution required of the
         Employer under Section 3.7 or to pay administrative expenses as
         provided in Section 12.9, as directed by the Employer. Any Suspense
         Accounts remaining at the termination of the Plan shall be likewise
         used and if any remain after such uses are satisfied, the same may be
         allocated to a Profit Sharing Account for each Participant remaining in
         the employment of the Employer as of the termination, pro-rata to
         Recognized Compensation.

                  6.2.4. RESTORATIONS. The amount necessary to make the
         restoration required under Section 6.2.2(b) shall come first from
         Suspense Accounts of Participants of the rehiring Employer that are to
         be forfeited on the Annual Valuation Date on which the restoration is
         to occur. If such Suspense Accounts are not adequate for this purpose,
         the rehiring Employer shall make a contribution adequate to make the
         restoration as of that Annual Valuation Date (in addition to any
         contributions made under Section 3). If the Participant is rehired by
         an Affiliate that is not an Employer, the amount necessary to make the
         restoration shall come first from Suspense Accounts of Participants of
         the Principal Sponsor that are to be forfeited on the Annual Valuation
         Date on which the restoration is to occur and, if such Suspense
         Accounts are not adequate for this purpose, then the Principal Sponsor
         shall make a contribution adequate to make the restoration as of that
         Annual Valuation Date (in addition to any contributions made under
         Section 3).

         6.3. UNCLAIMED VESTED TOTAL ACCOUNTS. If a Participant or Beneficiary
cannot be found under procedures established by the Retirement Committee, the
Vested Total Account of such Participant or Beneficiary shall be forfeited as of
the Annual Valuation Date the Account is both (i) distributable under Section
7.1.2 or Section 7.2.2 and (ii) determined by the Retirement Committee to be
unclaimed. A Vested Total Account so forfeited shall be restored (without
adjustment for gains or losses after the

                                       27
<PAGE>

forfeiture of the Account) as of the Annual Valuation Date following a claim for
the Account by the Participant or Beneficiary; provided, however, the claim is
made before the termination of the Plan. The forfeiture and restoration of an
unclaimed Vested Total Account shall be in accordance with the following
procedures.

                  6.3.1. FORFEITURES. Forfeited unclaimed Vested Total Accounts
         shall be used first to restore any forfeited unclaimed Vested Total
         Account for a `Participant or Beneficiary who makes a claim for a
         Vested Total Account as of the Annual Valuation Date. Any remaining
         forfeited unclaimed Vested Total Accounts as of the Annual Valuation
         Date in the Plan Year in which the forfeiture occurred shall be used to
         reduce the Employer's Safe Harbor Matching Contribution under Section
         3.7 or to pay administrative expenses as provided in Section 12.9, as
         directed by the Employer. Any forfeited unclaimed Vested Total Accounts
         remaining at the termination of the Plan shall be used in a similar
         fashion or otherwise as provided in Section 6.2.4.

                  6.3.2. RESTORATIONS. The amount necessary to make the
         restoration of a forfeited unclaimed Vested Total Account shall come
         first from the unclaimed Vested Total Accounts of Participants or
         Beneficiaries that are to be forfeited as of the Annual Valuation Date
         on which the restoration is to occur. If such Vested Total Accounts are
         not adequate for this purpose, the Employer shall make a contribution
         adequate to make the restoration as of that Annual Valuation Date (in
         addition to any contributions made under Section 3).

                                    SECTION 7

                                  DISTRIBUTION

         7.1. APPLICATION FOR DISTRIBUTION.

                  7.1.1. APPLICATION REQUIRED. No distribution shall be made
         from the Plan until the Retirement Committee has received an
         application for distribution from the Participant or the Beneficiary
         entitled to receive distribution (the "Distributee"). The Retirement
         Committee may prescribe rules regarding the form of such application,
         the manner of filing such application and the information required to
         be furnished in connection with such application.

                  7.1.2. EXCEPTION FOR SMALL AMOUNTS. Effective for Plan Years
         beginning on or after January 1, 1998, a Vested Total Account which
         does not exceed Five Thousand Dollars ($5,000) (or for distributions
         made prior to October 17, 2000, never exceeded that amount at the time
         of any prior distribution) shall be distributed automatically in a
         single lump sum as soon as is administratively feasible following the
         occurrence of an Event of Maturity effective as to a Participant,
         without an application for distribution.

                  7.1.3. EXCEPTION FOR REQUIRED DISTRIBUTIONS. Any Vested Total
         Account for which no application has been received on the required
         beginning date effective as to a Distributee under Section 7.2.2, shall
         be distributed automatically in a single lump sum as of that date
         without an application for distribution. Any amounts credited to a
         Vested Total Account after the required beginning date effective as to
         a Distributee under Section 7.2.2 shall be distributed in a single lump
         sum following the crediting of such amounts to the Account as directed
         by the Retirement Committee. The distribution shall be made without an
         application for distribution.

                  7.1.4. NOTICES. The Retirement Committee will issue such
         notices as may be required under Sections 402(f), 411(a)(11) and other
         sections of the Code in connection with distributions from the Plan. No
         distribution will be made unless it is consistent with such notice
         requirements. Distribution may commence less than thirty (30) days
         after the notice required under

                                       28
<PAGE>

         Section 1.411(a)-11(c) of the Income Tax Regulations or the notice
         required under Section 1.402(f)-2T of the Income Tax Regulations is
         given, provided that:

                           (a) The Retirement Committee clearly informs the
                  Distributee that the Distributee has a right to a period of at
                  least thirty (30) days after receiving the notice to consider
                  the decision of whether or not to elect distribution and, if
                  applicable, a particular distribution option); and

                           (b) The Distributee, after receiving the notice,
                  affirmatively elects a distribution.

                  7.1.5. DIRECT ROLLOVER. A Distributee who is eligible to elect
         a direct rollover may elect, at the time and in the manner prescribed
         by the Committee, to have all or any portion of an eligible rollover
         distribution paid directly to an eligible retirement plan specified by
         the Distributee in a direct rollover. A Distributee who is eligible to
         elect a direct rollover includes only a Participant, a Beneficiary who
         is the surviving spouse of a Participant and a Participant's spouse or
         former spouse who is the alternate payee under a qualified domestic
         relations order, as defined in Appendix C.

                           (a) ELIGIBLE ROLLOVER DISTRIBUTION AND ELIGIBLE
                  RETIREMENT PLAN for purposes of the Plan shall the same
                  meanings as defined in Section 401(a)(31) of the Code.

                           (b) DIRECT ROLLOVER means the payment of an eligible
                  rollover distribution by the Plan to the eligible retirement
                  plan specified by the Distributee who is eligible to elect a
                  direct rollover.

         7.2. TIME AND FORM OF DISTRIBUTION. Upon the receipt of a proper
application for distribution from the Distributee after the occurrence of an
Event of Maturity effective as to a Participant, and after the Participant's
Vested Total Account has been determined and the right of the Distributee to
receive a distribution has been established, the Retirement Committee shall
cause the Trustee to make distribution of such Vested Total Account in a single
lump sum as of (and as soon as administratively feasible after) a Valuation Date
specified by the Distributee which is not earlier than nor later than the dates
specified below.

                  7.2.1. EARLIEST BEGINNING DATE. Distribution shall not be made
         as of a Valuation Date which is earlier than the earliest beginning
         date.

                           (a) PARTICIPANT. If the Distributee is a Participant,
                  the earliest beginning date is the Valuation Date coincident
                  with or next following the date of the Participant's Event of
                  Maturity.

                           (b) BENEFICIARY. If the Distributee is a Beneficiary
                  of a Participant, the earliest beginning date is the Valuation
                  Date coincident with or next following the date of such
                  Participant's death.

         Distribution shall not be made, however, as of a Valuation Date which
         is earlier than the date the Retirement Committee receives any required
         application for distribution.

                  7.2.2. REQUIRED BEGINNING DATE. In all events distribution
         shall be made not later than the required beginning date.

                                       29
<PAGE>

                           (a) PARTICIPANT. The required beginning date of a
                  Participant is the later of the April 1 of the calendar year
                  following the calendar year in which the Participant attains
                  age 70 1/2 or retires, except that benefit distributions to a
                  5-percent owner (as defined in Appendix B to the Plan
                  statement) must commence by the April 1 of the calendar year
                  following the calendar year in which the Participant attains
                  age 70 1/2. The preretirement or in-service age 70 1/2
                  distribution option has been eliminated with respect to
                  employees who reach age 70 1/2 on or after January 1, 1999.

                           (b) BENEFICIARY. If the Distributee is a Beneficiary
                  of a Participant, the required beginning date is the November
                  30 of the calendar year in which occurs the fifth (5th)
                  anniversary of the Participant's death.

                  7.2.3. FORM OF DISTRIBUTION OF TRANSFER ACCOUNTS FROM THE
         PENN-DANIELS PLAN. In accordance with Section 411(d)(6) of the Code,
         any individual who has had an account transferred from the
         Penn-Daniels, Incorporated Employees' Savings and Retirement Plan (the
         "Penn-Daniels Plan") to this Plan shall have such account distributed
         in the form of a qualified joint and survivor annuity. Notwithstanding
         the foregoing, such individual may elect any optional form of
         distribution available under the Penn-Daniels Plan as in effect on July
         1, 1998, if the Participant's spouse consents to such distribution in a
         writing signed by the spouse and witnessed by a Plan representative or
         notary public. The Plan administrator shall cause to be furnished to
         each married Participant a written explanation, in non-technical terms,
         of the availability of the joint and survivor annuity, as specifically
         applicable to the Participant and spouse and of the fact that such
         Participant may elect an optional form of benefit. The written
         explanation shall be furnished to such participant during a reasonable
         period (generally at least thirty (30), but not more than ninety (90)
         days) before the commencement date of any benefits, consistent with
         applicable governmental regulations. The Participant may waive (with
         spousal consent) the requirement that such written explanation be
         provided at least thirty (30) days before the commencement date,
         consistent with applicable governmental regulations. Further,
         notwithstanding the above provision, the qualified joint and survivor
         annuity forms and the other optional forms of distribution under the
         Penn-Daniels Plan are hereby eliminated under this Plan effective as of
         August 15, 2001, provided that a written notice explaining this
         elimination is given to all Participants who have transfer accounts now
         in the Penn-Daniels Plan and such elimination is not applied to any
         such Participant who incurs an Event of Maturity and elects to have his
         or her benefits attributable to such Transfer Account begin before the
         end of a 90 day period after receipt of such notice.

                  7.2.4. REQUIRED MINIMUM DISTRIBUTIONS. All distributions under
         this Plan made after the Participant's Required Beginning Date or after
         the Participant's death shall comply with the minimum distribution
         requirements under Section 401(a)(9) of the Code, and regulations
         thereunder (which are hereby incorporated by reference). With respect
         to distributions under the Plan made in calendar years beginning on or
         after January 1, 2002, the Plan will apply the minimum distribution
         requirements of Section 401(a)(9) of the Internal Revenue Code in
         accordance with the regulations under Section 401(a)(9) that were
         proposed in January 2001, notwithstanding any provision of the Plan to
         the contrary. This amendment shall continue in effect until the end of
         the last calendar year beginning before the effective date of final
         regulations under Section 401(a)(9) or such other date specified in
         guidance published by the Internal Revenue Service.

         7.3. OTHER RULES.

                  7.3.1. EFFECT OF REEMPLOYMENT. If a Participant is reemployed
         by the Employer or an Affiliate after distribution has been scheduled
         to be made but before the Participant attains Normal Retirement Age and
         before actual distribution, distribution of the Participant's Vested

                                       30
<PAGE>

         Total Account shall be suspended, provided the request for such
         suspension is received by the Trustee sufficiently in advance so that
         such suspension is administratively feasible, and the Vested Total
         Account shall continue to be held in the Fund until another Event of
         Maturity effective as to the Participant shall occur after the
         Participant's reemployment. It is the general intent of this Plan that
         no distributions shall be made before the Normal Retirement Age of a
         Participant while the Participant is employed by the Employer or an
         Affiliate.

                  7.3.2. TEFRA SECTION 242(B) DESIGNATIONS. Effective February
         26, 1989, TEFRA Section 242(b) designations shall not be given effect.
         Prior to February 26, 1989, distributions to or with respect to each
         individual eligible to make a designation (before January 1, 1984) of a
         method of distribution pursuant to Section 242(b) of the Tax Equity and
         Fiscal Responsibility Act of 1982 were made in accordance with the
         TEFRA Section 242(b) designation provisions set forth in the Prior Plan
         Statement.

         7.4. DESIGNATION OF BENEFICIARIES.

                  7.4.1. RIGHT TO DESIGNATE. Each Participant may designate,
         upon forms to be furnished by and filed with the Retirement Committee,
         one or more primary Beneficiaries or alternative Beneficiaries to
         receive all or a specified part of the Participant's Vested Total
         Account in the event of the Participant's death. The Participant may
         change or revoke any such designation from time to time without notice
         to or consent from any Beneficiary or spouse. No such designation,
         change or revocation shall be effective unless executed by the
         Participant and received by the Retirement Committee during the
         Participant's lifetime.

                  7.4.2. SPOUSAL CONSENT. Notwithstanding the foregoing, a
         designation will not be valid for the purpose of paying benefits from
         the Plan to anyone other than a surviving spouse of the Participant (if
         there is a surviving spouse) unless that surviving spouse consents in
         writing to the designation of another person as Beneficiary. To be
         valid, the consent of such spouse must be in writing, must acknowledge
         the effect of the designation of the Beneficiary and must be witnessed
         by a notary public. The consent of the spouse must be to the
         designation of a specific named Beneficiary which may not be changed
         without further spousal consent, or alternatively, the consent of the
         spouse must expressly permit the Participant to make and to change the
         designation of Beneficiaries without any requirement of further spousal
         consent. The consent of the spouse to a Beneficiary is a waiver of the
         spouse's rights to death benefits under the Plan. The consent of the
         surviving spouse need not be given at the time the designation is made.
         The consent of the surviving spouse need not be given before the death
         of the Participant. The consent of the surviving spouse will be
         required, however, before benefits can be paid to any person other than
         the surviving spouse. The consent of a spouse shall be irrevocable and
         shall be effective only with respect to that spouse.

                  7.4.3. FAILURE OF DESIGNATION. If a Participant:

                           (a) fails to designate a Beneficiary,

                           (b) designates a Beneficiary and thereafter such
                  designation is revoked without another Beneficiary being
                  named, or

                           (c) designates one or more Beneficiaries and all such
                  Beneficiaries so designated fail to survive the Participant,

         such Participant's Vested Total Account, or the part thereof as to
         which such Participant's designation fails, as the case may be, shall
         be payable to the first class of the following classes of automatic
         Beneficiaries with a member surviving the Participant and (except in
         the case of the

                                       31
<PAGE>

         Participant's surviving issue) in equal shares if there is more than
         one member in such class surviving the Participant:

                  Participant's surviving spouse
                  Participant's surviving issue per stirpes and not per capita
                  Participant's surviving parents Participant's surviving
                  brothers and sisters Representative of Participant's estate.

                  7.4.4. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to
         a distribution of all or a portion of a deceased Participant's Vested
         Total Account may disclaim his or her interest therein subject to the
         following requirements. To be eligible to disclaim, a Beneficiary must
         be a natural person, must not have received a distribution of all or
         any portion of a Vested Total Account at the time such disclaimer is
         executed and delivered, and must have attained legal age as of the date
         of the Participant's death. Any disclaimer must be in writing and must
         be executed personally by the Beneficiary before a notary public. A
         disclaimer shall state that the Beneficiary's entire interest in the
         undistributed Vested Total Account is disclaimed or shall specify what
         portion thereof is disclaimed. To be effective, duplicate original
         executed copies of the disclaimer must be both executed and actually
         delivered to both the Retirement Committee and to the Trustee after the
         date of the Participant's death but not later than nine (9) months
         after the date of the Participant's death. A disclaimer shall be
         irrevocable when delivered to both the Retirement Committee and the
         Trustee. A disclaimer shall be considered to be delivered to the
         Retirement Committee or the Trustee only when actually received by the
         Retirement Committee or the Trustee (and in the case of a corporate
         Trustee, shall be considered to be delivered only when actually
         received by a trust officer familiar with the affairs of the Plan). The
         Retirement Committee (and not the Trustee) shall be the sole judge of
         the content, interpretation and validity of a purported disclaimer.
         Upon the filing of a valid disclaimer, the Beneficiary shall be
         considered not to have survived the Participant as to the interest
         disclaimed. A disclaimer by a Beneficiary shall not be considered to be
         a transfer of an interest in violation of the provisions of Section 8
         and shall not be considered to be an assignment or alienation of
         benefits in violation of federal law prohibiting the assignment or
         alienation of benefits under this Plan. No other form of attempted
         disclaimer shall be recognized by either the Retirement Committee or
         the Trustee.

                  7.4.5. DEFINITIONS. When used herein and, unless the
         Participant has otherwise specified in the Participant's Beneficiary
         designation, when used in a Beneficiary designation, "issue" means all
         persons who are lineal descendants of the person whose issue are
         referred to, including legally adopted descendants and their
         descendants but not including illegitimate descendants and their
         descendants; "child" means an issue of the first generation; "per
         stirpes" means in equal shares among living children of the person
         whose issue are referred to and the issue (taken collectively) of each
         deceased child of such person, with such issue taking by right of
         representation of such deceased child; and "survive" and "surviving"
         mean living after the death of the Participant.

                  7.4.6. SPECIAL RULES. Unless the Participant has otherwise
         specified in the Participant's Beneficiary designation, the following
         rules shall apply:

                           (a) If there is not sufficient evidence that a
                  Beneficiary was living at the time of the death of the
                  Participant, it shall be deemed that the Beneficiary was not
                  living at the time of the death of the Participant.

                           (b) The automatic Beneficiaries specified in Section
                  7.4.3 and the Beneficiaries designated by the Participant
                  shall become fixed at the time of the Participant's death so
                  that, if a Beneficiary survives the Participant but dies
                  before the

                                       32
<PAGE>

                  receipt of all payments due such Beneficiary hereunder, such
                  remaining payments shall be payable to the representative of
                  such Beneficiary's estate.

                           (c) If the Participant designates as a Beneficiary
                  the person who is the Participant's spouse on the date of the
                  designation, either by name or by relationship, or both, the
                  dissolution, annulment or other legal termination of the
                  marriage between the Participant and such person shall
                  automatically revoke such designation. (The foregoing shall
                  not prevent the Participant from designating a former spouse
                  as a Beneficiary on a form executed by the Participant and
                  received by the Retirement Committee after the date of the
                  legal termination of the marriage between the Participant and
                  such former spouse, and during the Participant's lifetime.)

                           (d) Any designation of a nonspouse Beneficiary by
                  name that is accompanied by a description of relationship to
                  the Participant shall be given effect without regard to
                  whether the relationship to the Participant exists either then
                  or at the Participant's death.

                           (e) Any designation of a Beneficiary only by
                  statement of relationship to the Participant shall be
                  effective only to designate the person or persons standing in
                  such relationship to the Participant at the Participant's
                  death.

                                       33
<PAGE>

A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Retirement Committee (and not the Trustee) shall be the sole judge of the
content, interpretation and validity of a purported Beneficiary designation.

         7.5. DEATH PRIOR TO FULL DISTRIBUTION. If a Participant dies after the
Participant's Event of Maturity but before distribution of the Participant's
Vested Total Account has been made, the undistributed Vested Total Account shall
be distributed in the same manner as hereinbefore provided in the Event of
Maturity by reason of death. If, at the death of the Participant, any payment to
the Participant was due or otherwise pending but not actually paid, the amount
of such payment shall be included in the Vested Total Account which is payable
to the Beneficiary (and shall not be paid to the Participant's estate).

         7.6. DISTRIBUTION IN CASH. Distribution of a Participant's Vested Total
Account shall be made in cash. If, however, the Vested Total Account to be
distributed consists in whole or in part of a Participant's unpaid promissory
note, the Trustee shall cause distribution of that portion of the Vested Total
Account to be made in kind.

         7.7. FACILITY OF PAYMENT. In case of the legal disability, including
minority, of a Participant or Beneficiary entitled to receive any distribution
under the Plan, payment shall be made, if the Retirement Committee shall be
advised of the existence of such condition:

                           (a) to the duly appointed guardian, conservator or
                  other legal representative of such Participant or Beneficiary,
                  or

                           (b) to a person or institution entrusted with the
                  care or maintenance of the incompetent or disabled Participant
                  or Beneficiary, provided such person or institution has
                  satisfied the Retirement Committee that the payment will be
                  used for the best interest and assist in the care of such
                  Participant or Beneficiary, and provided further, that no
                  prior claim for said payment has been made by a duly appointed
                  guardian, conservator or other legal representative of such
                  Participant or Beneficiary.

Any payment made in accordance with the foregoing provisions of this Section
shall constitute a complete discharge of any liability or obligation of the
Employer, the Retirement Committee, the Trustee and the Fund therefor.

         7.8. WITHDRAWALS FROM VOLUNTARY AND ROLLOVER ACCOUNTS.

                  7.8.1. WHEN AVAILABLE. A Participant (or an employee who has
         made a rollover) may make withdrawals from time to time from the
         Participant's Voluntary Account or Rollover Account. To receive such a
         withdrawal, the Participant or such employee must file an application
         with the Retirement Committee. In the application, the Participant or
         such employee shall specify the dollar amount to be withdrawn. Such
         withdrawal application shall be approved by the Retirement Committee to
         be made as of the Valuation Date coincident with or next following the
         approval of a completed application by the Retirement Committee and
         shall be made in a lump sum cash payment as soon as administratively
         feasible after such Valuation Date.

                  7.8.2. LIMITATION. The amount of a Participant's withdrawal
         from the Participant's Voluntary Account shall not exceed the amount of
         contributions made to such Account.

                  7.8.3. SEQUENCE OF ACCOUNTS. Each withdrawal made pursuant to
         this Section 7.8 shall first be taken from and charged against the
         amount of contributions in the Participant's Voluntary Account and
         thereafter taken from and charged against the Participant's Rollover
         Account.

                                       34
<PAGE>

                  7.8.4. COORDINATION WITH SECTION 4.1. If a withdrawal is made
         from an Account which is invested in more than one (1) Subfund
         authorized and established under Section 4.1, the amount withdrawn
         shall be charged to each Subfund in the same proportions as the Account
         is invested in each Subfund.

         7.9. IN-SERVICE DISTRIBUTIONS.

                  7.9.1. WHEN AVAILABLE. A Participant may receive an in-service
         distribution from the Vested portion of such Participant's Profit
         Sharing Account if the Retirement Committee determines that such
         in-service distribution is for one of the purposes described in Section
         7.9.2 and the conditions in Section 7.9.3 have been fulfilled. To
         receive such a distribution, the Participant must file an in-service
         distribution application with the Retirement Committee. In the
         application, the Participant shall specify the dollar amount to be
         distributed. Such in-service distribution shall be approved by the
         Retirement Committee and shall be made in a lump sum cash payment as
         soon as administratively feasible following the approval of a completed
         application by the Retirement Committee.

                  7.9.2. PURPOSES. In-service distributions under Section 7.9.1
         shall be approved by the Retirement Committee only if it is established
         that the in-service distribution is to be made:

                           (a) to reimburse the Participant for medical expenses
                  not covered by insurance, or

                           (b) to reimburse the Participant for expense caused
                  by natural disasters such as floods, tornados, etc.

                  7.9.3. LIMITATIONS. Unless and until a Participant shall have
         been a Participant for five (5) full years, the Participant shall not
         be entitled to an in-service distribution from the Participant's Profit
         Sharing Account under this Section 7.9 which would reduce that Profit
         Sharing Account below the amounts credited as a result of the Employer
         contributions made during the most recent two (2) consecutive Plan
         Years ending coincident with or immediately preceding the date as of
         which such distribution is made.

                  7.9.4. LIMIT ON DISTRIBUTIONS FROM VOLUNTARY ACCOUNT.
         Distributions from the Participant's Voluntary Account shall be subject
         to the limitation described in Section 7.8.2.

                  7.9.5. COORDINATION WITH SECTION 4.1. If an in-service
         distribution is made from an Account which is invested in more than one
         (1) Subfund authorized and established under Section 4.1, the amount
         distributed shall be charged to each Subfund in the same proportions as
         the Account is invested in each Subfund.

                  7.9.6. IN-SERVICE WITHDRAWALS AT 59 1/2. Notwithstanding any
         other provision of this Plan, any individual that has had an account
         transferred from Penn-Daniels, Incorporated Employees' Savings and
         Retirement Plan may have the balance of such account distributed at any
         time after he attains age 59 1/2, subject to the provisions of that
         plan regarding such withdrawals, as then in effect on July 1, 1998.
         Further, effective as of the date stated in Section 6.1(h), any
         Participant may withdraw all or any part of the Total Account which is
         vested on or after reaching age 59 1/2, even if such Participant is
         continuing in the service of the Employer, subject to such reasonable
         rules as the Committee may adopt with regard to minimum withdrawals and
         frequency. Distributions made to a Participant who has assets in more
         than one Account shall be deemed to have been made from the Accounts in
         the following sequence:

                                       35

<PAGE>

                  Voluntary Account
                  Rollover Account
                  Penn-Daniels Deferral Account
                  401(k) Account
                  Penn-Daniels Matching Account
                  Employer Matching Account
                  Additional Contributions account
                  Penn-Daniels Employer Account - Other
                  Profit Sharing Account

         7.10. HARDSHIP DISTRIBUTIONS.

                  7.10.1. WHEN AVAILABLE. A Participant may receive an
         in-service hardship distribution from the Vested portion of the
         Accounts if the Committee determines that such hardship distribution is
         for one of the purposes described in Section 7.10.2 and the conditions
         in Section 7.10.3 and Section 7.10.4 have been fulfilled. To receive
         such a distribution, the Participant must file a hardship distribution
         application with the Committee. In the application, the Participant
         shall specify the dollar amount to be distributed. Subject to the rules
         in Section 7.1, such hardship distribution shall be approved by the
         Committee and such hardship distribution shall be made in a lump sum
         cash payment as soon as administratively feasible following the
         approval of a completed application by the Committee.

                  7.10.2. PURPOSES. In-service hardship distributions shall be
         allowed under Section 7.11.1 only if the Participant establishes that
         the in-service hardship distribution is to be made for one of the
         following purposes:

                           (a) expenses for medical care described in Section
                  213(d) of the Code previously incurred by the Participant, the
                  Participant's spouse or any dependents of the Participant (as
                  defined in Section 152 of the Code) or necessary for these
                  persons to obtain medical care described in Section 213(d) of
                  the Code,

                           (b) costs directly related to the purchase of a
                  principal residence for the Participant (excluding mortgage
                  payments),

                           (c) payment of tuition and related educational fees
                  for the next twelve (12) months of post-secondary education
                  for the Participant, or the Participant's spouse, children or
                  dependents (as defined in Section 152 of the Code), or

                           (d) payments necessary to prevent the eviction of the
                  Participant from the Participant's principal residence or
                  foreclosure on the mortgage of that principal residence.

         Such purposes shall be considered to be an immediate and heavy
financial need of the Participant.

                  7.10.3. LIMITATIONS. In no event shall the cumulative amount
         of hardship distributions withdrawn from a Participant's 401(k) Account
         exceed the amount of contributions to that Account made pursuant to
         Section 3.2 (i.e., hardship distributions from that Account shall not
         include any earnings on such contributions or any curative allocations
         or earnings on curative allocations made pursuant to Section 3.3.2).
         The amount of the hardship distribution shall not exceed the amount of
         the Participant's immediate and heavy financial need; provided,
         however, that the amount of the immediate and heavy financial need may
         include amounts necessary to pay any federal, state, or local income
         taxes or penalties reasonably anticipated to result from the
         distribution. In addition, a hardship distribution which includes a
         portion of the Participant's

                                       36

<PAGE>

         401(k) Account shall not be allowed unless the Participant has obtained
         all distributions, other than hardship distributions, and, prior to
         February 1, 2002, all nontaxable loans (at the time of the loan)
         currently available under all plans maintained by the Employer and
         Affiliates. If a hardship distribution does not include any portion of
         the Participant's 401(k) Account, then the Participant shall not be
         required to have obtained all available non-taxable loans as a
         condition to such distribution. Other funds are not currently available
         unless the funds are available prior to or coincidentally with the date
         the hardship distribution is available. Distributions from the
         Participant's Voluntary Account shall be distributed in the sequence
         described in Section 7.8.

                  7.10.4. COORDINATION WITH OTHER PLANS. The rules described in
         this Section 7.10.4 apply only if the hardship distribution includes a
         portion of the Participant's 401(k) Account. The Participant's 401(k)
         Agreement and elective contributions and employee contributions under
         all other plans maintained by the Employer and Affiliates shall be
         canceled for twelve (12) months after receipt of a hardship
         distribution and shall not be automatically reinstated. Thereafter, the
         Participant may, upon notice to the Committee, enter into a new 401(k)
         Agreement effective as of the payday on or after any subsequent
         Valuation Date following such twelve (12) month period, provided the
         Participant is in Recognized Employment on that date. However, in the
         case of any hardship distribution made by the Plan after December 31,
         2001, the suspension period shall become six (6) months, instead of
         twelve (12). In addition, the Participant shall not be allowed to make
         elective contributions under the Plan and all other plans maintained by
         the Employer and Affiliates for the Participant's taxable year
         immediately following the taxable year of the hardship distribution
         which exceed the adjusted limit ($10,500 for 2001) (as described in
         Section 2.4) for the next taxable year less the amount of such
         Participant's elective contributions for the taxable year of the
         hardship distribution. The limitation described in the preceding
         sentence is referred to below as the "Post-Hardship Contribution
         Limit." For the purposes of this Section 7.10, all other plans
         maintained by the Employer and Affiliates shall mean all qualified and
         nonqualified plans of deferred compensation maintained by the Employer
         and Affiliates (including stock option, stock purchase or similar
         plans). However, the Post-Hardship Contribution Limit is eliminated
         effective as of January 1, 2002 for any Participant who received a
         hardship distribution during 2001 or thereafter.

                  7.10.5. COORDINATION WITH SECTION 4.1. If the hardship
         distribution is made from an Account which is invested in more than one
         (1) Subfund authorized and established under Section 4.1, the amount
         withdrawn shall be charged to each Subfund in the same proportions as
         the Account is invested in each Subfund.

                  7.10.6. HARDSHIP WITHDRAWALS FROM TRANSFER ACCOUNTS FROM THE
         PENN-DANIELS PLAN. Notwithstanding any other provision of this Plan, at
         any time prior to the elimination of the qualified joint and survivor
         annuity rules form the Penn-Daniels Plan as provided in Section 7.2.3
         above, hardship withdrawals made from accounts transferred from the
         Penn-Daniels, Incorporated Employees' Savings and Retirement Plan, will
         remain subject to the qualified election provisions of that plan as in
         effect on July 1, 1998, including the requirement that spousal consent
         be obtained prior to such distribution.

         7.11. LOANS. The provisions of this Section shall be subject to the
following rules, conditions and limitations:

                  7.11.1. AVAILABILITY. Loans shall be made available to all
         Participants who are active employees and to any other Participant or
         Beneficiary, whether or not an active employee, who is a party in
         interest as defined in Section 3(14) of ERISA, subject to limitations
         and conditions established under this Section on a reasonably
         equivalent basis and shall not be made available to highly compensated
         employees (as defined in Appendix D to the Plan Statement) in an amount
         (expressed as a percentage of the Total Account) greater than is made
         available to other

                                       37
<PAGE>

         employees. An alternate payee shall be considered a Beneficiary for
         this purpose only after the domestic relation order has been finally
         determined to be a qualified domestic relations order as defined in
         Appendix C to the Plan Statement.

                  7.11.2. ADMINISTRATION. Loans shall be made available to any
         eligible borrower as determined by the Retirement Committee, in
         accordance with this Section 7 or any separate loan program rules (the
         "Rules") developed by the Retirement Committee, which are incorporated
         by reference. Denials shall be processed under the claims procedure
         rules of the Plan. Loans shall be approved (or denied) by the
         Retirement Committee. The Retirement Committee shall be contacted for
         this purpose at the address shown in the summary plan description. A
         copy of the Rules and any other information that is available
         concerning loans shall be made available at that address upon written
         request or may be made available electronically. Loans under this Plan
         and any other Plan maintained by the Employer will be considered
         separate loans. A loan will be made upon the borrower's endorsement of
         the check representing the loan proceeds, or completion of such other
         actions, forms or information as may be required to comply with this
         Section

                  7.11.3. LOAN TERMS. Loans shall be made only from the
         borrower's 401(k) Account and Rollover Account. The total amount of
         such loans to any borrower under this Plan or under the plan of any
         other entity that is a member of the same controlled or affiliated
         service group as the Company under Section 414(b), (c) and (m) shall
         not exceed the lesser of:

                           (a) Fifty percent (50%) of the borrower's Vested
                  Total Account balance, or

                           (b) Fifty Thousand Dollars ($50,000);

         provided, however, that the Fifty Thousand Dollar ($50,000) limitation
         shall be reduced by the excess (if any) of: (i) the highest outstanding
         balance of loans from the Plan to such person during the one-year
         period ending on the day before the new loan is made, over (ii) the
         outstanding balance of all loans from the Plan to such person on the
         day the new loan is made. Loans will not be made in a principal amount
         less than One Thousand Dollars ($1,000). In the event of a foreclosure,
         the amount available from the borrower's 401(k) Account or Rollover
         Account for a loan shall be reduced by the amount of the foreclosure.

                  The interest rate on any loan shall be as specified in the
Rules.

                  Any such loan must be repaid in substantially level amounts,
         including principal and interest, over the term of the loan, with
         payments due not less frequently than quarterly. Any such loan shall
         provide that it shall be repaid within a definite period of time to be
         specified by the borrower in the loan application and the promissory
         note. That period shall not exceed five (5) years, except for loans
         used to acquire the principal residence of the Participant.

                  7.11.4. ACCOUNTING FOR THE LOAN. For the purpose of
         determining the extent to which a 401(k) Account or Rollover Account is
         entitled to share in income, gains or losses of the Fund under Section
         4, the same shall be deemed to be reduced by the unpaid balance of any
         outstanding loans to the borrower, and the interest payments on such
         loans shall be credited to the borrower's 401(k) Account and Rollover
         Account. If the loan is made to a person who has assets in more than
         one Account, such loan shall be deemed to have been made from the
         Accounts in the following sequence:

                  Rollover Account
                  401(k) Account

                                       38

<PAGE>

                  Penn-Daniels Deferral Account
                  Additional Contributions Account

         Repayments of principal on loans and payments of interest shall be
         apportioned among the Accounts from which the loan was made in
         proportion to the amounts by which the Accounts were initially reduced
         in order to make the loan.

                  7.11.5. OTHER TERMS GOVERNED BY COMMITTEE LOAN PROGRAM RULES.
         All other terms and provisions with respect to loans under the Plan
         shall be governed by the loan program rules as adopted by the Committee
         from time to time.

                  7.11.6. REPORTING AND DISCLOSURE. To the extent required by
         Section 72(p) of the Code, the Trustee shall report, from time to time,
         distributions of income in connection with loans made under this Plan,
         including deemed distributions under applicable regulations. The
         operation of those tax rules is entirely independent of the rules of
         the Plan. It may be possible for loans not in default under these rules
         to nevertheless require reports of distributable income. Similarly,
         loans in default under these rules may not result in such reports. This
         Plan shall make all disclosures required under applicable law.

                  7.11.7. LOANS FROM TRANSFER ACCOUNTS FROM THE PENN-DANIELS
         PLAN. Notwithstanding any other provision of this Plan, loans from
         Accounts transferred from the Penn-Daniels, Incorporated Employees'
         Savings and Retirement Plan are subject to the requirements of Code
         Section 401(a)(11) and the regulations thereunder, including the
         requirement that spousal consent be obtained before any portion of such
         an Account may be used as security for a loan. However, subject to the
         same terms and conditions as set forth in Section 7.2.3, the
         requirement for such spousal consent and the application of the joint
         and survivor annuity requirements of Code Section 401(a)(11) shall
         cease effective as of August 15, 2001.

         7.12. CORRECTIVE DISTRIBUTIONS.

                  7.12.1. EXCESS ELECTIVE DEFERRALS ($7,000 LIMIT AS ADJUSTED).

                           (a) IN GENERAL. A Participant may assign to this Plan
                  any excess elective deferrals made during a taxable year of
                  the Participant by notifying (in writing) the Retirement
                  Committee not later than the March 1 following such taxable
                  year of the amount of the excess elective deferral to be
                  assigned to the Plan. Notwithstanding any other provision of
                  the Plan Statement, a Participant's excess elective deferrals,
                  plus any income and minus any loss allocable thereto, shall be
                  distributed to the Participant no later than the first April
                  15 following the close of the Participant's taxable year.

                           (b) DEFINITIONS. For purposes of this Section,
                  "excess elective deferrals" shall mean the amount of
                  retirement savings allocated to the Participant's 401(k)
                  Account for a Participant's taxable year and which the
                  Participant allocates to this Plan pursuant to the claim
                  procedure described below.

                           (c) CLAIMS. The Participant's claim shall be in
                  writing; shall be submitted to the Retirement Committee not
                  later than March 1 with respect to the immediately preceding
                  taxable year; shall specify the amount of the Participant's
                  excess elective deferrals for the preceding taxable year; and
                  shall be accompanied by the Participant's written statement
                  that if such amounts are not distributed, such excess elective
                  deferrals, when added to amounts deferred under other plans or
                  arrangements described in Sections 401(k), 408(k) or 403(b) of
                  the Code, will exceed the limit imposed on the Participant by
                  Section 402(g) of the Code for the taxable year in which the
                  deferral occurred.

                                       39

<PAGE>

                           (d) DETERMINATION OF INCOME OR LOSS. The excess
                  elective deferrals shall be adjusted for income or loss. The
                  income or loss allocable to excess elective deferrals shall be
                  determined by multiplying the income or loss allocable to the
                  Participant's retirement savings for the Plan Year ending
                  within such preceding taxable year by a fraction, the
                  numerator of which is the excess elective deferrals on behalf
                  of the Participant for such preceding taxable year and the
                  denominator of which is the Participant's 401(k) Account
                  balance attributable to retirement savings on the Valuation
                  Date coincident with or immediately before the last day of
                  such preceding taxable year without regard to any income or
                  loss occurring during such taxable year. The excess elective
                  deferrals shall also be adjusted for income or loss for the
                  period between the Valuation Date coincident with or
                  immediately before the last day of such preceding taxable year
                  and the date of distribution. The income or loss allocable for
                  such period shall be equal to ten percent (10%) of the income
                  or loss allocable to the distributable excess elective
                  deferrals for the applicable taxable year multiplied by the
                  number of whole calendar months that have elapsed since the
                  Valuation Date coincident with or immediately before the last
                  day of such taxable year, including the month of distribution
                  if distribution occurs after the fifteenth (15th) of such
                  month.

                           (e) ACCOUNTING FOR EXCESS ELECTIVE DEFERRALS. Excess
                  elective deferrals distributed under this Section 7.12.1 shall
                  be distributed from the Participant's 401(k) Account.

                  7.12.2. EXCESS CONTRIBUTIONS (SECTION 401(K) TEST).

                           (a) IN GENERAL. Notwithstanding any other provision
                  of the Plan Statement, the amount of excess contributions for
                  a Plan Year as determined under (b) hereof, plus any income
                  and minus any loss allocable thereto, shall be distributed no
                  later than the last day of the following Plan Year to
                  Participants to whose accounts retirement savings were
                  allocated. Such distribution shall be accomplished by first
                  making a distribution to the highly compensated employee
                  Participants (as defined in Section 2) having the largest
                  dollar amount of such excess contributions and income or loss
                  allocable thereto until the total amount has been distributed
                  or until the amount of such Participant's remaining
                  contribution made under a 401(k) Agreement equals the 401(k)
                  Agreement contributions of such Highly Compensated Employee
                  Participants who have the next largest amount of such
                  contributions. This process shall continue until the total
                  amount of such excess contributions and income or loss
                  allocable thereto has been distributed.

                           (b) EXCESS CONTRIBUTIONS. For purposes of this
                  Section, "excess contributions" shall mean, with respect to
                  any Plan Year, the excess of:

                                    (i) the aggregate amount of Employer
                           contributions taken into account in computing the
                           average deferral percentage (as defined in Section 2)
                           of highly compensated eligible employees (as defined
                           in Section 3) for such Plan Year, over

                                    (ii) the maximum amount of such
                           contributions permitted by the Section 401(k) test
                           described in Section 2 (determined by reducing
                           contributions made on behalf of the highly
                           compensated eligible employees in order of their
                           actual deferred percentage ratios, as defined in
                           Section 2, beginning with the highest of such
                           ratios).

                           (c) DETERMINATION OF INCOME OR LOSS. The excess
                  contributions shall be adjusted for income or loss. The income
                  or loss allocable to excess contributions shall be determined
                  by multiplying income or loss allocable to the Participant's
                  retirement

                                       40

<PAGE>

                  savings for the Plan Year by a fraction, the numerator of
                  which is the excess contributions on behalf of the Participant
                  for the Plan Year and the denominator of which is the sum of
                  the Participant's account balances attributable to retirement
                  savings on the last day of the Plan Year, without regard to
                  any income or loss occurring during such Plan Year. The excess
                  contributions shall also be adjusted for income or loss for
                  the period between the last day of the Plan Year and the date
                  of distribution. The income or loss allocable for such period
                  shall be equal to ten percent (10%) of the income or loss
                  allocable to the distributable excess contributions for the
                  applicable Plan Year multiplied by the number of whole
                  calendar months that have elapsed since the end of the
                  applicable Plan Year, including the month of distribution if
                  distribution occurs after the fifteenth (15th) of such month.

                           (d) ACCOUNTING FOR EXCESS CONTRIBUTIONS. Excess
                  contributions distributed under this Section 7.12.2 shall be
                  treated as distributions from the Participant's 401(k) Account
                  for the Plan Year.

                  7.12.3. EXCESS AGGREGATE CONTRIBUTIONS (SECTION 401(M) TEST).

                           (a) IN GENERAL. Notwithstanding any other provision
                  of the Plan Statement, the amount of excess aggregate
                  contributions as determined under (b) hereof, plus any income
                  and minus any loss allocable thereto, shall be distributed no
                  later than the last day of the following Plan Year to
                  Participants to whose accounts Employer matching
                  contributions, and if used to determine the contribution
                  percentage under Section 3, elective contributions or
                  qualified nonelective contributions (within the meaning of
                  Section 401(m)(4)(C) of the Code, or both, were allocated.
                  Such distributions shall be accomplished by first making a
                  distribution to the highly compensated employee Participant
                  (as defined in Section 2) having the largest dollar amount in
                  such excess aggregate contributions and income or loss
                  allocable thereto until the total amount has been distributed
                  or until the amount of Participant's remaining excess
                  aggregate contributions equals the excess aggregate
                  contributions of such highly compensated employee Participants
                  who have the next largest amount of such excess aggregate
                  contributions has been distributed. This process shall
                  continue until the total amount of such excess aggregate
                  contributions has been distributed.

                           (b) EXCESS AGGREGATE CONTRIBUTIONS. For purposes of
                  this Section, "excess aggregate contributions" shall mean,
                  with respect to any Plan Year, the excess of:

                                    (i) the aggregate amount of contributions
                           taken into account in computing the average
                           contribution percentage (as defined in Section 3) of
                           highly compensated eligible employees (as defined in
                           Section 3) for such Plan Year, over

                                    (ii) the maximum amount of such
                           contributions permitted by the Section 401(m) test
                           described in Section 3 (determined by reducing
                           contributions made on behalf of the highly
                           compensated eligible employees in order of their
                           actual contribution percentage ratios, as defined in
                           Section 3, beginning with the highest of such
                           ratios).

                           (c) DETERMINATION OF INCOME. The excess aggregate
                  contributions shall be adjusted for income or loss. Unless the
                  Committee and the Trustee agree otherwise in writing, the
                  income or loss allocable to excess aggregate contributions
                  shall be determined by multiplying the income or loss
                  allocable to the Participant's Employer matching contributions
                  (to the extent used to determine the eligible employee's

                                       41

<PAGE>

                  contribution percentage under Section 3), and if used to
                  determine an eligible employee's contribution percentage under
                  Section 3, elective contributions or qualified nonelective
                  contributions (within the meaning of Section 401(m)(4)(C) of
                  the Code), or both, for the Plan Year by a fraction, the
                  numerator of which is the excess aggregate contributions on
                  behalf of the Participant for the Plan Year and the
                  denominator of which is the sum of the account balances
                  attributable to Employer matching contributions and such
                  elective contributions or qualified nonelective contributions,
                  or both, on the last day of the Plan Year without regard to
                  any income or loss occurring during such Plan Year.

                           (d) ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS.
                  Excess aggregate contributions shall be distributed from the
                  Participant's Employer Matching Account (and, if applicable,
                  the Participant's 401(k) Account or Employer Profit Sharing
                  Account, or both) in proportion to the Participant's Employer
                  matching contributions, and if used to determine the
                  contribution percentage under Section 3, elective
                  contributions or qualified nonelective contributions (within
                  the meaning of Section 401(m)(4)(C) of the Code), or both, for
                  the Plan Year.

                  7.12.4. PRIORITY. The determination of the excess aggregate
         contributions shall be made after first determining the excess
         deferrals, and then determining the excess contributions. The amount of
         excess contributions shall be reduced by excess deferrals previously
         distributed to such Participant for the Participant's taxable year
         ending with or within such Plan Year.

                  7.12.5. MATCHING CONTRIBUTIONS. If excess deferrals, excess
         contributions or elective contributions treated as excess aggregate
         contributions are distributed pursuant to this Section 7.12, applicable
         matching contributions under Section 3.3 shall be treated as
         forfeitures and reallocated as if such forfeitures were an Employer
         matching contribution under Section 3.3 made for those Participants who
         were entitled to receive an Employer matching contribution for that
         Plan Year.

                  7.12.6. SAFE HARBOR COMPLIANCE. The Plan is designed so that
         from and after January 1, 2001, it will be deemed to satisfy the
         special rules of Section 401(k)(12)(D) of the Code and thus eliminate
         the need for any further testing for excess contributions or excess
         aggregate contributions, except as may otherwise be required in the
         case of Early Participants.

                  7.12.7. COMMITTEE DISCRETION. For any Plan Year in which the
         Code Section 401(k) or (m) tests or the aggregate limit or multiple use
         test referred to in Section 3.5.3 apply, notwithstanding any other
         provision of the Plan, the Committee may, in its discretion, use one or
         more alternative methods to satisfy such tests, if allowable under
         applicable government regulations, including (without limitation)
         applying Code Section 410(b)(4)(B) to disaggregate the Plan in
         satisfying the minimum coverage requirements (i.e., treating those
         Participants, if any, who have not satisfied the maximum age and
         service requirements under Section 410(b) of the Code as if covered
         under a separate plan for purposes of testing for the satisfaction of
         the minimum coverage requirements and for separate 401(k) and 401(m)
         testing) and in such event, applying Safe Harbor Matching Contributions
         only to the deemed separate plan that covers those Participants who
         have satisfied the maximum age and service requirements under Section
         410(b) of the Code.

                                   SECTION 8

                             SPENDTHRIFT PROVISIONS

         No Participant or Beneficiary shall have any transmissible interest in
any Account nor shall any Participant or Beneficiary have any power to
anticipate, alienate, dispose of, pledge or encumber the same while in the
possession or control of the Trustee, nor shall the Trustee, the Employer or the
Retirement

                                       42
<PAGE>

Committee recognize any assignment thereof, either in whole or in part, nor
shall any Account be subject to attachment, garnishment, execution following
judgment or other legal process while in the possession or control of the
Trustee.

         The power to designate Beneficiaries to receive the Vested Total
Account of a Participant in the event of death shall not permit or be construed
to permit such power or right to be exercised by the Participant so as thereby
to anticipate, pledge, mortgage or encumber the Participant's Account or any
part thereof, and any attempt of a Participant so to exercise said power in
violation of this provision shall be of no force and effect and shall be
disregarded by the Employer, the Retirement Committee and the Trustee.

         This Section shall not prevent the Employer, the Retirement Committee
or the Trustee from exercising, in their discretion, any of the applicable
powers and options granted to them upon the occurrence of an Event of Maturity,
as such powers may be conferred upon them by any applicable provision hereof,
nor prevent the Plan from foreclosing on the lien granted to secure any and all
loans made to a Participant or Beneficiary from the Fund. (In the event of a
default on a loan made to a Participant or a Beneficiary, foreclosure on the
promissory note and the attachment of the security interest in the Account will
not occur until an Event of Maturity occurs with respect to such Participant.)
This Section shall not prevent the Employer or the Trustee from observing the
terms of a qualified domestic relations order as provided in Appendix C to this
Plan Statement or from otherwise complying with applicable law.

         Notwithstanding the foregoing, a Participant's Accounts, even if fully
vested, may be offset against amounts that such Participant is ordered or
required to pay to the Plan if the order or requirement to pay arises on or
after August 5, 1997 as a result of a judgment of conviction for a crime
involving the Plan, a civil judgment (including a consent order or decree)
entered by a court in an action brought in connection with a breach or alleged
breach of fiduciary duty under ERISA, or a settlement agreement entered into by
the Participant and either the Secretary of Labor or the Pension Benefit
Guaranty Corporation in connection with a breach or alleged breach of fiduciary
duty under ERISA, all in accordance with and subject to the provisions of
Sections 206(d)(4) and (5) of ERISA, which are incorporated by reference.

                                   SECTION 9

                            AMENDMENT AND TERMINATION

         9.1. AMENDMENT. The Principal Sponsor reserves the power to amend this
Plan Statement either prospectively or retroactively or both:

                  (a) in any respect by resolution of its Board of Directors;
         and

                  (b) in any respect that does not materially increase the cost
         of the Plan by action of the ShopKo Stores, Inc. Retirement Committee;

provided that no amendment shall be effective to reduce or divest the Total
Account of any Participant unless the same shall have been adopted with the
consent of the Secretary of Labor pursuant to the provisions of ERISA, or in
order to comply with the provisions of the Code and the regulations and rulings
thereunder affecting the tax-qualified status of the Plan and the deductibility
of Employer contributions thereto.

         9.2. DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN. The
Principal Sponsor reserves the right to reduce, suspend or discontinue its
contributions to the Plan and to terminate the Plan herein embodied in its
entirety.

                                       43

<PAGE>

         9.3. MERGER OR SPINOFF OF PLANS.

                  9.3.1. IN GENERAL.

                           (a) The Retirement Committee may cause all or part of
                  this Plan to be merged with all or part of any other plan and
                  may cause all or part of the assets and liabilities to be
                  transferred from this Plan to another plan. In the case of
                  merger or consolidation of this Plan with, or transfer of
                  assets and liabilities of this Plan to, any other plan, each
                  Participant shall (if such other plan were then terminated)
                  receive a benefit immediately after the merger, consolidation
                  or transfer which is not less than the benefit the Participant
                  would have been entitled to receive immediately before the
                  merger, consolidation or transfer (if this Plan had then
                  terminated). If the Retirement Committee agrees to a transfer
                  of assets and liabilities to or from another plan, the
                  agreement under which such transfer is concluded (or an
                  amendment of or appendix to this Plan Statement) shall specify
                  the Accounts to which the transferred amounts are to be
                  credited.

                           (b) If any persons become employees of the Company as
                  the result of merger or consolidation or as the result of the
                  acquisition of all or part of the assets or business of
                  another company, the Retirement Committee shall determine to
                  what extent, if any, previous service with such company shall
                  be recognized under the Plan.

                  9.3.2. LIMITATIONS. No transfer shall be made to this Plan of
         assets that are subject to the joint and survivor annuity and
         pre-retirement survivor annuity rules of Section 401(a)(11) of Code,
         unless such transferred assets are maintained in a separate account
         (the "Transfer Account"). In no event shall assets be transferred from
         any other plan to this Plan unless this Plan complies (or has been
         amended to comply) with the optional form of benefit requirements of
         Section 411(d)(6)(B)(ii) of the Code (or, where applicable, the
         distribution rules of Section 401(k) of the Code) with respect to such
         transferred assets. In no event shall assets be transferred from this
         Plan to any other plan unless such other plan complies (or has been
         amended to comply) with the optional form of benefit requirements of
         Section 411(d)(6)(b)(ii) of the Code and the distribution rules of
         Section 401(k) of the Code with respect to such transferred assets.

                  9.3.3. BENEFICIARY DESIGNATIONS. If assets and liabilities are
         transferred from another plan to this Plan, Beneficiary designations
         made under that plan shall become void on the date as of which such
         transfer is made and the Beneficiary designation rules of this Plan
         Statement shall apply beginning on such date.

                  9.3.4. PAMIDA MERGER. Effective as of November 15, 2000, the
         Pamida, Inc. Savings Plus Plan (the "Pamida Plan") was merged into this
         Plan. Notwithstanding any other provisions of this Plan, for the
         portion of the Plan Year from November 15 to December 31, 2000, the
         employer matching contribution formula of the Pamida Plan (100% of the
         first 5% of pay contributed as elective salary deferrals) was continued
         for the benefit of the former Pamida Plan participants, rather than the
         matching formula under this Plan. Further, any forfeitures arising
         under this Plan as of December 31, 2000 were allocated only among
         employee Participants in this Plan other than the former Pamida Plan
         participants.

         9.4. ADOPTION BY OTHER EMPLOYERS.

                  9.4.1. ADOPTION BY CONSENT. The Retirement Committee may
         consent to the adoption of the Plan by any business entity subject to
         such conditions as the Retirement Committee may impose.

                                       44

<PAGE>

                  9.4.2. PROCEDURE FOR ADOPTION. Any such adopting business
         entity shall initiate its adoption of the Plan by delivery of a
         certified copy of the resolutions of its board of directors (or other
         authorized body or individual) adopting this Plan Statement to the
         Retirement Committee. Upon the consent by the Retirement Committee to
         the adoption by the adopting business entity, and the delivery to the
         Trustee of written evidence of the Retirement Committee's consent, the
         adoption of the Plan by the adopting business entity shall be effective
         as of the date specified by the Retirement Committee. If such adopting
         business entity is not a corporation, any reference in the Plan
         Statement to its board of directors shall be deemed to refer to such
         entity's governing body or other authorized individual.

                  9.4.3. EFFECT OF ADOPTION. Upon the adoption of the Plan by an
         adopting business entity as heretofore provided, the adopting business
         entity shall be an Employer hereunder in all respects. Each adopting
         business entity, as a condition of continued participation in the Plan,
         delegates to the Principal Sponsor the sole power and authority over
         all Plan matters except that the board of directors of each adopting
         business entity shall have the power to amend this Plan Statement as
         applied to it by establishing a successor plan to which assets and
         liabilities may be transferred as provided in Section 9.3 and to
         terminate the Plan as applied to it. Each reference herein to the
         Employer shall include the Principal Sponsor and all adopting business
         entities unless the context clearly requires otherwise.

                                   SECTION 10

                             CONCERNING THE TRUSTEE

         10.1. DEALINGS WITH TRUSTEE.

                  10.1.1. NO DUTY TO INQUIRE. No person, firm or corporation
         (other than the Retirement Committee, the Employer, or any fiduciary
         respecting the Plan with authority to direct the Trustee) dealing with
         the Trustee shall be required to take cognizance of the provisions of
         this Plan Statement or be required to make inquiry as to the authority
         of the Trustee to do any act which the Trustee shall do hereunder. No
         person, firm or corporation dealing with the Trustee shall be required
         to see either to the administration of the Plan or the Fund or to the
         faithful performance by the Trustee of its duties hereunder (except to
         the extent otherwise provided by ERISA). Any such person, firm or
         corporation shall be entitled to assume conclusively that the Trustee
         is properly authorized to do any act which it shall do hereunder. Any
         such person, firm or corporation shall be under no liability to anyone
         whomsoever for any act done hereunder pursuant to the written direction
         of the Trustee.

                  10.1.2. ASSUMED AUTHORITY. Any such person, firm or
         corporation may conclusively assume that the Trustee has full power and
         authority to receive and receipt for any money or property becoming due
         and payable to the Trustee. No such person shall be bound to inquire as
         to the disposition or application of any money or property paid to the
         Trustee or paid in accordance with the written directions of the
         Trustee.

                  10.1.3. DIRECTED TRUSTEE. The Principal Sponsor authorizes the
         Retirement Committee to direct and instruct the Trustee as provided in
         this Agreement. The Retirement Committee will direct the Trustee as to
         the Investment Funds to be established for investment of Trust Fund
         assets in accordance with the provisions of the Plan. Except for those
         Investment Funds that are mutual funds, the Retirement Committee or
         Investment Manager shall be responsible for determining the underlying
         investments of the Investment Funds. The Trustee shall invest in the
         Investment Funds in accordance with investment directions given by the
         Participants and Beneficiaries for whose Accounts such assets are held,
         to the extent so provided for in the Plan. All such directions by the
         Participants or Beneficiaries to the Trustee will be made by telephonic

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<PAGE>

         communication or in such other manner as is acceptable to the Trustee.
         Where the Retirement Committee, a Participant, a Beneficiary or an
         Investment Manager other than the Trustee has the power and authority
         to direct the investment of assets of the Trust Fund, the Trustee does
         not have any duty to question any direction, to review any securities
         or other property, or to make any suggestions in connection therewith.
         The Trustee will promptly comply with any direction given by the
         Retirement Committee, a Participant, a Beneficiary or Investment
         Manager. The Trustee will neither be liable for failing to invest any
         assets of the Trust Fund under the management and control of the
         Retirement Committee, a Participant, a Beneficiary or an Investment
         Manager in the absence of investment directions regarding such assets.

         10.2. COMPENSATION OF TRUSTEE. If a corporate Trustee shall be acting
hereunder, the corporate Trustee shall be entitled to receive compensation for
its services as Trustee hereunder as may be agreed upon from time to time by the
Principal Sponsor and the Trustee. Any individual Trustee who already receives
full-time pay from the Employer shall receive no compensation for services
hereunder. Other individual Trustees shall likewise serve without compensation
unless they shall otherwise specifically agree with the Principal Sponsor to the
contrary. In any event, however, the Trustee (whether corporate or individual
Trustees be acting) shall be entitled to receive reimbursement for reasonable
expenses, fees, costs and other charges incurred by it or payable by it on
account of the administration of the Plan and the Fund to the extent approved by
the Principal Sponsor. Such items of expense and compensation shall be payable
out of the Fund in a fair and equitable manner as determined by the Trustee,
except to the extent that the Employer, in its discretion, directly pays the
Trustee. In the event the Principal Sponsor files or declares bankruptcy, the
Principal Sponsor authorizes the Trustee to make payments from the Trust Fund
for any and all fees, expenses or other forms of compensation due under this
Section whether or not the fees, expenses or other compensation were earned but
not yet paid prior to or after the bankruptcy filing.

         10.3. RESIGNATION AND REMOVAL OF TRUSTEE.

                  10.3.1. RESIGNATION, REMOVAL AND APPOINTMENT. The Trustee (or
         in the event two or more co-trustees are acting, any such co-trustee)
         may resign by giving sixty (60) days' notice of intention so to do to
         the Principal Sponsor or such shorter notice as the Principal Sponsor
         may approve. The Principal Sponsor may remove any Trustee or successor
         Trustee hereunder by giving such Trustee (or any co-trustee) sixty (60)
         days' written notice of removal by certified mail. The Principal
         Sponsor shall have the power to appoint one or more individual or
         corporate Trustees, or both, as additional or successor Trustees. If no
         appointment of a successor Trustee is made by the Principal Sponsor
         within sixty (60) days following resignation or removal of the Trustee,
         the Trustee may apply to a court of competent jurisdiction for the
         appointment of a successor Trustee.

                  10.3.2. SURVIVING TRUSTEES. When any person appointed,
         qualified and serving as a Trustee hereunder shall cease to be a
         Trustee of the Fund, the remaining Trustee or Trustees then serving
         hereunder, or the successor Trustee or Trustees appointed hereunder, as
         the case may be, shall thereupon be and become vested with full title
         and right to possession of all assets and records of the Plan and the
         Fund in the possession or control of such prior Trustee, and the prior
         Trustee shall forthwith account for and deliver the same to such
         remaining or successor Trustee or Trustees. The successor Trustee will
         neither be liable or responsible for any act or omission to act with
         respect to the operation or administration of the Trust Fund under this
         Trust Agreement prior to the date it receives any Trust Fund assets and
         related documents, nor be under any duty or obligation to audit or
         otherwise inquire into or take any action concerning the acts or
         omissions of any predecessor Trustee.

                  10.3.3. SUCCESSOR ORGANIZATIONS. By designating a corporate
         Trustee, original or successor, hereunder, there is included in such
         designation and as a part thereof any other

                                       46

<PAGE>

         corporation possessing trust powers and authorized by law to accept the
         Plan and the Fund into which or with which the designated corporate
         Trustee, original or successor, shall be converted, consolidated or
         merged, and the corporation into which or with which any corporate
         Trustee hereunder shall be so converted, consolidated or merged shall
         continue to be the corporate Trustee of the Plan and the Fund.

                  10.3.4. CO-TRUSTEE RESPONSIBILITY. No Trustee shall be or
         become liable for any act or omission of a co-trustee serving hereunder
         with the Trustee (except to the extent that liability is imposed under
         ERISA) or of a prior Trustee hereunder, it being the purpose and intent
         that each Trustee shall be liable only for the Trustee's own acts or
         omissions during the Trustee's term of service as Trustee hereunder.

                  10.3.5. ALLOCATION OF RESPONSIBILITY. If there shall at any
         time be two (2) or more co-trustees serving hereunder, such Trustees,
         in addition to all other powers and authorities vested in them by law
         or conferred upon them by any provision of this Plan Statement, shall
         have power to allocate and reallocate from time to time to any one or
         more of their number specific responsibilities, obligations or duties
         and may delegate and redelegate from time to time to any one or more of
         their number the exercise of any right, power or discretion vested in
         the Trustees by law or conferred upon them by any provision of this
         Plan Statement, and any person, firm or corporation dealing with the
         co-trustees with respect to the Plan or the Fund may assume
         conclusively that any action taken or instrument executed by any one of
         such co-trustees is the action of all the co-trustees serving
         hereunder, and that authority for the doing of such act or the
         execution of such instrument has been conferred upon and delegated to
         the Trustee doing such act or executing such instrument. If any
         responsibility, obligation, duty, right, power or discretion vested in
         the Trustee is allocated or delegated to one or more co-trustees, the
         remaining co-trustees shall not be or become liable for an act or
         omission by the co-trustees to whom a right, power or discretion was
         delegated while such co-trustees were acting pursuant to such
         delegation.

                  10.3.6. MAJORITY DECISIONS. If there shall at any time be
         three (3) or more co-trustees serving hereunder who are qualified to
         perform a particular act, the same may be performed, on behalf of all,
         by a majority of those qualified, with or without the concurrence of
         the minority. No person who failed to join or concur in such act shall
         be held liable for the consequences thereof, except to the extent that
         liability is imposed under ERISA.

         10.4. ACCOUNTINGS BY TRUSTEE.

                  10.4.1. PERIODIC REPORTS. The Trustee shall render to the
         Retirement Committee an account and report within ninety (90) days
         after each Annual Valuation Date showing all transactions affecting the
         administration of the Plan and the Fund, including, but not necessarily
         limited to, such information concerning the Plan and the Fund and the
         administration thereof by the Trustee as shall be requested in writing
         by the Retirement Committee.

                  10.4.2. SPECIAL REPORTS. The Trustee shall also render such
         further reports from time to time as may be requested by the Retirement
         Committee and shall submit its final report and account to the
         Retirement Committee when it shall cease to be Trustee hereunder,
         whether by resignation or other cause.

         10.5. TRUSTEE'S POWER TO PROTECT ITSELF ON ACCOUNT OF TAXES. As a
condition to making the distribution of a Participant's Vested Total Account
during the Participant's lifetime, the Trustee may require the Participant (or
the person or persons entitled to receive the Participant's Vested Total Account
in the event of the Participant's death) to furnish the Trustee with proof of
payment of all income, inheritance, estate, transfer, legacy and succession
taxes and all other taxes of any different type or kind that may be imposed
under or by virtue of any state or federal statute or law upon the payment,
transfer, descent or distribution of such Vested Total Account and for the
payment of which the Trustee may, in its

                                       47

<PAGE>

judgment, be directly or indirectly liable. In lieu of the foregoing, the
Trustee may deduct, withhold and transmit to the proper taxing authorities any
such tax which it may be permitted or required to deduct and withhold and the
Vested Total Account to be distributed in such case shall be correspondingly
reduced. Unless the Employer and the Trustee agree otherwise in writing, the
Trustee shall be responsible for withholding federal income taxes and for
providing all required notices and elections concerning such withholding to all
Participants and Beneficiaries.

         10.6. OTHER TRUST POWERS. Pursuant to such direction, the Trustee shall
have the authority:

                           (a) To invest and reinvest any Subfunds established
                  pursuant to Section 4.1 in accordance with the investment
                  characteristics and objectives determined therefor and to
                  invest and reinvest the assets of the Fund in any securities
                  or properties in which an individual could invest the
                  individual's own funds and which it deems for the best
                  interest of the Fund, without limitation by any statute, rule
                  of law or regulation of any governmental body prescribing or
                  limiting the investment of trust assets by corporate or
                  individual trustees, in or to certain kinds, types or classes
                  of investments or prescribing or limiting the portion of the
                  Fund which may be invested in any one property or kind, type
                  or class of investment. Specifically and without limiting the
                  generality of the foregoing, the Trustee may invest and
                  reinvest principal and accumulated income of the Fund in any
                  real or personal property; preferred or common stocks of any
                  kind or class of any corporation, including but not limited to
                  investment and small business investment companies of all
                  types; voting trust certificates; interests in investment
                  trusts; shares of mutual funds including those for which the
                  Trustee or an affiliate of the Trustee serves as investment
                  advisor and receives a fee as an advisor; interests in any
                  limited or general partnership or other business enterprise,
                  however organized and for whatever purpose; group or
                  individual annuity contracts (which may involve investment in
                  the issuer's general account or any of its separate accounts);
                  interests in common or collective trusts, variable interest
                  notes or any other type of collective fund maintained by a
                  bank or similar institution (whether or not the Trustee
                  hereunder); bonds, notes and debentures, secured or unsecured;
                  mortgages, leases or other interests in real or personal
                  property; interests in mineral, gas, oil or timber properties
                  or other wasting assets; call options; put options; commodity
                  or financial futures contracts; foreign currency;
                  interest-bearing certificates or accounts in a bank or similar
                  financial institution, including the Trustee or an affiliate
                  of the Trustee provided such certificates, accounts or
                  instruments bear a reasonable rate of interest; insurance
                  contracts on the life of any "keyman" or shareholder of the
                  Employer; or conditional sales contracts. Prior to maturity
                  and distribution of the Vested Total Accounts of Participants,
                  the Trustee shall commingle the Accounts of Participants in
                  each Subfund and invest, reinvest, control and manage each of
                  the same as a common trust fund.

                           (b) To sell, exchange or otherwise dispose of any
                  asset of whatsoever character at any time held by the Trustee
                  in trust hereunder.

                           (c) To segregate any part or portion of the Fund for
                  the purpose of administration or distribution thereof and to
                  hold the Fund uninvested whenever and for so long as the same
                  is likely to be required for the payment in cash of Accounts
                  normally expected to become distributable in the near future,
                  or for any other reason which requires such action or makes
                  such action advisable.

                           (d) In connection with the Trustee's power to hold
                  uninvested reasonable amounts of cash whenever it is deemed
                  advisable to do so, to deposit the same, with or without
                  interest, in the commercial or savings departments of any
                  corporate Trustee serving hereunder or of any other bank,
                  trust company or other financial institution.

                                       48

<PAGE>

                           (e) To register any investment held in the Fund in
                  the name of the Trustee, without trust designation, or in the
                  name of a nominee or nominees, and to hold any investment in
                  bearer form, but the records of the Trustee shall at all times
                  show that all such investments are part of the Fund, and the
                  Trustee shall be as responsible for any act or default of any
                  such nominee as for its own.

                           (f) Subject to the prior approval of the Retirement
                  Committee, to retain and employ such attorneys, agents and
                  servants as may be necessary or desirable, in the opinion of
                  the Trustee, in the administration of the Fund, and to pay
                  them such reasonable compensation for their services as may be
                  agreed upon as an expense of administration of the Fund,
                  including power to employ and retain counsel upon any matter
                  of doubt as to the meaning of or interpretation to be placed
                  upon this Plan Statement or any provisions thereof with
                  reference to any question arising in the administration of the
                  Fund or pertaining to the distribution thereof or pertaining
                  to the rights and liabilities of the Trustee hereunder or to
                  the rights and claims of Participants and Beneficiaries. The
                  Trustee, in any such event, may act in reliance upon the
                  advice, opinions, records, statements and computations of any
                  attorneys and agents and on the records, statements and
                  computations of any servants so selected by it in good faith
                  and shall be released and exonerated of and from all liability
                  to anyone in so doing (except to the extent that liability is
                  imposed under ERISA).

                           (g) Subject to the prior approval of the Retirement
                  Committee, to institute, prosecute and maintain, or to defend,
                  any proceeding at law or in equity concerning the Plan or the
                  Fund or the assets thereof or any claims thereto, or the
                  interests of Participants and Beneficiaries hereunder at the
                  sole cost and expense of the Fund or at the sole cost and
                  expense of the Total Account of the Participant who may be
                  concerned therein or who may be affected thereby as, in the
                  Trustee's opinion, shall be fair and equitable in each case,
                  and to compromise, settle and adjust all claims and
                  liabilities asserted by or against the Plan or the Fund or
                  asserted by or against the Trustee, on such terms as the
                  Trustee, in each such case, shall deem reasonable and proper.
                  The Trustee shall be under no duty or obligation to institute,
                  prosecute, maintain or defend any suit, action or other legal
                  proceeding unless it shall be indemnified to its satisfaction
                  against all expenses and liabilities which it may sustain or
                  anticipate by reason thereof.

                           (h) Both with respect to any stock constituting
                  "Employer Securities" within the meaning of Section 10.9
                  hereof and with respect to all other investments held
                  hereunder, the Trustee shall deliver or cause to be executed
                  and delivered to the Retirement Committee, the designated
                  Investment Manager, or some other fiduciary designated by the
                  Retirement Committee, all notices, prospectuses, financial
                  statements, tender offers, proxies and proxy soliciting
                  materials relating to investments held hereunder. Except for
                  those Trust Fund assets for which American Express Trust is
                  the Investment Manager, the Trustee shall not vote any proxy
                  or tender offer election, participate in any voting trust,
                  exercise any options or subscription right or join in, dissent
                  from or oppose any merger, reorganization, consolidation,
                  liquidation or sale with respect to any asset held hereunder
                  except in accordance with the timely written instructions of
                  the Retirement Committee. If no such written instructions are
                  received, such proxies, elections and voting trust votes shall
                  not be voted; such options or subscription rights shall not be
                  exercised; and such mergers, reorganizations, consolidations,
                  liquidations or sales shall not be joined, dissented from or
                  opposed.

         However, the Retirement Committee may assign to the Participants the
right to vote proxies or exercise other rights of ownership (including tender
offers) with respect to such Employer Securities, or all or part of the other
investments held hereunder, or all of the foregoing of the Investment Funds. To
the

                                       49

<PAGE>

extent the right to vote or other incidents of ownership are vested in whole or
in part in the Participants, the Trustee shall act in this regard only in
accordance with the timely written instructions received from the Participants.
Solely for this purpose, each Participant shall act as the Named Fiduciary, as
defined in ERISA, in providing direction to the Trustee. To the extent
practicable, all unallocated assets or investments held hereunder, and all
assets or investment for which the trustee has not received instruction, shall,
solely for the purposes of this section be allocated to the Account of each
Participant who has issued instructions to the Trustee, in the same proportion
as such Participant's allocated proportion of assets or investments bears to the
aggregate of all like assets or investments for which instructions have been
issued by the Participant to the Trustee.

                           (i) In any matter of doubt affecting the meaning,
                  purpose or intent of any provision of this Plan Statement
                  which directly affects its duties, to determine such meaning,
                  purpose or intent.

                           (j) To require, as a condition to distribution of any
                  Vested Total Account, proof of identity or of authority of the
                  person entitled to receive the same, including power to
                  require reasonable indemnification on that account as a
                  condition precedent to its obligation to make distribution
                  hereunder.

                           (k) To collect, receive, receipt and give acquittance
                  for all payments that may be or become due and payable on
                  account of any asset in trust hereunder which has not, by act
                  of the Trustee taken pursuant thereto, been made payable to
                  others; and payment thereof by the company issuing the same,
                  or by the party obligated thereon, as the case may be, when
                  made to the Trustee hereunder or to any person or persons
                  designated by the Trustee, shall acquit, release and discharge
                  such company or obligated party from any and all liability on
                  account thereof.

                           (l) To determine from time to time, as required for
                  the purpose of distribution or for the purpose of allocating
                  trust income or for any other purpose of the Plan, the then
                  value of the Fund and the Accounts in the Fund, the Trustee,
                  in each such case, using and employing for that purpose the
                  fair market value of each of the assets constituting the Fund.
                  Each such determination so made by the Trustee in good faith
                  shall be binding and conclusive upon all persons interested or
                  becoming interested in the Plan or the Fund. The fair market
                  value of assets of the Trust Fund will be determined by the
                  Trustee on the basis of such sources of information as it may
                  deem reliable, including (but not limited to) information
                  reported in (i) newspapers of general circulation, (ii)
                  standard financial periodicals or publications, (iii)
                  statistical and valuation services, (iv) records of securities
                  exchanges, (v) reports of any Investment Manager, insurance
                  company or financial institution that has issued an investment
                  contract to the Trustee or brokerage firm deemed reliable by
                  the Trustee, or (vi) any combination of the foregoing. If the
                  Trustee is unable to value assets from sources, it may rely on
                  information from the Principal Sponsor, the Retirement
                  Committee, appraisers or other sources, and will not be liable
                  for inaccurate valuation based in good faith.

                  The Retirement Committee may, for administrative purposes,
         establish unit values for one or more Investment Funds (or any portion
         thereof) and maintain the Accounts setting forth each Participant's
         interest in such Investment Fund (or any portion thereof) in terms of
         such units, all in accordance with such rules and procedures as the
         Retirement Committee shall deem to be fair, equitable, and
         administratively practicable. In the event that unit accounting is thus
         established for any Investment Fund, the value of a Participant's
         interest in that Investment Fund (or any portion thereof) at any time
         shall be an amount equal to the then value of a unit in such Investment
         Fund (or any portion thereof) multiplied by the number of units then
         credited to the Participant.

                                       50
<PAGE>

                           (m) To receive and retain contributions made in a
                  form other than cash in the form in which the same are
                  received.

                           (n) To commingle, for investment purposes, the assets
                  of the Fund with the assets of any other qualified retirement
                  plan trust fund of the Employer, provided that the records of
                  the Trustee shall reflect the relative interests of the
                  separate trusts in such commingled fund.

                           (o) To grant options for the sale or other
                  disposition of Fund assets; to purchase options for the
                  acquisition of assets of any type; and to buy and sell
                  (including short sales) call options, put options and futures
                  contracts.

                           (p) To have and to exercise such other and additional
                  powers as may be advisable or proper in its opinion for the
                  effective and economical administration of the Fund.

                           (q) To deposit any part or all of the assets in any
                  collective trust fund which is now or hereafter maintained by
                  the Trustee, an agent of the Trustee or an Investment Manager
                  as a medium for the collective investment of funds of pension,
                  profit sharing or other employee benefit plans, and which is
                  qualified under Section 401(a) of the Code and exempt from
                  taxation under Section 501(a) of the Code, and to withdraw any
                  part or all of the assets so deposited and any assets
                  deposited with the trustee of a collective trust fund shall be
                  held and invested by the trustee thereunder pursuant to all
                  the terms and conditions of the trust agreement or declaration
                  of trust establishing the fund, which are hereby incorporated
                  herein by reference and shall prevail over any contrary
                  provisions of this Plan Statement.

                           (r) To invest or reinvest a portion of the assets in
                  individual Participant-directed loans.

                           (s) To accept the transfer of assets by use of
                  telephonic communications or any other method approved by the
                  Retirement Committee.

                           (t) To pool all or any of the assets of the Trust
                  with assets belonging to any other employee benefit trust
                  created by the Principal Sponsor or an Affiliate, or a
                  non-related employer and to commingle such assets and make
                  joint or common investment, carry joint accounts on behalf of
                  the Trust and such other trust or trusts, and allocate
                  undivided shares or interest in such investments or accounts
                  or in any pooled assets to the two or more trusts in respect
                  to their respective interests in the pooled investment.

                           (u) To appoint an investment manager, including the
                  right to appoint the Trustee as an investment manager, as that
                  term is defined in and subject to the requirements of Section
                  3(38) of ERISA.

                           (v) In addition to all other powers and authorities
                  elsewhere in this Plan Statement specifically granted to the
                  Trustee, the Trustee shall have the following powers and
                  authorities, to be exercised in its sole discretion:

                                    (i) To keep any or all securities or other
                           property in the name of a nominee with or without
                           power of attorney for a transfer or in its own name
                           without disclosing its fiduciary capacity, or in
                           bearer or book-entry form.

                                       51

<PAGE>

                                    (ii) To make, execute, acknowledge and
                           deliver any and all instruments deemed necessary or
                           appropriate to carry out the powers herein granted.

                                    (iii) To employ suitable agents, including,
                           but not limited to, auditors, actuaries, accountants,
                           and legal and other counsel, and to pay their
                           expenses and reasonable compensation for services to
                           the Trust from the Fund. The Trustee may from time to
                           time consult with legal counsel who may, but need not
                           be, legal counsel for the Employer and shall be fully
                           protected in acting or refraining from acting upon
                           the advice of any counsel with respect to legal
                           questions.

                                    (iv) To settle securities trades through a
                           securities depository that utilizes an institutional
                           delivery system, in accordance with appropriate trade
                           reports or statements given to the Trustee by such
                           depository.

         Notwithstanding anything contained herein to the contrary, all the
         powers described in this Section 10.6, with the exception of those
         described in Sections 10.6(e), (f), (k), (l), (p), and (v) shall only
         be exercised as directed by the Retirement Committee.

         10.7. INVESTMENT MANAGERS.

                  10.7.1. APPOINTMENT AND QUALIFICATIONS. The Principal Sponsor
         shall have the power to appoint from time to time one or more
         Investment Managers to direct the Trustee in the investment of, or to
         assume complete investment responsibility over, all or any portion of
         the Fund. An Investment Manager may be any person or firm (a) which is
         either (1) registered as an investment adviser under the Investment
         Advisers Act of 1940, (2) a bank, (3) an insurance company which is
         qualified to perform the services of an Investment Manager under the
         laws of more than one state, or (4) any other person described in
         Section 3(38) of ERISA; and (b) which acknowledges in writing that it
         is a fiduciary with respect to the Plan. The conditions prescribed in
         the preceding sentence shall apply to the issuer of any group annuity
         contract hereunder only if, and to the extent that, such issuer would
         otherwise be considered a "fiduciary" with respect to the Plan, within
         the meaning of ERISA.

                  10.7.2. REMOVAL. The Principal Sponsor may remove any such
         Investment Manager and shall have the power to appoint a successor or
         successors from time to time in succession to any Investment Manager
         who shall be removed, shall resign or shall otherwise cease to serve
         hereunder.

                  10.7.3. RELATION TO OTHER FIDUCIARIES. The Trustee shall
         comply with all investment directions given to the Trustee with respect
         to the designated portion of the Fund, and the Trustee shall be
         released and exonerated of and from all liability for or on account of
         any action taken or not taken by it pursuant to the directions of such
         Investment Manager, Retirement Committee, Participant, or Beneficiary,
         except to the extent that liability is imposed under ERISA. Neither the
         Employer or any of its officers, directors or employees nor any member
         of the Retirement Committee shall be liable for the acts or omissions
         of the Trustee or of any Investment Manager appointed hereunder unless
         liability is imposed under ERISA. The fees and expenses of any
         Investment Manager, as agreed upon from time to time between the
         Investment Manager and the Employer, shall be charged to and paid from
         the Fund in a fair and equitable manner, except to the extent that the
         Employer, in its discretion, may pay such directly to the Investment
         Manager.

                                       52
<PAGE>

         10.8. NO INVESTMENT IN EMPLOYER REAL PROPERTY. Notwithstanding any
other provision of this Plan Statement, the Plan may not acquire or hold any
"employer real property" as that term is defined in Section 407(d) of ERISA.

         10.9. INVESTMENT IN EMPLOYER SECURITIES. Notwithstanding any other
provision of this Plan Statement, the Plan may acquire or hold stock of ShopKo
Stores, Inc. which is a "qualifying employer security" (within the meaning of
Section 407(d)(5) of ERISA) up to one hundred percent (100%) of the assets of
the Plan.

         10.10. FIDUCIARY PRINCIPLES. The Trustee and each other fiduciary
hereunder, in the exercise of each and every power or discretion vested in them
by the provisions of this Plan Statement, shall (subject to the provisions of
ERISA) discharge their duties with respect to the Plan solely in the interest of
the Participants and Beneficiaries and:

                           (a) for the exclusive purpose of:

                                    (i) providing benefits to Participants and
                           Beneficiaries, and

                                    (ii) defraying reasonable expenses of
                           administering the Plan,

                           (b) with the care, skill, prudence and diligence
                  under the circumstances then prevailing that a prudent man
                  acting in a like capacity and familiar with such matters would
                  use in the conduct of an enterprise of a like character and
                  with like aims,

                           (c) by diversifying the investments of the Plan so as
                  to minimize the risk of large losses, unless under the
                  circumstances it is clearly prudent not to do so, and

                           (d) in accordance with the documents and instruments
                  governing the Plan, insofar as they are consistent with the
                  provisions of ERISA.

         Notwithstanding anything in this Plan Statement to the contrary, any
         provision hereof which purports to relieve a fiduciary from
         responsibility or liability for any responsibility, obligation or duty
         under Part 4 of Subtitle B of Title I of ERISA shall, to the extent the
         same is inconsistent with said Part 4, be deemed void.

         10.11. PROHIBITED TRANSACTIONS. Except as may be permitted by law,
regulation, or exemption, no Trustee or other fiduciary hereunder shall permit
the Plan to engage, directly or indirectly, in any prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code.

         10.12. INDEMNITY. Each individual (as distinguished from corporate)
trustee of the Plan or officer, director or employee of the Employer shall,
except as prohibited by law, be indemnified and held harmless by the Employer
from any and all liabilities, costs and expenses (including legal fees), to the
extent not covered by liability insurance, arising out of any action taken by
such individual with respect to the Plan, whether imposed under ERISA or
otherwise, unless the liability, cost or expense arises from the individual's
claim for his or her own benefit, the proven gross negligence, the bad faith or,
if the individual had reasonable cause to believe his or her conduct was
unlawful, the criminal misconduct of such individual. This indemnification shall
continue as to an individual who has ceased to be a trustee of the Plan or
officer, director or employee of the Employer and shall inure to the benefit of
the heirs, executors and administrators of such an individual.

         The Principal Sponsor recognizes that a burden of litigation may be
imposed upon the Trustee as a result of some transaction for which it has no
responsibility or over which it has no control under this Agreement. Therefore,
the Principal Sponsor agrees to indemnify and hold harmless and, if requested,

                                       53

<PAGE>

defend the Trustee (and any employee of the Trustee) from any expenses
(including counsel fees, liabilities, claims, damages, actions, suits or other
charges) incurred by the Trustee (or its employees) in defending against any
such litigation.

                                   SECTION 11

                     DETERMINATIONS -- RULES AND REGULATIONS

         11.1. DETERMINATIONS. The Retirement Committee shall make such
determinations as may be required from time to time in the administration of the
Plan. The Retirement Committee shall have the sole, full and complete
discretionary authority and responsibility to interpret and construe the Plan
Statement, to decide any matters presented as a part of the claims procedure set
forth in this Section, and to determine all factual and legal questions under
the Plan, including, but not limited to, the entitlement of employees,
Participants and Beneficiaries and the amounts of their respective interests.
The Trustee and other interested parties may act and rely upon all information
reported to them hereunder and need not inquire into the accuracy thereof, nor
be charged with any notice to the contrary.

         11.2. RULES AND REGULATIONS. Any rule not in conflict or at variance
with the provisions hereof may be adopted by the Retirement Committee.

         11.3. METHOD OF EXECUTING INSTRUMENTS.

                  11.3.1. EMPLOYER OR COMMITTEE. Information to be supplied or
         written notices to be made or consents to be given by the Principal
         Sponsor, the Employer, the Retirement Committee pursuant to any
         provision of this Plan Statement may be signed in the name of the
         Principal Sponsor or Employer by any officer thereof who has been
         authorized to make such certification or to give such notices or
         consents or by any committee member.

                  11.3.2. TRUSTEE. Any instrument or written notice required,
         necessary or advisable to be made or given by the Trustee may be signed
         by any Trustee, if all Trustees serving hereunder are individuals, or
         by any authorized officer or employee of the Trustee, if a corporate
         Trustee shall be acting hereunder as sole Trustee, or by any such
         officer or employee of the corporate Trustee or by an individual
         Trustee acting hereunder, if corporate and individual Trustees shall be
         serving as co-trustees hereunder.

         11.4. CLAIMS PROCEDURE. Until modified by the Retirement Committee, the
claims procedure set forth in this Section 11.4 shall be the claims procedure
for the resolution of disputes and disposition of claims arising under the Plan.
An application for a distribution under Section 7 shall be considered as a claim
for the purposes of this Section.

                  11.4.1. ORIGINAL CLAIM. Any employee, former employee, or
         Beneficiary of such employee or former employee may, if he or she so
         desires, file with the Retirement Committee a written claim for
         benefits under the Plan. Within ninety (90) days after the filing of
         such a claim, the Retirement Committee or its delegate shall notify the
         claimant in writing whether the claim is upheld or denied in whole or
         in part or shall furnish the claimant a written notice describing
         specific special circumstances requiring a specified amount of
         additional time (but not more than one hundred eighty days from the
         date the claim was filed) to reach a decision on the claim. If the
         claim is denied in whole or in part, the Retirement Committee shall
         state in writing:

                           (a) the specific reasons for the denial,

                           (b) the specific references to the pertinent
                  provisions of this Plan Statement on which the denial is
                  based,

                                       54

<PAGE>

                           (c) a description of any additional material or
                  information necessary for the claimant to perfect the claim
                  and an explanation of why such material or information is
                  necessary, and

                           (d) an explanation of the claims review procedure set
                  forth in this Section.

                  11.4.2. CLAIMS REVIEW PROCEDURE. A claimant who desires a
         review of any claim which has been denied in whole or in part must, in
         order to preserve any legal recourse, file a written request for such a
         review with the Retirement Committee within sixty (60) days after
         receipt of the notice of denial and may, in conjunction therewith,
         submit written issues and comments. Within sixty (60) days after the
         filing of such a request for review, the Retirement Committee shall
         notify the claimant in writing whether, upon review, the claim was
         upheld or denied in whole or in part or shall furnish the claimant a
         written notice describing specific special circumstances requiring a
         specified amount of additional time (but not more than one hundred
         twenty days from the date the request for review was filed) to reach a
         decision on the request for review.

                  11.4.3. GENERAL RULES.

                           (a) No inquiry or question shall be deemed to be a
                  claim or a request for a review of a denied claim unless made
                  in accordance with the claims procedure. The Retirement
                  Committee may require that any claim for benefits and any
                  request for a review of a denied claim be filed on forms to be
                  furnished by the Retirement Committee upon request.

                           (b) All decisions on claims and on requests for a
                  review of denied claims shall be made by the Retirement
                  Committee or its delegate.

                           (c) The Retirement Committee may, in its discretion,
                  hold one or more hearings on a claim or a request for a review
                  of a denied claim.

                           (d) Claimants may be represented by a lawyer or other
                  representative (at their own expense), but the Retirement
                  Committee reserves the right to require the claimant to
                  furnish written authorization. A claimant's representative
                  shall be entitled to copies of all notices given to the
                  claimant.

                           (e) The decision of the Retirement Committee on a
                  claim and on a request for a review of a denied claim shall be
                  served on the claimant in writing. If a decision or notice is
                  not received by a claimant within the time specified, the
                  claim or request for a review of a denied claim shall be
                  deemed to have been denied.

                           (f) Prior to filing a claim or a request for a review
                  of a denied claim, the claimant or the claimant's
                  representative shall have a reasonable opportunity to review a
                  copy of this Plan Statement and all other pertinent documents
                  in the possession of the Employer, the Retirement Committee
                  and the Trustee.

                           (g) A denied claim may be challenged in court only
                  after the review procedure above has been exhausted. If
                  challenged in court, determinations by the Retirement
                  Committee shall not be subject to an initial redetermination
                  of the claim but to review only and shall not be overturned
                  unless proven to be arbitrary and capricious based upon the
                  evidence considered by the Retirement Committee at the time of
                  the determination.

                                       55

<PAGE>

         11.5. INFORMATION FURNISHED BY PARTICIPANTS. Neither the Employer nor
the Retirement Committee nor the Trustee shall be liable or responsible for any
error in the computation of the Account of a Participant resulting from any
misstatement of fact made by the Participant, directly or indirectly, to the
Employer, the Retirement Committee or the Trustee and used by them in
determining the Participant's Account. Neither the Employer nor the Retirement
Committee nor the Trustee shall be obligated or required to increase the Account
of such Participant which, on discovery of the misstatement, is found to be
understated as a result of such misstatement of the Participant. However, the
Account of any Participant which is overstated by reason of any such
misstatement shall be reduced to the amount appropriate for the Participant in
view of the truth. Any refund received upon reduction of an Account so made
shall be used to reduce the next succeeding contribution of the Employer to the
Plan.

                                   SECTION 12

                               PLAN ADMINISTRATION

         12.1. PRINCIPAL SPONSOR.

                  12.1.1. OFFICERS. Except as hereinafter provided, functions
         generally assigned to the Principal Sponsor shall be discharged by its
         officers or delegated and allocated as provided herein.

                  12.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter
         provided, the Chief Executive Officer of the Principal Sponsor may
         delegate or redelegate and allocate and reallocate to one or more
         persons or to a committee of persons jointly or severally, and whether
         or not such persons are directors, officers or employees, such
         functions assigned to the Principal Sponsor hereunder as the Chief
         Executive Officer may from time to time deem advisable.

                  12.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the
         Board of Directors of the Principal Sponsor shall have the exclusive
         authority, which may not be delegated, to act for the Principal
         Sponsor:

                           (a) to terminate the Plan,

                           (b) to appoint or remove members of the Committee;

                           (c) to determine the Employer contribution under
                  Section 3; to reduce, suspend or discontinue contributions to
                  the Plan,

         12.2. COMMITTEE.

                  12.2.1. APPOINTMENT AND REMOVAL. The Committee shall consist
         of such members as may be determined and appointed from time to time by
         the Board of Directors of the Principal Sponsor and they shall serve at
         the pleasure of such Board of Directors. Members of the Committee shall
         serve without compensation, but their reasonable expenses shall be an
         expense of the administration of the Fund and shall be paid by the
         Trustee from and out of the Fund except to the extent the Employer, in
         its discretion, directly pays such expenses.

                  12.2.2. AUTOMATIC REMOVAL. If any individual who is a member
         of the Committee is a director, officer or employee when appointed as a
         member of the Committee, then such individual shall be automatically
         removed as a member of the Committee at the earliest time such
         individual ceases to be a director, officer or employee. This removal
         shall occur automatically and without any requirement for action by the
         Board of Directors of the Principal Sponsor or any notice to the
         individual so removed.

                                       56

<PAGE>

                  12.2.3. AUTHORITY. The Committee may elect such officers as
         the Committee may decide upon. The Committee shall:

                           (a) establish rules for the functioning of the
                  Committee, including the times and places for holding
                  meetings, the notices to be given in respect of such meetings
                  and the number of members who shall constitute a quorum for
                  the transaction of business,

                           (b) organize and delegate to such of its members as
                  it shall select authority to execute or authenticate rules,
                  advisory opinions or instructions, and other instruments
                  adopted or authorized by the Committee; adopt such bylaws or
                  regulations as it deems desirable for the conduct of its
                  affairs; appoint a secretary, who need not be a member of the
                  Committee, to keep its records and otherwise assist the
                  Committee in the performance of its duties; keep a record of
                  all its proceedings and acts and keep all books of account,
                  records and other data as may be necessary for the proper
                  administration of the Plan; notify the Employer and the
                  Trustee of any action taken by the Committee and, when
                  required, notify any other interested person or persons,

                           (c) determine from the records of the Employer the
                  compensation, service records, status and other facts
                  regarding Participants and other employees,

                           (d) cause to be compiled at least annually, from the
                  records of the Committee and the reports and accountings of
                  the Trustee, a report or accounting of the status of the Plan
                  and the Accounts of the Participants, and make it available to
                  each Participant who shall have the right to examine that part
                  of such report or accounting (or a true and correct copy of
                  such part) which sets forth the Participant's benefits and
                  ratable interest in the Fund,

                           (e) prescribe forms to be used for applications for
                  participation, benefits, notifications, etc., as may be
                  required in the administration of the Plan,

                           (f) set up such rules as are deemed necessary to
                  carry out the terms of this Plan Statement,

                           (g) resolve all questions of administration of the
                  Plan not specifically referred to in this Section,

                           (h) delegate or redelegate to one or more persons,
                  jointly or severally, and whether or not such persons are
                  members of the Committee or employees of the Employer, such
                  functions assigned to the Committee hereunder as it may from
                  time to time deem advisable,

                           (i) perform all other acts reasonably necessary for
                  administering the Plan and carrying out the provisions of this
                  Plan Statement and performing the duties imposed on it,

                           (j) have the authority to appoint or remove a Trustee
                  or accept the resignation of a Trustee,

                           (k) have the authority to appoint or remove an
                  Investment Manager,

                           (l) have the authority and discretion to engage an
                  Administrative Delegate who shall perform, without
                  discretionary authority or control, administrative functions
                  within the framework of policies, interpretations, rules,
                  practices and procedures made by the Retirement Committee or
                  other Plan Fiduciary. Any action made or taken by the

                                       57
<PAGE>

                  Administrative Delegate may be appealed by an affected
                  Participant to the Retirement Committee in accordance with the
                  claims review procedures provided in Section 11.4. Any
                  decisions which call for interpretations of Plan provisions
                  not previously made by the Retirement Committee shall be made
                  only by the Retirement Committee. The Administrative Delegate
                  shall not be considered a fiduciary with respect to the
                  services it provides, unless otherwise required under ERISA,
                  and

                           (m) may, for administrative purposes, establish unit
                  values for one or more investment fund (or any portion
                  thereof) and maintain the Accounts setting forth each
                  Participant's interest in such investment fund (or any portion
                  thereof) in terms of such units, all in accordance with such
                  rules and procedures as shall be administratively practicable.
                  In the event that unit accounting is thus established for any
                  investment fund (or any portion thereof), the value of a
                  Participant's interest in that investment fund (or any portion
                  thereof) at any time shall be an amount equal to the then
                  value of a unit in such investment fund (or any portion
                  thereof) multiplied by the number of units then credited to
                  the Participant.

                  12.2.4. MAJORITY DECISIONS. If there shall at any time be
         three (3) or more members of the Committee serving hereunder who are
         qualified to perform a particular act, the same may be performed, on
         behalf of all, by a majority of those qualified, with or without the
         concurrence of the minority. No person who failed to join or concur in
         such act shall be held liable for the consequences thereof, except to
         the extent that liability is imposed under ERISA.

         12.3. LIMITATION ON AUTHORITY.

                  12.3.1. FIDUCIARIES GENERALLY. No action taken by any
         fiduciary, if authority to take such action has been delegated or
         redelegated to it, shall be the responsibility of any other fiduciary
         except as may be required by the provisions of ERISA. Except to the
         extent imposed by ERISA, no fiduciary shall have the duty to question
         whether any other fiduciary is fulfilling all of the responsibility
         imposed upon such other fiduciary by the Plan Statement or by ERISA.

                  12.3.2. TRUSTEE. The responsibilities and obligations of the
         Trustee shall be strictly limited to those set forth in this Plan
         Statement. The Trustee shall have no authority or duty to determine or
         enforce payment of any Employer contribution under the Plan or to
         determine the existence, nature or extent of any individual's rights in
         the Fund or under the Plan or question any determination made by the
         Principal Sponsor or the Retirement Committee regarding the same. Nor
         shall the Trustee be responsible in any way for the manner in which the
         Principal Sponsor, the Employer or the Retirement Committee carries out
         its responsibilities under this Plan Statement or, more generally,
         under the Plan. The Trustee shall give the Principal Sponsor notice of
         (and tender to the Principal Sponsor) the prosecution or defense of any
         litigation involving the Plan, the Fund or other fiduciaries of the
         Plan.

         12.4. CONFLICT OF INTEREST. If any officer or employee of the Employer,
any member of the board of directors of the Employer, any member of the
Retirement Committee or any Trustee to whom authority has been delegated or
redelegated hereunder shall also be a Participant or Beneficiary in the Plan,
the individual shall have no authority as such officer, employee, member or
Trustee with respect to any matter specially affecting his or her individual
interest hereunder (as distinguished from the interests of all Participants and
Beneficiaries or a broad class of Participants and Beneficiaries), all such
authority being reserved exclusively to the other officers, employees, members
or Trustees as the case may be, to the exclusion of such Participant or
Beneficiary, and such Participant or Beneficiary shall act only in his or her
individual capacity in connection with any such matter.

                                       58
<PAGE>

         12.5. DUAL CAPACITY. Individuals, firms, corporations or partnerships
identified herein or delegated or allocated authority or responsibility
hereunder may serve in more than one fiduciary capacity.

         12.6. ADMINISTRATOR. The Principal Sponsor shall be the administrator
for purposes of Section 3(16)(A) of ERISA.

         12.7. NAMED FIDUCIARIES. The Employer and the Retirement Committee
shall be named fiduciaries for the purpose of Section 402(a) of ERISA.

         12.8. SERVICE OF PROCESS. In the absence of any designation to the
contrary by the Retirement Committee, the Secretary of the Principal Sponsor is
designated as the appropriate and exclusive agent for the receipt of service of
process directed to the Plan in any legal proceeding, including arbitration,
involving the Plan.

         12.9. ADMINISTRATIVE EXPENSES. The reasonable expenses of administering
the Plan, including but not limited to record keeping fees, investment fees and
trustee fees, shall be payable out of the Fund except to the extent that the
Employer, in its discretion, directly pays the expenses. The Employer may direct
the Trustee to charge such expenses first against the aggregate forfeiture
account referred to in Section 1.1.1(g).

         12.10. IRS QUALIFICATION. This Plan is intended to qualify under
Section 401(a) of the Code as a defined contribution profit sharing plan (and
not as a defined contribution money purchase pension plan or stock bonus plan or
a defined benefit pension plan).

                                   SECTION 13

                                   IN GENERAL

         13.1. DISCLAIMERS.

                  13.1.1. EFFECT ON EMPLOYMENT. Neither the terms of this Plan
         Statement nor the benefits hereunder nor the continuance thereof shall
         be a term of the employment of any employee, and the Employer shall not
         be obliged to continue the Plan. The terms of this Plan Statement shall
         not give any employee the right to be retained in the employment of the
         Employer.

                  13.1.2. SOLE SOURCE OF BENEFITS. Neither the Employer nor any
         of its officers nor any member of its board of directors nor any member
         of the Retirement Committee or the Trustee in any way guarantee the
         Fund against loss or depreciation, nor do they guarantee the payment of
         any benefit or amount which may become due and payable hereunder to any
         Participant, Beneficiary or other person. Each Participant, Beneficiary
         or other person entitled at any time to payments hereunder shall look
         solely to the assets of the Fund for such payments. If a Vested Total
         Account shall have been distributed to a former Participant,
         Beneficiary or any other person entitled jointly to the receipt thereof
         (or shall have been transferred to the Trustee of another tax-qualified
         deferred compensation plan), such former Participant, Beneficiary or
         other person, as the case may be, shall have no further right or
         interest in the other assets of the Fund.

                  13.1.3. CO-FIDUCIARY MATTERS. Neither the Employer nor any of
         its officers nor any member of its board of directors nor any member of
         the Retirement Committee shall in any manner be liable to any
         Participant, Beneficiary or other person for any act or omission of the
         Trustee (except to the extent that liability is imposed under ERISA).
         Neither the Employer nor any of its officers nor any member of its
         board of directors nor any member of the Retirement

                                       59
<PAGE>

         Committee or the Trustee shall be under any liability or responsibility
         (except to the extent that liability is imposed under ERISA) for
         failure to effect any of the objectives or purposes of the Plan by
         reason of loss or fluctuation in the value of Fund or for the form,
         genuineness, validity, sufficiency or effect of any Fund asset at any
         time held hereunder, or for the failure of any person, firm or
         corporation indebted to the Fund to pay such indebtedness as and when
         the same shall become due or for any delay occasioned by reason of any
         applicable law, order or regulation or by reason of any restriction or
         provision contained in any security or other asset held by the Fund.
         Except as is otherwise provided in ERISA, the Employer and its
         officers, the members of its board of directors and the members of the
         Retirement Committee, the Trustee and other fiduciaries shall not be
         liable for an act or omission of another person with regard to a
         fiduciary responsibility that has been allocated to or delegated to
         such other person pursuant to the terms of this Plan Statement or
         pursuant to procedures set forth in this Plan Statement.

         13.2. REVERSION OF FUND PROHIBITED. The Fund from time to time
hereunder shall at all times be a trust fund separate and apart from the assets
of the Employer, and no part thereof shall be or become available to the
Employer or to creditors of the Employer under any circumstances other than
those specified in Section 3.11 and Appendix A to this Plan Statement. It shall
be impossible for any part of the corpus or income of the Fund to be used for,
or diverted to, purposes other than for the exclusive benefit of Participants
and Beneficiaries (except as hereinbefore provided).

         13.3. CONTINGENT TOP HEAVY PLAN RULES. The rules set forth in Appendix
B to this Plan Statement (concerning additional provisions that apply if the
Plan becomes top heavy) are incorporated herein.

         13.4. CONTINUITY. The tenure and membership of any committee previously
appointed, the rules of administration adopted and the Beneficiary designations
in effect under the Prior Plan Statement shall, to the extent not inconsistent
with this Plan Statement, continue in full force and effect until altered as
provided herein.

         13.5. EXECUTION IN COUNTERPARTS. This Plan Statement may be executed in
any number of counterparts, each of which, without production of the others,
shall be deemed to be an original.

         13.6. GOVERNING LAW. To the extent not preempted by federal law, the
Trust shall be governed under the laws of the State of Wisconsin.

                                   SECTION 14

                             EGTRRA PLAN AMENDMENTS

         14.1. AMENDMENT OF THE PLAN FOR EGTRRA.

                  14.1.1. ADOPTION AND EFFECTIVE DATE OF EGTRRA AMENDMENTS. This
         Section 14 of the Plan are adopted to reflect certain provisions of the
         Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA").
         These amendments are intended as good faith compliance with the
         requirements of EGTRRA and are to be construed in accordance with
         EGTRRA and guidance issued thereunder. Except as otherwise provided,
         the amendments in this Section 14 shall be effective as of the first
         day of the first Plan Year beginning after December 31, 2001.

                  14.1.2. SUPERSESSION OF INCONSISTENT PROVISIONS. This Section
         14 shall supersede the provisions of the Plan to the extent those
         provisions are inconsistent with the provisions of this Article.

                                       60

<PAGE>

         14.2. LIMITATIONS ON CONTRIBUTIONS.

                  14.2.1. EFFECTIVE DATE. This Section 14.2 shall be effective
         for limitation years beginning after December 31, 2001.

                  14.2.2. MAXIMUM ANNUAL ADDITION. Except to the extent
         permitted under Plan Section 14.9 and Section 414(v) of the Code, if
         applicable, the Annual Additions that may be contributed or allocated
         to a Participant's Account under the Plan for any limitation year shall
         not exceed the lesser of:

                           (a) $40,000, as adjusted for increases in the
                  cost-of-living under Section 415(d) of the Code, or

                           (b) 100% of the Participant's compensation, within
                  the meaning of Section 415(c)(3) of the Code, for the
                  limitation year.

         The compensation limit referred to in (b) shall not apply to any
         contribution for medical benefits after separation from service (within
         the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which
         is otherwise treated as an Annual Addition.

         14.3. INCREASE IN COMPENSATION LIMIT. The annual Compensation of each
Participant taken into account in determining allocations for any Plan Year
beginning after December 31, 2001, shall not exceed $200,000, as adjusted for
cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code.
Annual Compensation means Compensation during the Plan Year or such other
consecutive 12-month period over which Compensation is otherwise determined
under the Plan (the "determination period"). The cost-of-living adjustment in
effect for a calendar year applies to annual Compensation for the determination
period that begins with or within such calendar year.

         14.4. MODIFICATION OF TOP-HEAVY RULES.

                  14.4.1. EFFECTIVE DATE. This Section 14.4 shall apply for
         purposes of determining whether the Plan is a top-heavy plan under
         Section 416(g) of the Code for Plan Years beginning after December 31,
         2001, and whether the Plan satisfies the minimum benefits requirements
         of Section 416(c) of the Code for such years. This Section amends
         Appendix B of the Plan.

                  14.4.2. DETERMINATION OF TOP-HEAVY STATUS.

                           (a) KEY EMPLOYEE. Key employee means any employee or
                  former employee (including any deceased employee) who at any
                  time during the Plan Year that includes the determination date
                  was an officer of the Company having annual compensation
                  greater than $130,000 (as adjusted under Section 416(i)(1) of
                  the Code for Plan Years beginning after December 31, 2002), a
                  5% owner of the employer, or a 1% owner of the Company having
                  "annual compensation" of more than $150,000. For this purpose,
                  annual compensation means compensation within the meaning of
                  Section 415(c)(3) of the Code. The determination of who is a
                  key employee will be made in accordance with Section 416(i)(1)
                  of the Code and the applicable regulations and other guidance
                  of general applicability issued thereunder.

                           (b) DETERMINATION OF PRESENT VALUES AND AMOUNTS. This
                  Section 14.4.2(b), (c) and (d) shall apply for purposes of
                  determining the present values of accrued benefits and the
                  amounts of account balances of employees as of the
                  determination date.

                           (c) DISTRIBUTIONS DURING YEAR ENDING ON THE
                  DETERMINATION DATE. The present values of accrued benefits and
                  the amounts of account balances of an employee as

                                       61
<PAGE>

                  of the determination date shall be increased by the
                  distributions made with respect to the employee under the Plan
                  and any plan aggregated with the Plan under Section 416(g)(2)
                  of the Code during the 1-year period ending on the
                  determination date. The preceding sentence shall also apply to
                  distributions under a terminated plan which, had it not been
                  terminated, would have been aggregated with the Plan under
                  Section 416(g)(2)(A)(i) of the Code. In the case of a
                  distribution made for a reason other than separation from
                  service, death, or disability, this provision shall be applied
                  by substituting "5-year period" for "1-year period."

                           (d) EMPLOYEES NOT PERFORMING SERVICES DURING YEAR
                  ENDING ON THE DETERMINATION DATE. The accrued benefits and
                  accounts of any individual who has not performed services for
                  the Company during the 1-year period ending on the
                  determination date shall not be taken into account.

                  14.4.3. MINIMUM BENEFITS.

                           (a) MATCHING CONTRIBUTIONS. Company matching
                  contributions shall be taken into account for purposes of
                  satisfying the minimum contribution requirements of Section
                  416(c)(2) of the Code and the Plan. The preceding sentence
                  shall apply with respect to matching contributions under the
                  Plan or, if the Plan provides that the minimum contribution
                  requirement shall be met in another plan, such other plan.
                  Company matching contributions that are used to satisfy the
                  minimum contribution requirements shall be treated as matching
                  contributions for purposes of the Actual Contribution
                  Percentage Test and other requirements of Section 401(m) of
                  the Code.

                           (b) CONTRIBUTIONS UNDER OTHER PLANS. The Company may
                  provide that the minimum benefit requirement shall be met in
                  another plan (including another plan that consists solely of a
                  cash or deferred arrangement which meets the requirements of
                  Section 401(k)(12) of the Code and matching contributions with
                  respect to which the requirements of Section 401(m)(11) of the
                  Code are met).

         14.5. DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS FROM THIS PLAN.

                  14.5.1. EFFECTIVE DATE. This Section 14.5 shall apply to
         distributions made after December 31, 2001.

                  14.5.2. MODIFICATION OF DEFINITION OF ELIGIBLE RETIREMENT
         PLAN. For purposes of the direct rollover provisions in Section 7.6 of
         the Plan, an eligible retirement plan shall also mean an annuity
         contract described in Section 403(b) of the Code and an eligible plan
         under Section 457(b) of the Code which is maintained by a state,
         political subdivision of a state, or any agency or instrumentality of a
         state or political subdivision of a state and which agrees to
         separately account for amounts transferred into such plan from this
         Plan. The definition of eligible retirement plan shall also apply in
         the case of a distribution to a surviving spouse, or to a spouse or
         former spouse who is the alternate payee under a qualified domestic
         relation order, as defined in Section 414(p) of the Code.

                  14.5.3. MODIFICATION OF DEFINITION OF ELIGIBLE ROLLOVER
         DISTRIBUTION TO EXCLUDE HARDSHIP DISTRIBUTIONS. For purposes of the
         direct rollover provisions in Section 7.6 of the Plan, any amount that
         is distributed on account of hardship shall not be an eligible rollover
         distribution and the distributee may not elect to have any portion of
         such a distribution paid directly to an eligible retirement plan.

                  14.5.4. MODIFICATION OF DEFINITION OF ELIGIBLE ROLLOVER
         DISTRIBUTION TO INCLUDE AFTER-TAX EMPLOYEE CONTRIBUTIONS. For purposes
         of the direct rollover provision in Section 7.6 of the Plan,

                                       62

<PAGE>

         a portion of a distribution shall not fail to be an eligible rollover
         distribution merely because the portion consists of after-tax employee
         contributions which are not includable in gross income. However, such
         portion may be transferred only to an individual retirement account or
         annuity described in Section 408(a) or (b) of the Code, or to a
         qualified defined contribution plan described in Section 401(a) or
         403(a) of the Code that agrees to separately account for amounts so
         transferred, including separately accounting for the portion of such
         distribution which is includable in gross income and the portion of
         such distribution which is not so includable.

         14.6. ROLLOVERS DISREGARDED IN INVOLUNTARY CASH-OUTS. With respect to
distributions after December 31, 2001, for purposes of Section 7.1.2 of the
Plan, the value of a Participant's Vested Total Account shall be determined
without regard to that portion of the account balance that is attributable to
rollover contributions (and earnings allocable thereto) within the meaning of
Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii) and 457(e)(16) of the
Code. If the value of the Participant's Vested Total Account as so determined is
$5,000 or less, the Plan shall immediately distribute the Participant's entire
nonforfeitable account balance.

         14.7. REPEAL OF MULTIPLE USE TEST. The multiple use test described in
Treasury Regulation Section 1.401(m)-2 and Section 3.5.3 of the Plan shall not
apply for Plan Years beginning after December 31, 2001.

         14.8. MODIFICATION OF TOP-HEAVY RULES. The top-heavy requirements of
Section 416 of the Code and Appendix B of the Plan shall not apply in any year
beginning after December 31, 2001, in which the Plan consists solely of a cash
or deferred management which meets the requirements of Section 401(k)(12) of the
Code and matching contributions with respect to which the requirements of
Section 401(m)(11) of the Code are met.

         14.9. ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION. No Participant
shall be permitted to have elective deferrals made under this Plan, or any other
qualified plan maintained by the Company during any taxable year, in excess of
the dollar limitation contained in Section 402(g) of the Code in effect for such
taxable year, except to the extent permitted under Section 14.9 and Section
414(v) of the Code, if applicable.

         14.10. CATCH-UP CONTRIBUTIONS. Effective for Salary Deferral
Contributions after December 31, 2001 and the effective date for implementation
of this provision as specified by the Retirement Committee, all employees who
are eligible to make elective deferrals under this Plan and who have attained
age 50 before the close of the Plan Year shall be eligible to make catch-up
contributions in accordance with, and subject to the limitations of, Section
414(v) of the Code. Such catch-up contributions shall not be taken into account
for purposes of the provisions of the Plan implementing the required limitations
of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing
to satisfy the provisions of the Plan implementing the requirements of Section
401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by
reason of the making of such catch-up contributions.

         14.11. SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION. A Participant
who receives a distribution of elective deferrals after December 31, 2001, on
account of hardship shall be prohibited from making elective deferral and
employee contributions under this and all other plans of the employer for 6
months after receipt of the distribution. A Participant who receives a
distribution of elective deferrals in calendar year 2001 on account of hardship
shall be prohibited from making elective deferrals and employee contributions
under this and all other plans of the employer for 6 months after receipt of the
distribution or until January 1, 2002, if later.

         14.12. DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT. A Participant's
elective deferrals, qualified nonelective contributions, qualified matching
contributions, and earnings attributable to these contributions shall be
distributed on account of the Participant's severance from employment. However,

                                       63

<PAGE>

such a distribution shall be subject to the other provisions of the Plan
regarding distributions, other than provisions that require a separation from
service before such amounts may be distributed. This provision shall apply for
distributions after December 31, 2001, regardless of when the severance from
employment occurred.

         IN WITNESS WHEREOF, the Principal Sponsor and the Trustee, by their
duly authorized officers, have executed this Plan Trust Agreement on the _____
day of _______________, 2002, to become generally effective as of February 23,
1997.

                                               SHOPKO STORES, INC.
                                               (THE "PRINCIPAL SPONSOR")

                                               By:_____________________________

                                               Title:__________________________

                                               AMERICAN EXPRESS TRUST COMPANY
                                               (THE "TRUSTEE")

                                               By:_____________________________

                                               Title:__________________________

                                       64
<PAGE>
                                   SCHEDULE I
                                       TO
                       SHOPKO STORES, INC. SHARED SAVINGS

Participating Employers
As of __________, 2001

                    Employer                                        EIN

        1.       ShopKo Stores, Inc.                             41-0985054

        (update as appropriate)

                                       65
<PAGE>
                                   APPENDIX A

                         LIMITATION ON ANNUAL ADDITIONS

                                    SECTION 1

                                  INTRODUCTION

         Terms defined in the Plan Statement shall have the same meanings when
used in this Appendix. In addition, when used in this Appendix, the following
terms shall have the following meanings:

         1.1. ANNUAL ADDITION. Annual addition means, with respect to any
Participant for a limitation year, the sum of:

                           (a) all employer contributions (including employer
                  contributions of the Participant's earnings reductions under
                  Section 401(k), Section 403(b) and Section 408(k) of the Code)
                  allocable as of a date during such limitation year to the
                  Participant under all defined contribution plans;

                           (b) all forfeitures allocable as of a date during
                  such limitation year to the Participant under all defined
                  contribution plans; and

                           (c) all Participant contributions made as of a date
                  during such limitation year to all defined contribution plans.

                  1.1.1. SPECIFIC INCLUSIONS. With regard to a plan which
         contains a qualified cash or deferred arrangement or matching
         contributions or employee contributions, excess deferrals and excess
         contributions and excess aggregate contributions (whether or not
         distributed during or after the limitation year) shall be considered
         annual additions in the year contributed.

                  1.1.2. SPECIFIC EXCLUSIONS. The annual addition shall not,
         however, include any portion of a Participant's rollover contributions
         or any additions to accounts attributable to a plan merger or a
         transfer of plan assets or liabilities or any other amounts excludable
         under law.

                  1.1.3. ESOP RULES. In the case of an employee stock ownership
         plan within the meaning of Section 4975(e)(7) of the Code, annual
         additions shall not include any dividends or gains on sale of employer
         securities held by the employee stock ownership plan (regardless of
         whether such dividends or gains are (i) on securities which are
         allocated to Participants' accounts or (ii) on securities which are not
         allocated to Participants' accounts which, in the case of dividends
         used to pay principal on an employee stock ownership plan loan, result
         in employer securities being allocated to Participants' accounts or, in
         the case of a sale, result in sale proceeds being allocated to
         Participants' accounts). In the case of an employee stock ownership
         plan under which no more than one-third of the employer contributions
         for a limitation year which are deductible under Section 404(a)(9) of
         the Code are allocated to highly compensated employees (as defined in
         Section 414(q) of the Code), annual additions shall not include
         forfeitures of employer securities under the employee stock ownership
         plan if such securities were acquired with the proceeds of an exempt
         loan or employer contributions to the employee stock ownership plan
         which are deductible by the employer under Section 404(a)(9)(B) of the
         Code and charged against the Participant's account (i.e., interest
         payments).

         1.2. ANNUAL BENEFIT. Annual benefit means a retirement benefit under a
defined benefit plan which is payable annually in the form of a straight life
annuity.

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<PAGE>

                  1.2.1. STRAIGHT LIFE ANNUITY. Except as provided below, a
         benefit payable in a form other than a straight life annuity will be
         adjusted to the actuarial equivalent straight life annuity before
         applying the limitations of this Appendix. To determine this actuarial
         equivalent, the interest rate assumption shall be the greater of the
         interest rate specified in the defined benefit plan's plan document or
         five percent (5%) and the mortality assumption shall be that specified
         in the defined benefit plan's plan document.

                  1.2.2. EXCLUDED CONTRIBUTIONS. The annual benefit does not
         include any benefits attributable to employee contributions, rollover
         contributions or the assets transferred from a qualified plan that was
         not maintained by a controlled group member.

                  1.2.3. ANCILLARY BENEFITS. No actuarial adjustment to the
         annual benefit is required for: (i) the value of a qualified joint and
         survivor annuity (to the extent such value exceeds the sum of the value
         of a straight life annuity beginning on the same date and the value of
         post-retirement death benefits that would be paid even if the annuity
         were not in the form of a joint and survivor annuity), or (ii) the
         value of benefits that are not directly related to retirement benefits
         (such as a pre-retirement disability benefit, a pre-retirement death
         benefit or a post-retirement medical benefit), or (iii) the value of
         post-retirement cost-of-living increases made in accordance with
         regulations under the Code.

         1.3. CONTROLLED GROUP MEMBER. Controlled group member means the
Employer and each member of a controlled group of corporations (as defined in
Section 414(b) of the Code and as modified by Section 415(h) of the Code), all
commonly controlled trades or businesses (as defined in Section 414(c) of the
Code and as modified by Section 415(h) of the Code), affiliated service groups
(as defined in Section 414(m) of the Code) of which the Employer is a part and
other organizations required to be aggregated for this purpose under Section
414(o) of the Code.

         1.4. DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS. Defined benefit
plan and defined contribution plan have the meanings assigned to those terms by
Section 415(k)(1) of the Code. Whenever reference is made to defined benefit
plans and defined contribution plans in this Appendix, it shall include all such
plans maintained by the Employer and all controlled group members.

         1.5. DEFINED BENEFIT FRACTION.

                  1.5.1. GENERAL RULE. Defined benefit fraction means a fraction
         the numerator of which is the sum of the Participant's projected annual
         benefits under all defined benefit plans determined as of the close of
         the limitation year, and the denominator of which is the lesser of:

                           (i) One hundred twenty-five percent (125%) of the
                  dollar limitation in effect under Section 415(b)(l)(a) of the
                  Code as of the close of such limitation year (i.e., 125% of
                  $90,000 as adjusted for cost of living, commencement dates,
                  length of service and other factors), or

                           (ii) One hundred forty percent (140%) of the dollar
                  amount which may be taken into account under section
                  415(b)(l)(b) of the code with respect to such participant as
                  of the close of such limitation year (i.e., 140% of the
                  participant's highest average compensation as adjusted for
                  cost of living, length of service and other factors).

                  1.5.2. TRANSITION RULE. Notwithstanding the above, if the
         Participant was a participant as of the first day of the first
         limitation year beginning after December 31, 1986, in one or more
         defined benefit plans which were in existence on May 6, 1986, the
         denominator of this fraction will not be less than one hundred
         twenty-five percent (125%) of the sum of the annual benefits under such
         plans which the Participant had accrued as of the close of the last
         limitation year beginning before January 1, 1987, disregarding any
         changes in the terms and conditions of the

                                       67
<PAGE>

         Plan after May 5, 1986. The preceding sentence applies only if the
         defined benefit plans individually and in the aggregate satisfied the
         requirements of Section 415 of the Code for all limitation years
         beginning before January 1, 1987.

         1.6. DEFINED CONTRIBUTION FRACTION.

                  1.6.1. GENERAL RULE. Defined contribution fraction means a
         fraction the numerator of which is the sum of the Participant's annual
         additions (including Employer contributions which are allocated to a
         separate account established for the purpose of providing medical
         benefits or life insurance benefits with respect to a key employee (as
         defined in Appendix B) under a welfare benefit fund or individual
         medical account) as of the close of the limitation year and for all
         prior limitation years, and the denominator of which is the sum of the
         amounts determined under paragraph (i) or (ii) below, whichever is the
         lesser, for such limitation year and for each prior limitation year in
         which the Participant had any service with the employer (regardless of
         whether that or any other defined contribution plan was in existence
         during those years or continues in existence):

                           (i) one hundred twenty-five percent (125%) of the
                  dollar limitation in effect under Section 415(c)(l)(a) of the
                  Code for such limitation year determined without regard to
                  Section 415(c)(6) of the Code (i.e., 125% of $30,000 as
                  adjusted for cost-of-living), or

                           (ii) one hundred forty percent (140%) of the dollar
                  amount which may be taken into account under Section
                  415(c)(l)(b) of the Code with respect to such individual under
                  the plan for such limitation year (i.e., 140% of 25% of the
                  Participant's Section 415 compensation for such limitation
                  year).

                  1.6.2. TEFRA TRANSITION RULE. The Employer may elect that the
         amount taken into account for each Participant for all limitation years
         ending before January 1, 1983, under Section 1.6.1(i) and Section
         1.6.1(ii) shall be determined pursuant to the special transition rule
         provided in Section 415(e)(6) of the Code.

                  1.6.3. EMPLOYEE CONTRIBUTIONS. Notwithstanding the definition
         of "annual additions", for the purpose of determining the defined
         contribution fraction in limitation years beginning before January 1,
         1987, employee contributions shall not be taken into account to the
         extent that they were not required to be taken into account under
         Section 415 of the Code prior to the Tax Reform Act of 1986.

                  1.6.4. ANNUAL DENOMINATOR. The amounts to be determined under
         Section 1.6.1(i) and Section 1.6.1(ii) for the limitation year and for
         all prior limitation years in which the Participant had any service
         with the employer shall be determined separately for each such
         limitation year on the basis of which amount is the lesser for each
         such limitation year.

                  1.6.5. RELIEF RULE. If the Participant was a participant as of
         the end of the first day of the first limitation year beginning after
         December 31, 1986, in one or more defined contribution plans which were
         in existence on May 6, 1986, the numerator of this fraction will be
         adjusted if the sum of this fraction and the defined benefit fraction
         would otherwise exceed one (1.0) under the terms of this Plan
         Statement. Under the adjustment, an amount equal to the product of the
         excess of the sum of the fractions over one (10), times the denominator
         of this fraction, will be permanently subtracted from the numerator of
         this fraction. The adjustment is calculated using the fractions as they
         would be computed as of the end of the last limitation year beginning
         before January 1, 1987, and disregarding any changes in the terms and
         conditions of the plan made after May 6, 1986, but using the Section
         415 limitations applicable to the first limitation year beginning on or
         after January 1, 1987.

                                       68
<PAGE>

         1.7. HIGHEST AVERAGE COMPENSATION. Highest average compensation means
the average Section 415 compensation for the three (3) consecutive years of
service with the controlled group members that produce the highest average. A
year of service with the controlled group members is the Plan Year.

         1.8. INDIVIDUAL MEDICAL ACCOUNT. Individual medical account means an
account, as defined in Section 415(1)(2) of the Code maintained by the Employer
or a controlled group member which provides an annual addition.

         1.9. LIMITATION YEAR. The limitation year shall be the Plan Year.

         1.10. MAXIMUM PERMISSIBLE ADDITION.

                  1.10.1. GENERAL RULE. The maximum permissible addition (to
         defined contribution plans) for any one (1) limitation year shall be
         the lesser of:

                           (i) Thirty Thousand Dollars ($30,000), adjusted from
                  time to time for increases in the cost of living as provided
                  under applicable regulations (prorated for any short
                  limitation year), or

                           (ii) Twenty-five percent (25%) of the Participant's
                  Section 415 compensation for such limitation year, or if
                  greater, the percentage limitation under Section 415(c)(l)(B)
                  of the Code in effect for such limitation year.

                  1.10.2. ESOP RULE. For limitation years beginning before July
         13, 1989, in the case of an employee stock ownership plan within the
         meaning of Section 4975(e)(7) of the Code under which no more than one
         third of the employer contributions for a limitation year are allocated
         to highly compensated employees (as defined in Section 414(q) of the
         Code), the dollar limitation in Section 1.10.1(i) (after adjustment for
         cost of living) shall be increased to be equal to the sum of:

                           (i) the dollar limitation in Section 1.10.1(i) (after
                  adjustment for cost of living), and

                           (ii) the lesser of the dollar limitation in Section
                  1.10.1(i) (after adjustment for cost of living) or the amount
                  of employer securities contributed or purchased with cash
                  contributed to the employee stock ownership plan.

                  1.10.3. MEDICAL BENEFITS. The dollar limitation in Section
         1.10.1(i) (after adjustment for cost of living) shall be reduced by the
         amount of employer contributions which are allocated to a separate
         account established for the purpose of providing medical benefits or
         life insurance benefits with respect to a key employee (as defined in
         Appendix B) under a welfare benefit fund or an individual medical
         account.

         1.11. PROJECTED ANNUAL BENEFIT. Projected annual benefit means the
annual benefit payable to the Participant at his or her normal retirement age
(as defined in the defined benefit plan) adjusted to an actuarially equivalent
straight life annuity form (or, if it would be a lesser amount, to any
actuarially equivalent qualified joint and survivor annuity form that is
available under the defined benefit plan) assuming that:

                           (i) the Participant continues employment and
                  participation under the defined benefit plan until his or her
                  normal retirement age (as defined in the defined benefit plan)
                  or, if later, until his or her current age, and

                                       69
<PAGE>

                           (ii) the Participant's Section 415 compensation and
                  all other factors used to determine annual benefits under the
                  defined benefit plan remain unchanged for all future
                  limitation years.

         1.12. SECTION 415 COMPENSATION. Section 415 compensation (sometimes,"
Section 415 compensation") shall mean, with respect to any limitation year,
wages within the meaning of Section 3401(a) of the Code (for purposes of income
tax withholding at the source), but determined without regard to any rules that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code). For Plan Years beginning after
February 28, 1998, Section 415 compensation shall include elective contributions
made by the Employer on behalf of the Participant that are not includible in
gross income under Sections 125, 402(e)(3), 402(h) and 403(b) of the Code,
including elective contributions authorized by the Participant under a 401(k)
Agreement, a cafeteria plan or any other qualified cash or deferred arrangement
under Section 401(k) of the Code, and including elective contributions under any
qualified transportation fringe benefit under Section 132(f) of the Code. For
limitation years beginning after December 31, 1991, Section 415 compensation
shall be determined on a cash basis.

         1.13. SOCIAL SECURITY RETIREMENT AGE. Social security retirement age
means the age used as retirement age under Section 216(l) of the Social Security
Act except that such section shall be applied (i) without regard to the age
increase factor, and (ii) as if the early retirement age under Section 216(1)(2)
of the Social Security Act were age sixty-two (62) years.

         1.14. WELFARE BENEFIT FUND. Welfare benefit fund means a fund as
defined in Section 419(e) of the Code which provides post-retirement medical
benefits allocated to separate accounts for key employees as defined in Section
419A(d)(3).

                                   SECTION 2

                         DEFINED CONTRIBUTION LIMITATION

         Notwithstanding anything to the contrary contained in the Plan
Statement, there shall not be allocated to the Account of any Participant for
any limitation year an amount which would cause the annual addition for such
Participant to exceed the maximum permissible addition.

                                   SECTION 3

                            COMBINED PLANS LIMITATION

         Notwithstanding anything to the contrary contained in the Plan
Statement, if the Participant participates in both a defined benefit plan and a
defined contribution plan, then for Plan Years commencing prior to January 1,
2000, the sum of the defined benefit fraction and the defined contribution
fraction shall not exceed one (1) at the close of any limitation year.

                                    SECTION 4

                                 REMEDIAL ACTION

         4.1. DEFINED CONTRIBUTION PLANS ONLY. If the Participant's annual
additions for a limitation year would exceed the maximum permissible additions
applicable to defined contribution plans alone, the

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<PAGE>

Employer shall, to the extent they cause such excess to occur, cause the
following to occur until such excess is eliminated:

                           (i) return any unmatched employee contributions made
                  by the Participant for the limitation year to the Participant
                  (adjusted for their proportionate share of gains but not
                  losses while held in the Plan), and

                           (ii) distribute unmatched elective deferrals (within
                  the meaning of Section 402(g)(3) of the Code) made for the
                  limitation year to the Participant (adjusted for their
                  proportionate share of gains but not losses while held in the
                  Plan), and

                           (iii) return any matched employee contributions made
                  by the Participant for the limitation year to the Participant
                  (adjusted for their proportionate share of gains but not
                  losses while held in the Plan), and

                           (iv) distribute matched elective deferrals (within
                  the meaning of Section 402(g)(3) of the Code) made for the
                  limitation year to the Participant (adjusted for their
                  proportionate share of gains but not losses while held in the
                  Plan).

         To the extent either matched employee contributions are returned or
matched elective deferrals are distributed, any matching contribution made with
respect thereto shall be forfeited and reallocated to Participants as provided
in the Plan Statement.

                                       71
<PAGE>

         If, after returning such employee contributions to the Participant and
distributing elective deferrals to the Participant, an excess still exists, the
Employer shall cause such excess to be used to reduce employer contributions for
the next limitation year ("second limitation year") (and succeeding limitation
years, as necessary) for that Participant if that Participant is covered by the
Plan at the end of the second limitation year (or succeeding limitation years).
If the Participant is not covered by the Plan at the end of the second
limitation year (or succeeding limitation years), however, then the excess
amounts must be held unallocated in an "excess account" for the second
limitation year (or succeeding limitation years) and allocated and reallocated
in the second limitation year (or succeeding limitation year) to all the
remaining Participants in the Plan as if an employer contribution for the second
limitation year (or succeeding limitation year). However, if the allocation or
reallocation of the excess amounts pursuant to the provisions of the Plan causes
the limitations of this Appendix to be exceeded with respect to each Participant
for the second limitation year (or succeeding limitation years), then these
amounts must be held unallocated in an excess account. If an excess account is
in existence at any time during the second limitation year (or any succeeding
limitation year), all amounts in the excess account must be allocated and
reallocated to Participants' accounts (subject to the limitations of this
Appendix) as if they were additional employer contributions before any employer
contribution and any Participant contributions which would constitute annual
additions may be made to the Plan for that limitation year. Furthermore, the
excess amounts must be used to reduce employer contributions for the second
limitation year (and succeeding limitation years, as necessary) for all of the
remaining Participants. Excess amounts may not be distributed from the Plan to
Participants or former Participants. If an excess account is in existence at any
time during a limitation year, the gains and losses and other income
attributable to the excess account shall be allocated to such excess account. To
the extent that investment gains or other income or investment losses are
allocated to the excess account, the entire amount allocated to Participants
from the excess account, including any such gains or other income or less any
losses, shall be considered as an annual addition. If the Plan should be
terminated prior to the date any such temporarily held, unallocated excess can
be allocated to the Accounts of Participants, the date of termination shall be
deemed to be an Annual Valuation Date for the purpose of allocating such excess
and, if any portion of such excess cannot be allocated as of such deemed Annual
Valuation Date by reason of the limitations of this Appendix, such remaining
excess shall be returned to the Employer. It is specifically intended that such
remedial action as may be necessary to correct an excess allocation shall be
made in the following defined contribution plans in the following sequence:

                           (i) all profit sharing and stock bonus plans
                  containing cash or deferred arrangements,

                           (ii) all money purchase pension plans,

                           (iii) all profit sharing and stock bonus plans other
                  than employee stock ownership plans or plans containing cash
                  or deferred arrangements,

                           (iv) all employee stock ownership plans.

         If an excess allocation occurs in two (2) or more plans in the same
category, correction of the excess allocation shall be made in chronological
order as determined by the effective date of each plan (using the original
effective date of the plan) beginning with the most recently established plan.

         4.2. COMBINED DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS. If for
any Plan Year commencing prior to January 1, 2000, the combination of benefits
under all defined contribution plans and all defined benefit plans would exceed
the limits described above which are applicable to a combination of defined
benefit and defined contribution plans, then such Participant shall not be
entitled to the accrual of any benefits under such defined benefit plans to the
extent it would cause such combination of plans to exceed the limits hereinabove
described. If such reduction or curtailment of the accrual of future benefits
under the defined benefit plans and the cancellation of previously accrued

                                       72
<PAGE>

benefits is not adequate to eliminate an excess under the combination-of-plans
rule, then annual additions to the defined contribution plans shall be reduced.
It is specifically intended that the Employer shall cause the reduction or
elimination of future accruals and the cancellation of previously accrued
benefits under all defined benefit plans (other than terminated defined benefit
plans) to occur before any reduction of annual additions to defined contribution
plans.

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<PAGE>
                                   APPENDIX B

                         CONTINGENT TOP HEAVY PLAN RULES

         Notwithstanding any of the foregoing provisions of the Plan Statement,
if, after applying the special definitions set forth in Section 1 of this
Appendix, this Plan is determined under Section 2 of this Appendix to be a top
heavy plan for a Plan Year, then the special rules set forth in Section 3 of
this Appendix shall apply. For so long as this Plan is not determined to be a
top heavy plan, the special rules in Section 3 of this Appendix shall be
inapplicable to this Plan.

                                    SECTION 1

                               SPECIAL DEFINITIONS

         Terms defined in the Plan Statement shall have the same meanings when
used in this Appendix. In addition, when used in this Appendix, the following
terms shall have the following meanings:

         1.1. AGGREGATED EMPLOYERS. Aggregated employers means the Employer and
each other corporation, partnership or proprietorship which is a "predecessor"
to the Employer, or is under "common control" with the Employer, or is a member
of an "affiliated service group" that includes the Employer, as those terms are
defined in Section 414(b), (c), (m) or (o) of the Code.

         1.2. AGGREGATION GROUP. Aggregation group means a grouping of this Plan
and:

                           (a) if any Participant in the Plan is a key employee,
                  each other qualified pension, profit sharing or stock bonus
                  plan of the aggregated employers in which a key employee is a
                  Participant (and for this purpose, a key employee shall be
                  considered a Participant only during periods when he is
                  actually accruing benefits and not during periods when he has
                  preserved accrued benefits attributable to periods of
                  participation when he was not a key employee), and

                           (b) each other qualified pension, profit sharing or
                  stock bonus plan of the aggregated employers which is required
                  to be taken into account for this Plan or any plan described
                  in paragraph (a) above to satisfy the qualification
                  requirements under Section 410 or Section 401(a)(4) of the
                  Code, and

                           (c) each other qualified pension, profit sharing or
                  stock bonus plan of the aggregated employers which is not
                  included in paragraph (a) or (b) above, but which the Employer
                  elects to include in the aggregation group and which, when
                  included, would not cause the aggregation group to fail to
                  satisfy the qualification requirements under Section 410 or
                  Section 401(a)(4) of the Code.

         1.3. COMPENSATION. Unless the context clearly requires otherwise,
compensation means wages within the meaning of Section 3401(a) of the Code (for
purposes of income tax withholding at the source) but determined without regard
to any rules that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as the exception
for agricultural labor in Section 3401(a)(2) of the Code), but limited to Two
Hundred Thousand Dollars adjusted annually as provided in Section 401(a)(17) of
the Code. Compensation shall be determined on a cash basis.

         1.4. DETERMINATION DATE. Determination date means, for the first (1st)
Plan Year of a plan, the last day of such first (1st) Plan Year, and for each
subsequent Plan Year, the last day of the immediately preceding Plan Year.

                                       74
<PAGE>

         1.5. FIVE PERCENT OWNER. Five percent owner means for each aggregated
employer that is a corporation, any person who owns (or is considered to own
within the meaning of the shareholder attribution rules) more than five percent
(5%) of the value of the outstanding stock of the corporation or stock
possessing more than five percent (5%) of the total combined voting power of the
corporation, and, for each aggregated employer that is not a corporation, any
person who owns more than five percent (5%) of the capital interest or the
profits interest in such aggregated employer. For the purposes of determining
ownership percentages, each corporation, partnership and proprietorship
otherwise required to be aggregated shall be viewed as a separate entity.

         1.6. KEY EMPLOYEE. Key employee means each Participant (whether or not
then an employee) who at any time during a Plan Year (or any of the four
preceding Plan Years) is:

                           (a) an officer of any aggregated employer (excluding
                  persons who have the title of an officer but not the authority
                  and including persons who have the authority of an officer but
                  not the title) having an annual compensation from all
                  aggregated employers for any such Plan Year in excess of fifty
                  percent (50%) of the amount in effect under Section
                  415(b)(1)(A) of the Code for any such Plan Year, or

                           (b) one (1) of the ten (10) employees (not
                  necessarily Participants) owning (or considered to own within
                  the meaning of the shareholder attribution rules) both more
                  than one-half of one percent (1/2%) ownership interest in
                  value and the largest percentage ownership interests in value
                  of any of the aggregated employers (which are owned by
                  employees) and who has an annual compensation from all the
                  aggregated employers in excess of the limitation in effect
                  under Section 415(c)(1)(A) of the Code for any such Plan Year,
                  or

                           (c) a five percent owner, or

                           (d) a one percent owner having an annual compensation
                  from the aggregated employers of more than One Hundred Fifty
                  Thousand Dollars ($150,000);

         provided, however, that no more than fifty (50) employees (or, if
         lesser, the greater of three of all the aggregated employers' employees
         or ten percent of all the aggregated employers' employees) shall be
         treated as officers. For the purposes of determining ownership
         percentages, each corporation, partnership and proprietorship otherwise
         required to be aggregated shall be viewed as a separate entity. For
         purposes of paragraph (b) above, if two (2) employees have the same
         interest in any of the aggregated employers, the employee having the
         greatest annual compensation from that aggregated employer shall be
         treated as having a larger interest. For the purpose of determining
         compensation, however, all compensation received from all aggregated
         employers shall be taken into account. The term "key employee" shall
         include the beneficiaries of a deceased key employee.

         1.7. ONE PERCENT OWNER. One percent owner means, for each aggregated
employer that is a corporation, any person who owns (or is considered to own
within the meaning of the shareholder attribution rules) more than one percent
(1%) of the value of the outstanding stock of the corporation or stock
possessing more than one percent (1%) of the total combined voting power of the
corporation, and, for each aggregated employer that is not a corporation, any
person who owns more than one percent (1%) of the capital or the profits
interest in such aggregated employer. For the purposes of determining ownership
percentages, each corporation, partnership and proprietorship otherwise required
to be aggregated shall be viewed as a separate entity.

         1.8. SHAREHOLDER ATTRIBUTION RULES. Shareholder attribution rules means
the rules of Section 318 of the Code, (except that subparagraph (C) of Section
318(a)(2) of the Code shall be applied

                                       75
<PAGE>

by substituting "5 percent" for "50 percent") or, if the Employer is not a
corporation, the rules determining ownership in such Employer which shall be set
forth in regulations prescribed by the Secretary of the Treasury.

         1.9. TOP HEAVY AGGREGATION GROUP. Top heavy aggregation group means any
aggregation group for which, as of the determination date, the sum of:

                           (i) the present value of the cumulative accrued
                  benefits for key employees under all defined benefit plans
                  included in such aggregation group, and

                           (ii) the aggregate of the accounts of key employees
                  under all defined contribution plans included in such
                  aggregation group,

exceed sixty percent (60%) of a similar sum determined for all employees. In
applying the foregoing, the following rules shall be observed:

                           (a) For the purpose of determining the present value
                  of the cumulative accrued benefit for any employee under a
                  defined benefit plan, or the amount of the account of any
                  employee under a defined contribution plan, such present value
                  or amount shall be increased by the aggregate distributions
                  made with respect to such employee under the plan during the
                  five (5) year period ending on the determination date.

                           (b) Any rollover contribution (or similar transfer)
                  initiated by the employee, made from a plan maintained by one
                  employer to a plan maintained by another employer and made
                  after December 31, 1983, to a plan shall not be taken into
                  account with respect to the transferee plan for the purpose of
                  determining whether such transferee plan is a top heavy plan
                  (or whether any aggregation group which includes such plan is
                  a top heavy aggregation group). Any rollover contribution (or
                  similar transfer) not described in the preceding sentence
                  shall be taken into account with respect to the transferee
                  plan for the purpose of determining whether such transferee
                  plan is a top heavy plan (or whether any aggregation group
                  which includes such plan is a top heavy aggregation group).

                           (c) If any individual is not a key employee with
                  respect to a plan for any Plan Year, but such individual was a
                  key employee with respect to a plan for any prior Plan Year,
                  the cumulative accrued benefit of such employee and the
                  account of such employee shall not be taken into account.

                           (d) The determination of whether a plan is a top
                  heavy plan shall be made once for each Plan Year of the plan
                  as of the determination date for that Plan Year.

                           (e) In determining the present value of the
                  cumulative accrued benefits of employees under a defined
                  benefit plan, the determination shall be made as of the
                  actuarial valuation date last occurring during the twelve (12)
                  months preceding the determination date and shall be
                  determined on the assumption that the employees terminated
                  employment on the valuation date except as provided in Section
                  416 of the Code and the regulations thereunder for the first
                  and second Plan Years of a defined benefit plan. The accrued
                  benefit of any employee (other than a key employee) shall be
                  determined under the method which is used for accrual purposes
                  for all plans of the employer or if there is no method which
                  is used for accrual purposes under all plans of the employer,
                  as if such benefit accrued not more rapidly than the slowest
                  accrual rate permitted under Section 411(b)(1)(C) of the Code.
                  In determining this present value, the mortality and interest
                  assumptions shall be those which would be used by the Pension
                  Benefit Guaranty Corporation in valuing the defined benefit
                  plan if it terminated on such

                                       76
<PAGE>

                  valuation date. The accrued benefit to be valued shall be the
                  benefit expressed as a single life annuity.

                           (f) In determining the accounts of employees under a
                  defined contribution plan, the account values determined as of
                  the most recent asset valuation occurring within the twelve
                  (12) month period ending on the determination date shall be
                  used. In addition, amounts required to be contributed under
                  either the minimum funding standards or the plan's
                  contribution formula shall be included in determining the
                  account. In the first year of the plan, contributions made or
                  to be made as of the determination date shall be included even
                  if such contributions are not required.

                           (g) If any individual has not performed any services
                  for any employer maintaining the plan at any time during the
                  five (5) year period ending on the determination date, any
                  accrued benefit of the individual under a defined benefit plan
                  and the account of the individual under a defined contribution
                  plan shall not be taken into account.

                           (h) For this purpose, a terminated plan shall be
                  treated like any other plan and must be aggregated with other
                  plans of the employer if it was maintained within the last
                  five (5) years ending on the determination date for the Plan
                  Year in question and would, but for the fact that it
                  terminated, be part of the aggregation group for such Plan
                  Year.

         1.10. TOP HEAVY PLAN. Top heavy plan means a qualified plan under which
(as of the determination date):

                           (i) if the plan is a defined benefit plan, the
                  present value of the cumulative accrued benefits for key
                  employees exceeds sixty percent (60%) of the present value of
                  the cumulative accrued benefits for all employees, and

                           (ii) if the plan is a defined contribution plan, the
                  aggregate of the accounts of key employees exceeds sixty
                  percent (60%) of the aggregate of all of the accounts of all
                  employees.

         In applying the foregoing, the following rules shall be observed:

                           (a) Each plan of an Employer required to be included
                  in an aggregation group shall be a top heavy plan if such
                  aggregation group is a top heavy aggregation group.

                           (b) For the purpose of determining the present value
                  of the cumulative accrued benefit for any employee under a
                  defined benefit plan, or the amount of the account of any
                  employee under a defined contribution plan, such present value
                  or amount shall be increased by the aggregate distributions
                  made with respect to such employee under the plan during the
                  five (5) year period ending on the determination date.

                           (c) Any rollover contribution (or similar transfer)
                  initiated by the employee, made from a plan maintained by one
                  employer to a plan maintained by another employer and made
                  after December 31, 1983, to a plan shall not be taken into
                  account with respect to the transferee plan for the purpose of
                  determining whether such transferee plan is a top heavy plan
                  (or whether any aggregation group which includes such plan is
                  a top heavy aggregation group). Any rollover contribution (or
                  similar transfer) not described in the preceding sentence
                  shall be taken into account with respect to the transferee
                  plan for the

                                       77
<PAGE>

                  purpose of determining whether such transferee plan is a top
                  heavy plan (or whether any aggregation group which includes
                  such plan is a top heavy aggregation group).

                           (d) If any individual is not a key employee with
                  respect to a plan for any Plan Year, but such individual was a
                  key employee with respect to the plan for any prior Plan Year,
                  the cumulative accrued benefit of such employee and the
                  account of such employee shall not be taken into account.

                           (e) The determination of whether a plan is a top
                  heavy plan shall be made once for each Plan Year of the plan
                  as of the determination date for that Plan Year.

                           (f) In determining the present value of the
                  cumulative accrued benefits of employees under a defined
                  benefit plan, the determination shall be made as of the
                  actuarial valuation date last occurring during the twelve (12)
                  months preceding the determination date and shall be
                  determined on the assumption that the employees terminated
                  employment on the valuation date except as provided in Section
                  416 of the Code and the regulations thereunder for the first
                  and second Plan Years of a defined benefit plan. The accrued
                  benefit of any employee (other than a key employee) shall be
                  determined under the method which is used for accrual purposes
                  for all plans of the employer or if there is no method which
                  is used for accrual purposes under all plans of the employer,
                  as if such benefit accrued not more rapidly than the slowest
                  accrual rate permitted under Section 411(b)(1)(C) of the Code.
                  In determining this present value, the mortality and interest
                  assumptions shall be those which would be used by the Pension
                  Benefit Guaranty Corporation in valuing the defined benefit
                  plan if it terminated on such valuation date. The accrued
                  benefit to be valued shall be the benefit expressed as a
                  single life annuity.

                           (g) In determining the accounts of employees under a
                  defined contribution plan, the account values determined as of
                  the most recent asset valuation occurring within the twelve
                  (12) month period ending on the determination date shall be
                  used. In addition, amounts required to be contributed under
                  either the minimum funding standards or the plan's
                  contribution formula shall be included in determining the
                  account. In the first year of the plan, contributions made or
                  to be made as of the determination date shall be included even
                  if such contributions are not required.

                           (h) If any individual has not performed any services
                  for any employer maintaining the plan at any time during the
                  five (5) year period ending on the determination date, any
                  accrued benefit of the individual under a defined benefit plan
                  and the account of the individual under a defined contribution
                  plan shall not be taken into account.

                           (i) For this purpose, a terminated plan shall be
                  treated like any other plan and must be aggregated with other
                  plans of the employer if it was maintained within the last
                  five (5) years ending on the determination date for the Plan
                  Year in question and would, but for the fact that it
                  terminated, be part of the aggregation group for such Plan
                  Year.

                                   SECTION 2

                         DETERMINATION OF TOP HEAVINESS

         Once each Plan Year, as of the determination date for that Plan Year,
the administrator of this Plan shall determine if this Plan is a top heavy plan.

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<PAGE>

                                    SECTION 3

                              CONTINGENT PROVISIONS

         3.1. WHEN APPLICABLE. If this Plan is determined to be a top heavy plan
for any Plan Year, the following provisions shall apply for that Plan Year (and,
to the extent hereinafter specified, for subsequent Plan Years), notwithstanding
any provisions to the contrary in the Plan.

         3.2. VESTING REQUIREMENT.

                  3.2.1. GENERAL RULE. During any Plan Year that the Plan is
         determined to be a Top Heavy Plan, then all accounts of all
         Participants in a defined contribution plan that is a top heavy plan
         and the accrued benefits of all Participants in a defined benefit plan
         that is a top heavy plan shall be vested and nonforfeitable in
         accordance with the following schedule if, and to the extent, that it
         is more favorable than other provisions of the Plan:

<TABLE>
<CAPTION>
                            If the Participant Has                         His Vested
                            Completed the Following                        Percentage
                           Years of Vesting Service:                        Shall Be:
                           -------------------------                        ---------
<S>                                                                        <C>
                  Less than 2 years                                            0%
                  2 years but less than 3 years                                20%
                  3 years but less than 4 years                                40%
                  4 years but less than 5 years                                60%
                  5 years but less than 6 years                                80%
                  6 years or more                                             100%
</TABLE>

                  3.2.2. SUBSEQUENT YEAR. In each subsequent Plan Year that the
         Plan is determined not to be a top heavy plan, the other
         nonforfeitability provisions of the Plan Statement (and not this
         section) shall apply in determining the vested and nonforfeitable
         rights of Participants who do not have five (5) or more years of
         Vesting Service (three or more years of Vesting Service for
         Participants who have one or more Hours of Service in any Plan Year
         beginning after December 31, 1988) as of the beginning of such
         subsequent Plan Year; provided, however, that they shall not be applied
         in a manner which would reduce the vested and nonforfeitable percentage
         of any Participant.

                  3.2.3. CANCELLATION OF BENEFIT SERVICE. If this Plan is a
         defined benefit plan and if the Participant's vested percentage is
         determined under this Appendix and if a Participant receives a lump sum
         distribution of the present value of the vested portion of his accrued
         benefit, the Plan shall:

                           (a) thereafter disregard the Participant's service
                  with respect to which he received such distribution in
                  determining his accrued benefit, and

                           (b) permit the Participant who receives a
                  distribution of less than the present value of his entire
                  accrued benefit to restore this service by repaying (after
                  returning to employment covered under the Plan) to the trustee
                  the amount of such distribution together with interest at the
                  interest rate of five percent (5%) per annum compounded
                  annually (or such other interest rate as is provided by law
                  for such repayment). If the distribution was on account of
                  separation from service such repayment must be made before the
                  earlier of,

                                    (i) five (5) years after the first date on
                           which the Participant is subsequently reemployed by
                           the employer, or

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<PAGE>

                                    (ii) the close of the first period of five
                           (5) consecutive one-year breaks in service commencing
                           after the distribution.

         If the distribution was on account of any other reason, such repayment
         must be made within five (5) years after the date of the distribution.

         3.3. DEFINED CONTRIBUTION PLAN MINIMUM BENEFIT REQUIREMENT.

                  3.3.1. GENERAL RULE. If this Plan is a defined contribution
         plan, then for any Plan Year that this Plan is determined to be a top
         heavy plan, the Employer shall make a contribution for allocation to
         the account of each employee who is a Participant for that Plan Year
         and who is not a key employee in an amount (when combined with other
         Employer contributions and forfeited accounts allocated to his account)
         which is at least equal to three percent (3%) of such Participant's
         compensation. (This minimum contribution amount shall be further
         reduced by all other Employer contributions to this Plan or any other
         defined contributions plan.) This contribution shall be made for each
         Participant who has not separated from service with the Employer at the
         end of the Plan Year (including for this purpose any Participant who is
         then on temporary layoff or authorized leave of absence or who, during
         such Plan Year, was inducted into the Armed Forces of the United States
         from employment with the Employer) including, for this purpose, each
         employee of the Employer who would have been a Participant if he had:
         (i) completed one thousand (1,000) Hours of Service (or the equivalent)
         during the Plan Year, and (ii) made any mandatory contributions to the
         Plan, and (iii) earned compensation in excess of the stated amount
         required for participation in the Plan.

                  3.3.2. SPECIAL RULE. Subject to the following rules, the
         percentage referred to in Section 3.3.1 of this Appendix shall not
         exceed the percentage at which contributions are made (or required to
         be made) under this Plan for the Plan Year for that key employee for
         whom that percentage is the highest for the Plan Year.

                           (a) The percentage referred to above shall be
                  determined by dividing the Employer contributions for such key
                  employee for such Plan Year by his compensation for such Plan
                  Year.

                           (b) For the purposes of this Section 3.3, all defined
                  contribution plans required to be included in an aggregation
                  group shall be treated as one (l) plan.

                           (c) The exception contained in this Section 3.3.2
                  shall not apply to (be available to) this Plan if this Plan is
                  required to be included in an aggregation group if including
                  this Plan in an aggregation group enables a defined benefit
                  plan to satisfy the qualification requirements of Section 410
                  or Section 401(a)(4) of the Code.

                  3.3.3. SALARY REDUCTION AND MATCHING CONTRIBUTIONS. For the
         purpose of this Section 3.3, all Employer contributions attributable to
         a salary reduction or similar arrangement shall be taken into account
         for the purpose of determining the minimum percentage contribution
         required to be made for a particular Plan Year for a Participant who is
         not a key employee but not for the purpose of determining whether that
         minimum contribution requirement has been satisfied. For the purpose of
         this Section 3.3 during all Plan Years beginning after December 31,
         1988, all Employer matching contributions shall be taken into account
         for the purposes of determining the minimum percentage contribution
         required to be made for a particular Plan Year for a Participant who
         was not a key employee but not for the purpose of determining whether
         that minimum contribution requirement has been satisfied.

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<PAGE>

         3.4. DEFINED BENEFIT PLAN MINIMUM BENEFIT REQUIREMENT.

                  3.4.1. GENERAL RULE. If this Plan is a defined benefit plan,
         then for any Plan Year that the Plan is determined to be a top heavy
         plan, the accrued benefit for each Participant who is not a key
         employee shall not be less than one-twelfth (1/12) of the applicable
         percentage of the Participant's average compensation for years in the
         testing period.

                  3.4.2. SPECIAL RULES AND DEFINITIONS. In applying the general
         rule of Section 3.4.1 of this Appendix, the following special rules and
         definitions shall apply:

                           (a) The term "applicable percentage" means the lesser
                  of:

                                    1) two percent (2%) multiplied by the number
                           of years of service with the Employer, or

                                    2) twenty percent (20%).

                           (b) For the purpose of this Section 3.4, a
                  Participant's years of service with the Employer shall be
                  equal to the Participant's Vesting Service except that a year
                  of Vesting Service shall not be taken into account if:

                                    1) the Plan was not a top heavy plan for any
                           Plan Year ending during such year of Vesting Service,
                           or

                                    2) such year of Vesting Service was
                           completed in a Plan Year beginning before January l,
                           1984.

                           (c) A Participant's "testing period" shall be the
                  period of five (5) consecutive years during which the
                  Participant had the greatest compensation from the Employer;
                  provided, however, that:

                                    1) the years taken into account shall be
                           properly adjusted for years not included in a year of
                           service, and

                                    2) a year shall not be taken into account if
                           such year ends in a Plan Year beginning before
                           January l, 1984, or such year begins after the close
                           of the last year in which the Plan was a top heavy
                           plan.

                           (d) An individual shall be considered a Participant
                  for the purpose of accruing the minimum benefit only if such
                  individual has at least one thousand (1,000) Hours of Service
                  during a benefit accrual computation period (or equivalent
                  service determined under Department of Labor regulations).
                  Furthermore, such individual shall accrue a minimum benefit
                  only for a benefit accrual computation period in which such
                  individual has one thousand (1,000) Hours of Service (or
                  equivalent service). An individual shall not fail to accrue
                  the minimum benefit merely because the individual: (i) was not
                  employed on a specified date, or (ii) was excluded from
                  participation (or otherwise failed to accrue a benefit)
                  because the individual's compensation was less than a stated
                  amount, or (iii) because the individual failed to make any
                  mandatory contributions.

                  3.4.3. ACCRUALS PRESERVED. In years subsequent to the last
         Plan Year in which this Plan is a top heavy plan, the other benefit
         accrual rules of the Plan Statement shall be applied to determine the
         accrued benefit of each Participant, except that the application of
         such other rules shall not serve to reduce a Participant's accrued
         benefit as determined under this Section 3.4.

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<PAGE>

         3.5. PRIORITIES AMONG PLANS. In applying the minimum benefit provisions
of this Appendix in any Plan Year that this Plan is determined to be a top heavy
plan, the following rules shall apply:

                           (a) If an employee participates only in this Plan,
                  the employee shall receive the minimum benefit applicable to
                  this Plan.

                           (b) If an employee participates in both a defined
                  benefit plan and a defined contribution plan and only one (1)
                  of such plans is a top heavy plan for the Plan Year, the
                  employee shall receive the minimum benefit applicable to the
                  plan which is a top heavy plan.

                           (c) If an employee participates in both a defined
                  contribution plan and a defined benefit plan and both are top
                  heavy plans, then the employee, for that Plan Year, shall
                  receive the defined benefit plan minimum benefit unless for
                  that Plan Year the employee has received employer
                  contributions and forfeitures allocated to his account in the
                  defined contribution plan in an amount which is at least equal
                  to five percent (5%) of his compensation.

                           (d) If an employee participates in two (2) or more
                  defined contribution plans which are top heavy plans, then the
                  employee, for that Plan Year, shall receive the defined
                  contribution plan minimum benefit in that defined contribution
                  plan which has the earliest original effective date.

         3.6. ANNUAL CONTRIBUTION LIMITS.

                  3.6.1. GENERAL RULE. Notwithstanding anything apparently to
         the contrary in the Appendix A to the Plan Statement, for any Plan Year
         prior to 2000 that this Plan is a top heavy plan, the defined benefit
         fraction and defined contribution fraction of the Appendix to the Plan
         Statement pertaining to limits under Section 415 of the Code shall be
         one hundred percent (100%) and not one hundred twenty-five percent
         (125%).

                  3.6.2. SPECIAL RULE. Section 3.6.1 of this Appendix shall not
         apply to any top heavy plan if such top heavy plan satisfies the
         following requirements:

                           (a) MINIMUM BENEFIT REQUIREMENT. The top heavy plan
                  (and any plan required to be included in an aggregation group
                  with such plan) satisfies the requirements of Section 3.4 of
                  this Appendix when Section 3.4.2(a)(1) of this Appendix is
                  applied by substituting three percent (3%) for two percent
                  (2%) and by increasing (but by no more than ten percentage
                  points) twenty percent (20%) by one percentage point for each
                  year for which the plan was taken into account under this
                  Section 3.7. Section 3.3.1 of this Appendix shall be applied
                  by substituting "four percent (4%)" for "three percent (3%)."
                  Section 3.5(c) of this Appendix shall be applied by
                  substituting "seven and one-half percent (7 1/2%)" for "five
                  percent (5%)."

                           (b) NINETY PERCENT RULE. A top heavy plan would not
                  be a top heavy plan if "ninety percent (90%)" were substituted
                  for "sixty percent (60%)" each place that it appears in the
                  definitions of top heavy plan and top heavy aggregation group.

                  3.6.3. TRANSITION RULE. If, but for this Section 3.6.3,
         Section 3.6.l of this Appendix would begin to apply with respect to
         this Plan because it is a top heavy plan, the application of Section
         3.6.l of this Appendix shall be suspended with respect to any
         individual so long as there are no:

                                       82
<PAGE>

                           (a) employer contributions, forfeitures or voluntary
                  nondeductible contributions allocated to such individual (if
                  this Plan is a defined contribution plan), or

                           (b) accruals for such individual (if this Plan is a
                  defined benefit plan).

                  3.6.4. COORDINATING CHANGE. If this Plan is a top heavy plan
         for any Plan Year prior to 2000, then for purposes of the Appendix A to
         the Plan Statement, Section 415(e)(6)(i) of the Code shall be applied
         by substituting "Forty-one Thousand Five Hundred Dollars ($41,500)" for
         "Fifty-one Thousand Eight Hundred Seventy-five Dollars ($51,875)."

         3.7. BARGAINING UNITS. The requirements of Section 3.2 through Section
3.6 of this Appendix shall not apply with respect to any employee included in a
unit of employees covered by an agreement which the Secretary of Labor finds to
be a collective bargaining agreement between employee representatives and one
(1) or more employers if there is evidence that retirement benefits are the
subject of good faith bargaining between such employee representatives and such
employer or employers.

                                       83
<PAGE>
                                   APPENDIX C

                       QUALIFIED DOMESTIC RELATIONS ORDERS

                                    SECTION 1

                                 GENERAL MATTERS

         Terms defined in the Plan Statement shall have the same meanings when
used in this Appendix.

         1.1. GENERAL RULE. The Plan shall not honor the creation, assignment or
recognition of any right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless that domestic relations order is a
qualified domestic relations order.

         1.2. ALTERNATE PAYEE DEFINED. The only persons eligible to be
considered alternate payees with respect to a Participant shall be that
Participant's spouse, former spouse, child or other dependent.

         1.3. DRO DEFINED. A domestic relations order is any judgment, decree or
order (including an approval of a property settlement agreement) which relates
to the provision of child support, alimony payments, or marital property rights
to a spouse, former spouse, child or other dependent of a Participant and which
is made pursuant to a state domestic relations law (including a community
property law).

         1.4. QDRO DEFINED. A qualified domestic relations order is a domestic
relations order which creates or recognizes the existence of an alternate
payee's right to (or assigns to an alternate payee the right to) receive all or
a portion of the Account of a Participant under the Plan and which satisfies all
of the following requirements.

                  1.4.1. NAMES AND ADDRESSES. The order must clearly specify the
         name and the last known mailing address, if any, of the Participant and
         the name and mailing address of each alternate payee covered by the
         order.

                  1.4.2. AMOUNT. The order must clearly specify the amount or
         percentage of the Participant's Account to be paid by the Plan to each
         such alternate payee or the manner in which such amount or percentage
         is to be determined.

                  1.4.3. PAYMENT METHOD. The order must clearly specify the
         number of payments or period to which the order applies.

                  1.4.4. PLAN IDENTITY. The order must clearly specify that it
         applies to this Plan.

                  1.4.5. SETTLEMENT OPTIONS. Except as provided in Section 1.4.8
         of this Appendix, the order may not require the Plan to provide any
         type or form of benefits or any option not otherwise provided under the
         Plan.

                  1.4.6. INCREASED BENEFITS. The order may not require the Plan
         to provide increased benefits.

                  1.4.7. PRIOR AWARDS. The order may not require the payment of
         benefits to an alternate payee which are required to be paid to another
         alternate payee under another order previously determined to be a
         qualified domestic relations order.

                  1.4.8. EXCEPTIONS. The order will not fail to meet the
         requirements of Section 1.4.5 of this Appendix if:

                                       84
<PAGE>

                           (a) The order requires payment of benefits be made to
                  an alternate payee before the Participant has separated from
                  service, even if this is prior to the "earliest retirement
                  age" with respect to the Participant, as that term is defined
                  in Section 414(p) of the Code; and

                           (b) The order requires that payment of benefits be
                  made to an alternate payee as if the Participant had retired
                  on the date on which payment is to begin under such order (but
                  taking into account only the present value of benefits
                  actually accrued); and

                           (c) The order requires payment of benefits to be made
                  to an alternate payee in any form in which benefits may be
                  paid under the Plan to the Participant (other than in the form
                  of a joint and survivor annuity with respect to the alternate
                  payee and his or her subsequent spouse).

                  In lieu of the foregoing, the order will not fail to meet the
         requirements of Section 1.4.5 of this Appendix if the order: (1)
         requires that payment of benefits be made to an alternate payee in a
         single lump sum as soon as is administratively feasible after the order
         is determined to be a qualified domestic relations order, and (2) does
         not contain any of the provisions described in Section 1.4.9 of this
         Appendix, and (3) provides that the payment of such single lump sum
         fully and permanently discharges all obligations of the Plan to the
         alternate payee.

                  1.4.9. DEEMED SPOUSE. Notwithstanding the foregoing:

                           (a) The order may provide that the former spouse of a
                  Participant shall be treated as a surviving spouse of such
                  Participant for the purposes of Section 7 of the Plan
                  Statement (and that any subsequent or prior spouse of the
                  Participant shall not be treated as a spouse of the
                  Participant for such purposes), and

                           (b) The order may provide that, if the former spouse
                  has been married to the Participant for at least one (1) year
                  at any time, the surviving former spouse shall be deemed to
                  have been married to the Participant for the one (1) year
                  period ending on the date of the Participant's death.

                                    SECTION 2

                                   PROCEDURES

         2.1. ACTIONS PENDING REVIEW. During any period when the issue of
whether a domestic relations order is a qualified domestic relations order is
being determined by the Committee, the Committee shall cause the Plan to
separately account for the amounts which would be payable to the alternate payee
during such period if the order were determined to be a qualified domestic
relations order.

         2.2. REVIEWING DROS. Upon the receipt of a domestic relations order,
the Committee shall determine whether such order is a qualified domestic
relations order.

                  2.2.1. RECEIPT. A domestic relations order shall be considered
         to have been received only when the Committee shall have received a
         copy of a domestic relations order which is complete in all respects
         and is originally signed, certified or otherwise officially
         authenticated.

                  2.2.2. NOTICE TO PARTIES. Upon receipt of a domestic relations
         order, the Committee shall notify the Participant and all persons
         claiming to be alternate payees and all prior alternate payees with
         respect to the Participant that such domestic relations order has been
         received. The Committee shall include with such notice a copy of this
         Appendix.

                                       85
<PAGE>

                  2.2.3. COMMENT PERIOD. The Participant and all persons
         claiming to be alternate payees and all prior alternate payees with
         respect to the Participant shall be afforded a comment period of thirty
         (30) days from the date such notice is mailed by the Committee in which
         to make comments or objections to the Committee concerning whether the
         domestic relations order is a qualified domestic relations order. By
         the unanimous written consent of the Participant and all persons
         claiming to be alternate payees and all prior alternate payees with
         respect to the Participant, the thirty (30) day comment period may be
         shortened.

                  2.2.4. INITIAL DETERMINATION. Within a reasonable period of
         time after the termination of the comment period, the Committee shall
         give written notice to the Participant and all persons claiming to be
         alternate payees and all prior alternate payees with respect to the
         Participant of its decision that the domestic relations order is or is
         not a qualified domestic relations order. If the Committee determines
         that the order is not a qualified domestic relations order or if the
         Committee determines that the written objections of any party to the
         order being found a qualified domestic relations order are not valid,
         the Committee shall include in its written notice:

                           (i) the specific reasons for its decision;

                           (ii) the specific reference to the pertinent
                  provisions of this Plan Statement upon which its decision is
                  based;

                           (iii) a description of additional material or
                  information, if any, which would cause the Committee to reach
                  a different conclusion; and

                           (iv) an explanation of the procedures for reviewing
                  the initial determination of the Committee.

                  2.2.5. APPEAL PERIOD. The Participant and all persons claiming
         to be alternate payees and all prior alternate payees with respect to
         the Participant shall be afforded an appeal period of sixty (60) days
         from the date such an initial determination and explanation is mailed
         in which to make comments or objections concerning whether the original
         determination of the Committee is correct. By the unanimous written
         consent of the Participant and all persons claiming to be alternate
         payees and all prior alternate payees with respect to the Participant,
         the sixty (60) day appeal period may be shortened.

                  2.2.6. FINAL DETERMINATION. In all events, the final
         determination of the Committee shall be made not later than eighteen
         (18) months after the date on which first payment would be required to
         be made under the domestic relations order if it were a qualified
         domestic relations order. The final determination shall be communicated
         in writing to the Participant and all persons claiming to be alternate
         payees and all prior alternate payees with respect to the Participant.

         2.3. FINAL DISPOSITION. If the domestic relations order is finally
determined to be a qualified domestic relations order and all comment and appeal
periods have expired, the Plan shall pay all amounts required to be paid
pursuant to the domestic relations order to the alternate payee entitled
thereto. If the domestic relations order is finally determined not to be a
qualified domestic relations order and all comment and appeal periods have
expired, benefits under the Plan shall be paid to the person or persons who
would have been entitled to such amounts if there had been no domestic relations
order.

         2.4. ORDERS BEING SOUGHT. If the Committee has notice that a domestic
relations order is being or may be sought but has not received the order, the
Committee shall not (in the absence of a written request from the Participant)
delay payment of benefits to a Participant or Beneficiary which otherwise would
be due. If the Committee has determined that a domestic relations order is not a
qualified domestic relations order and all comment and appeal periods have
expired, the Committee shall not (in the absence of a written request from the
Participant) delay payment of benefits to a Participant or

                                       86
<PAGE>

Beneficiary which otherwise would be due even if the Committee has notice that
the party claiming to be an alternate payee or the Participant or both are
attempting to rectify any deficiencies in the domestic relations order.

                                    SECTION 3

                               PROCESSING OF AWARD

         3.1. GENERAL RULES. If a benefit is awarded to an alternate payee
pursuant to an order which has been finally determined to be a qualified
domestic relations order, the following rules shall apply.

                  3.1.1. SOURCE OF AWARD. If a Participant shall have a Vested
         interest in more than one Account under the Plan, the benefit awarded
         to an alternate payee shall be withdrawn from the Participant's
         Accounts in proportion to his Vested interest in each of them, unless
         the qualified domestic relations order clearly provides otherwise.

                  3.1.2. EFFECT ON ACCOUNT. For all purposes of the Plan, the
         Participant's Account (and all benefits payable under the Plan which
         are derived in whole or in part by reference to the Participant's
         Account) shall be permanently diminished by the portion of the
         Participant's Account which is awarded to the alternate payee. The
         benefit awarded to an alternate payee shall be considered to have been
         a distribution from the Participant's Account for the limited purpose
         of applying any rules of the Plan Statement relating to distributions
         from an Account that is only partially Vested.

                  3.1.3. AFTER DEATH. After the death of an alternate payee, all
         amounts awarded to the alternate payee which have not been distributed
         to the alternate payee and which continue to be payable shall be paid
         in a single lump sum distribution to the personal representative of the
         alternate payee's estate as soon as administratively feasible, unless
         the qualified domestic relations order clearly provides otherwise. The
         Participant's Beneficiary designation shall not be effective to dispose
         of any portion of the benefit awarded to an alternate payee, unless the
         qualified domestic relations order clearly provides otherwise.

                  3.1.4. IN-SERVICE BENEFITS. Any in-service distribution
         provisions of the Plan Statement shall not be applicable to the benefit
         awarded to an alternate payee.

         3.2. SEGREGATED ACCOUNT. If the Committee determines that it would
facilitate the administration or the distribution of the benefit awarded to the
alternate payee or if the qualified domestic relations order so requires, the
benefit awarded to the alternate payee shall be established on the books and
records of the Plan as a separate account belonging to the alternate payee.

         3.3. FORMER ALTERNATE PAYEES. If an alternate payee has received all
benefits to which the alternate payee is entitled under a qualified domestic
relations order, the alternate payee will not at any time thereafter be deemed
to be an alternate payee or prior alternate payee for any substantive or
procedural purpose of this Plan.

                                       87
<PAGE>
                                   APPENDIX D

                           HIGHLY COMPENSATED EMPLOYEE

                                    SECTION 1

                               GENERAL DEFINITIONS

         1.1. HIGHLY COMPENSATED EMPLOYEE. Effective for Plan Years beginning
after December 31, 1996, a "highly compensated employee" means any employee who:

                           (i) during the current or preceding Plan Year was at
                  any time a five percent (5%) owner; or,

                           (ii) for the preceding Plan Year had compensation
                  from the Employer in excess of $80,000, as adjusted from time
                  to time in accordance with applicable rules, and, if the
                  Employer so elects (and such election will be indicated by the
                  Employer's use of the top-paid group limitation in the
                  satisfaction of any applicable non-discrimination test under
                  the Code), was in the top-paid group for the preceding year;
                  or

                           (iii) is a former employee and was a highly
                  compensated employee under the applicable legal rules in
                  effect when such employee separated from service or was a
                  highly compensated employee at any time after attaining age 55
                  under the applicable legal rules then in effect.

         1.2. CODE AND REGULATIONS CONTROLLING. The determination of who is a
highly compensated employee shall be made in accordance with Section 414(q) of
the Code and regulations thereunder, which shall be controlling in the event of
any conflict with the rules in this Appendix D.

                                    SECTION 2

                           SPECIAL RULES & DEFINITIONS

         2.1. INCORPORATED DEFINITIONS. Terms defined in the Plan Statement
shall have the same meanings when used in this Appendix.

         2.2. FIVE PERCENT OWNER. An employee shall be treated as a five percent
(5%) owner for any determination year or look-back year if at any time during
such year such employee was a five percent (5%) owner (as defined in Appendix B
to this Plan Statement) of the Employer.

         2.3. TOP-PAID GROUP. An employee is in the top-paid group of employees
for any Plan Year if such employee is in the group consisting of the top twenty
percent (20%) of the employees when ranked on the basis of compensation paid
during such year, excluding those employees described in Section 2.6. For
purposes of the preceding sentence, the top twenty percent (20%) shall be
determined by disregarding fractional numbers (i.e., the top 20% of 118
employees shall be the top 22 employees). Employees who perform no services for
the Employer during the year are not included in determining the top-paid group
of employees for that year.

         2.4. EMPLOYEES DESCRIBED IN SEVERAL GROUPS. An employee who is a highly
compensated employee for a particular Plan Year by reason of being described in
one group under Section 1.1, shall not be disregarded in determining whether
another employee is a highly compensated employee by reason of being described
in another group under Section 1.1.

                                       88
<PAGE>

         2.5. COMPENSATION. FOR PURPOSES OF THIS APPENDIX:

                  2.5.1. IN GENERAL. The term "compensation" means wages within
         the meaning of Section 3401(a) of the Code (for purposes of income tax
         withholding at the source) but determined without regard to any rules
         that limit the remuneration included in wages based on the nature or
         location of the employment or the services performed (such as the
         exception for agricultural labor in Section 3401(a)(2) of the Code),
         plus, for Plan Years commencing from and after March 1, 1998, any
         elective deferral (as defined in Section 402(g)(3) of the Code) and any
         amount which is contributed or deferred by the Employer at the election
         of the employee by reason of Sections 125 or 457 of the Code.

         2.6. EXCLUDED EMPLOYEES.

                  2.6.1. GENERAL EXCLUSIONS. For purposes of determining the
         number of employees in the top-paid group for a Plan Year under Section
         2.3 of this Appendix, the following employees shall be excluded:

                           (i) employees who have not completed six (6) months
                  of service by the end of the year;

                           (ii) employees who normally work less than seventeen
                  and one-half (17 1/2) hours per week;

                           (iii) employees who normally work during not more
                  than six (6) months during the year; and

                           (iv) employees who have not attained age twenty-one
                  (21) by the end of the year.

         For purposes of computing months of service under (i) above, an
         employee's service in the immediately preceding year is added to
         service in the current year to determine whether an employee is
         excluded in the current year.

                  2.6.2. EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
         In general, employees who are included in a unit of employees covered
         by a collective bargaining agreement are included in determining the
         number of employees in the top-paid group. However, if ninety percent
         (90%) or more of all employees are covered under collective bargaining
         agreements and this Plan covers only employees who are not covered
         under such agreements, then the employees who are covered under such
         collective bargaining agreements shall not be counted in determining
         the number of employees who will be included in the top-paid group. In
         addition, the employees covered by such agreements will not be included
         in the top-paid group.

                  2.6.3. MINIMUM HOUR RULE. An employee who works at least 17
         1/2 hours a week for 50% or more of the total weeks worked by such
         employee during a determination year or look-back year is deemed to
         normally work more than 17 1/2 hours a week. An employee who works less
         than 17 1/2 hours a week for 50% or more of the total weeks worked by
         such employee during a determination year or look-back year is deemed
         to normally work less than 17 1/2 hours a week. The foregoing
         determinations may be made separately with respect to each employee or
         on the basis of groups of employees who fall within particular job
         categories as established by the Employer on a reasonable basis. In
         general, 80% of the positions within a particular job category must be
         filled by employees who normally work less than 17 1/2 hours a week
         before any employees may be excluded under this rule on the basis of
         their membership in that job category. Alternatively, an Employer may
         exclude employees who are members of a particular job category

                                       89
<PAGE>

         if the median number of hours credited to employees in that category
         during a determination year or look-back year is 500 or less.

                  2.6.4. MINIMUM PERIOD OF TIME RULE. The determination of
         whether an employee normally works during less than six months in any
         determination year or look-back year is made on the basis of the facts
         and circumstances of the Employer as evidenced by the Employer's
         customary experience in the years preceding such year. An employee who
         works on one day during a month is deemed to have worked during that
         month.

                  2.6.5. NONRESIDENT ALIENS. Employees who are nonresident
         aliens and who receive no earned income (within the meaning of Section
         911(d)(2) of the Code) from the employer which constitutes income from
         sources within the United States (within the meaning of Section
         861(a)(3) of the Code) are excluded for all purposes of this Appendix.

         2.7. ELECTION TO INCLUDE LEASED EMPLOYEES. The term "employee" shall
include all leased employees of the Employer, whether or not such leased
employees are covered by a "safe-harbor plan" as described in Section 414(n)(5)
of the Code.

         2.8. AGGREGATION. Subsections (b), (c), (m), (n), and (o) of Section
414 of the Code shall be applied before the application of the rules in this
Appendix.

                                       90<PAGE>
                                                                    EXHIBIT 10.1

                          JANUARY 2002 - DECEMBER 2003

                 CONTRACT FOR MEDICAID/BADGERCARE HMO SERVICES

                                    BETWEEN

                                      HMO

                                      AND

                            WISCONSIN DEPARTMENT OF
                           HEALTH AND FAMILY SERVICES

<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                           Page No.
                                                                                           --------
<S>             <C>                                                                        <C>
ARTICLE I ...................................................................................  1
        I. DEFINITIONS ......................................................................  1

ARTICLE II ....................................... ..........................................  7
        II. DELEGATIONS OF AUTHORITY.........................................................  7

ARTICLE III .................................................................................  8
        III. FUNCTIONS AND DUTIES OF THE HMO ................................................  8
                A. Statutory Requirement ....................................................  8
                B. Provision of Contract Services............................................  8
                C. Time Limit for Decision on Certain Referrals.............................. 19
                D. Emergency Care ........................................................... 19
                E. 24-Hour Coverage ......................................................... 20
                F. Thirty Day Payment Requirement............................................ 20
                G. HMO Claim Retrieval System ............................................... 21
                H. Appeals to the Department for HMO Payment/Denial of Providers ............ 21
                I. Payments for Diagnosis of Whether an Emergency Condition Exists........... 22
                J. Memoranda of Understanding for Emergency Services......................... 22
                K. Provision of Services..................................................... 23
                L. Open Enrollment........................................................... 23
                M. Pre-Existing Conditions................................................... 23
                N. Hospitalization at the Time of Enrollment or Disenrollment................ 24
                O. Non-Discrimination ....................................................... 24
                P. Affirmative Action Plan .................................................. 25
                Q. Cultural Competency....................................................... 26
                R. Health Education and Prevention........................................... 26
                S. Enrollee Handbook and Education and Outreach for Newly Enrolled
                   Recipients................................................................ 28
                T. Approval of Marketing Plans and Informing Materials ...................... 30
                U. Conversion Privileges..................................................... 32
                V. Choice of Health Professional ............................................ 32
                W. Quality Assessment/Performance Improvement (QAPI) ........................ 32
                X. Access to Premises ....................................................... 52
                Y. Subcontracts ............................................................. 52
                Z. Compliance with Applicable Laws, Rules or Regulations .................... 52
                AA. Use of Providers Certified By Medicaid Program .......................... 52
                BB. Reproduction and Distribution of Materials .............................. 53
                CC. Provision of Interpreters................................................ 53
                DD. Coordination and Continuation of Care ................................... 53
                EE. HMO ID Cards ............................................................ 54
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                      i

<PAGE>

<Table>
<Caption>
                                                                                                Page No.
                                                                                                --------
<S>             <C>                                                                             <C>
                FF. Federally Qualified Health Centers and Rural Health Centers
                    (FQHCs and RHCs) ............................................................. 54
                GG. Coordination with Prenatal Care Services, School-Based Services,
                    Targeted Case Management Services, a Child Welfare Agencies, and
                    Dental Managed Care Organizations............................................. 55
                HH. Physician Incentive Plans..................................................... 56
                II. Advance Directives............................................................ 57
                JJ. Ineligible Organizations...................................................... 57
                KK. Clinical Laboratory Improvement Amendments ................................... 59
                LL. Limitation on Fertility Enhancing Drugs....................................... 59
                MM. Reporting of Communicable Diseases ........................................... 60
                NN. Medicaid/BadgerCare HMO Advocate Requirements................................. 60
                OO. HMO Designation of Staff Person as Contract Representative ................... 63
                PP. Subcontracts with Local Health Departments.................................... 63
                QQ. Subcontracts with Community-Based Health Organizations........................ 64
                RR. Prescription Drugs............................................................ 64
                SS. HMO Attestation............................................................... 65
                TT. Fraud and Abuse Investigations ............................................... 65

ARTICLE IV ....................................................................................... 66
        IV. FUNCTIONS AND DUTIES OF THE DEPARTMENT ............................................... 66
                A. Eligibility Determination ..................................................... 66
                B. Enrollment .................................................................... 67
                C. Disenrollment ................................................................. 67
                D. HMO Enrollment Reports ........................................................ 67
                E. Utilization Review and Control................................................. 68
                F. HMO Review .................................................................... 68
                G. HMO Review of Study or Audit Results .......................................... 68
                H. Vaccines....................................................................... 68
                I. Coordination of Benefits....................................................... 69
                J. Wisconsin Medicaid Provider Reports............................................ 69
                K. Enrollee Health Status and Primary Language Report ............................ 69
                L. Fraud and Abuse Training....................................................... 69
                M. Provision of Data to HMOs...................................................... 69
                N. Special Procedures for Retroactive Payments Adjustments for
                   Pregnant BadgerCare Enrollees.................................................. 69

ARTICLE V ........................................................................................ 70
        V. PAYMENT TO THE HMO .................................................................... 70
                A. Capitation Rates............................................................... 70
                B. Actuarial Basis ............................................................... 70
                C. Renegotiation.................................................................. 70
                D. Reinsurance.................................................................... 70
                E. Neonatal Intensive Care Unit Risk-Sharing...................................... 70
                F. Payment Schedule .............................................................. 72
                G. Capitation Payments For Newborns .............................................. 72
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       ii
<PAGE>

<Table>
<Caption>
                                                                                              Page No.
                                                                                              --------
<S>             <C>                                                                           <C>
                H. Coordination of Benefits (COB) .............................................. 73
                I. Recoupments ................................................................. 75
                J. Payment for Aids, HIV-Positive, and Ventilator Dependent..................... 76

ARTICLE VI ..................................................................................... 79
        VI. REPORTS, DATA, AND COMPUTER/DATA REPORTING SYSTEM .................................. 79
                A. Disclosure................................................................... 79
                B. Periodic Reports ............................................................ 79
                C. Access to and Audit of Contract Records ..................................... 80
                D. Records Retention ........................................................... 80
                E. Special Reporting and Compliance Requirements ............................... 81
                F. Reporting of Corporate and Other Changes .................................... 81
                G. Computer/Data Reporting System............................................... 82

ARTICLE VII .................................................................................... 83
        VII. ENROLLMENT AND DISENROLLMENTS ..................................................... 83
                A. Enrollment .................................................................. 83
                B. Third Trimester Pregnancy Disenrollment ..................................... 84
                C. Ninth Month Pregnancy Disenrollment ......................................... 84
                D. Exemptions from Enrollment in any HMO and Disenrollment for
                   Patients of Certified Nurse Midwives or Nurse Practitioners ................. 84
                E. Exemption from Enrollment in any HMO and Disenrollment For
                   AIDS HIV-Positive with Anti Retroviral Drug Treatment ....................... 85
                F. Exemptions from Enrollment in any HMO and Disenrollment for
                   Patients of Federally Qualified Health Centers Federally Qualified
                   Health Centers .............................................................. 85
                G. Native American Disenrollment ............................................... 86
                H. Special Disenrollments....................................................... 86
                I. Exemptions from Enrollment in any HMO and Disenrollment for
                   Recipients With Commercial HMO Insurance or Commercial
                   Insurance With a Restricted Provider Network ................................ 86
                J. Exemption from Enrollment in any HMO and Disenrollment for
                   Families Where One or More Members are receiving SSI benefits ............... 86
                K. Voluntary Disenrollment ..................................................... 87
                L. Section 1115(A) Waiver and State Plan Amendment.............................. 87
                M. Additional Services.......................................................... 87
                N. Enrollment/Disenrollment Practices .......................................... 87
                O. Enrollee Lock-In Period ..................................................... 88

ARTICLE VIII ................................................................................... 88
        VIII. GRIEVANCE PROCEDURES.............................................................. 88
                A. Procedures .................................................................. 88
                B. Recipient Appeals of HMO Formal Grievance Decisions/Formal
                   Grievance Process. .......................................................... 90
                C. Notifications of Denial, Termination, Suspension, or Reduction of
                   Benefits to Enrollees ....................................................... 91
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       -iii-
<PAGE>

<Table>
<Caption>
                                                                                           Page No.
                                                                                           --------
<S>             <C>                                                                        <C>
                D. Notifications of Denial of New Benefits to Enrollees ....................  93
                E. Reporting of Grievances to the Department ...............................  94

ARTICLE IX .................................................................................  94
        IX. REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT .................  94
                A. Suspension of New Enrollment ............................................  94
                B. Department-Initiated Enrollment Reductions ..............................  94
                C. Other Enrollment Reductions .............................................  95
                D. Withholding of Capitation Payments and Orders to Provide Services .......  95
                E. Inappropriate Payment Denials ...........................................  98
                F. Sanctions ...............................................................  99
                G. Sanctions and Remedial Actions...........................................  99

ARTICLE X ..................................................................................  99
        X. TERMINATION AND MODIFICATION OF CONTRACT.........................................  99
                A. Mutual Consent ..........................................................  99
                B. Unilateral Termination...................................................  99
                C. Obligations of Contracting Parties ...................................... 100
                D. Where this Contract is terminated for any reason......................... 101
                E. Where this Contract is terminated on any basis not given
                   including non-renewal of the contract for a given contract period ....... 101
                F. Modification............................................................. 102

ARTICLE XI ................................................................................. 102
        XI. INTERPRETATION OF CONTRACT LANGUAGE............................................. 102
                A. Interpretations ......................................................... 102

ARTICLE XII ................................................................................ 102
        XII. CONFIDENTIALITY OF RECORDS .................................................... 102

ARTICLE XIII ............................................................................... 103
        XIII. DOCUMENTS CONSTITUTING CONTRACT............................................... 103
                A. Current Documents........................................................ 103
                B. Future Documents ........................................................ 104

ARTICLE XIV ................................................................................ 105
        XIV. MISCELLANEOUS ................................................................. 105
                A. Indemnification ......................................................... 105
                B. Independent Capacity of Contractor ...................................... 105
                C. Omissions ............................................................... 105
                D. Choice of Law ........................................................... 105
                E. Waiver................................................................... 105
                F. Severability ............................................................ 106
                G. Force Majeure............................................................ 106
                H. Headings ................................................................ 106
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       -iv-

<PAGE>

<Table>
<Caption>
                                                                                            Page No.
                                                                                            --------
<S>             <C>                                                                         <C>
                I. Assignability............................................................. 106
                J. Right to Publish.......................................................... 106

ARTICLE XV .................................................................................. 107
        XV. HMO SPECIFIC CONTRACT TERMS...................................................... 107
                A. Initial Contract Period .................................................. 107
                B. Renewals.................................................................. 107
                C. Specific Terms of the Contract ........................................... 107
        SUBCONTRACT FOR CHIROPRACTIC SERVICES ............................................... 108

ADDENDUM I .................................................................................. 109
        SUBCONTRACTS AND MEMORANDA OF UNDERSTANDING.......................................... 109

ADDENDUM II ................................................................................. 118
        POLICY GUIDELINES FOR MENTAL HEALTH/SUBSTANCE ABUSE AND
        COMMUNITY HUMAN SERVICE PROGRAMS..................................................... 118

ADDENDUM III (DELETED)
        RISK-SHARING FOR INPATIENT HOSPITAL SERVICES

ADDENDUM IV ................................................................................. 126
        CONTRACT SPECIFIED REPORTING REQUIREMENTS............................................ 126
        PART A. REPORTS AND DUE DATES........................................................ 126
        PART B. WISCONSIN MEDICAID/BADGERCARE HMO SUMMARY AND
                ENCOUNTER DATA SET .......................................................... 130
        PART C. PROVIDER LIST ON TAPE ....................................................... 131
        PART D. AIDS COST SUMMARY / VENTILATOR COST SUMMARY.................................. 133

ADDENDUM V .................................................................................. 135
        STANDARD ENROLLEE HANDBOOK LANGUAGE ................................................. 135

ADDENDUM VI ................................................................................. 147
        MEDICAID/BADGERCARE HMO REPORT ON COORDINATION
        OF BENEFITS.......................................................................... 147

ADDENDUM VII ................................................................................ 149
        ACTUARIAL BASIS...................................................................... 149

ADDENDUM VIII................................................................................ 150
        COMPLIANCE AGREEMENT - AFFIRMATIVE ACTION/CIVIL RIGHTS............................... 150

ADDENDUM IX ................................................................................. 153
        MODEL MEMORANDUM OF UNDERSTANDING BETWEEN
        HEALTH MAINTENANCE ORGANIZATION AND PRENATAL CARE
        COORDINATION AGENCY ................................................................. 153
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       -v-

<PAGE>

<Table>
<Caption>
                                                                                                   Page No.
                                                                                                   --------
<S>     <C>                                                                                        <C>
ADDENDUM X ......................................................................................... 154
        MEMORANDUM OF UNDERSTANDING BETWEEN MILWAUKEE
        COUNTY HMOS AND BUREAU OF MILWAUKEE CHILD WELFARE .......................................... 154

ADDENDUM XI ........................................................................................ 157
        HEALTHCHECK WORKSHEET ...................................................................... 157
        HMO RATE REGIONS AND ESTABLISHED COUNTIES .................................................. 158
        Region 1: Duluth/Superior................................................................... 158
        Region 2: Wausau/Rhinelander ............................................................... 158
        Region 3: Green Bay......................................................................... 158
        Region 4: Twin Cities ...................................................................... 158
        Region 5: Marshfield/Stevens Point ......................................................... 158
        Region 6: Appleton/Oshkosh ................................................................. 158
        Region 7: LaCrosse ......................................................................... 158
        Region 8: Madison/South Central............................................................. 158
        Region 9: Southeast Wisconsin............................................................... 158
        Established Counties ....................................................................... 158

ADDENDUM XII ....................................................................................... 159
        COMMON CARRIER TRANSPORTATION MEMORANDUM OF
        UNDERSTANDING BETWEEN MILWAUKEE COUNTY MEDICAID/
        BADGERCARE HMOS AND MILWAUKEE COUNTY DEPARTMENT
        OF HUMAN SERVICES .......................................................................... 159

ADDENDUM XIII....................................................................................... 161
        MODEL MEMORANDUM OF UNDERSTANDING BETWEEN .................................................. 161
        HEALTH MAINTENANCE ORGANIZATION AND SCHOOL DISTRICT
        OR CESA MEDICAID-CERTIFIED FOR THE SCHOOL BASED SERVICES
        BENEFIT .................................................................................... 161

ADDENDUM XIV ....................................................................................... 162
        GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOS,
        TARGETED CASE MANAGEMENT (TCM) AGENCIES, AND CHILD
        WELFARE AGENCIES............................................................................ 162

ADDENDUM XV ........................................................................................ 164
        PERFORMANCE IMPROVEMENT PROJECT OUTLINE..................................................... 164

ADDENDUM XVI ....................................................................................... 166
        TARGETED PERFORMANCE IMPROVEMENT MEASURES DATA SET.......................................... 166

ADDENDUM XVII....................................................................................... 167
        MEDICAID/BADGERCARE HMO NEWBORN REPORT ..................................................... 167

ADDENDUM XVIII (DELETED)
        RECOMMENDED CHILDHOOD IMMUNIZATION SCHEDULE
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       -vi-

<PAGE>

<Table>
<Caption>
                                                                                                  Page No.
                                                                                                  --------
<S>     <C>                                                                                       <C>
ADDENDUM XIX
        REPORTING REQUIREMENTS FOR NEONATAL INTENSIVE CARE UNIT RISK-SHARING ....................... 170

ADDENDUM XX (DELETED)
        SPECIFIC TERMS OF THE MEDICAID/BADGERCARE HMO CONTRACT

ADDENDUM XXI-A...................................................................................... 173
        FORMAL GRIEVANCE EXPERIENCE SUMMARY REPORT ................................................. 173

ADDENDUM XXI-B ..................................................................................... 174
        HMO REPORTING FORM FOR INFORMAL GRIEVANCES ................................................. 174

ADDENDUM XXII....................................................................................... 175
        GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN
        MEDICAID HMOS AND COUNTY BIRTH TO THREE (B-3) AGENCIES...................................... 175

ADDENDUM XXIII...................................................................................... 181
        WISCONSIN MEDICAID HMO REPORT ON AVERAGE BIRTH COSTS BY COUNTY ............................. 181

ADDENDUM XXIV....................................................................................... 184
        LOCAL HEALTH DEPARTMENTS AND COMMUNITY-BASED HEALTH ORGANIZATIONS - A RESOURCE FOR HMOs .... 184

ADDENDUM XXV ....................................................................................... 187
        GENERAL INFORMATION ABOUT THE WIC PROGRAM, SAMPLE
        HMO-TO-WIC REFERRAL FORM, AND STATEWIDE LIST OF WIC AGENCIES................................ 187

ADDENDUM XXVII...................................................................................... 206
        STATEWIDE LIST OF LOCAL WIC AGENCIES ....................................................... 206

ADDENDUM XXVII ..................................................................................... 214
        STATEWIDE LIST OF LOCAL WIC AGENCIES........................................................ 214
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                       -vii-

<PAGE>
                             CONTRACT FOR SERVICES

                                    Between

                    Department of Health and Family Services

                                      and

                                      HMO

The Wisconsin Department of Health and Family Services and HMO, an insurer with
a certificate of authority to do business in Wisconsin, and an organization
which makes available to enrolled participants, in consideration of periodic
fixed payments, comprehensive health care services provided by providers
selected by the organization and who are employees or partners of the
organization or who have entered into a referral or contractual arrangement with
the organization, for the purpose of providing and paying for
Medicaid/BadgerCare contract services to recipients enrolled in the HMO under
the State of Wisconsin Medicaid Plan approved by the Secretary of the United
States Department of Health and Human Services pursuant to the provisions of the
Social Security Act and for the further specific purpose of promoting
coordination and continuity of preventive health services and other medical care
including prenatal care, emergency care, and HealthCheck services, do herewith
agree:

                                   ARTICLE I

I. DEFINITIONS

     The term "ABUSE" means provider practices that are inconsistent with sound
     fiscal, business, or medical practices, and result in an unnecessary cost
     to Medicaid/BadgerCare, in reimbursement for services that are not
     medically necessary, or in services that fail to meet professionally
     recognized standards for health. Abuse also includes client or member
     practices that result in unnecessary costs to Medicaid.

     The term "ACTION" means the denial or limited authorization of a requested
     service, including the type or level of service; the reduction, suspension
     or termination of a previously authorized service; the denial, in whole or
     in part, of payment for a service.

     The term "APPEAL" means a request for review of an action.

     The term "BADGERCARE" means part of the Wisconsin Medical Assistance
     Program operated by the Wisconsin Department of Health and Family Services
     under Title XIX and Title XXI of the Federal Social Security Act, s.
     49.655, Wis. Stats., and related State and Federal rules and regulations.
     This term will be used throughout this contract.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -1-
<PAGE>
     The term "CESA" means Cooperative Educational Service Agencies, which are
     cooperatives that include multiple school districts that work together for
     purchasing and other coordinated functions. There are twelve (12) CESAs in
     Wisconsin.

     The term "CHILDREN WITH SPECIAL HEALTH CARE NEEDS" means children who have
     or are at increased risk for chronic physical, developmental, behavioral,
     or emotional conditions and who also require health and related services of
     a type or amount beyond that required by children generally and who are
     enrolled in a Children with Special Health Care Needs program operated by a
     Local Health Department or a local Title V funded Maternal and Child Health
     Program.

     The term "COMMUNITY BASED HEALTH ORGANIZATIONS" means non-profit agencies
     providing community based health services. These organizations provide
     important health care services such as HealthCheck screenings, nutritional
     support, and family planning, targeting such services to high-risk
     populations.

     The term "CONTINUING CARE PROVIDER" means (as stated in 42 CFR 441.60(a)) a
     provider who has an agreement with the Medicaid agency to provide:

     A.   any reports that the Department may reasonably require, and

     B.   at least the following services to eligible HealthCheck recipients
          formally enrolled with the provider as enumerated in 42 CFR
          441.60(a)(1)-(5):

          1.   screening, diagnosis, treatment, and referrals for follow-up
               services,

          2.   maintenance of the recipient's consolidated health history,
               including information received from other providers,

          3.   physician's services as needed by the recipient for acute,
               episodic or chronic illnesses or conditions,

          4.   provision or referral for dental services, and

          5.   transportation and scheduling assistance.

     The term "CONTRACT" means the agreement executed between the HMO and the
     Department to accomplish the duties and functions, in accordance with the
     rules and arrangements specified in this document.

     The term "CONTRACT SERVICES" means those services that the HMO is required
     to provide under this contract.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -2-
<PAGE>

     The term "CONTRACTOR" means the HMO(s) awarded the contract resulting from
     the HMO Certification process to provide capitated managed care in
     accordance with the contract.

     The term "CULTURAL COMPETENCY" means a set of congruent behaviors,
     attitudes, practices and policies that are formed within an agency, and
     among professionals that enable the system, agency, and professionals to
     work respectfully, effectively and responsibly in diverse situations.
     Essential elements of cultural competence include understanding diversity
     issues at work, understanding the dynamic of difference, institutionalizing
     cultural knowledge, and adapting to and encouraging organizational
     diversity.

     The term "DEPARTMENT" means the Wisconsin Department of Health and Family
     Services.

     The term "EMERGENCY MEDICAL CONDITION" means---

     A.   A medical condition manifesting itself by acute symptoms of sufficient
          severity (including severe pain) such that a prudent layperson, who
          possesses an average knowledge of health and medicine, could
          reasonably expect the absence of immediate medical attention to result
          in:

          1.   placing the health of the individual (or, with respect to a
               pregnant woman, the health of the woman or her unborn child) in
               serious jeopardy,

          2.   serious impairment of bodily functions, or

          3.   serious dysfunction of any bodily organ or part; or

     B.   With respect to a pregnant woman who is in active labor---

          1.   where there is inadequate time to effect a safe transfer to
               another hospital before delivery; or

          2.   where transfer may pose a threat to the health or safety of the
               woman or the unborn child.

     C.   A psychiatric emergency involving a significant risk of serious harm
          to oneself or others.

     D.   A substance abuse emergency exists if there is significant risk of
          serious harm to an enrollee or others, or there is likelihood of
          return to substance abuse without immediate treatment.

     E.   Emergency dental care is defined as an immediate service needed to
          relieve the patient from pain, an acute infection, swelling, trismus,
          fever, or trauma. In all emergency situations, the HMO must document
          in the recipient's dental records the nature of the emergency.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -3-
<PAGE>

     The term "ENCOUNTER" shall include the following:

     1.   A service or item provided to a patient through the health care
          system. Examples include but are not limited to:

          a.   Office visits

          b.   Surgical procedures

          c.   Radiology, including professional and/or technical components

          d.   Prescribed drugs

          e.   Durable medical equipment

          f.   Emergency transportation to a hospital

          g.   Institutional stays (inpatient hospital, rehabilitation stays)

          h.   HealthCheck screens

     2.   A service or item not directly provided by the HMO, but for which the
          HMO is financially responsible. An example would include an emergency
          service provided by an out-of-network provider or facility.

     3.   A service or item not directly provided by the HMO, and one for which
          no claim is submitted but for which the HMO may supplement its
          encounter data set. Such services might include HealthCheck screens
          for which no claims have been received and if no claim is received,
          the HMO's medical chart. Examples of services or items the HMO may
          include are:

          a.   HealthCheck services

          b.   Lead Screening and Testing

          c.   Immunizations

     The terms "SERVICES" or "ITEMS" as used above include those services and
     items not covered by the Wisconsin Medicaid Program, but which the HMO
     chooses to provide as part of its Medicaid managed care product. Examples
     include educational services, certain over-the-counter drugs, and delivered
     meals.

     The term "ENCOUNTER RECORD" means an electronically formatted list of
     encounter data elements per encounter as specified in the Wisconsin
     Medicaid 2002-2003 HMO Encounter Data User Manual. An encounter record may
     be prepared from a single detail line from a claim such as the HCFA 1500 or
     UB-92.

     The terms "ENROLLEE" and "PARTICIPANT" mean a Medicaid/BadgerCare recipient
     who has been certified by the State as eligible to enroll under this
     Contract, and whose name appears on the HMO Enrollment Reports which the
     Department will transmit to the HMO every month in accordance with an
     established notification schedule. Children who are reported to the
     certifying agency within 100 days of birth shall be enrolled in the HMO
     their mother is enrolled in from their date of birth if the mother was an
     enrollee on the date

HMO Contract for January 1, 2002 - December 31, 2003

                                      -4-
<PAGE>

     of birth. Children who are reported to the certifying agency after the
     100th day but before their first birthday may be eligible for
     Medicaid/BadgerCare on a fee-for-service (FFS) basis.

     The term "ENROLLMENT AREA" means the geographic area within which
     recipients must reside in order to enroll, on a mandatory basis, in the HMO
     under this Contract.

     The term "EXPERIMENTAL SURGERY AND PROCEDURES" means experimental services
     that meet the definition of HFS 107.035(1) and (2) Wis. Adm. Code. as
     determined by the Department.

     The term "FORMALLY ENROLLED WITH A CONTINUING CARE PROVIDER" (as cited in
     42 CFR 441.60(d)) means that a recipient (or recipient's guardian) agrees
     to use one continuing care provider as the regular source of a described
     set of services for a stated period of time.

     The term "FRAUD" means an intentional deception or misrepresentation made
     by a person or entity with the knowledge that the deception could result in
     some unauthorized benefit to him/herself, itself or to some other person or
     entity. It includes any act that constitutes fraud under applicable Federal
     or State law.

     The term "GRIEVANCE" means an expression of dissatisfaction about any
     matter other than an action. The term is also used to refer to the overall
     system that includes grievances and appeals handled by the HMO. Possible
     subjects for grievances include, but are not limited to, the quality of
     care or services provided, and aspects of interpersonal relationships such
     as rudeness of a provider or employee, or failure to respect the enrollee's
     rights.

     The term "HMO" means the health maintenance organization or its parent
     corporation with a certificate of authority to do business in Wisconsin,
     that is obligated under this Contract.

     The term "HMO ENCOUNTER TECHNICAL WORKGROUP" means a workgroup composed of
     HMO technical staff, contract administrators, claims processing,
     eligibility, and/or other HMO staff, as necessary; Department staff from
     the Division of Health Care Financing; and staff from the Department's
     fiscal agent contractor.

     The term "LOCAL HEALTH DEPARTMENT" (LHD) means an agency of local
     government established according to Chapter 251, Wis. Stats. Local health
     departments have statutory obligation to perform certain core functions,
     which include assessment, assurance, and policy development for the purpose
     of protecting and promoting the health of their communities.

     The term "MEDICAID" means the Wisconsin Medical Assistance Program operated
     by the Wisconsin Department of Health and Family Services under Title XIX
     of the Federal Social Security Act, Ch. 49, Wis. Stats., and related State
     and Federal rules and

HMO Contract for January 1, 2002 - December 31, 2003

                                      -5-
<PAGE>
     regulations. This will be the term used consistently in this Contract.
     However, other expressions or words equivalent to Medicaid are "MA,"
     "Medical Assistance," and "WMAP."

     The term "MEDICAL STATUS CODE" means the two digit (alphanumeric) code that
     the Department uses in its computer system to define the type of Medicaid
     eligibility a recipient has: the code identifies the basis of eligibility,
     whether cash assistance is being provided, and other aspects of Medicaid.
     The medical status code is listed on the HMO enrollment reports. Please
     refer to Article IV. A. for a list of HMO eligible medical status codes.

     The term "MEDICALLY NECESSARY" means a medical service that meets the
     definition of HFS 101.03(96m) Wis. Adm. Code.

     The term "NEWBORN" means an enrollee who is less than 100 days old.

     The term "POST STABILIZATION SERVICES" means medically necessary
     non-emergency services furnished to an enrollee after he or she is
     stabilized following an emergency medical condition.

     The term "PROVIDER" means a person who has been certified by the Department
     to provide health care services to recipients and to be reimbursed by
     Medicaid for those services.

     The term "PUBLIC INSTITUTION" means an institution that is the
     responsibility of a governmental unit or over which a governmental unit
     exercises administrative control as defined by federal regulations
     including but not limited to prisons and jails.

     The term "RECIPIENT" means any individual entitled to benefits under Title
     XIX and XXI of the Social Security Act, and under the Medicaid State Plan
     as defined in Chapter 49, Wis. Stats.

     The term "RISK" means the possibility of monetary loss or gain by the HMO
     resulting from service costs exceeding or being less than payments made to
     it by the Department.

     The term "SERVICE AREA" means an area of the State in which the HMO has
     agreed to provide Medicaid services to Medicaid enrollees. The Department
     will monitor enrollment levels of HMOs by the service areas of the HMO, and
     HMO will indicate whether they will provide dental or chiropractic services
     by service area. A service area may be as small as a zip code, may be a
     county, a number of counties, or the entire State.

     The term "STATE" means the State of Wisconsin.

     The term "SUBCONTRACT" means any written agreement between the HMO and
     another party to fulfill the requirements of this Contract. However, such
     term does not include

HMO Contract for January 1, 2002 - December 31, 2003

                                      -6-
<PAGE>

     insurance purchased by the HMO to limit its loss with respect to an
     individual enrollee, provided the HMO assumes some portion of the
     underwriting risk for providing health care services to that enrollee.

     The term "WISCONSIN TRIBAL HEALTH DIRECTORS ASSOCIATION (WTHDA)" means the
     coalition of all Wisconsin American Indian Tribal Health Departments.

     Terms that are not defined above shall have their primary meaning
     identified in the Wisconsin Administrative Code, Chs. HFS 101-108.

                                   ARTICLE II

II. DELEGATIONS OF AUTHORITY

     The HMO shall oversee and remain accountable for any functions and
     responsibilities that it delegates to any subcontractor. For all major or
     minor delegation of function or authority:

     A.   There shall be a written agreement that specifies the delegated
          activities and reporting responsibilities of the subcontractor and
          provides for revocation of the delegation or imposition of other
          sanctions if the subcontractor's performance is inadequate.

     B.   Before any delegation, the HMO shall evaluate the prospective
          subcontractor's ability to perform the activities to be delegated.

     C.   The HMO shall monitor the subcontractor's performance on an ongoing
          basis and subject the subcontractor to formal review at least once a
          year.

     D.   If the HMO identifies deficiencies or areas for improvement, the HMO
          and the subcontractor shall take corrective action.

     E.   If the HMO delegates selection of providers to another entity, the HMO
          retains the right to approve, suspend, or terminate any provider
          selected by that entity.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -7-
<PAGE>
                                  ARTICLE III

III. FUNCTIONS AND DUTIES OF THE HMO

     In consideration of the functions and duties of the Department contained in
     this Contract the HMO shall:

     A.   Statutory Requirement Retain at all times during the period of this
          Contract a valid Certificate of Authority issued by the State of
          Wisconsin Office of the Commissioner of Insurance.

     B.   Provision of Contract Services

          1.   Promptly provide or arrange for the provision of all services
               required under Section 49.46(2), Wis. Stats., and HFS 107 Wis.
               Adm. Code; as further clarified in all Wisconsin Medicaid Program
               Provider Handbooks and Bulletins, and HMO Contract Interpretation
               Bulletins (CIBs) and as otherwise specified in this Contract
               except:

               a.   County Transportation by common carrier or private motor
                    vehicle (except as required in Article III. B (10).
                    HealthCheck). HMOs are required to arrange for
                    transportation for HealthCheck visits. When authorized by
                    the Department, the HMO may provide non-emergency
                    transportation by common carrier or private motor vehicle
                    for HealthCheck visits and be reimbursed by the County.

                    HMOs may negotiate arrangements with local county
                    Departments of Health and Social Services for common carrier
                    or private vehicle transportation for HMO services in
                    general and not just for HealthCheck visits. The Department
                    will make a list of county transportation contacts available
                    to HMOs upon request.

                    The Department will facilitate the development of such
                    arrangements between the HMO and the county. HMOs interested
                    in developing a transportation arrangement with one or more
                    counties and interested in Department assistance should
                    contact the following office either by mail or phone:

                    Bureau of Managed Health Care Programs
                    P.O. Box 309
                    Madison, WI 53701- 0309
                    Phone Number: (608) 266-7894 or 267-2170
                    Fax Number: (608) 261-7792

HMO Contract for January 1, 2002 - December 31, 2003

                                      -8-
<PAGE>

               b.   Milwaukee County HMOs will provide common carrier
                    transportation to enrollees. Transportation services will be
                    limited to:

                    o    Transportation of Medicaid/BadgerCare HMO members only.

                    o    Transportation of Medicaid/BadgerCare HMO members to
                         and from Medicaid covered services.

                    The HMO is responsible for arranging for the common carrier
                    transportation and providing monthly costs incurred to
                    Milwaukee County Department of Human Services (MCDHS), for
                    common carrier transportation arranged. HMO agrees to submit
                    costs to the DHS within 15 days following the end of each
                    month to:

                         Milwaukee County DHS
                         Financial Assistant, Division Administrator
                         1220 W. Vliet Street
                         Milwaukee, WI 53206

                    The DHS is responsible for reimbursing the HMO for mileage
                    and an administration fee. The State Department of Health
                    and Family Services reserves the right to adjust these
                    rates.

                    The HMO shall maintain adequate records for each enrollee
                    which include all pertinent and sufficient information
                    relating to common carrier transportation, and make this
                    information readily available to the Department of Health
                    and Family Services (DHFS). HMO agrees to report suspected
                    abuse by enrollees or providers to the DHFS.

               c.   Dental, unless the HMO is certified to provide dental
                    services.

               d.   Prenatal Care Coordination.

               e.   Targeted Case Management.

               f.   School-Based Services.

               g.   Milwaukee Childcare Coordination.

               h.   Tuberculosis-related Services.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -9-
<PAGE>

          2.   Cover chiropractic services, or in the alternative, enter into a
               subcontract for chiropractic services with the State as provided
               in Article XV. State law mandates coverage.

          3.   Remain liable for provision of care for that period for which
               capitation payment has been made in cases where medical status
               code changes occur subsequent to capitation payment.

          4.   Be liable, where emergencies and HMO referrals to out-of-area or
               non-affiliated providers occur, for payment only to the extent
               that Medicaid pays, including Medicare deductibles, or would pay,
               its FFS providers for services to the AFDC/BadgerCare population.
               For inpatient hospital services, the Department will provide each
               HMO per diem rates based on the Medicaid FFS equivalent. This
               condition does not apply to: (1) cases where prior payment
               arrangements were established; and (2) specific subcontract
               agreements.

          5.   Changes to Medicaid covered services mandated by Federal or State
               law subsequent to the signing of this Contract will not affect
               the contract services for the term of this Contract, unless (1)
               agreed to by mutual consent, or (2) unless the change is
               necessary to continue to receive federal funds or due to action
               of a court of law.

               The Department may incorporate any change in covered services
               mandated by Federal or State law into the Contract effective the
               date the law goes into effect, if it adjusts the capitation rate
               accordingly. The Department will give the HMO 30 days notice of
               any such change that reflects service increases, and the HMO may
               elect to accept or rejects the service increases for the
               remainder of that contract year; the Department will give the HMO
               60 days notice of any such change that reflects service
               decreases, with a right of the HMO to dispute the amount of the
               decrease within that 60 days. The HMO has the right to accept or
               reject service decreases for the remainder of the Contract year.
               The date of implementation of the change in coverage will
               coincide with the effective date of the increased or decreased
               funding. This section does not limit the Department's ability to
               modify the Medicaid/HMO Contract for changes in the State Budget.

          6.   Be responsible for payment of all contract services provided to
               all Medicaid/BadgerCare recipients listed as ADDs or CONTINUEs on
               either the Initial or Final Enrollment Reports (see Article IV. B
               and D) generated for the month of coverage. The HMO is also
               responsible for payment of services to all newborns meeting the
               criteria described in Article V.G, "Capitation Payments for
               Newborns." Additionally, the HMO agrees to provide, or authorize
               provision of, services to all Medicaid enrollees with valid
               Forward cards indicating HMO enrollment without regard to
               disputes

HMO Contract for January 1, 2002 - December 31, 2003

                                      -10-
<PAGE>
               about enrollment status and without regard to any other
               identification requirements. Any discrepancies between the cards
               and the reports will be reported to the Department for
               resolution. The HMO shall continue to provide and authorize
               provision of all contract services until the discrepancy is
               resolved. This includes recipients who were PENDING on the
               Initial Report and held a valid Forward card indicating HMO
               enrollment, but did not appear as an CONTINUE on the Final
               Report.

          7.   Transplants: As a general principle, Wisconsin Medicaid does not
               pay for items that it determines to be experimental in nature.

               a.   Procedures that are covered by Medicaid that are no longer
                    considered experimental are cornea transplants and kidney
                    transplants. HMOs shall cover these services.

               b.   There are other procedures that are approved only at
                    particular institutions, including bone marrow transplants,
                    liver, heart, heart-lung, lung, pancreas-kidney, and
                    pancreas transplants. HMOs need not cover the
                    transplantation because there are no funds in the FFS
                    experience data (and thus in the HMO capitation rates) for
                    these services. This relieves the HMO from paying for
                    expensive follow-up care, as when there are permanent,
                    expensive requirements for drugs or equipment.

                    1)   The person to get the transplant will be permanently
                         exempted from HMO enrollment the first of the month in
                         which surgery is performed.

                    2)   In the case of autologous bone marrow transplants, the
                         person will be permanently exempted from HMO enrollment
                         the date the bone marrow was extracted.

               c.   Enrollees who have had one or more transplant surgeries
                    referenced in 7 b, prior to enrollment in an HMO will be
                    permanently exempted the first of the month of their HMO
                    enrollment.

          8.   Dental Care: HMOs that agree to accept the dental capitation rate
               for the purpose of covering all Medicaid dental services must:

               a.   Cover all dental services as required under HFS 107.07,
                    provider handbooks, bulletins, and periodic updates.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -11-
<PAGE>

               b.   Provide diagnostic, preventive, and medically necessary
                    follow-up care to treat the dental disease, illness, injury
                    or disability of enrollees while they are enrolled in an
                    HMO, except as required in sub. (c).

               c.   Complete orthodontic or prosthodontic treatment begun while
                    an enrollee is enrolled in an HMO if the enrollee becomes
                    ineligible or disenrolls from the HMO, no matter how long
                    the treatment takes. Medicaid/BadgerCare covers such
                    continuing services for FFS recipients and the costs of
                    continuing treatment are included in the FFS payment data on
                    which the HMO capitation rates are based. An HMO will not be
                    required to complete orthodontic or prosthodontic treatment
                    on an enrollee who has begun treatment as a FFS recipient
                    and who subsequently has been enrolled in an HMO.

                    [Refer to the chart following this page of the Contract for
                    the specific details of completion of orthodontic or
                    prosthodontic treatment in these situations.]

               d.   HMOs who cover dental will be required to do quarterly
                    progress reports to the Department documenting the outcomes
                    or current status of activities intended to increase
                    utilization. These reports are due fifteen (15) days after
                    the end of each calendar quarter.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -12-
<PAGE>

     RESPONSIBILITY FOR PAYMENT OF ORTHODONTIC AND PROSTHODONTIC TREATMENT WHEN
     THERE IS AN ENROLLMENT STATUS CHANGE DURING THE COURSE OF TREATMENT

<Table>
<Caption>
                                                                                        WHO PAYS FOR COMPLETION OF
                                                                                       ORTHODONTIC AND PROSTHODONTIC
                                                                                        TREATMENT* WHERE THERE IS AN
                                                                                          ENROLLMENT STATUS CHANGE
                                                                                     -----------------------------------
                                                                                     FIRST HMO       SECOND HMO      FFS
                                                                                     ---------       ----------      ---
<S>        <C>                                                                       <C>             <C>             <C>
Person converts from one status to another:

1.         FFS to an HMO covering dental.                                                               N/A            X

2a.        HMO covering dental to an HMO not covering dental, and person's              X
           residence remains within 50 miles of the person's residence when in
           the first HMO.

2b.        HMO covering dental to an HMO not covering dental, and person's                                             X
           residence changes to greater than 50 miles of the person's residence
           when in the first HMO.

3a.        HMO covering dental to the same or another HMO covering dental and           X
           the person's residence remains within 50 miles of the residence when
           in the first HMO.

3b.        HMO covering dental to the same or another HMO covering dental and                                          X
           the person's residence changes to greater than 50 miles of the
           residence when in the first HMO.

4.         HMO with dental coverage to FFS because:

           a.  Person moves out of the HMO service area but the person's                X
               residence remains within 50 miles of the residence when in the
               HMO.

           b.  Person moves out of the HMO service area, but the person's                               N/A            X
               residence changes to greater than 50 miles of the residence when
               in the HMO.

           c.  Person exempted from HMO enrollment.                                                     N/A            X

           d.  Person's medical status changes to an ineligible HMO code and the        X               N/A
               person's residence remains within 50 miles of the residence when
               in that HMO.

           e.  Person's medical status changes to an ineligible HMO code and the                        N/A            X
               person's residence changes to greater than 50 miles of the
               residence when in that HMO.

5a.        HMO with dental to ineligible for Medicaid/BC and the                        X               N/A
           person's residence remains within 50 miles of the
           residence when in that HMO.

5b.        HMO with dental to ineligible for Medicaid/BC and the person's                               N/A            X
           residence changes to greater than 50 miles of the residence when in
           that HMO.

6.         HMO without dental to ineligible for Medicaid/BC.                                            N/A            X
</Table>

----------
* Orthodontic treatment is only covered by Medicaid/BadgerCare for children
under 21 as a result of a HealthCheck referral (HFS 107.07(3)).

HMO Contract for January 1, 2002 - December 31, 2003

                                      -13-
<PAGE>

          9.   The following provision refers to payments made by the HMO. HMO
               covered primary care and emergency care services provided to a
               recipient living in a Health Professional Shortage Area (HPSA) or
               by a provider practicing in a HPSA must be paid at an enhanced
               rate of 20 percent above the rate the HMO would otherwise pay for
               those services. Primary care providers are defined as nurse
               practitioners, nurse midwives, physician assistants, and
               physicians who are Medicaid-certified with specialties of general
               practice, OB-GYN, family practice, internal medicine, or
               pediatrics. Specified HMO-covered obstetric or gynecological
               services (see the Wisconsin Medicaid and BadgerCare Physicians
               Services Handbook) provided to a recipient living in a HPSA or by
               a provider practicing in a HPSA must be paid at an enhanced rate
               of 25 percent above the rate the HMO would otherwise pay
               providers in HPSAs for those services.

               However, this does not require the HMO to pay more than the
               enhanced Medicaid FFS rate or the actual amount billed for these
               services. The HMO shall ensure that the money for HPSA payments
               are paid to the physicians and are not used to supplant funds
               that previously were used for payment to the physicians. The
               Department will supply a list of the services affected by this
               provision, the maximum FFS rates, and HPSAs. The HMO must develop
               written policies and procedures to ensure compliance with this
               provision. These policies must be available for review by the
               Department, upon request.

          10.  HealthCheck

               a.   HMO Responsibilities:

                    Provide services as a continuing care provider as defined in
                    Article I, and according to policies and procedures in Part
                    D of the Wisconsin Medicaid Provider Handbook related to
                    covered services.

                    Provide HealthCheck screens upon request. For enrollees over
                    1 year of age, if an enrollee, parent or guardian of an
                    enrollee requests a HealthCheck screen, HMO shall provide
                    such screen within 60 days, if a screen is due according to
                    the periodicity schedule. If the screen is not due within 60
                    days, then the HMO shall schedule the appointment in
                    accordance with the periodicity schedule. For enrollees up
                    to one (1) year of age, if a parent or guardian of an
                    enrollee's requests a HealthCheck screen, HMO shall provide
                    such screen within 30 days, if a screen is due according to
                    the periodicity schedule. If the screen is not due

HMO Contract for January 1, 2002 - December 31, 2003

                                      -14-
<PAGE>

                    within 30 days, then the HMO shall schedule the appointment
                    in accordance with the periodicity schedule.

                    Provide HealthCheck screens at a rate equal to or greater
                    than 80 percent of the expected number of screens. The rate
                    of HealthCheck screens will be determined by the calculation
                    in the HealthCheck Worksheet in Addendum XI. The HMO may
                    complete the worksheet on its own, periodically, as a means
                    to monitor its HealthCheck screening performance.

                    HealthCheck data provided by the HMO must agree with its
                    medical record documentation. For the purpose of the
                    HealthCheck recoupment process the Department will not
                    include any additional HealthCheck encounter records that
                    are received after January 16, 2004 and 2005 for the year
                    under consideration. (Please note: This is a thirteen-month
                    period of time from the end of the years under
                    consideration. (For example, for dates of service in 2002
                    the cut-off period will be January 16, 2004).

               b.   Department Responsibilities:

                    If the HMO provides fewer screens in the contract year than
                    80 percent, the Department will:

                    1)   recoup the funds provided to the HMO for the provision
                         of the remaining screens. The following formula will be
                         used:

                         (0.80 x A - B) x (C - D), where

                         A =  Expected number of screens (Line 6 of HealthCheck
                              Worksheet)

                         B =  Number of screens paid in the contract year as
                              reported in the HMO's Encounter Data Set as of
                              January 16, 2004 and January 16, 2005. (This is a
                              total of a thirteen-month period following the
                              year under consideration.

                         C =  *FFS maximum allowable fee (Line 11 of the
                              HealthCheck Worksheet). The FFS maximum allowable
                              fee is the average maximum fee for the year.
                              For example, if the maximum allowable fee for
                              HealthCheck is $50 from January through June, and
                              $52 from July through December, then the average
                              maximum allowable fee for the year is $51.

                         D =  HMO discount, if applicable.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -15-
<PAGE>

                    2)   determine the amount of the HMO's HealthCheck
                         recoupment, by Rate Region, excluding Dane, Eau Claire,
                         Kenosha, Milwaukee and Waukesha counties, which will be
                         determined separately. Rate Regions are defined in
                         Addendum XI.

                    3)   determine the actual number of screens completed, for
                         the recoupment calculation (Line 8 of the Worksheet),
                         by using the number of screens reported in the HMO's
                         Encounter Database for calendar years 2002 and 2003 by
                         Rate Region, except for Dane, Eau Claire, Kenosha,
                         Milwaukee and Waukesha counties which will be
                         determined separately. The Department will identify and
                         retrieve the HealthCheck screening data from the
                         Encounter Database.

                         When assigning HealthCheck screens to an age category,
                         the Department will use the member's age on the first
                         day of the month in which the screening occurred. If
                         a newborn enrollee is screened in the month of their
                         birth, the newborn's screen will be assigned to the
                         <1 age category.

                    4)   determine the number of eligible months and
                         unduplicated enrollees (Lines 1 and 2 of the Worksheet)
                         per HMO per year, for the HealthCheck recoupment
                         calculation, by using the Medicaid Management
                         Information System Recipient Eligibility File according
                         to specifications contained in Article III B 10 b.

                         When calculating member months for each age category,
                         the Department will use the member's age on the first
                         day of the month except for newborns. Newborns
                         enrolled in an HMO in the month of their birth will be
                         counted as eligible from their date of birth.

                    5)   inform the HMO in writing of its preliminary analysis
                         of the HealthCheck data and allow the HMO 30 business
                         days to review and respond to the calculations. If the
                         HMO responds within 30 business days, the Department
                         will review the HMO's concerns and notify the HMO of
                         its final decision. If an HMO does not respond within
                         30 business days, the Department will send a "Notice of
                         Intent to Recover" letter 40 days after the initial
                         letter.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -16-
<PAGE>

                    11.  The HMO must adequately fund physician services
                         provided to pregnant women and children under age 19,
                         so that they are paid at rates sufficient to ensure
                         that provider participation and services are as
                         available to the Medicaid/BadgerCare population as to
                         the general population in the HMO service area(s).

                    12.  The actual provision of any service is subject to the
                         professional judgment of the HMO providers as to the
                         medical necessity of the service, except that the HMO
                         must provide assessment and evaluation services ordered
                         by a court. Decisions to provide or not to provide or
                         authorize medical services shall be based solely on
                         medical necessity and appropriateness as defined in HFS
                         101.03(96m). Disputes between HMOs and recipients about
                         medical necessity can be appealed through an HMO
                         grievance system, and ultimately to the Department for
                         a binding determination; the Department's
                         determinations will be based on whether Medicaid would
                         have covered that service on a FFS basis (except for
                         certain experimental procedures discussed in Article
                         III, B. 7). Alternatively, disputes between HMOs and
                         enrollees about medical necessity can be appealed
                         directly to the Department.

                         HMOs are not restricted to providing Wisconsin Medicaid
                         covered services. Sometimes, HMOs find that other
                         treatment methods may be more appropriate than
                         Medicaid covered services, or result in better
                         outcomes.

                         None of the provisions of this contract that are
                         applicable to Wisconsin Medicaid covered services
                         apply to other services that an HMO may choose to
                         provide, except that abortions, hysterectomies and
                         sterilizations must comply with 42 CFR 441 Subpart E
                         and 42 CFR 441 Subpart F.

                         If a service provided is an alternative or replacement
                         to a Wisconsin Medicaid covered service, then the HMO
                         or HMO provider is not allowed to bill the enrollee for
                         the service.

                    13.  HMO and its providers and subcontractors shall not bill
                         a Medicaid/ BadgerCare enrollee for medically necessary
                         services covered under this Contract and provided
                         during the enrollee's period of HMO enrollment. HMO and
                         its providers and subcontractors shall not bill a
                         Medicaid/ BadgerCare enrollee for copayments and/or
                         premiums for medically necessary services covered under
                         this Contract and provided during the enrollee's period
                         of HMO enrollment. Any provider who knowingly and
                         willfully bills a Medicaid/BadgerCare enrollee for an
                         MA covered service shall be guilty of a felony and upon
                         conviction shall be fined, imprisoned, or both, as
                         defined in Section 1128B.(d)(1) [42 U.S.C. 1320a-7b] of
                         the

HMO Contract for January 1, 2002 - December 31, 2003

                                      -17-
<PAGE>

                         Social Security Act. This provision shall continue to
                         be in effect even if the HMO becomes insolvent.

                         However, if an enrollee agrees in advance in writing
                         to pay for a non-Medicaid/ BadgerCare covered service,
                         then the HMO, HMO provider, or HMO subcontractor may
                         bill the enrollee. The standard release form signed by
                         the enrollee at the time of services does not relieve
                         the HMO and its providers and subcontractors from the
                         prohibition against billing an enrollee in the absence
                         of a knowing assumption of liability for a
                         non-Medicaid/BadgerCare covered service. The form or
                         other type of acknowledgment relevant to an enrollee's
                         liability must specifically state the admissions,
                         services, or procedures that are not covered by
                         Medicaid/BadgerCare.

                    14.  The HMO must operate a program to promote full
                         immunization of enrollees. The HMO shall be responsible
                         for administration of immunizations including payment
                         of an administration fee for vaccines provided by the
                         Department. For vaccines that are newly approved during
                         the term of the Contract and not yet part of the
                         Vaccine for Children program, the HMO will report usage
                         for reimbursement from the Department. The Department
                         will identify vaccines that meet these criteria to the
                         HMO.

                         The HMO, as a condition of their certification as a
                         Medicaid/ BadgerCare provider, shall share enrollee
                         immunization status with Local Health Departments and
                         other non-profit HealthCheck providers upon request of
                         those providers without the necessity of enrollee
                         authorization. The Department is also requiring that
                         Local Health Departments and other non-profit
                         HealthCheck providers share that equivalent
                         information with HMOs upon request. This provision is
                         made to ensure proper coordination of immunization
                         services and to prevent duplication of services.

                    15.  Services required under Section 49.46(2), Wis. Stats.,
                         and HFS 107 Wis. Adm. Code, include (without limitation
                         due to enumeration) private duty nursing services,
                         nurse-midwife services, and independent nurse
                         practitioner services; physician services, including
                         primary care services, are not only services performed
                         by physicians, but services under the direct,
                         on-premises supervision of a physician performed by
                         other providers such as physician assistants and nurses
                         of various levels of certification.

                    16.  Provision of Family Planning Services and
                         Confidentiality of Family Planning Information: Give
                         enrollees the opportunity to have their own primary
                         physician for the provision of family planning services
                         whether that provider is in-plan or out-of-plan. If the
                         enrollee chooses an out-of-plan provider, those family
                         planning services will be paid FFS. The physician

HMO Contract for January 1, 2002 - December 31, 2003

                                      -18-
<PAGE>

                         does not replace the primary care provider chosen by or
                         assigned to the enrollee. All such information and
                         medical records relating to family planning shall be
                         kept confidential including those of a minor.

          C.   Time Limit for Decision on Certain Referrals

               Pay for covered services provided by a non-HMO provider to a
               disabled participant less than three (3) years of age, or to any
               participant pursuant to a court order (for treatment), effective
               with the receipt of a written request for referral from the
               non-HMO provider, and extending until the HMO issues a written
               denial of referral. This requirement does not apply if the HMO
               issues a written denial of referral within seven (7) days of
               receiving the request for referral.

          D.   Emergency Care

               Promptly provide or pay for needed contract services for
               emergency medical conditions and post-stabilization services as
               defined in Article I. Nothing in this requirement mandates HMOs
               to reimburse for post-stabilization services that were not
               authorized by the HMO.

               1.   Payments for qualifying emergencies (including services at
                    hospitals or urgent care centers within the HMO service
                    area(s)) are to be based on the medical signs and symptoms
                    of the condition upon initial presentation. The
                    retrospective findings of a medical work-up may legitimately
                    be the basis for determining how much additional care may be
                    authorized, but not for payment for dealing with the initial
                    emergency.

               2.   All HMOs, regardless of whether dental care is included in
                    their contract, are responsible for paying all ancillary
                    charges relating to dental emergencies with the only
                    exception being the dentist's or oral surgeon's direct and
                    office charges. These ancillary charges would include, but
                    are not limited to, physician, anesthesia, pharmacy and
                    emergency room in a hospital or freestanding ambulatory care
                    setting.

               Ambulance Services

               1.   HMOs may require submission of a trip ticket with ambulance
                    claims before paying the claim. Claims submitted without a
                    trip ticket need only be paid at the service charge rate.

               2.   HMOs will pay a service fee for ambulance response to a call
                    in order to determine whether an emergency exists,
                    regardless of the HMO's determination to pay for the call.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -19-
<PAGE>

               3.   HMOs will pay for emergency ambulance services based on
                    established Medicaid criteria for claims payment of these
                    services.

               4.   HMO will either pay or deny payment of a complete claim for
                    ambulance services within 45 days of receipt of the claim.

               5.   HMOs will respond to appeals from ambulance companies within
                    the time frame described in Article III. H. Failure will
                    constitute HMO agreement to pay the appealed claim in full.

          E.   24-Hour Coverage

               Provide all emergency contract services and post-stabilization
               services as defined in this Contract twenty-four (24) hours each
               day, seven (7) days a week, either by the HMO's own facilities or
               through arrangements approved by the Department with other
               providers. The HMO shall have one (1) toll-free phone number that
               enrollees or individuals acting on behalf of an enrollee can call
               at any time to obtain authorization for emergency transport,
               emergency, or urgent care. (Authorization here refers to the
               requirements defined in Addendum V, in the Standard Enrollee
               Handbook Language, regarding the conditions under which an
               enrollee must receive permission from the HMO prior to receiving
               services from a non-HMO affiliated provider in order for the HMO
               to reimburse the provider: e.g., for urgent care, for ambulance
               services for non-emergency care, for extended emergency services,
               and other situations.) This number must have access to
               individuals with authority to authorize treatment as appropriate.
               A response to such call must be provided within 30 minutes
               (except that response to ambulance calls shall be within 15
               minutes) or the HMO will be liable for the cost of subsequent
               care related to that illness or injury incident whether treatment
               is in- or out-of-plan and whether the condition is emergency,
               urgent, or routine.

               The HMO must be able to communicate with a caller in the language
               spoken by the caller or the HMO will be liable for the cost of
               subsequent care related to that illness or injury incident
               whether treatment is in- or out-of-plan and whether the condition
               is emergency, urgent, or routine.

               These calls must be logged with time, date and any pertinent
               information related to persons involved, resolution and follow-up
               instructions.

               The HMO shall notify the Department of any changes of this one
               toll-free phone number for emergency calls within seven (7)
               working days of change.

          F.   Thirty Day Payment Requirement

               Pay at least 90% (ninety percent) of adjudicated (clean) claims
               from subcontractors for covered medically necessary services
               within thirty (30) days of

HMO Contract for January 1, 2002 - December 31, 2003

                                      -20-
<PAGE>

               receipt of a clean claim , and 99% (ninety-nine percent) within
               ninety (90) days and 100 percent of the claims within 180 days of
               receipt, except to the extent subcontractors have agreed to later
               payment. HMO agrees not to delay payment to subcontractors
               pending subcontractor collection of third party liability unless
               the HMO has an agreement with their subcontractor to collect
               third party liability.

          G.   HMO Claim Retrieval System

               Maintain a claim retrieval system that can on request identify
               date of receipt, action taken on all provider claims (i.e., paid,
               denied, other), and when action was taken. HMO shall date stamp
               all provider claims upon receipt. In addition, maintain a claim
               retrieval system that can identify, within the individual claim,
               services provided and diagnoses of enrollees with nationally
               accepted coding systems: HCPCS including level I CPT codes and
               level II and level III HCPCS codes with modifiers, ICD-9-CM
               diagnosis and procedure codes, and other national code sets such
               as place of service, type of service, and EOB codes. Finally, the
               claim retrieval system must be capable of identifying the
               provider of services by the appropriate Wisconsin Medicaid
               provider ID number assigned to all in-plan providers. Refer to
               Article III, section AA for use of providers certified by the
               Medicaid program.

          H.   Appeals to the Department for HMO Payment/Denial of Providers

               Provide the name of the person and/or function at the HMO to whom
               provider appeals should be submitted.

               Provide written notification to providers of HMO payment/denial
               determinations which includes:

               1.   A specific explanation of the payment amount or a specific
                    reason for the payment denial.

               2.   A statement regarding the provider's rights and
                    responsibilities in appealing to the HMO about the HMO's
                    initial determination by submitting a separate letter or
                    form:

                    a.   clearly marked "appeal"

                    b.   which contains the provider's name, date of service,
                         date of billing, date of rejection, and reason(s) claim
                         merits reconsideration

                    c.   for each appeal

                    d.   to the person and/or function at the HMO that handles
                         Provider Appeals within sixty (60) days of the initial
                         denial or partial payment.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -21-
<PAGE>

               3.   A statement advising the provider of the provider's right to
                    appeal to the Department if the HMO fails to respond to the
                    appeal within forty-five (45) days or if the provider is not
                    satisfied with the HMO's response to the request for
                    reconsideration, and that all appeals to the Department must
                    be submitted in writing within sixty (60) days of the HMO's
                    final decision.

               4.   Accept written appeals from providers who disagree with the
                    HMO's payment/denial determination, if the provider submits
                    the dispute in writing and within sixty (60) days of the
                    initial payment/denial notice. The HMO has forty-five (45)
                    days from the date of receipt of the request for
                    reconsideration to respond in writing to the provider. If
                    the HMO fails to respond within that time frame, or if the
                    provider is not satisfied with the HMO's response, the
                    provider may seek a final determination from the Department.

               5.   Accept the Department's determinations regarding appeals of
                    disputed claims. In cases where there is a dispute about an
                    HMO's payment/ denial determination and the provider has
                    requested a reconsideration by the HMO according to the
                    terms described above, the Department will hear appeals and
                    make final determinations. These determinations may include
                    the override of the HMO's time limit for submission of
                    claims in exceptional cases. The Department will not
                    exercise its authority in this regard unreasonably. The
                    Department will accept written comments from all parties to
                    the dispute prior to making the decision. Appeals must be
                    submitted to the Department within sixty (60) days of the
                    date of written notification of the HMO's final decision
                    resulting from a request for reconsideration. The Department
                    has forty-five (45) days from the date of receipt of all
                    written comments to respond to these appeals. HMOs will pay
                    provider(s) within forty-five (45) days of receipt of the
                    Department's final determination.

          I.   Payments for Diagnosis of Whether an Emergency Condition Exists

               Pay for appropriate, medically necessary, and reasonable
               diagnostic tests utilized to determine if an emergency exists.
               Payment for emergency services continue until the patient is
               stabilized and can be safely discharged or transferred.

          J.   Memoranda of Understanding for Emergency Services

               HMOs may have a contract or an MOU with hospitals or urgent care
               centers within the HMO's service area(s) to ensure prompt and
               appropriate payment for emergency services. For situations where
               a contract or MOU is not possible, HMOs must identify for
               hospitals and urgent care centers procedures that ensure prompt
               and appropriate payment for emergency services.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -22-
<PAGE>

               1.   Such MOUs shall provide for:

                    a.   The process for determining whether an emergency
                         exists.

                    b.   The requirements and procedures for contacting the HMO
                         before the provision of urgent or routine care.

                    c.   Agreements, if any, between the HMO and the provider
                         regarding indemnification, hold harmless, or any other
                         deviation from malpractice or other legal liability
                         which would attach to the HMO or provider in the
                         absence of such an agreement.

                    d.   Payments for appropriate, medically necessary, and
                         reasonable diagnostic tests to determine if an
                         emergency exists.

                    e.   Assurance of timely and appropriate provision of and
                         payment for emergency services.

               2.   Unless a contract or MOU specifies otherwise, HMOs are
                    liable to the extent that FFS would have been liable for the
                    emergency situation. The Department reserves the right to
                    resolve disputes between HMOs, hospitals and urgent care
                    centers regarding emergency situations based on FFS
                    criteria.

          K.   Provision of Services

               Provide contract services to Medicaid/BadgerCare enrollees under
               this Contract in the same manner as those services are provided
               to other members of the HMO.

          L.   Open Enrollment

               Conduct a continuous open enrollment period during which the HMO
               shall accept recipients eligible for coverage under this Contract
               in the order in which they are enrolled without regard to health
               status of the recipient or any other factor(s).

          M.   Pre-Existing Conditions

               Assume responsibility for all covered medical conditions of each
               enrollee as of the effective date of coverage under the Contract.
               The aforementioned responsibility shall not apply in the case of
               persons hospitalized at the time of initial enrollment, as
               provided for in this article.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -23-
<PAGE>

          N.   Hospitalization at the Time of Enrollment or Disenrollment

               1.   The HMO will not assume financial responsibility for
                    enrollees who are hospitalized at the time of enrollment
                    (effective date of coverage) until an appropriate hospital
                    discharge.

               2.   The Department will be responsible for paying on a FFS basis
                    all Medicaid covered services for such hospitalized
                    enrollees during hospitalization.

               3.   Enrollees, including newborn enrollees, who are hospitalized
                    at the time of disenrollment from the HMO shall remain the
                    financial responsibility of the HMO. The financial liability
                    of the HMO shall encompass all contract services. The HMO's
                    financial liability shall continue for the duration of the
                    hospitalization, except where (1) loss of Medicaid/
                    BadgerCare eligibility occurs; (2) disenrollment occurs
                    because there is a voluntary disenrollment from the HMO as a
                    result of one of the conditions in Addendum II, in which
                    case HMO liability shall terminate upon disenrollment being
                    effective; and (3) except where disenrollment is due to
                    medical status change to a code indicating SSI, 503 case, or
                    institutionalized eligibility. 503 cases are SSI cases that
                    continue Medicaid eligibility in spite of social security
                    cost of living increases that cause an SSI recipient to lose
                    SSI eligibility. In these three exceptions, the HMO's
                    liability shall not exceed the period for which it is
                    capitated.

               4.   Discharge from one hospital and admission to another within
                    twenty-four (24) hours for continued treatment shall not be
                    considered discharge under this section. Discharge is
                    defined here as it is in the UB-92 Manual.

          O.   Non-Discrimination

               Comply with all applicable Federal and State laws relating to
               non-discrimination and equal employment opportunity including s.
               16.765, Wis. Stats., Federal Civil Rights Act of 1964,
               regulations issued pursuant to that Act and the provisions of
               Federal Executive Order 11246 dated September 26, 1985, and
               assure physical and program accessibility of all services to
               persons with physical and sensory disabilities pursuant to
               Section 504 of the Federal Rehabilitation Act of 1973, as amended
               (29 U.S.C. 794), all requirements imposed by the applicable
               Department regulations (45 CFR part 84) and all guidelines and
               interpretations issued pursuant thereto, and the provisions of
               the Age Discrimination and Employment Act of 1967 and Age
               Discrimination Act of 1975.

               Chapter 16.765, Wis. Stats. requires that in connection with the
               performance of work under this Contract, the Contractor agrees
               not to discriminate against any employee or applicant for
               employment because of age, race, religion, color, handicap, sex,
               physical condition, developmental disability as defined in

HMO Contract for January 1, 2002 - December 31, 2003

                                      -24-
<PAGE>

               Section 51.01(5), sexual orientation or national origin. This
               provision shall include, but not be limited to, the following:
               employment, upgrading, demotion or transfer; recruitment or
               recruitment advertising; layoff or termination; rates of pay or
               other forms of compensation; and selection for training,
               including apprenticeship. Except with respect to sexual
               orientation, the Contractor further agrees to take affirmative
               action to ensure equal employment opportunities. The Contractor
               agrees to post in conspicuous places, available for employees and
               applicants for employment, notices to be provided by the
               contracting officer setting forth the provisions of the
               non-discrimination clause. Addendum VIII contains further details
               on the requirements of non-discrimination.

               With respect to provider participation, reimbursement, or
               indemnification - HMO will not discriminate against any provider
               who is acting within the scope of the provider's license or
               certification under applicable State law, solely on the basis of
               such license or certification. This shall not be construed to
               prohibit an HMO from including providers to the extent necessary
               to meet the needs of the Medicaid population or from establishing
               any measure designed to maintain quality and control cost
               consistent with these responsibilities.

          P.   Affirmative Action Plan

               Comply with State Affirmative Action policies. Contracts
               estimated to be twenty-five thousand dollars ($25,000) or more
               require the submission of a written affirmation action plan or
               have a current plan on file with the State of Wisconsin.
               Contractors with an annual work force of less than twenty-five
               employees are exempted from this requirement; however, such
               contractors shall submit a statement to the Division of Health
               Affirmative Action/Civil Rights Compliance Office certifying that
               its work force is less than twenty-five employees.

               1.   "Affirmative Action Plan" is a written document that details
                    an affirmative action program. Key parts of an affirmative
                    action plan are:

                    a.   a policy statement pledging nondiscrimination and
                         affirmative action in employment;

                    b.   internal and external dissemination of the policy;

                    c.   assignment of a key employee as the equal opportunity
                         officer;

                    d.   a work force analysis that identifies job
                         classification where representation of women,
                         minorities and the disabled is deficient;

                    e.   goals and timetables that are specific and measurable,
                         and that are set to correct deficiencies and to reach a
                         balance of work force;

HMO Contract for January 1, 2002 - December 31, 2003

                                      -25-

<PAGE>
                    f.   revision of all employment practices to ensure that
                         they do not have discriminatory effects; and

                    g.   establishment of internal monitoring and reporting
                         systems to measure progress regularly.

               2.   Within fifteen (15) days after the award of a contract, the
                    affirmative action plan shall be submitted to the Department
                    of Health and Family Services Box 7850, Madison, WI
                    53707-7850. Contractors are encouraged to contact the
                    Department of Health and Family Services, Affirmative
                    Action/Civil Rights Compliance Office at (608) 266-9372 for
                    technical assistance.

               3.   Addendum VIII contains further details on the requirements
                    of Affirmative Action Plans.

          Q.   Cultural Competency

               1.   HMO shall address the special health needs of enrollees such
                    as those who are low income or members of specific
                    population groups needing specific culturally competent
                    services. HMO shall incorporate in its policies,
                    administration, and service practice such as (1) recognizing
                    member's beliefs, (2) addressing cultural differences in a
                    competent manner, (3) fostering in staff/providers behaviors
                    and effectively address interpersonal communication styles
                    which respect enrollees' cultural backgrounds. HMO shall
                    have specific policy statements on these topics and
                    communicate them to subcontractors.

               2.   HMO shall encourage and foster cultural competency among
                    providers. HMO shall, when appropriate, permit enrollees to
                    choose providers from among the HMO's network based on
                    linguistic/cultural needs. HMO shall permit enrollees to
                    change primary providers based on the provider's ability to
                    provide services in a culturally competent manner. Enrollees
                    may submit grievances to the HMO and/or the Department
                    related to inability to obtain culturally appropriate care,
                    and the Department may, pursuant to such grievance, permit
                    an enrollee to disenroll and enroll into another HMO, or
                    into FFS in a county where HMOs do not enroll all eligibles.

          R.   Health Education and Prevention

               1.   Inform all enrollees of contributions that they can make to
                    the maintenance of their own health and the proper use of
                    health care services.

               2.   Have a program of health education and prevention available
                    and within reasonable geographic proximity to its enrollees.
                    The program shall.

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                                      -26-
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                    include health education and anticipatory guidance provided
                    as a part of the normal course of office visits, and in
                    discrete programming.

               3.   The program shall provide:

                    a.   An individual responsible for the coordination and
                         delivery of services in the program.

                    b.   Information on how to obtain these services (locations,
                         hours, phones, etc.).

                    c.   Health-related educational materials in the form of
                         printed, audiovisual, and/or personal communication.

                    d.   Information on recommended check-ups and screenings,
                         and prevention and management of disease states which
                         affect the general population. This includes specific
                         information for persons who have or who are at risk of
                         developing such health problems (e.g., hypertension,
                         diabetes, STD, asthma, breast and cervical cancer,
                         osteoporosis and postpartum depression).

                    e.   Health education and prevention programs. Recommended
                         programs include: injury control, family planning, teen
                         pregnancy, sexually transmitted disease prevention,
                         prenatal care, nutrition, childhood immunization,
                         substance abuse prevention, child abuse prevention,
                         parenting skills, stress control, postpartum
                         depression, exercise, smoking cessation, weight gain
                         and healthy birth, postpartum weight loss, and
                         breast-feeding promotion and support. Note that any
                         education and prevention programs for family planning
                         and substance abuse would supplement the required
                         family planning and substance abuse health care
                         services covered in the Medicaid/BadgerCare program.

                    f.   Promotion of the health education and prevention
                         program, including use of languages understood by the
                         population served, and use of facilities accessible to
                         the population served.

                    g.   Information on and promotion of other available
                         prevention services offered outside of the HMO
                         including child nutrition programs, parenting classes,
                         programs offered by local health departments and other
                         programs.

                    h.   Systematic referrals of potentially eligible women,
                         infants, and children to the Special Supplemental
                         Nutrition Program for Women, Infants, and Children
                         (WIC) and relevant medical

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                                      -27-
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                         information to the WIC program. General information
                         about recipient eligibility requirements for the WIC
                         program, a statewide list of WIC agencies, as well as
                         a sample WIC Referral Form that can be used by HMOs,
                         can be found in Addendum XXV. The Department will
                         develop a resource manual for information related to
                         the Medicaid/BadgerCare Program. Specific information
                         concerning WIC and WIC agencies will be contained in
                         the resource manual.

               4.   Health related educational materials produced by the HMO
                    must be at a sixth (6th ) grade reading comprehension level
                    and reflect sensitivity to the diverse cultures served.
                    Also, if the HMO uses material produced by other entities,
                    the HMO must review these materials for grade level
                    comprehension level and for sensitivity to the diverse
                    cultures served. Finally, the HMO must make all reasonable
                    efforts to locate and use culturally appropriate health
                    related material.

          S.   Enrollee Handbook and Education and Outreach for Newly Enrolled
               Recipients

               1.   Within one week of initial enrollment notification to the
                    HMO, annually thereafter and whenever the enrollee's
                    requests, mail to each casehead an enrollee handbook which
                    is at the "sixth (6th ) grade reading comprehension level"
                    and which at a minimum will include information about:

                    a.   the phone number that can be used for assistance in
                         obtaining emergency care or for prior authorization for
                         urgent care;

                    b.   information on contract services offered by the HMO;

                    c.   location of facilities;

                    d.   hours of service;

                    e.   informal and formal grievance procedures, including
                         notification of the enrollee's right to a fair hearing;

                    f.   grievance appeal procedures;

                    g.   HealthCheck;

                    h.   family planning policies;

                    i.   policies on the use of emergency and urgent care
                         facilities;

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                                      -28-
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                    j.   providers and whether the provider is accepting new
                         "enrollees," and

                    k.   changing HMOs.

               2.   The HMO must provide periodic updates to the handbook, as
                    needed explaining changes in the above policies. Such
                    changes must be approved by the Department prior to
                    printing.

               3.   New standard language for the enrollee handbooks required by
                    this Contract will be included in the handbooks when HMOs
                    reprint the informing materials

               4.   Enrollee handbooks (or substitute enrollee information
                    approved by the Department which explains HMO services and
                    how to use the HMO) shall be made available in at least the
                    following languages: Spanish, Lao, Russian and Hmong if the
                    HMO has enrollees who are conversant only in those
                    languages. The handbook should direct enrollees who are not
                    conversant in English to the appropriate resources within
                    the HMO for obtaining a copy of the handbook with the
                    appropriate language. The Department will provide
                    translations of the standard handbook language in Addendum V
                    for the four specified languages. HMOs may use the
                    translated standard handbook language as appropriate to its
                    service area. However, HMOs must utilize local resources to
                    review the final handbook language. This will assure the
                    that the appropriate dialect(s) is/are used in the standard
                    translation. HMOs must arrange for translation into other
                    dialects if the translation is inappropriate for its
                    enrollees.

               5.   HMOs may create enrollee handbook language that they believe
                    is simpler than the standard language of Addendum V, but
                    this substitute language must be approved by the Department
                    and HMOs must independently arrange for the translation of
                    any non-standard language.

               6.   HMOs shall submit their enrollee handbook for review and
                    approval within sixty (60) days of signing the contract for
                    2002-2003.

               7.   Standard language on several subjects, including
                    HealthCheck, family planning, grievance and appeal rights,
                    conversion rights, and emergency and urgent care shall
                    appear in all handbooks and is included in Addendum V. Any
                    exceptions to the standard must be approved in advance by
                    the Department, and will be approved only for exceptional
                    reasons. Standard language may change during the course of
                    the contract period, if there are changes in federal or
                    state laws, rules or regulations, in which case the new
                    language will have to be inserted into the enrollee
                    handbooks as of the effective date of any such change.

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                                      -29-
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               8.   In addition to the above requirements sections 1 through 7
                    for the enrollee handbook, HMOs are required to perform
                    other education and outreach activities for newly enrolled
                    recipients. HMOs are to submit to the Department for prior
                    written approval an education and outreach plan targeted
                    towards newly enrolled recipients. This outreach plan will
                    be examined by the Department during pre-contract review.
                    Newly enrolled recipients are those recipients appearing on
                    the enrollment reports described in Article IV. D. and
                    listed as "ADD-NEW." The plan must identify at least two (2)
                    educational/outreach activities in addition to the enrollee
                    handbook to be undertaken by the HMO for the purpose of
                    informing new enrollees of pertinent information necessary
                    to access services within the HMO network. The plan must
                    include the frequency (i.e., weekly, monthly, etc.) of the
                    activity, the person within the HMO responsible for the
                    activities, and how activities will be documented and
                    evaluated for effectiveness.

          T.   Approval of Marketing Plans and Informing Materials

               1.   Marketing and Informing Materials

                    As used in this section, "marketing materials, other
                    marketing activities, and informing materials" include the
                    production and dissemination of any informing materials,
                    marketing plans, marketing materials and other marketing
                    activities that refer to Medicaid, Title XIX, BadgerCare, or
                    Title XXI or are intended for Medicaid/BadgerCare
                    recipients. This requirement includes marketing or informing
                    materials that are produced by providers under contract to
                    the HMO or owned by the HMO in whole or in part.

               2.   Department Approval of Marketing and Informing Materials--

                    HMOs must submit to the Department for prior written
                    approval all informing materials, marketing plans, and all
                    marketing materials and other marketing activities that
                    refer to Medicaid Title XIX, BadgerCare, or Title XXI or are
                    intended for Medicaid/ BadgerCare recipients. This
                    requirement includes marketing or informing materials that
                    are produced by providers under contract to the HMO or owned
                    by the HMO in whole or in part.

                    Marketing plans and informing materials must be written at a
                    "sixth grade comprehensive level" and will be reviewed by
                    the Department in a manner that does not unduly restrict or
                    inhibit the HMO's informing or marketing plans. When
                    applying this provision to specific marketing plans,
                    informing materials and/or activities, the entire content
                    and use of the

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                                      -30-
<PAGE>

                    informing/marketing materials or activities shall be taken
                    into consideration. All materials will be reviewed as
                    follows:

                    a.   The Department will review and either approve, approve
                         with modifications, or deny all marketing or informing
                         material within ten (10) working days of receipt of the
                         informing materials, except that informing, marketing
                         materials and other marketing activities are deemed
                         approved if there is no response from the Department
                         within ten (10) working days

                    b.   Time-sensitive marketing or informing material must be
                         clearly marked time-sensitive by the HMO and will be
                         approved, approved with modifications or denied by the
                         Department within ten business days. The Department
                         reserves the right to determine whether the material
                         is, indeed, time-sensitive.

                    c.   The Department will not approve any materials which are
                         deemed to be confusing, fraudulent, misleading, or do
                         not accurately reflect the scope and philosophy of the
                         Medicaid program and/or its covered benefits.

                    d.   Problems and errors subsequently identified by the
                         Department must be corrected by the HMO when they are
                         identified. HMO agrees to comply with Ins. 6.07 and
                         3.27, Wis. Admin. Code, and practices consistent with
                         the Balanced Budget Amendment of 1997 P.L. 105-33 Sec.
                         4707(a) [42 U.S.C. 1396v(d)(2)].

               3.   Prohibited Practices:

                    The following marketing practices are prohibited:

                    a.   Practices that are discriminatory;

                    b.   Practices that seek to influence enrollment in
                         conjunction with the sale of any other insurance
                         product;

                    c.   Direct and indirect cold calls, either door-to-door or
                         telephonic;

                    d.   Offer of material or financial gain to potential
                         members as an inducement to enroll;

                    e.   Activities and material that could mislead, confuse or
                         defraud consumers;

                    f.   Materials that contain false information; and

                    g.   Practices that are reasonably expected to have the
                         effect of denying or discouraging enrollment.

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                                      -31-
<PAGE>

               4.   HMOs Agreement to Abide by Marketing/Informing Criteria

                    HMO agrees to engage only in marketing activities and
                    distribute only those informing and marketing materials that
                    are pre-approved in writing. HMOs that fail to abide by
                    these marketing requirements may be subject to any and all
                    sanctions available under Article IX. In determining any
                    sanctions, the Department will take into consideration any
                    past unfair marketing practices, the nature of the current
                    problem and the specific implications on the health and well
                    being of the Medicaid enrollees. In the event that an HMO's
                    affiliated provider fails to abide by these requirements,
                    the Department will evaluate whether the HMO should have had
                    knowledge of the marketing issue and the HMO's ability to
                    adequately onitor ongoing future marketing activities of the
                    subcontractor(s).

          U.   Conversion Privileges

               Offer any enrollee covered under this Contract, whose enrollment
               is subsequently terminated due to loss of Medicaid/BadgerCare
               eligibility, the opportunity to convert to a private enrollment
               contract without underwriting. This time period for conversion
               following Medicaid/BadgerCare termination notice will comply with
               Wisconsin Stats. 632.897 regarding conversion rights.

          V.   Choice of Health Professional

               Offer each enrollee covered under this Contract the opportunity
               to choose a primary health care professional affiliated with the
               HMO, to the extent possible and appropriate. If the HMO assigns
               recipients to primary care providers, then the HMO shall notify
               recipients of the assignment. HMOs must permit Medicaid/
               BadgerCare enrollees to change primary providers at least twice
               in any calendar year, and to change primary providers more often
               than that for just cause, just cause being defined as lack of
               access to quality, culturally appropriate, health care. Such just
               cause will be handled as a formal grievance. If the HMO has
               reason to lock-in an enrollee to one primary provider and/or
               pharmacy in cases of difficult case management, the HMO must
               submit a written request in advance of such lock-in to the
               Department. Requests should be submitted to the Contract Monitor.
               Culturally appropriate care in this section means care by a
               provider who can relate to the enrollee and who can provide care
               with sensitivity, understanding, and respect for the enrollee's
               culture.

          W.   Quality Assessment/Performance Improvement (QAPI)

               1.   The HMO Quality Assessment/Performance Improvement (QAPI)
                    program must conform to requirements of 42 CFR, Part 400,
                    Medicaid Managed Care Requirements, Subpart D, Quality
                    Assessment and Performance Improvement. The program must
                    also comply with 42 Code of Federal

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                    Regulations (CFR) 434.34 which states that the HMO must have
                    a QAPI system that:

                    a.   Is consistent with the utilization control requirement
                         of 42 CFR 456;

                    b.   Provides for review by appropriate health professionals
                         of the process followed in providing health services;

                    c.   Provides for systematic data collection of performance
                         and patient results;

                    d.   Provides for interpretation of this data to the
                         practitioners; and

                    e.   Provides for making needed changes.

               2.   Quality Assessment/Performance Improvement Program

                    a.   The HMO must have a comprehensive Quality Assessment/
                         Improvement Program (QAPI) program that protects,
                         maintains, and improves the quality of care provided to
                         Wisconsin Medicaid program recipients. The HMO must
                         evaluate the overall effectiveness of its QAPI program
                         annually to determine whether the program has
                         demonstrated improvement, where needed, in the quality
                         of care and service provided to its Medicaid/
                         BadgerCare population.

                         The HMO must have documentation of all aspects of the
                         QAPI program available for Department review upon
                         request. The Department may perform off-site and
                         on-site Quality Assessment/ Performance Improvement
                         audits to ensure that the HMO is in compliance with
                         contract requirements. The review and audit may
                         include: on-site visits; staff and enrollee interviews;
                         medical record reviews; review of all QAPI procedures,
                         reports, committee activities, including credentialing
                         and recredentialing activities, corrective actions and
                         follow-up plans; peer review process; review of the
                         results of the member satisfaction surveys, and review
                         of staff and provider qualifications.

                    b.   The HMO must have a written QAPI work plan that is
                         ratified by the board of directors and outlines the
                         scope of activity and the goals, objectives, and time
                         lines for the QAPI program. New goals and objectives
                         must be set at least annually based on findings from
                         quality improvement activities and studies and results
                         of the HMO

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                                      -33-
<PAGE>

                         on DHCF enrollee satisfaction surveys and MEDDIC-MS
                         performance measures.

                    c.   The HMO governing body is ultimately accountable to the
                         Department for the quality of care provided to HMO
                         enrollees. Oversight responsibilities of the governing
                         body include, at a minimum: approval of the overall
                         QAPI program and an annual QAPI plan; designating an
                         accountable entity or entities within the organization
                         to provide oversight of QAPI; review of written reports
                         from the designated entity on a periodic basis which
                         include a description of QAPI activities, progress on
                         objectives, and improvements made; formal review on an
                         annual basis of a written report on the QAPI program;
                         and directing modifications to the QAPI program on an
                         ongoing basis to accommodate review findings and issues
                         of concern within the HMO.

                    d.   The QAPI committee shall be in an organizational
                         location within the HMO such that it can be responsible
                         for all aspects of the QAPI program. The committee
                         membership must be interdisciplinary and be made up of
                         both providers and administrative staff of the HMO,
                         including:

                         1)   a variety of health professions (e.g., pharmacy,
                              physical therapy, nursing, etc.);

                         2)   qualified professionals specializing in mental
                              health or substance abuse and dental care on a
                              consulting basis when an issue related to these
                              areas arises;

                         3)   a variety of medical disciplines (e.g., medicine,
                              surgery, radiology, etc.);

                         4)   OB/GYN and pediatric representation; and

                         5)   HMO management or governing body.

                         6)   Enrollees of the HMO must be able to contribute
                              input to the QAPI Committee. The HMO must have a
                              system to receive enrollee input on quality
                              improvement, document the input received, document
                              the HMO's response to the input, including a
                              description of any changes or studies it
                              implemented as the result of the input and
                              document feedback to enrollees in response to
                              input received. The HMO response must be timely.

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                                      -34-
<PAGE>

                    e.   The committee must meet on a regular basis, but not
                         less frequently than quarterly. The activities of the
                         QAPI Committee must be documented in the form of
                         minutes and reports. The QAPI Committee must be
                         accountable to the governing body.

                         Documentation of Committee minutes and activities must
                         be available to the Department upon request.

                    f.   QAPI activities of HMO providers and subcontractors, if
                         separate from HMO QAPI activities, shall be integrated
                         into the overall HMO/QAPI program. Requirements to
                         participate in QAPI activities, including submission of
                         complete encounter data, are incorporated into all
                         provider and subcontractor contracts and employment
                         agreements. The HMO QAPI program shall provide feedback
                         to the providers/subcontractors regarding the
                         integration of, operation of, and corrective actions
                         necessary in provider/subcontractor QAPI efforts. Other
                         management activities (Utilization Management, Risk
                         Management, Customer Service, Complaints and
                         Grievances, etc.) must be integrated with the QAPI
                         program. Physicians and other health care practitioners
                         and institutional providers must actively cooperate and
                         participate in the HMO's quality activities.

                         The HMO remains accountable for all QAPI functions,
                         even if certain functions are delegated to other
                         entities. If the HMO delegates any activities to
                         contractors the conditions listed in Article II of
                         this agreement must be met.

                    g.   There is evidence that HMO management representatives
                         and providers participate in the development and
                         implementation of the QAPI plan of the HMO. This
                         provision shall not be construed to require that HMO
                         management representatives and providers participate in
                         every committee or subcommittee of the QAPI program.

                    h.   The HMO must designate a senior executive to be
                         responsible for the operation and success of the QAPI
                         program. If this individual is not the HMO Medical
                         Director, the Medical Director must have substantial
                         involvement in the QAPI program. The designated
                         individual shall be accountable for the QAPI activities
                         of the HMO's own providers, as well as the HMO's
                         subcontracted providers.

                    i.   The qualifications, staffing level and available
                         resources must be sufficient to meet the goals and
                         objectives of the QAPI program

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                                      -35-
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                         and related QAPI activities. Such activities
                         include, but are not limited to, monitoring and
                         evaluation of important aspects of care and
                         services, facilitating appropriate use of
                         preventive services, monitoring provider
                         performance, provider credentialing, involving
                         members in QAPI initiatives and conducting
                         performance improvement projects.

                         Written documentation listing the staffing
                         resources that are directly under the
                         organizational control of the person who is
                         responsible for QAPI (including total FTEs,
                         percent of time dedicated to QAPI, background and
                         experience, and role) must be available to the
                         Department upon request.

               3.   Monitoring and Evaluation

                    a.   The QAPI program must monitor and evaluate the quality
                         of clinical care on an ongoing basis. Important aspects
                         of care (i.e., acute, chronic conditions, high volume,
                         high-risk preventive care and services) are studied and
                         prioritized for performance improvement and/or
                         development of practice guidelines. Standardized
                         quality indicators must be used to asses improvement,
                         assure achievement of minimum performance levels (Ref:
                         MEDDIC-MS Measures and Technical Specifications),
                         monitor adherence to guidelines, and identify patterns
                         of over utilization and under utilization. The
                         measurement of quality indicators selected by the HMO
                         for areas other than those included in MEDDIC-MS must
                         be supported by appropriate data collection and
                         analysis methods to improve clinical care and services.

                    b.   Provider performance must be measured against practice
                         guidelines and standards adopted by the QAPI Committee.
                         Areas identified for improvement must be tracked and
                         corrective actions taken when warranted. The
                         effectiveness of corrective actions must be monitored
                         until problem resolution occurs. Reevaluation must
                         occur to assure that the improvement is sustained.

                    c.   The HMO must use appropriate clinicians to evaluate the
                         data on clinical performance, and multi disciplinary
                         teams to analyze and address data on systems issues.

                    d.   The HMO must also monitor and evaluate care and
                         services in certain priority clinical and non-clinical
                         areas specified in Article III W 13 c. d.

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                                      -36-
<PAGE>

                    e.   The HMO must make documentation available to the
                         Department upon request regarding quality improvement
                         and assessment studies on plan performance, which
                         relate to the enrolled population. See reporting
                         requirements in Article III. W. Section 13,
                         "Performance Improvement Priority Areas and Projects."

                    f.   Practice guidelines: The HMO must develop or adopt
                         practice guidelines that are disseminated to providers
                         and to enrollees as appropriate or upon request. The
                         guidelines should be based on reasonable medical
                         evidence or consensus of health professionals; consider
                         the needs of the enrollees; developed or adopted in
                         consultation with the contracting health professionals,
                         and reviewed and updated periodically.

                         Decisions with respect to utilization management,
                         enrollee education, coverage of services, and other
                         areas to which the practice guidelines apply are
                         consistent with the guidelines. Variations from the
                         guidelines must be based on the clinical situation.

               4.   Access

                    a.   The HMO must provide medical care to its
                         Medicaid/BadgerCare enrollees that is as accessible to
                         them, in terms of timeliness, amount, duration, and
                         scope, as those services are to nonenrolled
                         Medicaid/BadgerCare recipients within the area served
                         by the HMO.

                         The HMO must have a Medicaid certified primary care
                         provider within a 20-mile distance from any enrollee
                         residing in the HMO service area. A service area for an
                         HMO will be specified down to the zip code. Therefore,
                         all portions of each zip code in the HMO service area
                         must be within 20-miles from a Medicaid certified
                         primary care provider.

                    b.   Network Adequacy:

                         The HMO must assure that its delivery network is
                         sufficient to provide adequate access to all services
                         covered under this agreement. In establishing the
                         network, the HMO must consider:

                         1)   The anticipated Medicaid/BadgerCare enrollment.

                         2)   The expected utilization of services, considering
                              enrollee characteristics and health care needs.

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<PAGE>

                         3)   The number and types of providers (in terms of
                              training experience and specialization) required
                              to furnish the contracted services.

                         4)   The number of network providers not accepting new
                              patients.

                         5)   The geographic location of providers and
                              enrollees, distance, travel time, normal means of
                              transportation used by enrollees and whether 1
                              provider locations are accessible to enrollees
                              with disabilities.

                         The HMO must also assure the following provisions:

                         6)   In addition to any primary care provider a female
                              enrollee may have, provide female enrollees with
                              direct access to a women's health specialist
                              within the network for covered women's routine
                              and preventive health care services.

                         7)   Provision for a second opinion from a qualified
                              network provider upon enrollee request, subject to
                              referral procedures approved by the Department.
                              If an appropriately qualified provider is not
                              available within the network, arrange for a second
                              opinion outside the network at no charge to the
                              enrollee.

                         8)   Adequate and timely coverage of services provided
                              out of network, when the required medical service
                              is not available within the HMO network.

                         9)   Network providers are credentialed as required by
                              this contract.

                         HMO must provide documentation and assurance of the
                         above network adequacy criteria as required by the
                         Department for pre-contract certification or upon
                         request of the Department.

                         This access standard does not prevent a recipient from
                         choosing and HMO when the recipient resides in zip code
                         that does not meet the 20-mile distance standard.
                         However, the recipient will not be automatically
                         assigned to that HMO. If by some circumstance the
                         recipient has been assigned to the HMO or has chosen
                         the HMO and becomes dissatisfied with access to medical
                         care, the recipient will be allowed to disenroll from
                         the HMO for reason of distance.

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                                      -38-
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                         Primary care providers are defined to include, but are
                         not limited to, Physicians and Physician Clinics with
                         specialties in general practice, family practice,
                         internal medicine, obstetrics and gynecology, and
                         pediatrics, FQHCs, RHCs, Nurse Practitioners, Nurse
                         Midwives, Physician Assistants, and Tribal Health
                         Centers. HMOs may define other types of providers as
                         primary care providers. If they do so, the HMOs must
                         define these other types of primary care providers and
                         justify their inclusion as primary care providers
                         during the pre-contract review phase of the HMO
                         Certification process.

                    c.   The HMO must have written protocols to ensure that
                         enrollees have access to screening, diagnosis and
                         referral, and appropriate treatment for those
                         conditions and services covered under the Wisconsin
                         Medicaid program.

                         The HMO's protocols must include methods for
                         identification, outreach to and screening/assessment of
                         enrollees with special health care needs.

                    d.   The HMO must also provide medically necessary high risk
                         prenatal care within two weeks of the enrollee's
                         request for an appointment, or within three weeks if
                         the request is for a specific HMO provider.

                    e.   The HMO must have written standards for the
                         accessibility of care and services that are
                         communicated to providers and monitored. The standards
                         must include the following: waiting times for care at
                         facilities; waiting times for appointments; specify
                         that providers' hours of operation do not discriminate
                         against Medicaid/ BadgerCare enrollees; and whether or
                         not provider(s) speak member's language. The HMO must
                         take corrective action if its standards are not met.

                    f.   The HMO must have a mental health or substance abuse
                         provider within a 35-mile distance from any enrollee
                         residing in the HMO service area or no further than the
                         distance for non-enrolled recipients residing in the
                         service area. The HMO must also give consideration to
                         whether the providers are accepting new patients, and
                         where full or part-time coverage is available.

                    g.   The HMO must have a dental provider, when appropriate,
                         within a 35-mile distance from any enrollee residing in
                         the HMO service area or no further than the distance
                         for non-enrolled recipients residing in the service
                          area. The HMO must also give consideration

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                         to whether the dentist is accepting new patients, and
                         where full or part-time coverage is available.

               5.   Health Promotion and Disease Prevention Services

                    a.   The HMO must identify at-risk populations for
                         preventive services and develop strategies for reaching
                         Medicaid/ BadgerCare members included in this
                         population. Local health departments and
                         community-based health organizations can provide the
                         HMO with special access to vulnerable and low-income
                         population groups, as well as settings that reach
                         at-risk individuals in their communities, schools and
                         homes. Public health resources can be used to enhance
                         the HMO's health promotion and preventive care
                         programs.

                    b.   The HMO must have mechanisms for facilitating
                         appropriate use of preventive services and educating
                         enrollees on health promotion. At a minimum, an
                         effective health promotion and prevention program
                         includes: tracking of preventive services, practice
                         guidelines for preventive services, yearly measurement
                         of performance in the delivery of such services, and
                         communication of this information to providers and
                         enrollees.

               6.   Provider Selection (credentialing) and Periodic Evaluation
                    (recredentialing)

                    a.   The HMO must have written policies and procedures for
                         provider selection and qualifications. For each
                         practitioner, including each member of a contracting
                         group that provides services to the HMO's enrollees,
                         initial credentialing must be based on a written
                         application, primary source verification of licensure,
                         disciplinary status, eligibility for payment under
                         Medicaid and certified for Medicaid. The HMO's written
                         policies and procedures must identify the circumstances
                         in which site visits are appropriate in the
                         credentialing process.

                    b.   The HMO must periodically monitor (no less than every
                         three years) the provider's documented qualifications
                         to assure that the provider still meets the HMO's
                         specific professional requirements.

                    c.   The HMO must also have a mechanism for considering the
                         provider's performance. The recredentialing method must
                         include updating all the information (except medical
                         education) utilized in the initial credentialing
                         process. Performance evaluation must include
                         information from: the QAPI system, reviewing enrollee
                         complaints, and the utilization management system.

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                    d.   The selection process must not discriminate against
                         providers such as those serving high-risk populations,
                         or specialize in conditions that require costly
                         treatment. The HMO must have a process for receiving
                         advice on the selection criteria for credentialing and
                         recredentialing practitioners in the HMO's network.

                    e.   If the HMO delegates selection of providers to another
                         entity, the organization retains the right to approve,
                         suspend, or terminate any provider selected by that
                         entity.

                    f.   The HMO must have a formal process of peer review of
                         care delivered by providers and active participation of
                         the HMO's contracted providers in the peer review
                         process. This process may include internal medical
                         audits, medical evaluation studies, peer review
                         committees, evaluation of outcomes of care, and systems
                         for correcting deficiencies. The HMO must supply
                         documentation of its peer review process upon request.

                    g.   The HMO must have written policies that allow it to
                         suspend or terminate any provider for quality
                         deficiencies. There must also be an appeals process
                         available to the provider that conforms to the
                         requirements of the HealthCare Quality Improvement Act
                         of 1986 (42 USCss.11101 etc. Seq.).

                    h.   In addition to the requirements in this section, the
                         names of individual practitioners and institutional
                         providers who have been terminated from the HMO
                         provider network as a result of quality issues must be
                         immediately forwarded to the Department and reported to
                         other entities as required by law (42 USC Section 11101
                         et. Seq.).

                    i.   Institutional Provider Selection--For each provider,
                         other than an individual practitioner, the HMO
                         determines, and verifies at specified intervals, that
                         the provider is:

                         1) licensed to operate in the State, if licensure is
                            required, and in compliance with any other
                            applicable State or Federal requirements; and

                         2) the HMO verifies if the provider claims
                            accreditation, or is determined by the HMO to meet
                            standards established by the HMO itself.

                    j.   Exceptions to Credentialing and recredentialing
                         requirements:

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                         These standards do not apply to:

                         1) Providers who practice only under the direct
                            supervision of a physician or other provider, and;

                         2) Hospital-based providers such as emergency room
                            physicians, anesthesiologists, and other providers
                            who provide services only incident to hospital
                            services.

                         These exceptions do not apply if the provider contracts
                         independently with the HMO.

               7.   Enrollee Feedback on Quality Improvement

                    a.   The HMO must have a process to maintain a relationship
                         with its enrollees that promotes two way communication
                         and contributes to quality of care and service. The HMO
                         must show a commitment to treating members with respect
                         and dignity.

                    b.   Annually, DHCF will conduct a satisfaction of care
                         survey of a representative sample of enrolled Medicaid/
                         BadgerCare recipients.

                         The Department will work with HMOs to develop the
                         survey instrument and plan. The HMO shall have systems
                         in place for acting on survey results and shall report
                         to the Department any quality management projects
                         planned in response to survey results.

                    c.   The HMO is encouraged to find additional ways to
                         involve Medicaid/BadgerCare enrollees in quality
                         improvement initiatives and in soliciting enrollee
                         feedback on the quality of care and services the HMO
                         provides. Other ways to bring enrollees into the HMO's
                         efforts to improve the health care delivery system
                         include but are not limited to: focus groups, consumer
                         advisory councils, enrollee participation on the
                         governing board, the QAPI committees or other
                         committees, or task forces related to evaluating
                         services. All efforts to solicit feedback from
                         enrollees must be approved by the Department.

               8.   Medical Records

                    a.   The HMO must have policies and procedures for
                         participating provider medical records content and
                         documentation that have been communicated to providers
                         and a process for evaluating its providers' medical
                         records based on the HMO's policies. These policies
                         must address patient confidentiality, organization
                         and

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                         completeness, tracking, and important aspects of
                         documentation such as accuracy, legibility, and
                         safeguards against loss, destruction, or unauthorized
                         use. The HMO must also have confidentiality policies
                         and procedures that are applicable to administrative
                         functions that are concerned with confidential patient
                         information. Those policies must include information
                         with respect to disclosure of enrollee-identifiable
                         medical record and/or enrollment information and
                         specifically provide:

                         1. The enrollees may review and obtain copies of
                            medical records information that pertain to them.

                         2. The policies above must be made available to
                            enrollees upon request.

                    b.   Patient medical records must be maintained in an
                         organized manner (by the HMO, and/or by the HMO's
                         subcontractors) that permits effective patient care,
                         they must reflect all aspects of patient care and be
                         readily available for patient encounters, for
                         administrative purposes, and for Department review.

                    c.   Because HMOs are considered contractors of the State
                         and are therefore (only for the limited purpose of
                         obtaining medical records of its enrollees) entitled to
                         obtain medical records according to Wisconsin
                         Administrative Code, HFS 104.01(3), the Department will
                         require Medicaid-certified providers to release
                         relevant records to the HMO to assist in compliance
                         with this section. Where HMOs have not specifically
                         addressed photocopying expenses in their provider
                         contracts or other arrangements, the HMOs are liable
                         for charges for copying records only to the extent that
                         the Department would reimburse on a FFS basis.

                    d.   The HMO must have written confidentiality policies and
                         procedures in regard to confidential patient
                         information. Policies and procedures must be
                         communicated to HMO staff, members, and providers. The
                         transfer of medical records to out-of-plan providers or
                         other agencies not affiliated with HMO (except for the
                         Department) are contingent upon the receipt by the HMO
                         of written authorization to release such records signed
                         by the enrollee or, in the case of a minor, by the
                         enrollee's parent, guardian, or authorized
                         representative.

                    e.   The HMO must have written quality standards and
                         performance goals for participating provider medical
                         record documentation and be able to demonstrate, upon
                         request of the DHFS, that the

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                                      -43-
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                         standards and goals have been communicated to
                         providers. The HMO must actively monitor established
                         standards and provide documentation of standards and
                         goals upon request of the Department.

                    f.   Medical records must be readily available for HMO-wide
                         Quality Assessment/Performance Improvement (QAPI) and
                         Utilization Management (UM) activities and provide
                         adequate medical and other clinical data required for
                         (QAPI)/UM, and Department use.

                    g.   The HMO must have adequate policies in regard to
                         transfer of medical records to ensure continuity of
                         care when enrollees are treated by more than one
                         provider. This may include transfer to local health
                         departments subject to the receipt of a signed
                         authorization form as specified in Article III. W. 8
                         (d) above (with the exception of immunization status
                         information described in Article III. B. 14., which
                         doesn't require enrollee authorization).

                    h.   Requests for completion of residual functional capacity
                         evaluation forms and other impairment assessments, such
                         as queries as to the presence of a listed impairment,
                         shall be provided within ten (10) working days of
                         request (at the discretion of the individual provider
                         and subject to the provider's medical opinion of its
                         appropriateness) and according to the other
                         requirements listed above; the HMO and its providers
                         and subcontractor may charge the enrollee, authorized
                         representative, or other third party a reasonable rate
                         for the completion of such forms and other impairment
                         assessments. Such rates may be reviewed by the
                         Department for reasonableness and may be modified based
                         on this review.

                    i.   Minimum medical record documentation per chart entry or
                         encounter must conform to the Wisconsin Administrative
                         Code, Chapter HFS 106.02, (9)(b) Medical record
                         content.

               9.   Utilization Management (UM)

                    a.   The HMO must have documented policies and procedures
                         for all UM activities that involve determining medical
                         necessity, and the approval or denial of medical
                         services. Qualified medical professionals must be
                         involved in any decision-making that requires clinical
                         judgment. The decision to deny, reduce or authorize a
                         service that is less than requested must be made by a
                         health professional with appropriate clinical expertise
                         in treating the affected enrollee's condition(s).
                         Criteria used to determine medical necessity and
                         appropriateness must be communicated to providers.

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                         The criteria for determining medical necessity may not
                         be more stringent than HFS 101.03 (96m) Wisconsin
                         Administrative Code.

                    b.   If the HMO delegates any part of the UM program to a
                         third party, the delegation must meet the requirements
                         in Article II Delegations of Authority.

                    c.   If the HMO utilizes phone triage, nurse lines or other
                         demand management systems, the HMO must document review
                         and approval of qualification criteria of staff and of
                         clinical protocols or guidelines used in the system.
                         The system's performance will be evaluated annually in
                         terms of clinical appropriateness.

                    d.   The policies specify time frames for responding to
                         requests for initial and continued service
                         determinations, specify information required for
                         authorization decisions, provide for consultation with
                         the requesting provider when appropriate, and provide
                         for expedited responses to requests for authorization
                         of urgently needed services. In addition, the HMO must
                         have in effect mechanisms to ensure consistent
                         application of review criteria for authorization
                         decisions (interrater reliability).

                         Within the timeframes specified, the HMO must give the
                         enrollee and the requesting provider written notice of:

                         1) the decision to deny, limit, reduce, delay or
                            terminate a service along with the reasons for the
                            decision.

                         2) the enrollee's right to file a grievance or request
                            a state fair hearing.

                         Authorization decisions must be made within the
                         following time frames and in all cases as expeditiously
                         as the enrollee's condition requires:

                         1) within 14 days of the receipt of the request, or

                         2) within 3 working days if the physician indicates or
                            the HMO determines that following the ordinary time
                            frame could jeopardize the enrollee's health or
                            ability to regain maximum function.

                         One extension of up to 14 days may be allowed if the
                         enrollee requests it or if the HMO justifies the need
                         for more information.

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                                      -45-
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                    e.   Criteria for decisions on coverage and medical
                         necessity are clearly documented, are based on
                         reasonable medical evidence, current standards of
                         medical practice, or a consensus of relevant health
                         care professionals, and are regularly updated.

                    f.   The HMO oversees and is accountable for any functions
                         and responsibilities that it delegates to any
                         subcontractor. (See Article II Delegations of
                         Authority).

                    g.   Postpartum discharge policy for mothers and infants
                         must be based on medical necessity determinations. This
                         policy must include all follow-up tests and treatments
                         consistent with currently accepted medical practice and
                         applicable federal law. The policy must allow at least
                         a 48-hour hospital stay for normal spontaneous vaginal
                         delivery, and 96 hours for a cesarean section delivery,
                         unless a shorter stay is agreed to by both the
                         physician and the enrollee. HMOs may not deny coverage,
                         penalize providers, or give incentives or payments to
                         providers or enrollees. Post hospitalization follow-up
                         care must be based on the medical needs and
                         circumstances of the mother and infant. The Department
                         may request documentation demonstrating compliance with
                         this requirement.

               10.  External Quality Review Contractor

                    a.   The HMO must assist the Department and the external
                         quality review organization under contract with the
                         Department in identification of provider and enrollee
                         information required to carry out on-site or off-site
                         medical chart reviews. This includes arranging
                         orientation meetings for physician office staff
                         concerning medical chart review, and encouraging
                         attendance at these meetings by HMO and physician
                         office staff as necessary. The provider of service may
                         elect to have charts reviewed on-site or off-site.

                    b.   When the professional review organization under
                         contract with the Department identifies an adverse
                         health situation in which follow-up is needed to
                         determine whether appropriate care was provided, the
                         HMO will be responsible for the following tasks:

                         1) Assign a staff person(s) to conduct follow-up with
                            the provider(s) concerning each adverse health
                            situation identified by the Department's
                            professional review organization, including
                            informing the provider(s) of the finding and
                            monitoring the provider's resolution of the finding;

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                         2) Inform the HMO's QAPI Committee of the final finding
                            and involve the QAPI Committee in the development,
                            implementation and monitoring of the corrective
                            action plan; and

                         3) Submit a corrective action plan or an opinion in
                            writing to the Department within 60 days that
                            addresses the measures that the HMO and the provider
                            intend to take to resolve the finding. The HMO's
                            final resolution of all cases must be completed
                            within six (6) months of HMO notification. A case is
                            not considered resolved by the Department until the
                            Department approves the response provided by the
                            HMO and provider.

                    c.   The HMO will facilitate training provided by the
                         Department to its providers.

               11.  Dental Services Quality Improvement (Applies only to HMOs
                    covering dental services.)

                    a.   The HMO QAPI Committee and QAPI coordinator will review
                         subcontracted dental programs quarterly to assure that
                         quality dental care is provided and that the HMO and
                         the contractor comply with the following:

                         1) The HMO or HMO affiliated dental provider must
                            advise the enrollee within 30 days of effective
                            enrollment of the name of the dental provider and
                            the address of the dental provider's site. The HMO
                            or HMO affiliated dental provider must also inform
                            the enrollee in writing how to contact his/her
                            dentist (or dental office), what dental services
                            are covered, when the coverage is effective, and
                            how to appeal denied services.

                         2) An HMO or HMO affiliated dental provider who assigns
                            all or some Medicaid/BadgerCare HMO enrollees to
                            specific participating dentists must give enrollees
                            at least 30 days after assignment to choose another
                            dentist. Thereafter, in accordance with Article III.
                            V., the HMO and/or affiliated provider must permit
                            enrollees to change dentists at least twice in any
                            calendar year and more often than that for just
                            cause.

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                         3) HMO-affiliated dentists must provide a
                            routine dental appointment to an assigned
                            enrollee within 90 days after the request.
                            Enrollee requests for emergency treatment
                            must be addressed within 24 hours after the
                            request is received.

                         4) Dental providers must maintain adequate
                            records of services provided. Records must
                            fully disclose the nature and extent of each
                            procedure performed and should be maintained
                            in a manner consistent with standard dental
                            practice.

                         5) The HMO affirms by execution of this Contract
                            that the HMO's peer review systems are
                            consistently applied to all dental
                            subcontractors and providers.

                         6) The HMO must document, evaluate, resolve, and
                            follow up on all verbal and written
                            complaints they receive from
                            Medicaid/BadgerCare enrollees related to
                            dental services.

               12.  Accreditation

                    a.   The Department encourages the HMO to actively pursue
                         accreditation by the National Committee for Quality
                         Assurance (NCQA), the Joint Commission on Accreditation
                         of Healthcare Organizations (JCAHO) or other recognized
                         accrediting body approved by the Department.

                    b.   The achievement of full accreditation by an
                         accreditation body approved by the department and
                         satisfaction of the requirements of the HMO
                         Accreditation Incentive Program as specified by the
                         Department will result in the HMO qualifying for the
                         Accreditation Incentive.

                    Where accreditation standards conflict with the standard set
                    forth in this agreement, the agreement prevails unless the
                    accreditation standard is more stringent.

               13.  Performance Improvement Priority Areas and Projects:

                    a.   The HMO must develop and ensure implementation of
                         program initiatives to address the specific clinical
                         needs that have a higher prevalence in the HMO's
                         enrolled population served under this agreement. These
                         priority areas must include clinical and non-clinical
                         Performance Improvement projects. The Department
                         strongly advocates the development of collaborative
                         relationships among HMOs, Local Health Departments,
                         community based

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                                      -48-
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                         behavioral health treatment agencies (both public and
                         private), and other community health organizations to
                         achieve improved services in priority areas and must
                         report complete encounter data for all services
                         provided. Linkages between managed care organizations
                         and public health agencies is an essential element for
                         the achievement of the public health objectives,
                         potentially reducing the quantity and intensity of
                         services the HMO needs to provide. The Department and
                         the HMO are jointly committed to on-going collaboration
                         in the area of service and clinical care improvements
                         by the development and sharing of "best practices" and
                         use of encounter data-driven performance measures
                         (MEDDIC-MS).

                         Annually, for the priority areas specified by the
                         Department and listed below, the HMO must monitor and
                         evaluate the quality of care and services through
                         performance improvement projects for at least two of
                         the listed areas in Article III, W. 13 (c) or (d)
                         below, or an HMO may propose alternative performance
                         improvement topics to be addressed by making a request
                         in writing to the Department. In addition, the HMO may
                         be required to conduct up to two additional performance
                         improvement initiatives and submit reports as required
                         to achieve performance goals specified in the MEDDIC-MS
                         technical specifications in addition to two performance
                         improvement projects required under Article III
                         W.13.c.d. The final or on-going status report for each
                         project must be submitted by October 1, 2003, and
                         October 1, 2004, or as may be specified in the
                         MEDDIC-MS technical specifications. The performance
                         improvement topic must take into account: the
                         prevalence of a condition among, or need for a specific
                         service by, the HMO enrollees served under this
                         agreement, enrollee demographic characteristics and
                         health risks; and the interest of consumers or
                         purchasers in the aspect of care or services to be
                         addressed. Each project report must include all of the
                         information in the Performance Improvement Project
                         Outline in Addendum XV.

                    b.   Performance reporting will utilize standardized
                         indicators appropriate to the performance improvement
                         area or as specified in the MEDDIC-MS technical
                         specifications. Minimum performance levels must be
                         specified for each performance improvement area, using
                         normative standards derived from regional, national
                         norms, or from norms established by an appropriate
                         practice organization. Goals for improvement for the
                         "Priority Areas" listed in c. of this section, may be
                         set by the organization itself.

                         The organization must assure that improvements are
                         sustained through periodic audits of relevant data and
                         maintenance of the

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                         interventions that resulted in the improvement. The HMO
                         agrees to open at least one new performance improvement
                         project in 2002 with the report on that project to be
                         submitted to the Department by October 1, 2003. In all
                         cases, not less than two performance improvement
                         projects must be reported to the Department in any year
                         and not less than three different projects must be
                         reported to the Department between 2002 and 2004. These
                         projects are in addition to any that may be required as
                         the result of sub-goal performance on any MEDDIC-MS
                         Targeted Performance Improvement Measures. However, if
                         the HMO chooses to initiate or continue a project on a
                         topic that coincides with a required MEDDIC-MS project,
                         the Department will accept the report as fulfilling
                         both requirements during the next contract year.

                         The organization must implement a performance
                         improvement project in the area if a quality
                         improvement opportunity is identified. The HMO must
                         report to the Department on each study, including those
                         areas where the HMO will not pursue a performance
                         improvement project.

                    c.   Clinical Priority Areas: 1) prenatal services; 2)
                         identification of adequate treatment for high-risk
                         pregnancies, including those involving substance abuse;
                         3) evaluating the need for specialty services; 4)
                         availability of comprehensive, ongoing nutrition
                         education, counseling, and assessments; 5) Family
                         Health Improvement Initiative: Smoking Cessation; 6)
                         children with special health care needs; 7) outpatient
                         management of asthma; 8) the provision of family
                         planning services; 9) early postpartum discharge of
                         mothers and infants; 10) STD screening and treatment;
                         11) high volume/high risk services selected by the HMO;
                         12) prevention and care of acute and chronic
                         conditions; and 13) coordination and continuity of
                         care.

                         Non-Clinical Priority Areas: 1) grievances, appeals and
                         complaints; 2) access to and availability of services;
                         3) enrollee satisfaction with HMO customer service; and
                         4) satisfaction with services for enrollees with
                         special health care needs or cultural competency of the
                         HMO and its providers.

                         In addition, the HMO may be required to conduct
                         performance improvement projects specific to the HMO
                         and to participate in one annual statewide project that
                         may be specified by the Department.

                    d.   Performance Measurement and Improvement - MEDDIC-MS
                         Medicaid Encounter Data-Driven Improvement
                         Core--Measure Set:

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                         The Department will evaluate HMO performance using the
                         MEDDIC-MS technical specifications, based on
                         HMO-supplied encounter data and other data (for
                         selected measures). Evaluation of HMO performance on
                         each measure will be conducted on timetables determined
                         by the Department. The technical specifications for
                         each measure are established by the Department with HMO
                         input and are described in "MEDDIC-MS Proposed Measures
                         and Technical Specifications," as revised.

                         The Department will inform the HMO of its performance
                         on each measure, whether the HMO's performance
                         satisfied the goal requirements set by the Department
                         and whether a performance improvement initiative by the
                         HMO is required. The HMO will have 60 business days to
                         review and respond to the Departments performance
                         report. When a performance improvement initiative is
                         required due to sub-goal performance on the measure,
                         the HMO may request recalculation of the performance
                         level based on new or additional data the HMO may
                         supply, or if the HMO can demonstrate material error in
                         the calculation of the performance level. The
                         Department will provide a tentative schedule of measure
                         calculation dates to the HMO within 90 days of the
                         beginning of each calendar year in the contract period.

                         MEDDIC-MS consists of targeted performance improvement
                         measure (TPIMS) and monitoring measures. The
                         specifications for each TPIM includes denominator and
                         numerator specifications, performance goals and
                         requirements for actions to be taken when sub-goal
                         performance occurs.

                         Unless otherwise noted within a specific targeted
                         performance improvement measure, the Department may
                         specify minimum performance levels and require that the
                         HMOs develop plans to respond to levels below the
                         minimum performance levels. Additions, deletions or
                         modifications to the Targeted Performance Improvement
                         Measures and Monitoring Measures in the MEDDIC-MS
                         Technical Specifications and goals must be mutually
                         agreed upon by the parties. The Department will give 90
                         days notice to the HMO of its intent to change any of
                         measures, technical specifications or goals. The HMO
                         shall have the opportunity to comment on the measure
                         specifications, goals and implementation plan within
                         the 90 day notice period. The Department reserves the
                         right to require the HMO to report such performance
                         measure data as may be deemed necessary to monitor and
                         improve HMO-specific or program-wide quality
                         performance.

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          X.   Access to Premises

               Allow duly authorized agents or representatives of the State or
               Federal government, during normal business hours, access to HMO's
               premises or HMO subcontractor's premises to inspect, audit,
               monitor or otherwise evaluate the performance of the HMO's or
               subcontractor's contractual activities and shall within a
               reasonable time, but not more than 10 working days, produce all
               records requested as part of such review or audit. In the event
               right of access is requested under this Section, the HMO or
               subcontractor shall, upon request, provide and make available
               staff to assist in the audit or inspection effort, and provide
               adequate space on the premises to reasonably accommodate the
               State or Federal personnel conducting the audit or inspection
               effort. All inspections or audits shall be conducted in a manner
               as will not unduly interfere with the performance of HMO's or
               subcontractor's activities. The HMO will be given 30 business
               days to respond to any findings of an audit before the Department
               shall finalize its findings. All information so obtained will be
               accorded confidential treatment as provided under applicable
               laws, rules or regulations.

          Y.   Subcontracts

               Assure that all subcontracts shall be in writing, shall comply
               with the provisions of Addendum I, shall include any general
               requirements of this Contract that are appropriate to the service
               or activity identified in Addendum I, and assure that all
               subcontracts shall not terminate legal liability of the HMO under
               this Contract. The HMO may subcontract for any function covered
               by this Contract, subject to the requirements of this Contract.

          Z.   Compliance with Applicable Laws, Rules or Regulations

               Observe and comply with all Federal and State laws, rules or
               regulations in effect when the Contract is signed or which may
               come into effect during the term of the Contract, which in any
               manner affects HMO's performance under this Contract, except as
               specified in Article III, Section B.

          AA.  Use of Providers Certified By Medicaid Program

               Except in emergency situations, use only providers who have been
               certified by the Medicaid program for services or items covered
               by Wisconsin Medicaid. The Department reserves the right to
               withhold retrospectively from the capitation payments the monies
               related to services provided by non-Medicaid-certified providers,
               at the Medicaid FFS rate for those services. (See Wisconsin
               Administrative Code, Chapter HFS 105, for provider certification
               requirements.) Every Medicaid HMO will require each physician
               providing services to enrollees to

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                                      -52-
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               have a unique physician identifier, as specified in Section
               1173(b) of the Social Security Act.

          BB.  Reproduction and Distribution of Materials

               Reproduce and distribute at HMO expense, according to a
               reasonable Department timetable, information or documents sent to
               HMO from Department that contain information the HMO-affiliated
               providers must have in order to fully implement this Contract.

          CC.  Provision of Interpreters

               Provide interpreter services for enrollees as necessary to ensure
               availability of effective communication regarding treatment,
               medical history or health education and/or any other component of
               this contract. Furthermore, the HMO must provide for 24-hour a
               day, 7-day a week access to interpreter services in languages
               spoken by those individuals otherwise eligible to receive the
               services provided by the HMO or its provider. Also, upon a
               recipient or provider request for interpreter services in a
               specific situation where care is needed, the HMO shall provide an
               interpreter in time to assist adequately with all necessary care,
               including urgent and emergency care. The HMO must clearly
               document all such actions and results. This documentation must be
               available to the Department at the Department's request.

               1.   Professional interpreters shall be used, when needed, where
                    technical, medical, or treatment information or other
                    matters, where impartiality is critical, are to be discussed
                    or where use of a family member or friend, as interpreter is
                    otherwise inappropriate. Family members, especially
                    children, should not be used as interpreters in assessments,
                    therapy and other situations where impartiality is critical.

               2.   The HMO will maintain a current list of interpreters who are
                    on "on call" status to provide interpreter services.
                    Provision of interpreter services must be in compliance with
                    Title VI of the Civil Rights Act.

               3.   The HMO must designate a person responsible for the
                    administration of interpreter/translation services.

               4.   The HMO must receive Department approval of written policies
                    and procedures for the provision of interpreter services.
                    The policies and procedures for interpreters must be
                    submitted as part of the certification application as well
                    as a list of interpreters the HMO uses and the language
                    spoken by each interpreter.

          DD.  Coordination and Continuation of Care

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               Have systems in place to ensure well-managed patient care,
               including at a minimum:

               1.   Management and integration of health care through primary
                    provider/gatekeeper/other means.

               2.   Systems to assure referrals for medically necessary,
                    specialty, secondary and tertiary care.

               3.   Systems to assure provision of care in emergency situations,
                    including an education process to help assure that enrollees
                    know where and how to obtain medically necessary care in
                    emergency situations.

               4.   Specific referral requirements. HMO shall clearly specify
                    referral requirements to providers and subcontractors and
                    keep copies of referrals (approved and denied) in a central
                    file or the patient's medical records.

               5.   Systems to assure provision of a clinical determination,
                    within 10 working days, at the request of the enrollee, of
                    the medical necessity and appropriateness of an enrollee to
                    continue with MH or Substance Abuse providers who are not
                    subcontracted by the HMO. If the HMO determines that the
                    enrollee does not need to continue with the non-contracted
                    provider, it must ensure an orderly transition of care.

          EE.  HMO ID Cards

               The HMO may issue their own HMO ID cards. The HMO may not deny
               services to an enrollee solely for failure to present an HMO
               issued ID card. The Forward ID card will always determine HMO
               enrollment, even where an HMO issues HMO ID cards.

          FF.  Federally Qualified Health Centers and Rural Health Centers
               (FQHCs and RHCs)

               If an HMO contracts with a facility or program, which has been
               certified as an FQHC or RHC by the Medicaid program, for the
               provision of services to its enrollees, the HMO must negotiate
               payment rates for that FQHC or RHC on the same basis as it
               negotiates with other clinics and primary providers and the HMO
               must increase the FQHC's or RHC's payment in direct proportion to
               the annual increase for physicians' services in the capitation
               rate paid to the HMO. In other words, if an HMO receives a 10
               percent increase from the Department for physicians' services,
               the contracted rates paid to the FQHC or RHC either through
               capitation or FFS, must be increased by at least 10 percent over
               those that were in effect on the date this Contract is signed.
               The Department will notify the HMOs of the percentage increase
               for physician services made in the capitation rates by the

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<PAGE>

               Department when such changes occur. An HMO which contracts with
               an FQHC or RHC must report to the Department within 45 days of
               the end of each quarter (for example, January 1 - March 31 is due
               May 15) the total amount paid to each FQHC or RHC, per month and
               as reported on the 1099 forms prepared by the HMO for each FQHC
               or RHC. FQHC or RHC payments include direct payments to a medical
               provider who is employed by the FQHC or RHC. The report should be
               for the entire HMO, aggregating all service areas if the HMO has
               more than one service area.

          GG.  Coordination with Prenatal Care Services, School-Based Services,
               Targeted Case Management Services, a Child Welfare Agencies, and
               Dental Managed Care Organizations

               1.   Prenatal Care Services-- The HMO must sign an MOU (Addendum
                    IX) with all agencies in the HMO service area that are
                    Medicaid-certified prenatal care coordination agencies. The
                    MOU will be effective on the effective date of the agency's
                    PNCC certification or when both HMO and PNCC agency have
                    signed it, whichever is later. In addition, if the PNCC
                    wants to negotiate additional provisions into the MOU, the
                    HMO must negotiate in good faith and document those
                    negotiations. Such documentation must be available to the
                    Department for review on request. In addition, the HMO must
                    assign an HMO medical representative to interface with the
                    care coordinator from the prenatal care coordination agency.
                    This HMO representative shall work with the care coordinator
                    to identify what Medicaid covered services, in conjunction
                    with other identified social services, are to be provided to
                    the enrollee. The HMO is not liable for medical services
                    directed outside of their provider network by the care
                    coordinator unless prior authorized by the HMO. In addition,
                    the HMO is not required to pay for services provided
                    directly by the Prenatal Care Coordinating provider: such
                    services are paid on a FFS basis by the Department. The main
                    purpose of the MOU is to assure coordination of care between
                    the HMO, that provides medical services, and the Prenatal
                    Care Coordinating Agency, that provides outreach, risk
                    assessment, care planning, care coordination, and follow-up.

               2.   School-Based Services-- The HMO must sign an MOU (Addendum
                    XIII) with all School-Based Services (SBS) providers in the
                    HMO service area who are Medicaid-certified (a School-Based
                    Services provider is a school district or Cooperative
                    Educational Service Agency (CESA) and not the individual
                    schools within the school district). The MOU will be
                    effective on the date when both the HMO and the SBS provider
                    have signed it or the date the SBS provider is
                    Medicaid-certified, whichever is later. As described in
                    Addendum XIII, the purpose of the MOU is to develop policies
                    and procedures to avoid duplication of services and to
                    promote continuity of care between the HMO and SBS provider.
                    There are many

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                                      -55-
<PAGE>

                    situations where schools cannot provide services: after
                    school hours, during school vacations, and during the
                    summer, and these situations may interrupt the course of
                    treatment or otherwise affect the continuity of care. In
                    addition, the fact that HMOs and SBS providers may provide
                    the same services could lead to the duplication of services.
                    Therefore, an MOU is essential for the avoidance of
                    duplication of services and the assurance of continuity of
                    care. School-based services are paid FFS by Medicaid. SBS
                    providers, as a requirement of Medicaid/BadgerCare
                    certification, will be directed to negotiate MOUs with HMOs.

               3.   Targeted Case Management-- The HMO must assign an HMO
                    medical representative to interface with the case manager
                    from the Targeted Case Management (TCM) agency. This HMO
                    representative shall work with the case manager to identify
                    what Medicaid covered services, in conjunction with other
                    identified social services, are to be provided to the
                    enrollee. The HMO is not required to pay for medical
                    services directed outside of their provider network by the
                    case manager unless prior authorized by the HMO. The
                    Department will distribute a statewide list of
                    Medicaid-certified TCM agencies to the HMOs and periodically
                    update the list. Addendum XIV contains guidelines for how
                    HMOs and TCM agencies should coordinate care.

               4.   Child Welfare Agencies-- Milwaukee County HMOs must
                    designate at least one individual to serve as a contact
                    person for the Bureau of Milwaukee Child Welfare (BMCW)
                    agency. If the HMO chooses to designate more than one
                    contact person, the HMO should identify the service area for
                    which each contact person is responsible. The HMO must
                    provide all Medicaid covered mental health and substance
                    abuse services to individuals identified as clients of the
                    BMCW agency. Disputes regarding the medical necessity of
                    services identified in the Family Treatment Plan will be
                    adjudicated using the dispute process outlined in Addendum
                    X, except that HMOs will provide court ordered services in
                    accordance with Addendum II. Addendum X contains guidelines
                    for how Milwaukee County HMOs and the Bureau of Milwaukee
                    Child Welfare agency will work together to provide mental
                    health and substance abuse services.

          HH.  Physician Incentive Plans

               A physician incentive plan is any compensation arrangement
               between the HMO and a physician or physician group that may
               directly or indirectly have the effect of reducing or limiting
               services provided with respect to individuals enrolled with the
               HMO.

               1.   The HMO shall fully comply with the physician incentive plan
                    requirements specified in 42 CFR s. 417.479(d) through (g)
                    and the requirements

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                    relating to subcontracts set forth in 42 CFR s. 417.479(i),
                    as those provisions may be amended from time to time, and
                    shall submit to the Department its physician incentive plans
                    as required under 42 CFR s. 434.470 and as requested by the
                    Department.

          II.  Advance Directives

               Maintain written policies and procedures related to advance
               directives. An advance directive is a written instruction, such
               as a living will or durable power of attorney for health care,
               recognized under Wisconsin law (whether statutory or recognized
               by the courts of Wisconsin) and relating to the provision of such
               care when the individual is incapacitated. HMO shall:

               1.   Provide written information at time of HMO enrollment to all
                    adults receiving medical care through the HMO regarding: (a)
                    the individual's rights under Wisconsin law (whether
                    statutory or recognized by the courts of Wisconsin) to make
                    decisions concerning such medical care, including the right
                    to accept or refuse medical or surgical treatment and the
                    right to formulate advance directives; and (b) the HMO's
                    written policies respecting the implementation of such
                    rights.

               2.   Document in the individual's medical record whether or not
                    the individual has executed an advance directive.

               3.   Shall not discriminate in the provision of care or otherwise
                    discriminate against an individual based on whether or not
                    the individual has executed an advance directive. This
                    provision shall not be construed as requiring the provision
                    of care which conflicts with an advance directive.

               4.   Ensure compliance with requirements of Wisconsin law
                    (whether statutory or recognized by the courts of Wisconsin)
                    respecting advance directives.

               5.   Provide education for staff and the community on issues
                    concerning advance directives.

               The above provisions shall not be construed to prohibit the
               application of any Wisconsin law which allows for an objection on
               the basis of conscience for any health care provider or any agent
               of such provider which as a matter of conscience cannot implement
               an advance directive.

          JJ.  Ineligible Organizations

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          Upon obtaining information or receiving information from the
          Department or from another verifiable source, exclude from
          participation in the HMO all organizations which could be included in
          any of the following categories (references to the Act in this section
          refer to the Social Security Act):

          1.   Entities Which Could Be Excluded Under Section 1128(b)(8) of the
               Social Security Act.--These are entities in which a person who is
               an officer, director, agent or managing employee of the entity,
               or a person who has direct or indirect ownership or control
               interest of 5 percent or more in the entity has:

               a.   Been convicted of the following crimes:

                    1)   Program related crimes, i.e., any criminal offense
                         related to the delivery of an item or service under
                         Medicare or Medicaid (see Section 1128(a)(1) of the
                         Act);

                    2)   Patient abuse, i.e., criminal offense relating to abuse
                         or neglect of patients in connection with the delivery
                         of health care (see Section 1128(a)(2) of the Act);

                    3)   Fraud, i.e., a State or Federal crime involving fraud,
                         theft, embezzlement, breach of fiduciary
                         responsibility, or other financial misconduct in
                         connection with the delivery of health care or
                         involving an act or omission in a program operated by
                         or financed in whole or part by Federal, State or local
                         government (see Section 1128(b)(1) of the Act);

                    4)   Obstruction of an investigation, i.e., conviction under
                         State or Federal law of interference or obstruction of
                         any investigation into any criminal offense described
                         in subsections a, b, or c (see Section 1128(b)(2) of
                         the Act); or

                    5)   Offenses relating to controlled substances, i.e.,
                         conviction of a State or Federal crime relating to the
                         manufacture, distribution, prescription or dispensing
                         of a controlled substance (see Section 1128(b)(3) of
                         the Act).

               b.   Been Excluded, Debarred, Suspended, Otherwise Excluded, or
                    is an affiliate (as defined in such Act) of a person
                    described in JJ. above from participating in procurement
                    activities under the Federal Acquisition Regulation or from
                    participating in non procurement activities under
                    regulations issued pursuant to Executive Order No. 12549 or
                    under guideline implementing such order.

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                                      -58-

<PAGE>

               c.   Been Assessed a Civil Monetary Penalty under Section 1128A
                    of the Act.--Civil monetary penalties can be imposed on
                    individual providers, as well as on provider organizations,
                    agencies, or other entities by the DHHS Office of Inspector
                    General. Section 1128A authorizes their use in case of false
                    or fraudulent submittal of claims for payment, and certain
                    other violations of payment practice standards. (See Section
                    1128(b)(8)(B)(ii) of the Act.)

          2.   Entities Which Have a Direct or Indirect Substantial Contractual
               Relationship with an Individual or Entity Listed in subsection
               A.--A substantial contractual relationship is defined as any
               contractual relationship which provides for one or more of the
               following services:

               a.   The administration, management, or provision of medical
                    services;

               b.   The establishment of policies pertaining to the
                    administration, management, or provision of medical
                    services; or

               c.   The provision of operational support for the administration,
                    management, or provision of medical services.

          3.   Entities Which Employ, Contract With, or Contract Through Any
               Individual or Entity That is Excluded From Participation in
               Medicaid under Section 1128 or 1128A, for the Provision (Directly
               or Indirectly) of Health Care, Utilization Review, Medical Social
               Work or Administrative Services.--For the services listed, HMO
               must exclude from contracting any entity which employs, contracts
               with, or contracts through an entity which has been excluded from
               participation in Medicaid by the Secretary under the authority of
               Section 1128 or 1128A of the Act.

          HMO attests by signing this Contract that it excludes from
          participation in the HMO all organizations which could be included in
          any of the above categories.

     KK.  Clinical Laboratory Improvement Amendments

          Use only certain laboratories. All laboratory testing sites providing
          services under this Contract must have a valid Clinical Laboratory
          Improvement Amendments (CLIA) certificate along with a CLIA
          identification number, and comply with CLIA regulations as specified
          by 42 CFR Part 493, "Laboratory Requirements." Those laboratories with
          certificates will provide only the types of tests permitted under the
          terms of their certification.

     LL.  Limitation on Fertility Enhancing Drugs

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<PAGE>
          The HMO must get prior authorization from the Chief Medical Officer in
          the Division of Health Care Financing before an HMO provider treats an
          enrollee with any of the following drug products: Chorionic
          Gonadotropin, Clomiphene, Gonadorelin, Menotropins, Urofollitropin and
          any other new fertility enhancing drugs.

     MM.  Reporting of Communicable Diseases

          As required by Wis. Stats. 252.05, 252.15(5)(a)6 and 252.17(7)(9b),
          Physicians, Physician Assistants, Podiatrists, Nurses, Nurse Midwives,
          Physical Therapists, and Dietitians affiliated with a Medicaid HMO
          shall report the appearance, suspicion or diagnosis of a communicable
          disease or death resulting from a communicable disease to the Local
          Health Department for any enrollee treated or visited by the provider.
          Reports of human immunodeficiency virus (HIV) infection shall be made
          directly to the State Epidemiologist. Such reports shall include the
          name, sex, age, residence, communicable disease, and any other facts
          required by the Local Health Department and Wisconsin Division of
          Public Health. Such reporting shall be made within 24 hours of
          learning about the communicable disease or death or as specified in
          Wis. Admin. Code HFS 145.04, Appendix A. Charts and reporting forms on
          communicable diseases are available from the Local Health Department.
          Each laboratory subcontracted or otherwise affiliated with the HMO
          shall report the identification or suspected identification of any
          communicable disease listed in Wis. Admin. Rules 145, Appendix A to
          the local health department; reports of HIV infections shall be made
          directly to the State Epidemiologist.

     NN.  Medicaid/BadgerCare HMO Advocate Requirements

          Each HMO must employ a Medicaid/BadgerCare HMO Advocate during the
          entire contract term. The HMO Advocate is to work with both enrollees
          and providers to facilitate the provision of Medicaid benefits to
          enrollees; is responsible for making recommendations to management on
          any changes needed to improve either the care provided or the way care
          is delivered; and must be in an organizational location within the HMO
          which provides the authority needed to carry out these tasks. The
          detailed requirements of the HMO Advocate are listed below:

          1.   Functions of the Medicaid/BadgerCare HMO Advocate(s)

               a.   Investigation and resolution of access and cultural
                    sensitivity issues identified by HMO staff, State staff,
                    providers, advocate organizations, and enrollees.

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<PAGE>

               b.   Monitoring formal and informal grievances with the grievance
                    personnel for purposes of identification of trends or
                    specific problem areas of access and care delivery. An
                    aspect of the monitoring function is the ongoing
                    participation in the HMO grievance committee.

               c.   Recommendation of policy and procedural changes to HMO
                    management including those needed to ensure and/or improve
                    enrollee access to care and enrollee quality of care.
                    Changes can be recommended for both internal administrative
                    policies and for subcontracted providers.

               d.   Act as the primary contact for enrollee advocacy groups.
                    Work with enrollee advocacy groups on an ongoing basis to
                    identify and correct enrollee access barriers.

               e.   Act as the primary contact for local community based
                    organizations (local governmental units, non-profit
                    agencies, etc.). Work with the local community based
                    organizations on an ongoing basis to acquire knowledge and
                    insight regarding the special health care needs of
                    enrollees.

               f.   Participate in the Advocacy Program for Managed Care that is
                    organized by the Department. Such participation includes the
                    following: attendance, on an as needed basis, at the
                    Regional Forums chaired by a Department staff person, and at
                    the semiannual Statewide Forum; work with Division of Health
                    Care Financing Managed Care staff person assigned to the HMO
                    on issues of access to medical care and quality of medical
                    care; work with the Enrollment Contractor staff persons on
                    issues of access to medical care, quality of medical care,
                    and enrollment/ disenrollment; attendance, on an as needed
                    basis, at bi-monthly Advocacy Team meetings, which will be
                    attended by the Division of Health Care Financing Managed
                    Care Staff, enrollment contractor staff, community based
                    organizations, recipient service representatives from the
                    Fiscal Agent, and EDS ombudsman.

               g.   Ongoing analysis of internal HMO system functions, with HMO
                    staff, as these functions affect enrollee access to medical
                    care and enrollee quality of medical care.

               h.   Organization and provision of ongoing training and
                    educational materials for HMO staff and providers to enhance
                    their understanding of the values and practices of all
                    cultures with which the HMO interacts.

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<PAGE>
               i.   Provision of ongoing input to HMO management on how changes
                    in the HMO provider network will affect enrollee access to
                    medical care and enrollee quality and continuity of care.
                    Participation in the development and coordination of plans
                    to minimize any potential problems that could be caused by
                    provider network changes.

               j.   Review and approve all HMO informing material to be
                    distributed to enrollees for the purpose of assessing
                    clarity and accuracy.

               k.   Provision of assistance to enrollees and their authorized
                    representatives for the purpose of obtaining medical
                    records.

               l.   The lead advocate position will be responsible for overall
                    evaluation of the HMO's internal advocacy plan and will be
                    required to monitor any contracts the HMO may enter into for
                    external advocacy with culturally diverse associations or
                    agencies. The lead advocate will be responsible for training
                    the associations or agencies and assuring their input into
                    the HMO's advocacy plan.

          2.   Staff Requirements and Authority of the Medicaid/BadgerCare HMO
               Advocate

               a.   At a minimum one HMO Advocate must be located in the
                    organizational structure so that the Advocate has the
                    authority to perform the functions and duties listed in
                    (1)(a-l).

                    The HMO Certification Application requires HMOs to state the
                    staffing levels to perform the functions and duties listed
                    in (1)(a-l) in terms of number of full and part time staff
                    and total Full Time Equivalents (FTEs) assigned to these
                    tasks. The Department assumes that an HMO acting as an
                    Administrative Service Organization (ASO) for another HMO
                    will have one Advocate or FTE position for each ASO contract
                    as well as maintaining their own internal advocate. An HMO
                    may employ less than a Full Time Equivalent (FTE) advocate
                    position, but must justify to the satisfaction of the
                    Department why less than one FTE position will suffice the
                    HMO's enrollee population. The HMO must also regularly
                    evaluate the advocate position, workplan, and job duties and
                    allocate an FTE advocate position to meet the duties listed
                    in (1)(a-l) if there is significant increase in the HMO's
                    enrollee population or in the HMO service area. The
                    Department reserves the right to require an HMO to employ an
                    FTE advocate position if the HMO does not demonstrate
                    adequacy of a part-time advocate position.

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<PAGE>

                    In order to meet the requirement for the Advocate position
                    statewide, the DHFS encourages HMOs to contract or have a
                    formal memorandum of understanding for advocacy and/or
                    translation services with associations or organizations who
                    have culturally diverse populations within the HMO service
                    area. However, the overall or lead responsibility for the
                    advocate position will be within each HMO. HMOs must monitor
                    the effectiveness of the associations and agencies under
                    contract and may alter the contract(s) with written
                    notification to the Department.

               b.   The HMO Advocate shall have authority for facilitating and
                    assuring access to all medically necessary services as
                    stipulated in this Contract for each enrollee.

               c.   The HMO Advocate staffing levels submitted in the HMO
                    Certification Application shall be maintained, and solely
                    devoted to the functions and duties listed in (1)(a-l)
                    throughout the contract term. Changes in the HMO Advocate
                    staffing levels must be approved by the Department thirty
                    days prior to the effective date of the change.

               d.   The HMO Advocate shall develop prior to contract signing,
                    and shall maintain and modify as necessary, throughout the
                    Contract term, a Medicaid/BadgerCare HMO Advocacy workplan,
                    with time lines and activities specified.

          OO.  HMO Designation of Staff Person as Contract Representative

               The HMO is required to designate a staff person to act as liaison
               to the Department on all issues that relate to the contract
               between the Department and the HMO. The contract representative
               will be authorized to represent the HMO regarding inquiries
               pertaining to the Contract, will be available during normal
               business hours, and will have decision making authority in regard
               to urgent situations that arise. The Contract representative will
               be responsible for follow-up on contract inquiries initiated by
               the Department.

          PP.  Subcontracts with Local Health Departments

               The Department encourages the HMO to contract with local health
               departments for the provision of care to Medicaid/BadgerCare
               enrollees in order to assure continuity and culturally
               appropriate care and services. Local health departments can
               provide HealthCheck outreach and screening, immunizations, blood
               lead screening services, and services to targeted populations
               within the community for

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<PAGE>

               the prevention, investigation, and control of communicable
               diseases (e.g., tuberculosis, HIV/AIDS, sexually transmitted
               diseases, hepatitis and others). WIC projects provide nutrition
               services and supplemental foods, breastfeeding promotion and
               support; and immunization screening. Many projects screen for
               blood lead poisoning during the WIC appointment.

               The Department encourages HMOs to work closely with local health
               departments as noted in Addendum XXIV - Recommendations for
               Coordination between HMOs and Local Health Departments and
               Community-Based Health Organizations.

               Local health departments have a wide variety of resources that
               could be coordinated with HMOs to produce more efficient and cost
               effective care for HMO enrollees. Examples of such resources are
               ongoing programs of medical services, materials on health
               education, prevention, and disease states, expertise on
               outreaching specific subpopulations, communication networks with
               varieties of medical providers, advocates, community-based health
               organizations, and social service agencies, and access to ongoing
               studies of and information about health status and disease trends
               and patterns.

          QQ.  Subcontracts with Community-Based Health Organizations

               The Department encourages the HMO to contract with
               community-based health organizations for the provision of care to
               Medicaid/BadgerCare enrollees in order to assure continuity and
               culturally appropriate care and services. Community-based
               organizations can provide HealthCheck outreach and screening,
               immunizations, family-planning services, and other types of
               services.

               The Department encourages HMOs to work closely with
               community-based health organizations as noted in Addendum XXIV -
               Recommendations for Coordination between HMOs and Local Health
               Departments and Community-Based Health Organizations.

               Community-based health organizations may also provide services,
               such as WIC services, that HMOs are required by Federal law to
               coordinate with and refer to, as appropriate.

          RR.  Prescription Drugs

               1.   If an HMO elects not to cover dental services, the HMO is
                    liable for the cost of all medically necessary prescription
                    drugs when ordered by a certified Medicaid dental provider.

               2.   When an enrollee elects to use a family planning provider
                    that is non-HMO affiliated, the HMO is liable for the cost
                    of all medically necessary drugs when ordered by a certified
                    Medicaid family planning provider.

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<PAGE>

          SS.  HMO Attestation

               The Chief Executive Officer (CEO), the Chief Financial Officer
               (CFO) or designee must attest to the best of their knowledge to
               the truthfulness, accuracy, and completeness of all data
               submitted to the Department at the time of submission. This
               includes encounter data, NICU, AIDS/Vent, Sterilization Reports
               or any other data in which the HMO paid claims.

          TT.  Fraud and Abuse Investigations

               HMO agrees to cooperate with the Department on fraud and abuse
               investigations. In addition, the HMO agrees to report allegations
               of fraud and abuse (both provider and enrollee) to the Department
               within fifteen days of the suspected fraud or abuse coming to the
               attention of the HMO. Failure on the part of HMOs to cooperate or
               report fraud and or abuse may result in any applicable sanctions
               under Article IX.

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<PAGE>
                                   ARTICLE IV

IV.  FUNCTIONS AND DUTIES OF THE DEPARTMENT

     In consideration of the functions and duties of the HMO contained in this
     Contract, the Department shall:

     A.   Eligibility Determination

          Identify Medicaid/BadgerCare recipients who are eligible for
          enrollment in HMOs as a result of eligibility under the following
          eligibility status:

<Table>
<Caption>
MED STAT                       CAP RATE*         DESCRIPTION
--------                       ---------         -----------

<S>                            <C>               <C>
31, WN                         A                 AFDC-Regular

32                             A                 AFDC-Unemployed

38, 39                         A                 AFDC-Related, No Cash Payment

CC, CM, GC, PC                 A                 Healthy Start Children

E2                             A                 AFDC-Related, No Cash Payment

GE                             A                 Healthy Start Children Ages 15-18

N1, N2                         A                 Medicaid Newborn

UA, WU                         A                 AFDC-Related, Unemployed

WH                             A                 AFDC Employed over 100 Hours a Month

X1, X2, X3, X4                 A                 AFDC-Related, No Cash Payment

B1                             A                 BadgerCare - Income equal or
                                                 greater than 100% of FPL, and
                                                 less than or equal to 150% of
                                                 FPL, Kids, No premium.

B4                             A                 BadgerCare - Income equal or
                                                 greater than 100% of FPL, and
                                                 less than or equal to 150% of
                                                 FPL, Adults, No premium.

B2                             A                 BadgerCare - Income greater than
                                                 150% of FPL, and less than
                                                 185% of FPL, Kids, Premium.

B5                             A                 Income greater than 150% of FPL,
                                                 and less than 185% of FPL,
                                                 Adults, Premium.

B3                             A                 Income equal or greater than
                                                 185% of the FPL, and less than
                                                 200% of the FPL, Kids, Premium.

B6                             A                 Income equal or greater than
                                                 185% of the FPL, and less than
                                                 200% of the FPL, Adults,
                                                 Premium.

GP                             A                 Income less than 100% of FPL,
                                                 Adults Parents of OBRA kids
                                                 (AFDC), No premium.

95                             B                 Pregnant Women in Intact Families

A6, A7, A8, A9                 B                 Pregnant Woman, IRCA Alien

E3, E4                         B                 Extension for Pregnant Woman

PW, P1                         B                 Healthy Start Pregnant Women
</Table>

     *A = AFDC/Healthy Start Children/BadgerCare capitation rate.

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                                      -66-

<PAGE>

     *B = Pregnant Women Healthy Start capitation rate.

     B.   Enrollment

          Promptly notify the HMO of all Medicaid/BadgerCare recipients enrolled
          in the HMO under this Contract. Notification shall be effected through
          the HMO Enrollment Reports. All recipients listed as an ADD or
          CONTINUE on either the Initial or Final HMO Enrollment Report are
          members of the HMO during the enrollment month. The reports shall be
          generated in the sequence specified under HMO ENROLLMENT REPORTS.
          These reports shall be in both tape and hard copy formats or available
          through electronic file transfer capability and shall include Medical
          Status Codes. The Department will make all reasonable efforts to
          enroll pregnancy cases as soon as possible.

     C.   Disenrollment

          Promptly notify the HMO of all Medicaid/BadgerCare recipients no
          longer eligible to receive services through the HMO under this
          Contract. Notification shall be effected through the HMO Enrollment
          Reports which the Department will transmit to the HMO for each month
          of coverage throughout the term of the Contract. The reports shall be
          generated in the sequence under HMO ENROLLMENT REPORTS. Any recipient
          who was enrolled in the HMO in the previous enrollment month, but does
          not appear as an ADD or CONTINUE on either the Initial or Final HMO
          Enrollment Report for the current enrollment month, is disenrolled
          from the HMO effective the last day of the previous enrollment month.

     D.   HMO Enrollment Reports

          For each month of coverage throughout the term of the Contract, the
          Department shall transmit "HMO Enrollment Reports" to the HMO. These
          reports will provide the HMO with ongoing information about its
          Medicaid/ BadgerCare enrollees and disenrollees and will be used as
          the basis for the monthly capitation claims described in Article
          V--PAYMENT TO THE HMO. The HMO Enrollment Reports will be generated in
          the following sequence:

          1.   The Initial HMO Enrollment Report will list all of the HMO's
               enrollees and disenrollees for the enrollment month that are
               known on the date of report generation. The Initial HMO
               Enrollment Report will be available to the HMO on or about the
               twenty-first of each month. A capitation claim shall be generated
               for each enrollee listed as an ADD or CONTINUE on this report.
               Enrollees who appear as PENDING on the Initial Report and are
               reinstated into the HMO prior to the end of the month will appear
               as a CONTINUE on the Final Report and a capitation claim shall be
               generated at that time.

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<PAGE>
          2.   The final HMO Enrollment Report will list all of the HMO's
               enrollees for the enrollment month, that were not included in the
               Initial HMO Enrollment Report. The Final HMO Enrollment Report
               will be available to the HMO by the first day of the capitation
               month. A capitation claim shall be generated for each enrollee
               listed as an ADD or CONTINUE on this report. Enrollees in PENDING
               status will not be included on the final report.

          3.   The Department shall provide HMOs with effective dates for
               medical status code changes, county changes and other address
               changes in each enrollment report to the extent that the county
               reports these to the Department.

     E.   Utilization Review and Control

          Waive, to the extent allowed by law, any present Department
          requirements for prior authorization, second opinions, co-payment, or
          other Medicaid restrictions for the provision of contract services
          provided by the HMO to enrollees, except as may be provided in
          Addendum II.

     F.   HMO Review

          Submit to HMOs for prior approval materials that describe specific
          HMOs and that will be distributed by the Department or County to
          recipients.

     G.   HMO Review of Study or Audit Results

          Submit to HMOs for a 30 business day review/comment period, any HMO
          Medicaid/BadgerCare audits, the annual HMO Comparison Report, HMO
          Consumer Satisfaction Reports, or any other HMO Medicaid studies the
          Department releases to the public.

     H.   Vaccines

          Provide certain vaccines to HMO providers for administration to
          Medicaid/ BadgerCare HMO enrollees according to the policies and
          procedures in the Wisconsin Medicaid and BadgerCare Physicians
          Services Handbook. The Department will reimburse the HMO for the cost
          of vaccines that are newly approved during the contract year and not
          yet part of the Vaccine for Children program. The cost of the vaccine
          shall be the same as the cost to the Department of buying the new
          vaccine through the Vaccine for Children program. The HMO retains
          liability for the cost of administering the vaccines.

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                                      -68-

<PAGE>

     I.   Coordination of Benefits

          Maintain a report of recovered money reported by the HMO and its
          subcontractor.

     J.   Wisconsin Medicaid Provider Reports

          Provide a monthly electronic listing of all Wisconsin Medicaid
          certified providers to include, at a minimum, the name, address,
          Wisconsin Medicaid provider ID number, and dates of certification in
          Wisconsin Medicaid.

     K.   Enrollee Health Status and Primary Language Report

          The Department will provide the HMO with an enrollee health status and
          primary language report of all enrollees who have agreed to
          participate with the gathering of this data. The reports will be
          provided to the HMO on a monthly basis. The purpose of this report is
          to assist HMOs with continuity of care issues and to assist with the
          identification of Non-English speaking enrollees and to facilitate
          appointments for enrollees who have urgent health care needs.

     L.   Fraud and Abuse Training

          The Department will provide fraud and abuse detection training to the
          HMOs annually.

     M.   Provision of Data to HMOs

          Provide to each HMO the following data related to the HMO's members:

          1.   Lead testing performed and sent to the State Lab of Hygiene for
               analysis

          2.   Immunization information from the Wisconsin immunization registry
               to the extent available. The Department will make every effort to
               get the Wisconsin Immunization Registry information to HMOs.

     N.   Special Procedures for Retroactive Payments Adjustments for Pregnant
          BadgerCare Enrollees

          The Department shall develop and implement a procedure by which HMOs
          may provide documentation that a BadgerCare enrollee should be
          redesignated as a Healthy Start Pregnant Women. When a HMO notifies
          the Department in writing of a pregnant BadgerCare enrollee who is
          eligible for Healthy Start, the Department will facilitate the
          correction of the enrollee's medical status code retroactive to the
          beginning of the pregnancy or the first day of enrollment, whichever
          is later. Providing that correct and validated documentation is
          available, the Department will assume a pregnancy duration of 38 weeks
          for purposes of establishing an effective date for the Healthy Start
          Pregnant Women medical status code and for providing retroactive
          capitation adjustments.

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                                      -69-

<PAGE>

                                    ARTICLE V

V.   PAYMENT TO THE HMO

     A.   Capitation Rates

          In full consideration of contract services rendered by the HMO, the
          Department agrees to pay the HMO monthly payments based on the
          capitation rate specified in Addendum VII. The capitation rate shall
          be prospectively designed to be less than the cost of providing the
          same services covered under this Contract to a comparable Medicaid
          population on a FFS basis. The capitation rate shall not include any
          amount for recoupment of losses incurred by the HMO under previous
          contracts. The Department shall have the right to make separate
          payments to subcontractors directly on a monthly basis when the
          Department determines it is necessary to assure continued access to
          quality care. Such separate payment will be made only to
          subcontractors that receive more than 90 percent of the contracted
          monthly capitation rate from the Department to the HMO.

     B.   Actuarial Basis

          The capitation rate is calculated on an actuarial basis (specified in
          Addendum VII) recognizing the payment limits set forth in 42 CFR
          447.361.

     C.   Renegotiation

          The monthly capitation rates set forth in this article shall not be
          subject to renegotiation during the contract term or retroactively
          after the contract term, unless such renegotiation is required by
          changes in Federal or State laws, rules or regulations.

     D.   Reinsurance

          The HMO may obtain a risk-sharing arrangement from an insurer other
          than the Department for coverage of enrollees under this Contract,
          provided that the HMO remains substantially at risk for providing
          services under this Contract.

     E.   Neonatal Intensive Care Unit Risk-Sharing

          The Department agrees to reimburse each HMO for a portion of the
          neonatal intensive care unit (NICU) costs incurred by the HMO if the
          HMO's average number of NICU days per thousand member year exceeds 75
          days per thousand member year during the contract period. This
          reimbursement shall be provided in the following manner:

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<PAGE>

          1.   The Department shall reimburse the HMO for the average number of
               NICU days per thousand member years that the HMO exceeds 75 NICU
               days per thousand member years per county during the contract
               period. (Please see addendum XIX for reporting requirements.) For
               each day that the HMO's average number of NICU days per thousand
               member years exceeds 75 NICU days per thousand member years, the
               Department will reimburse the HMO for ninety percent (90%) of the
               HMO's NICU cost per day, not to exceed $1,443 per day.

          2.   The HMO's NICU cost per day shall include the HMO's NICU
               inpatient payment per day and the HMO's associated physician
               payments. Associated physician payments refers to total HMO
               payments made by the HMO to the physician(s) for services
               provided to the infant during the NICU stay. Associated physician
               payments will be divided by the number of days reported for the
               NICU stay to determine the HMO's payment per day of associated
               physician payments.

          3.   Neonatal intensive care unit days cover any newborn transferred
               or directly admitted after birth, to a Level II, Level III or
               Level IV SCN/NICD for treatment and/or observation under the care
               of a neonatologist or pediatrician. NICU coverage will continue
               until the infant is deemed medically stable to be discharged to a
               newborn nursery, medical floor or home.

               NICU days will also cover any newborn infant transferred or
               directly admitted after birth to a Level II, Level III or Level
               IV SCN/NICD who requires transfer to another institution for a
               severe, compromised physical status, diagnostic testing or
               surgical intervention which cannot be provided for at the
               hospital of initial admission. NICU coverage will continue until
               the infant is transferred back to the initial hospital and deemed
               medically stable to be discharged to a newborn nursery, medical
               floor or home.

               Level I facilities are those which are designed primarily for the
               care of neonatal patients who have no complications but which are
               able to provide competent emergency services when the need
               arises. Level II facilities provide a full range of services for
               low birthweight neonates who are not sick, but require frequent
               feeding, and neonates who require more hours of nursing than do
               normal neonates. Level III facilities provide a full range of
               newborn intensive care services for neonatal patients who do not
               require intensive care but require 6-12 hours of nursing each
               day. Level IV facilities provide a full range of services for
               severely ill neonates who require constant nursing and continuous
               cardiopulmonary and other support.

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                                      -71-

<PAGE>

               NOTE: HMOs cannot claim additional reimbursement under both the
               NICU risk-sharing policy and the ventilator dependent policy for
               the same enrollee on the same date of service.

          4.   HMOs must submit all data requested by the Department for
               calculating the NICU reimbursement in the format specified by the
               Department before May 1 of the following calendar year. The data
               and data format required is defined in Addendum XIX. The
               Department will calculate the NICU reimbursement amount by
               county.

          5.   NICU reimbursement shall be made by the Department to the HMO
               after the end of the contract year, following submittal of all
               needed NICU data from the HMO. The Department will reimburse the
               HMO within sixty days of receipt of all necessary data from the
               HMO. A final adjustment to the NICU reimbursement amount may be
               made by the Department one year after the initial payment. This
               adjustment will be based on updated NICU days and eligible
               months.

     F.   Payment Schedule

          Payment to the HMO shall be based on the HMO Enrollment Reports which
          the Department will transmit to the HMO according to the schedule in
          Article IV. D. Payment for each person listed as an ADD or CONTINUE on
          the HMO Enrollment Reports shall be made by the Department within 60
          days of the date the report is generated. Also, all retroactive
          capitation payments for newborns shall be paid within 60 days of the
          child's first appearance on an enrollment report. (See Article V. G.)
          Any claim that is not paid within these time limits shall be denied by
          the Department and the recipient shall be disenrolled from the HMO for
          the capitation month specified on the claim. Notification of all paid
          and denied claims shall be given through the weekly Remittance Status
          Report, which is available on both tape and hard copy.

     G.   Capitation Payments For Newborns

          The HMO shall authorize provision of contract services to the newborn
          child of an enrolled mother for the first ten days of life. The
          child's date of birth should be counted as day one. In addition, if
          the child is reported within 100 days of its date of birth, the HMO
          shall provide contract services to the child from its date of birth
          until the child is disenrolled from the HMO. The HMO will receive a
          separate capitation payment for the month of birth and for all other
          months the HMO is responsible for providing contract services to the
          child. If the child is not reported within 100 days of its date of
          birth the child will not be retroactively enrolled into the HMO. In
          this case the HMO is not responsible for payment of services provided
          prior to the child's enrollment and will receive no capitation
          payments for that time period and may recoup from providers for any
          services that were

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                                      -72-

<PAGE>
          authorized in that 100 day time period. The providers who gave
          services in this 100 day time period may then bill the Department on a
          FFS basis. More detailed information for providers on billing the
          Department on a FFS basis in these situations can be found in Part A,
          Section IX, of the Wisconsin Medicaid Provider Handbook.

          HMOs, or their providers, must complete an HMO Newborn Report (example
          and instructions in Addendum XVII) for newborns. The HMO shall report
          all births to the Department's fiscal agent as soon as possible after
          the date of birth, but at least monthly. Prompt HMO reporting of
          newborns will facilitate retroactive enrollment and capitation
          payments for newborns, since this newborn reporting will ensure the
          newborn's Medicaid/BadgerCare eligibility for the first 12 months of
          life contingent upon the newborn continuously residing with the
          mother.

     H.   Coordination of Benefits (COB)

          The HMO must actively pursue, collect and retain all monies from all
          available resources for services to enrollees covered under this
          Contract except where the amount of reimbursement the HMO can
          reasonably expect to receive is less than the estimated cost of
          recovery (this exception does not apply to collections for AIDS and
          ventilator dependent patients), or except as provided in Addendum II.
          COB recoveries will be done by post-payment billing (pay and chase)
          for certain prenatal care and preventive pediatric services.
          Post-payment billing will also be done in situations where the third
          party liability is derived from a parent whose obligation to pay is
          being enforced by the State Child Support Enforcement Agency and the
          provider has not received payment within 30 days after the date of
          service.

          1.   Cost effectiveness of recovery is determined by, but not limited
               to time, effort, and capital outlay required to perform the
               activity. The HMO must be able to specify the threshold amount or
               other guidelines used in determining whether to seek
               reimbursement from a liable third party, or describe the process
               by which the HMO determines seeking reimbursement would not be
               cost effective, upon request of the Department.

          2.   To assure compliance, records shall be maintained by the HMO of
               all COB collections and reports shall be made quarterly on the
               form designated by the Department in Addendum VI. HMOs must be
               able to demonstrate that appropriate collection efforts and
               appropriate recovery actions were pursued. The Department has the
               right to review all billing histories and other data related to
               COB activities for enrollees. HMOs must seek from all enrollees'
               information on other available resources. HMOs must also seek to
               coordinate benefits before claiming reimbursement from the
               Department for the AIDS and ventilator dependent enrollees:

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                                      -73-

<PAGE>
               a.   Other available resources may include, but are not limited
                    to, all other State or Federal medical care programs which
                    are primary to Medicaid, group or individual health
                    insurance, ERISAs, service benefit plans, the insurance of
                    absent parents who may have insurance to pay medical care
                    for spouses or minor enrollees, and subrogation/workers
                    compensation collections.

               b.   Subrogation collections are any recoverable amounts arising
                    out of settlement of personal injury, medical malpractice,
                    product liability, or Worker's Compensation. State
                    subrogation rights have been extended to HMOs under s.
                    49.89(9), Act 31, Laws of 1989. After attorneys' fees and
                    expenses have been paid, the HMO shall collect the full
                    amount paid on behalf of the enrollee.

          3.   Section 1912(b) of the Social Security Act must be construed in a
               beneficiary-specific manner. The purpose of the distribution
               provision is to permit the beneficiary to retain TPL benefits to
               which he or she is entitled to except to the extent that Medicaid
               (or the HMO on behalf of Medicaid) is reimbursed for its costs.
               The HMO is free, within the constraints of State law and this
               contract, to make whatever case it can to recover the costs it
               incurred on behalf of its enrollee. It can use the Medicaid fee
               schedule, an estimate of what a capitated physician would charge
               on a FFS basis, the value of the care provided in the market
               place or some other acceptable proxy as the basis of recovery.
               However, any excess recovery, over and above the cost of care
               (however the HMO chooses to define that cost), must be returned
               to the beneficiary. HMOs may not collect from amounts allotted to
               the beneficiary in a judgement or court-approved settlement. The
               HMO is to follow the practices outlined in the DHFS Casualty
               Recovery Manual.

          4.   Where the HMO has entered a risk-sharing arrangement with the
               Department, the COB collection and distribution shall follow the
               procedures described in Addendum III of this Contract. Act 27,
               Laws of 1995 extended assignment rights to HMOs under s. 632.72.

          5.   COB collections are the responsibility of the HMO or its
               subcontractors. Subcontractors must report COB information to the
               HMO. HMOs and subcontractors shall not pursue collection from the
               enrollee, but directly from the third party payer. Access to
               medical services will not be restricted due to COB collection.

          6.   The following requirement shall apply if the Contractor (or the
               Contractor's parent firm and/or any subdivision or subsidiary of
               either the Contractor's parent firm or of the Contractor) is a
               health care insurer (including, but not limited to, a group
               health insurer and/or health

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                                      -74-

<PAGE>
               maintenance organization) licensed by the Wisconsin Office of the
               Commissioner of Insurance and/or a third-party administrator for
               a group or individual health insurer(s), health maintenance
               organization(s), and/or employer self-insurer health plan(s):

               a.   Throughout the Contract term, these insurers and third-party
                    administrators shall comply in full with the provision of
                    subsection 49.475 of the Wisconsin Statutes. Such compliance
                    shall include the routine provision of information to the
                    Department in a manner and electronic format prescribed by
                    the Department and based on a monthly schedule established
                    by the Department. The type of information provided shall be
                    consistent with the Department's written specifications.

               b.   Throughout the Contract term, these insurers and third-party
                    administrators shall also accept and properly process
                    postpayment billings from the Department's fiscal agent for
                    health care services and items received by Wisconsin
                    Medicaid enrollees.

          7.   If, at any time during the contract term, any of the insurers or
               third party administrators fail, in whole or in part, to adhere
               to the requirements of (Article V. H. subsection 6. (a.) or
               (6.(b.)) above, the Department may take the remedial measures
               specified in Article IX. D. 1. and Article X. B. (2).

     I.   Recoupments

          The Department will not normally recoup HMO per capita payments when
          the HMO actually provided service. However, in situations where the
          Medicaid enrollee cannot use HMO facilities, the Department will
          recoup HMO capitation payments. Such situations are described more
          fully below:

          1.   The Department will recoup HMO capitation payments for the
               following situations where an enrollee's HMO status has changed
               before the 1st day of a month for which a capitation payment has
               been made:

               a.   enrollee moves out of the HMO's service area

               b.   enrollee enters a public institution

               c.   enrollee dies

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                                      -75-

<PAGE>
          2.   The Department will recoup HMO capitation payments for the
               following situations where the Department initiates a change in
               an enrollee's HMO status on a retroactive basis, reflecting the
               fact that the HMO was not able to provide services. In these
               situations, recoupments for multiple month's capitation payments
               are more likely.

               a.   correction of a computer or human error, where the person
                    was never really enrolled in the HMO.

               b.   disenrollments of enrollees for reasons of pregnancy and
                    continuity of care, or for reasons specified in Addendum II.

          3.   In instances where membership is disputed between two HMOs, the
               Department shall be the final arbitrator of HMO membership and
               reserves the right to recoup an inappropriate capitation payment.

          4.   If an HMO enrollee moves out of the HMO service area, the
               enrollee will be disenrolled from the HMO on the date the
               enrollee moved as verified by the eligibility worker. If the
               eligibility worker is unable to verify the enrollee's move, the
               HMO may mail a "certified return receipt requested" letter to the
               enrollee to verify the move. The enrollee must sign for the
               letter. A copy of the letter and the signed return receipt must
               be sent to the Department or its designee within twenty days of
               the enrollees' signature date. If this criteria is met the
               effective date of the disenrollment is the first of the month in
               which the returned registered receipt requested letter was sent.
               Documentation that fails to meet the twenty-day criteria will
               result in disenrollment the first of the month in which the HMO
               supplied information to the Department or its designee. This
               policy does not apply to extended service area requests that have
               been approved by the HMO unless the enrollee moves out of the
               extended service area or HMO's service area. Any capitation
               payment made for periods of time after disenrollment will be
               recouped.

          5.   If a contract is terminated, recoupments will be handled through
               a payment by the HMO within 30 business days of contract
               termination.

          6.   If an HMO is unable to meet the HealthCheck requirements
               specified in Article III. B, 10.

     J.   Payment for Aids, HIV-Positive, and Ventilator Dependent

          The Department will pay the HMO's costs of providing Medicaid-covered
          services to HMO enrollees who meet the criteria in this section, by
          HMO service area. These payments will be made based on the data
          submitted by the HMO to the Department on a quarterly basis. The data
          submission and payment schedule is

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<PAGE>
          included as Addendum IV to this Contract. Reimbursement already
          provided to the HMO in the form of capitation payments for qualified
          enrollees will be deducted from 100 percent reimbursement payments.
          One-hundred percent reimbursement refers to full reimbursement of HMO
          costs for providing Medicaid services to the above enrollees. The
          criteria for enrollees are:

          1.   Ventilator Assisted Patients----Costs incurred for enrollees who
               need ventilator treatment services qualify for reimbursement if
               the enrollee meets the following criteria:

               a.   For the purposes of this reimbursement, a
                    ventilator-assisted patient must have died while on total
                    respiratory support or must meet all of the criteria below:

                    1)   The patient must require equipment that provides total
                         respiratory support. This equipment may be a volume
                         ventilator, a negative pressure ventilator, a
                         continuous positive airway pressure (CPAP) system, or a
                         Bi (inspiratory and expiratory) PAP. The patient may
                         need a combination of these systems. Any equipment used
                         only for the treatment of sleep apnea does not qualify
                         as total respiratory support.

                    2)   The total respiratory support must be required for a
                         total of six or more hours per 24 hours.

                    3)   The patient must have total respiratory support for at
                         least 30 days which need not be continuous.

                    4)   The patient must have absolute need for the respiratory
                         support, as documented by appropriate blood gases.

               b.   The HMO will submit the following written documentation to
                    qualify enrollees for reimbursement at the same time as the
                    quarterly reports identified in Addendum IV:

                    1)   The Department's designated form.

                    2)   A signed statement from the doctor attesting to the
                         need of the patient.

                    3)   Copies of progress notes which show the need for
                         continuation of total ventilatory support, any change
                         in the type of ventilatory support and the removal of
                         the ventilatory support.

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<PAGE>

                    Copies of lab reports must be submitted if the progress
                    notes do not include blood gas levels.

               c.   Dates of enhanced funding are based on the following
                    methodology:

                    1)   Day one is the day that the patient is placed on the
                         ventilator. If the patient is on the ventilator for
                         less than six hours on the first day, the use must
                         continue into the next day and be more than six total
                         hours.

                    2)   Each day that the patient is on the ventilator for a
                         part of any day, as long as it is part of the six total
                         hours per 24 hours, counts as a day for enhanced
                         funding.

                    3)   The period of enhanced funding starts on the first day
                         of the month that the patient was placed on ventilator
                         support. It ends on the last day of the month after
                         which the patient is removed from the ventilatory
                         support, or at the end of the hospital stay, whichever
                         is later.

               2.   HMOs cannot claim additional reimbursement under both the
                    NICU risk-sharing policy and the ventilator dependent policy
                    for the same enrollee on the same date of service.

               3.   AIDS or HIV-Positive with Anti Retroviral Drug
                    Treatment--Costs for services provided to enrollees with a
                    confirmed diagnosis of AIDS, as indicated by an ICD-9-CM
                    diagnosis code or HIV-Positive who are on anti retroviral
                    drug treatment approved by the Food and Drug Administration,
                    qualify for reimbursement. Written requests to qualify
                    enrollees for reimbursement must be submitted by the HMO to
                    the Contract Monitor. These requests should be batched and
                    submitted with the reports identified in Addendum IV. A
                    signed statement from a physician that indicates a diagnosis
                    of AIDS or HIV-Positive and that the patient is on an Anti
                    Retroviral Drug treatment must accompany each request. One
                    hundred percent reimbursement will be effective for services
                    provided on or after the first day of the month in which
                    treatment begins.

                    a.   For AIDS and HIV -- Positive enrollees retroactively
                         disenrolled under Article VII of this Contract, the HMO
                         will have to back out the cost of the care provided
                         during the backdated period from the reports in
                         Addendum IV. Part D.

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<PAGE>
                    b.   Submission of Data -- As required by the Wisconsin
                         Administrative Code HFS 106.03, payment data or
                         adjustment data for AIDS and/or vent enrollees must be
                         received by the Department's fiscal agent within 365
                         days after the date of the service. If the HMO cannot
                         meet this requirement, the HMO must provide
                         documentation that substantiates the delay. The
                         Department will make the final determination to pay or
                         deny the services. The Department will exercise its
                         discretion reasonably in making the determination to
                         waive the 365-day billing requirement.

               4.   NICU days for which the HMO will collect 100 percent
                    reimbursement cannot be counted under the NICU risk-sharing
                    policy in this Contract. (HMOs cannot choose between the 100
                    percent policy and the NICU policy; if a cost qualifies
                    under the 100 percent policy, it must be reported under that
                    policy.)

                    The HMO will manage the care of these enrollees, produce
                    quarterly cost and utilization reports and meet with the
                    Department on a quarterly basis to discuss cost and other
                    issues related to care management for these.

               5.   The HMO must submit reports (eligibility summary, cost
                    summary, inpatient hospital utilization summary, and detail)
                    to the Department according to the schedule and in the
                    format specified in Addendum IV.

                                   ARTICLE VI

VI.  REPORTS, DATA, AND COMPUTER/DATA REPORTING SYSTEM

     A.   Disclosure

          The HMO and any subcontractors shall make available to the Department,
          the Department's authorized agents, and appropriate representatives of
          the U.S. Department of Health and Human Services any financial records
          of the HMO or subcontractors which relate to the HMO's capacity to
          bear the risk of potential financial losses, or to the services
          performed and amounts paid or payable under this Contract. The HMO
          shall comply with applicable record keeping requirements specified in
          HFS 105.02(1)-(7) Wis. Adm. Code, as amended.

     B.   Periodic Reports

          The HMO agrees to furnish within the Department's time frame and
          within the Department's stated form and format, information and/or
          data from its records to

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          the Department, and to the Department's authorized agents, which the
          Department may require to administer this Contract, including but not
          limited to the following:

          1.   Summaries of amounts recovered from third parties for services
               rendered to enrollees under this Contract in the format specified
               in Addendum VI.

          2.   An encounter record for each service provided to enrollees
               covered under this contract. The Encounter data set will include
               at least those data elements specified in Addendum IV. The
               Department will work with the HMOs to develop a mechanism for
               sharing HMO specific data and blinded data from other HMOs in
               order for HMOs to perform their own independent analysis of the
               data.

               The encounter data set must be submitted monthly via electronic
               media. Refer to Article I, Definitions, for the definition of an
               encounter.

          3.   Copies of all formal grievances and documentation of actions
               taken on each grievance, as specified in Article VIII. A. (11).

          4.   Birth Cost as specified in Addendum XXIII.

     C.   Access to and Audit of Contract Records

          Throughout the duration of the Contract, and for a period of five (5)
          years after termination of the Contract, the HMO shall provide duly
          authorized representatives of the State or Federal government access
          to all records and material relating to the Contractor's provision of
          and reimbursement for activities contemplated under the Contract. Such
          access shall include the right to inspect, audit and reproduce all
          such records and material and to verify reports furnished in
          compliance with the provisions of the Contract. All information so
          obtained will be accorded confidential treatment as provided under
          applicable laws, rules or regulations.

     D.   Records Retention

          The HMO shall retain, preserve and make available upon request all
          records relating to the performance of its obligations under the
          Contract, including claim forms, paper and electronic, for a period of
          not less than five (5) years from the date of termination of the
          Contract. Records involving matters which are the subject of
          litigation shall be retained for a period of not less than five (5)
          years following the termination of litigation. Microfilm copies of the
          documents contemplated herein may be substituted for the originals
          with the prior written consent of the Department, provided that the
          microfilming procedures are approved by the Department as reliable and
          are supported by an effective retrieval system.

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          Upon expiration of the five (5) year retention period, the subject
          records shall, upon request, be transferred to the Department's
          possession. No records shall be destroyed or otherwise disposed of
          without the prior written consent of the Department.

     E.   Special Reporting and Compliance Requirements

          The HMO shall comply with the following State and Federal reporting
          and compliance requirements for the services listed below, for the
          entire HMO, aggregating all service areas if the HMO has more than one
          service area:

          1.   Abortions shall comply with the requirements of Chapter 20.927,
               Wis. Stats., and with 42 CFR 441 Subpart E--Abortions.

          2.   Hysterectomies and sterilizations shall comply with 42 CFR 441
               Subpart F--Sterilizations.

               Sanctions in the amount of $10,000.00 may be imposed for
               noncompliance with the above special reporting and compliance
               requirements.

          3.   HMOs shall abide by s. 609.30 Wis. Stats.

     F.   Reporting of Corporate and Other Changes

          If corporate restructuring or any other change affects the continuing
          accuracy of certain information previously reported by the HMO to the
          Department, the HMO shall report the change in information to the
          Department. The HMO shall report each such change in information as
          soon as possible, but not later than 30 days after the effective date
          of the change. Changes in information covered under this section
          include all of the following:

          1.   Any change in information previously provided by the HMO in
               response to questions posed by the Department in the current HMO
               Certification Application or any previous RFB for
               Medicaid/BadgerCare HMO Contracts. This includes any change in
               information originally provided by the HMO as a "new HMO," within
               the meaning of the HMO Certification Application or RFB.

          2.   Any change in information relevant to Article III, Section JJ of
               this Contract, relating to ineligible organizations.

          3.   Any change in information relevant to Section 4 of Addendum I of
               this Contract, relating to ownership and business transactions of
               the HMO.

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     G.   Computer/Data Reporting System

          The HMO must maintain a computer/data reporting system that meets the
          Department's following requirements. The HMO is responsible for
          complying with all of the reporting requirements established by the
          Department and with assuring the accuracy and completeness of the data
          as well as the timely submission of data. The data submitted must be
          supported by records available to the Department or its designee. The
          Department reserves the right to conduct on-site inspections and/or
          audits prior to awarding the Contract. The HMO must have a contact
          person responsible for the computer/data reporting system and in a
          position to answer questions from the Department and resolve problems
          identified by the Department in regard to the requirements listed
          below:

          1.   The HMO must have a claims processing system that is adequate to
               meet all claims processing and retrieval requirements specified
               in this Contract, specifically Article III. G.

          2.   The HMO must have a computer/data collection, processing, and
               reporting system sufficient to monitor HMO
               enrollment/disenrollment (in order to determine on any specific
               day which recipients are enrolled or disenrolled from the HMO)
               and to monitor service utilization for the Utilization Management
               requirements of Quality Improvement that are specified in Article
               III. W. (9) of the Contract.

          3.   The HMO must have a computer/data collection, processing, and
               reporting system sufficient to support the Quality Improvement
               (QI) requirements described in Article III. W. The system must be
               able to support the variety of QI monitoring and evaluation
               activities, including the monitoring/ evaluation of quality of
               clinical care and service (III. W. (3)); periodic evaluation of
               HMO providers (III. W.(6)(b)); member feedback on QI (III. W.
               (7)(b) and (c)); maintenance of and use of medical records in QI
               (III. W. (8)(f) and (i)); and monitoring and evaluation of
               priority areas (III. W. (13)(a) - (f)).

          4.   The HMO must have a computer and data processing system
               sufficient to accurately produce the data, reports, and encounter
               data set, in the formats and time lines prescribed by the
               Department in this contract, that are included in Addendum IV of
               the Contract. Newly certified HMOs and HMOs who substantially
               change the IS system during the contract period are required to
               submit electronic test encounter data files as required by the
               Department in the format specified in the HMO encounter data user
               manual and timelines specified in Addendum IV of the Contract and
               as may be further specified by the Department. The electronic
               test encounter data files are subject to Department review and
               approval before production data is accepted by the Department.
               Production claims or other documented encounter data must be used
               for the test data files.

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          5.   The HMO must capture and maintain a claim record of each service
               or item provided to enrollees, using HCFA 1500, UB-92, NCPDP, or
               other claim, or claim formats that are adequate to meet all
               reporting requirements of this contact. The computerized database
               must be a complete and accurate representation of all services
               covered by the HMO for the contract period. The HMO is
               responsible for monitoring the integrity of the data base, and
               facilitating its appropriate use for such required reports as
               encounter data, and targeted performance improvement studies.

          6.   The HMO must have a computer processing and reporting system that
               is capable of following or tracing an encounter within its system
               using a unique encounter record identification number for each
               encounter.

          7.   The HMO reporting system must have the ability to identify all
               denied claims/encounters using national ANSI EOB codes.

          8.   The HMO system must be capable of reporting original and reversed
               claim detail records and encounter records.

          9.   The HMO system must be capable of correcting an error to the
               encounter record within 90 days of notification by the
               Department.

          10.  The HMO must notify the Department of all significant changes to
               the system that may impact the integrity of the data, including
               such changes as new claims processing software, new claims
               processing vendors and significant changes in personnel.

                                   ARTICLE VII

VII. ENROLLMENT AND DISENROLLMENTS

     A.   Enrollment

          The HMO shall accept as enrolled all persons who appear as enrollees
          on the HMO Enrollment Reports and newborns as defined in Article I.
          Enrollment in the HMO shall be voluntary by the recipient except where
          limited by Departmental implementation of a State Plan Amendment or a
          Section 1115(a) waiver. The current State Plan Amendment and 1115(a)
          waiver requires mandatory enrollment into an HMO for those service
          areas in which there are two or more HMOs with sufficient slots for
          the HMO eligible population. The Department reserves the right to
          assign a Medicaid/ BadgerCare recipient to a specific HMO when the
          recipient fails to choose an HMO during a required enrollment period.

          The HMO shall designate, in Article XV, and Addendum XX, of this
          Contract, their maximum enrollment level for the different service
          areas of the HMO throughout the State. The Department may take up to
          60 days, from the date of

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          written notification, to implement maximum enrollment level changes.
          The HMO shall accept as enrolled all persons who appear as enrollees
          on the HMO Enrollment Reports and newborns up to the HMO specified
          enrollment level for a particular service area. The number of
          enrollees may exceed the maximum enrollment level by 5 percent on a
          temporary basis. The Department does not guarantee any minimum
          enrollment level. The maximum enrollment level for a service area may
          be increased or decreased during the course of the contract period
          based on mutual acceptance of a different maximum enrollment level.

     B.   Third Trimester Pregnancy Disenrollment

          Enrollees who are in their third trimester of pregnancy when they are
          expected to enter an HMO may be eligible for disenrollment. In order
          for disenrollment to occur, the enrollee must have been automatically
          assigned or reassigned. In addition, they must be seeking care from a
          provider (physician and/or hospital) who is either not affiliated with
          the HMO to which they were assigned or is affiliated but the HMO is
          closed to new enrollment. Disenrollment requests can only be made by
          the enrollee and/or casehead. Disenrollment requests must be made
          before the end of the second month in the HMO or before the birth,
          whichever occurs first. Disenrollment requests should be directed to
          the Enrollment Contractor or the Department's assigned HMO Contract
          Monitor.

     C.   Ninth Month Pregnancy Disenrollment

          Enrollees who deliver or are expected to deliver the first month they
          are assigned to a HMO may be eligible for disenrollment. In order for
          disenrollment to occur, the enrollee must have been automatically
          assigned or reassigned and must not have been in the HMO to which they
          were assigned or reassigned within the last seven months. In addition,
          they must be seeking care from a provider (physician and/or hospital)
          not affiliated with the HMO to which they were assigned. Disenrollment
          requests can be made by the HMO, a provider, or the recipient.
          Requests for ninth month pregnancy disenrollments should be directed
          to the Department's assigned HMO Contract Monitor.

     D.   Exemptions from Enrollment in any HMO and Disenrollment for Patients
          of Certified Nurse Midwives or Nurse Practitioners

          1.   Enrollees may be eligible for an exemption from enrollment if:

               a.   the enrollee resides in a service area of a certified nurse
                    midwife or nurse practitioner; and

               b.   the enrollee chooses to receive their care from a certified
                    nurse midwife or nurse practitioner; and

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               c.   the certified nurse midwife or nurse practitioner is not
                    affiliated with any HMO in the service area; or

               d.   the certified nurse midwife or nurse practitioner is not
                    independently certified as a provider of any HMO within the
                    service area.

          2.   Exemptions and disenrollment requests may be made by the enrollee
               and should be directed to the Department's Enrollment Contractor.
               Exemptions will be processed as soon as possible and will be
               effective as of the first of the month of request.

     E.   Exemption from Enrollment in any HMO and Disenrollment For AIDS or
          HIV-Positive with Anti Retroviral Drug Treatment

          Enrollees with a confirmed diagnosis of AIDS, as indicated by an
          ICD-9-CM diagnosis code, or HIV-Positive who are on anti retroviral
          drug treatment approved by the Federal Food and Drug Administration,
          are eligible for an exemption. The casehead may apply for the
          exemption. The HMO shall not counsel or otherwise influence an
          enrollee or potential enrollee in such a way as to encourage exemption
          from enrollment or continued enrollment. Exemptions will be processed
          as soon as possible. Disenrollment will be effective with the first
          day of the month in which anti retroviral treatment begins or in which
          the enrollee was diagnosed with AIDS except that disenrollment will
          not be backdated more than nine (9) months from the date the request
          is received.

     F.   Exemptions from Enrollment in any HMO and Disenrollment for Patients
          of Federally Qualified Health Centers

          1.   Enrollees may be eligible for an exemption from enrollment if:

               a.   the enrollee resides in the service area of an FQHC;

               b.   the enrollee chooses to receive their primary care from the
                    FQHC; and

               c.   the FQHC is not affiliated with any HMO within the service
                    area.

          2.   Exemption and Disenrollment requests may be made by the casehead
               and should be directed to the Department's assigned HMO Contract
               Monitor. Exemptions will be processed as soon as possible and
               will be effective as of the first of the month of the request.

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     G.   Native American Disenrollment

          Enrollees who are Native American and members of a federally
          recognized tribe are eligible for disenrollment. Only the enrollee can
          make disenrollment requests.

     H.   Special Disenrollments

          The HMO may request and the Department may approve disenrollment for
          specific cases or persons where there is just cause. Just cause is
          defined as a situation where enrollment would be harmful to the
          interests of the recipient or in which the HMO cannot provide the
          recipient with appropriate medically necessary contract services for
          reasons beyond its control. Disruptive behavior resulting from
          diminished mental capacity from a special needs enrollee will not
          qualify as a just cause disenrollment.

     I.   Exemptions from Enrollment in any HMO and Disenrollment for Recipients
          With Commercial HMO Insurance or Commercial Insurance With a
          Restricted Provider Network

          Enrollees who have commercial HMO insurance may be eligible for
          exemption from enrollment in any HMO or disenrollment, if the
          commercial HMO does not participate in Medicaid. In addition,
          enrollees who have commercial insurance which limits enrollees to a
          restricted provider network (e.g., PPOs, PHOs, etc.) may be eligible
          for an exemption from enrollment in any HMO or disenrollment. Requests
          for exemption and disenrollment should be directed to the Department's
          Enrollment Contractor. Exemptions will be processed as soon as
          possible and will be effective as of the first of the month of the
          request.

     J.   Exemption from Enrollment in any HMO and Disenrollment for Families
          Where One or More Members are receiving SSI benefits

          1.   Families may be eligible for exemption from enrollment if:

               a.   there are one or more members in the family who are
                    receiving SSI benefits, and

               b.   the SSI member receives primary care from a provider who
                    does not accept any Medicaid HMO, and

               c.   other family members receive their primary care from the
                    same provider as the SSI member.

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          2.   Exemption and Disenrollment requests may be made by the SSI
               member, parent or guardian and should be directed to the
               Department's Enrollment Contractor. Exemptions will be processed
               as soon as possible and will be effective as of the first of the
               month of request.

     K.   Voluntary Disenrollment

          All enrollees shall have the right to disenroll from the HMO pursuant
          to 42 CFR 434.27(b)(1) unless otherwise limited by a State Plan
          Amendment or a Section 1115(a) waiver of federal laws, or pursuant to
          Addendum II. A voluntary disenrollment shall be effective no later
          than the first day of the second month after the month in which the
          enrollee requests termination. The HMO will promptly forward to the
          Department or its designee all requests from enrollees for
          disenrollment. Wisconsin currently has a State Plan Amendment and an
          1115(a) waiver which allows the Department to "lock-in" enrollees to
          an HMO for a period of 12 months in mandatory HMO service areas,
          except that disenrollment is allowed for good cause as described in
          Sections B. through J. above. The lock-in policy is described more
          completely in Section O below. Addendum II allows voluntary exemptions
          and disenrollment from HMOs for a variety of reasons. Because of these
          two Department policies, voluntary disenrollment is limited to the
          situations described in Sections B. through K. of Article VII. and
          Addendum II.

     L.   Section 1115(A) Waiver and State Plan Amendment

          Should the Department, at any time during the Contract, obtain a State
          Plan Amendment, a waiver or revised waiver authority under the Social
          Security Act (as amended), the conditions of enrollment described in
          the Contract, including but not limited to voluntary enrollment and
          the right to voluntary disenrollment, shall be amended by the terms of
          said waiver and State Plan Amendment.

     M.   Additional Services

          The HMO shall not obtain enrollment through the offer of any
          compensation, reward, or benefit to the enrollee except for additional
          health-related services that have been approved by the Department.

     N.   Enrollment/Disenrollment Practices

          The HMO shall permit the Department to monitor enrollment and
          disenrollment practices of the HMO under this Contract. The HMO will
          not discriminate in enrollment/disenrollment activities between
          individuals on the basis of health status or requirement for health
          care services, including those individuals who have AIDS or are
          HIV-Positive. This includes an enrollee with a diminished mental
          capacity, who is uncooperative and displays disruptive behavior and
          the behavior results from the enrollees' special needs. This section
          shall not prevent the HMO from

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          assisting in the disenrollment process for individuals who can be in a
          different medical status code.

     O.   Enrollee Lock-In Period

          Under the Department's State Plan Amendment and waiver authority of
          Section 1115(a) of the Social Security Act (as amended), in mandatory
          HMO service areas, enrollees will be locked in to an HMO for twelve
          months. The first 90 days of the 12-month lock-in period will be an
          open enrollment period in which the enrollee may change their HMO. The
          conditions of disenrollment as specified in VII. B - K still apply
          during this lock-in period.

                                  ARTICLE VIII

VIII. GRIEVANCE PROCEDURES

     Medicaid/BadgerCare enrollees may grieve regarding any aspect of service
     delivery provided or arranged by the HMO.

     A.   Procedures:

          The HMO shall:

          1.   Have written policies and procedures that detail what the
               grievance system is and how it operates.

          2.   Identify a contact person in the HMO to receive grievances and be
               responsible for routing/processing.

          3.   Operate an informal grievance process which enrollees can use to
               get problems resolved without going through the formal, written
               grievance process.

          4.   Operate a formal grievance process which enrollees can use to
               grieve in writing.

          5.   Inform enrollees about the existence of the formal and informal
               grievance processes and how to use the formal and informal
               grievance process.

          6.   Attempt to resolve grievances informally.

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          7.   Respond to written grievances (i.e., formal grievances) in
               writing within 10 business days of receipt of grievance, except
               that in cases of emergency or urgent (expedited grievances)
               situations, HMOs must resolve the grievance within 2 business
               days of receiving the complaint or sooner if possible. This
               represents the first response. More complete procedures are
               described in Section B. of this Article.

          8.   Operate a grievance process within the HMO which enrollees can
               use to appeal any negative response to their grievance to the
               Board of Directors of the HMO. The HMO Board of Directors may
               delegate this authority to review appeals to an HMO grievance
               appeal committee, but the delegation must be in writing. If a
               grievance appeal committee is established, the Medicaid HMO
               Advocate must be a member of the committee.

          9.   Grant the enrollee the right to appear in person before the
               grievance committee, to present written and oral information. The
               enrollee may bring a representative to this meeting. The HMO must
               inform the enrollee in writing of the time and place of the
               meeting at least 7 calendar days before the meeting.

          10.  Maintain a record keeping system for informal grievances in the
               form of a "log" that includes a short, dated summary of each of
               the problems, the response, and the resolution. This log shall
               distinguish Medicaid/ BadgerCare from commercial enrollees, if
               the HMO does not have a separate log for Medicaid. The HMO must
               submit quarterly reports to the Department of all informal
               grievances/complaints. The analysis of the log will include the
               number of informal grievances/complaints divided into two
               categories, program administration and benefits denials.

          11.  Maintain a record keeping system for formal grievances that
               includes a copy of the original grievance, the response, and the
               resolution. This system shall distinguish Medicaid/BadgerCare
               from commercial enrollees.

          12.  Notify the enrollee who grieves, at the time of the initial HMO
               grievance decision denying the grievance, that the enrollee may
               appeal to the Division of Hearings and Appeals (DHA) or the
               Department.

          13.  Assure that individuals with the authority to require corrective
               action are involved in the grievance process.

          14.  Distribute to their gatekeepers* and IPAs the informational flyer
               on enrollee's grievance rights `(the ombudsman brochure). When a
               new brochure is available, the HMO shall distribute copies to
               their gatekeepers and IPAs within three weeks of receipt of the
               new brochure.

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          15.  Assure that their gatekeepers* and IPAs have written procedures
               for describing how enrollees are informed of denied services. The
               HMO will make copies of the gatekeeper's and IPA's grievance
               procedures available for review upon request by the Department.

          16.  HMOs must inform enrollees about the availability of interpreter
               services during the grievance process. In addition, HMOs must
               provide interpreter services for non-English speaking and hearing
               impaired enrollees throughout the grievance process except during
               the Department's fair hearing process. The Department will
               arrange for interpreters during the state fair hearing process.

               *The word "gatekeeper" in this context refers to any entity that
               performs a management services contract, a behavioral health
               science IPA, or a dental IPA, and not to individual physicians
               acting as a gatekeeper to primary care services.

     B.   Recipient Appeals of HMO Formal Grievance Decisions/Formal Grievance
          Process.

          The enrollee may choose to use the HMO's formal grievance process or
          may appeal to the Department instead of using the HMO's formal
          grievance process. If the enrollee chooses to use the HMO's process,
          the HMO must provide an initial response within ten business days and
          a final response within thirty calendar days of receiving the
          grievance. If the HMO is unable to resolve the grievance within thirty
          calendar days, the time period may be extended another fourteen
          calendar days from receipt of the grievance if the HMO notifies the
          enrollee in writing that the HMO has not resolved the grievance, when
          the resolution may be expected, and why the additional time is needed.
          The total timeline for HMOs to finalize a formal grievance may not
          exceed 45 calendar days from the date of the receipt of the grievance.

          Any formal grievance decision by the HMO may be appealed by the
          enrollee to the Department. The Department shall review such appeals
          and may affirm, modify, or reject any formal grievance decision of the
          HMO at any time after the enrollee files the formal appeal. The
          Department will give a final response within 30 days from the date the
          Department has all information needed for a decision. Also, an
          enrollee can submit a formal, written grievance directly to the
          Department at any time during the grievance process. Any formal
          decision made by the Department under this section is subject to
          enrollee appeal rights to the extent provided by State and Federal
          Laws and rules. The Department will receive input from the recipient
          and the HMO in considering appeals.

          For an expedited grievance, the HMO must resolve all issues within two
          business days of receiving the written request for an expedited
          grievance.

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     C.   Notifications of Denial, Termination, Suspension, or Reduction of
          Benefits to Enrollees

          1.   When an HMO, its gatekeepers,* or its IPAs discontinues,
               terminates, suspends, limits, or reduces a service (including
               services authorized by an HMO the enrollee was previously
               enrolled in or services received by the enrollee on a Medicaid
               FFS basis), the HMO shall notify the affected enrollee(s) in
               writing of:

               a.   The nature of the intended action.

               b.   The reasons for the intended action.

               c.   The circumstance under which a benefit will continue during
                    the grievance process. The fact that if the enrollee
                    continues to receive the disputed service, the enrollee may
                    be liable for the care if the decision is adverse to the
                    enrollee.

               d.   The fact that the enrollee if appealing the action must do
                    so within forty-five (45) days.

               e.   The enrollee has the right to examine the documentation used
                    when the HMO made its determination.

               f.   The fact that interpreter services are available free of
                    charge during the grievance process and how the enrollee can
                    access those services.

               g.   The enrollee may bring a representative with him/her to the
                    hearing.

               h.   The enrollee may present "new" information during the
                    grievance process

               i.   The process for requesting an expedited grievance.

               j.   An explanation of the enrollee's right to appeal the HMO's
                    decision to the Department.

               k.   The fact that the enrollee, if appealing the HMO action, may
                    file a request for a hearing with the Division of Hearings
                    and Appeals (DHA) and the address of the DHA.

               l.   The fact that the enrollee can receive help in filing a
                    grievance by calling either the Enrollment contractor or the
                    Ombudsman.

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               m.   The telephone number of both the Enrollment contractor and
                    the Ombudsman.

               * The word "gatekeeper" in this context refers to any entity that
               performs a management services contract, a behavioral health
               science IPA, or a dental IPA, and not to individual physicians
               acting as a gatekeeper to primary care services.

               This notice requirement does not apply when an HMO, its
               gatekeeper or its IPA triages an enrollee to proper health care
               provider or when an individual health care provider determines
               that a service is medically unnecessary.

               The Department must review and approve all notice language prior
               to its use by the HMO. Department review and approval will occur
               during the Medicaid certification process of the HMO and prior to
               any change of the notice language by the HMO.

          2.   If the recipient files a request for a hearing with the Division
               of Hearings and Appeals by the effective date of the decision to
               reduce, limit, terminate or suspend benefits, upon notification
               by the Division of Hearings and Appeals:

               a.   The Department will notify the enrollee they are eligible to
                    continue receiving care but may be liable for care if DHA
                    overturns the decision; and

               b.   The Department will put the enrollee on FFS status effective
                    the first of the month in which the enrollee received the
                    termination, reduction, or suspension notice from the HMO;
                    and:

                    1)   If the Division of Hearings and Appeals reverses the
                         HMO's decision, the Department will recoup from the HMO
                         the amount paid for any benefits provided to the
                         enrollee during the period of the enrollee's FFS status
                         while the decision was pending. The enrollee will be
                         reenrolled into the HMO following the resolution of the
                         medical condition, the completion of medical,
                         psychological or dental services or the end of medical
                         necessity of the service(s) unless the HMO has reversed
                         its original decisions and agrees to reimburse the
                         provider(s) for services provided to the enrollee
                         during the administrative hearing process.

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                    2)   If the Division of Hearings and Appeals upholds the
                         HMO's decision, the Department may pursue reimbursement
                         from the enrollee for all services provided to the
                         enrollee during their FFS period. The enrollee will be
                         reenrolled into the HMO no later than the end of the
                         second month following notification from the DHA.

     D.   Notifications of Denial of New Benefits to Enrollees

          When an HMO, its gatekeeper, or IPA denies a new service, the HMO
          shall notify the affected enrollee (s) in writing of:

          1.   The nature of the intended action.

          2.   The reasons for the intended action.

          3.   The fact that the enrollee if appealing the action must do so
               within forty-five (45) days.

          4.   An explanation of how the enrollee may request an expedited
               grievance.

          5.   The enrollee may bring a representative with him/her to the
               hearing.

          6.   The enrollee may present "new" information during the grievance
               process.

          7.   The enrollee may review the documents used to make the decision.

          8.   An explanation of the enrollee's right to appeal the HMO's
               decision to the Department.

          9.   The fact that interpreter services are available free of charge
               during the grievance process and how the enrollee can access
               those services.

          10.  The fact that the enrollee can receive help in filing a grievance
               by calling either the Enrollment contractor or the Ombudsman.

          11.  The telephone number of both the Enrollment contractor and the
               Ombudsman.

          If the enrollee was not receiving the service prior to the denial, the
          HMO is not required to provide the benefit while the decision is being
          appealed.

          HMO grievance procedures must be reviewed and approved by the
          Department prior to signing the HMO Contract. All changes to HMO
          grievance procedures require prior review and approval by the
          Department.

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     E.   Reporting of Grievances to the Department

          1.   HMOs shall forward both the formal and informal grievances
               reports to the Department within thirty days of the end of a
               quarter in the format specified in Addendum XXI. Failure on the
               part of an HMO to submit the quarterly grievance reports in the
               required format within five days of the due date may result in
               any or all sanctions available under Article IX.

                                   ARTICLE IX

IX.  REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT

     A.   Suspension of New Enrollment

          Whenever the Department determines that the HMO is out of compliance
          with this Contract, the Department may suspend the HMO's right to
          receive new enrollment under this Contract. The Department, when
          exercising this option, must notify the HMO in writing of its intent
          to suspend new enrollment at least 30 days prior to the beginning of
          the suspension period. The suspension will take effect if the
          noncompliance remains uncorrected at the end of this period. The
          Department may suspend new enrollment sooner than the time period
          specified in this paragraph if the Department finds that enrollee
          health or welfare is jeopardized. The suspension period may be for any
          length of time specified by the Department, or may be indefinite. The
          suspension period may extend up to the expiration of the Contract as
          provided under Article XV.

          The Department may also notify enrollees of HMO non-compliance and
          provide an opportunity to enroll in another HMO.

     B.   Department-Initiated Enrollment Reductions

          The Department may reduce the maximum enrollment level and/or number
          of current enrollees whenever it determines that the HMO has failed to
          provide one or more of the contract services required under Article
          III or that the HMO has failed to maintain or make available any
          records or reports required under this Contract which the Department
          needs to determine whether the HMO is providing contract services as
          required under Article III. The HMO shall be given at least 30 days to
          correct the non-compliance prior to the Department taking any action
          set forth in this paragraph. The Department may reduce enrollment
          sooner than the time period specified in this paragraph if the
          Department finds that enrollee health or welfare is jeopardized.

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     C.   Other Enrollment Reductions

          The Department may also suspend new enrollment or disenroll enrollees
          in anticipation of the HMO not being able to comply with federal or
          state law at its current enrollment level. Such suspension shall not
          be subject to the 30 day notification requirement.

     D.   Withholding of Capitation Payments and Orders to Provide Services

          Notwithstanding the provisions of Article V, the Department may
          withhold portions of capitation payments as liquidated damages or
          otherwise recover damages from the HMO on the following grounds:

          1.   Whenever the Department determines that the HMO has failed to
               provide one or more of the medically necessary Medicaid covered
               contract services required under Article III, the Department may
               either order the HMO to provide such service, or withhold a
               portion of the HMO's capitation payments for the following month
               or subsequent months, such portion withheld to be equal to the
               amount of money the Department must pay to provide such services.

               If the Department orders the HMO to provide services under this
               section and the HMO fails to provide the services within the
               timeline specified by the Department, the Department may withhold
               an amount up to 150 percent of the FFS amount for such services
               from the HMO's capitation payments.

               When it withholds payments under this section, the Department
               must submit to the HMO a list of the participants for whom
               payments are being withheld, the nature of the service(s) denied,
               and payments the Department must make to provide medically
               necessary services.

               If the Department acts under this section and subsequently
               determines that the services in question were not covered
               services:

               a.   In the event the Department withheld payments it shall
                    restore to the HMO the full capitation payment, or

               b.   In the event the Department ordered the HMO to provide
                    services under this section, it shall pay the HMO the actual
                    documented cost of providing the services.

          2.   If the HMO fails to submit required data and/or information to
               the Department or the Department's authorized agents, or fails to
               submit such data or information in the required form or format,
               by the deadline

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               specified by the Department, the Department may immediately
               impose liquidated damages in the amount of $1,500 per day for
               each day beyond the deadline that the HMO fails to submit the
               data or fails to submit the data in the required form or format,
               such liquidated damages to be deducted from the HMO's capitation
               payments.

          3.   If the HMO fails to submit State and Federal reporting and
               compliance requirements for abortions, hysterectomies and
               sterilizations, the Department may impose liquidated damages in
               the amount of $10,000 per reporting period.

          4.   If the HMO fails to correct an error to the encounter record
               within the timeframe specified, the Department may assess
               liquidated damages of $5 per erred encounter record per month
               until the error has been corrected. The liquidated damage amount
               will be deducted from the HMO's capitation payment. When applied,
               these liquidated damages will be calculated and assessed on a
               monthly basis.

               If upon audit or review, the Department finds that the HMO has,
               without Department approval, removed an erred encounter record,
               the Department may assess liquidated damages for each day from
               the date of original error notification until the date of
               correction.

               The term "erred encounter record" means an encounter record that
               has failed an edit when a correction is expected by the
               Department.

               The following criteria will be used prior to assessing liquidated
               damages:

               o    The Department will calculate a percentage rate by dividing
                    the number of erred records not corrected within 90 days
                    (numerator), by the total number of records in error
                    (denominator) and multiply the result by 100.

               o    Records failing non-critical edits, as defined in the
                    Wisconsin Medicaid/BadgerCare HMO Encounter Data User
                    Manual, will not be included in the numerator.

               o    If this rate is 2 percent or less, liquidated damages will
                    not be assessed.

               o    The Department will calculate this rate each month.

          5.   Whenever the Department determines that the HMO has failed to
               perform an administrative function required under this Contract,
               the Department may withhold a portion of future capitation
               payments. For the purposes of this section, "administrative
               function" is defined as any contract obligation

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               other than the actual provision of contract services. The amount
               withheld by the Department under this section will be an amount
               that the Department determines in the reasonable exercise of its
               discretion to approximate the cost to the Department to perform
               the function. The Department may increase these amounts by 50
               percent for each subsequent non-compliance.

               Whenever the Department determines that the HMO has failed to
               perform the administrative functions defined in Article V. H. (1)
               and (2), the Department may withhold a portion of future
               capitation payments sufficient to directly compensate the
               Department for the Medicaid/BadgerCare program's costs of
               providing health care services and items to individuals insured
               by said insurers and/or the insurers/ employers represented by
               said third party administrators.

          6.   In any case under this Contract where the Department has the
               authority to withhold capitation payments, the Department also
               has the authority to use all other legal processes for the
               recovery of damages.

          7.   Notwithstanding the provisions of this subsection, in any case
               where the Department deducts a portion of capitation payments
               under subsection (2) above, the following procedures shall be
               used:

               a.   The Department will notify the HMO's contract administrator
                    no later than the second business day after Department's
                    deadline that the HMO has failed to submit the required data
                    or the required data cannot be processed.

               b.   The HMO will be subject to liquidated damages without
                    further notification per submission, per data file or
                    report, beginning on the second business day after the
                    Department's deadline.

               c.   If the late submission of data is for encounter data, and
                    the HMO responds with a submission of the data within five
                    (5) business days from the deadline, the Department will
                    rescind liquidated damages if the data can be processed
                    according to the criteria published in the Wisconsin
                    Medicaid/BadgerCare HMO Encounter Data User Manual. The
                    Department will not edit the data until the process period
                    in the subsequent month.

               d.   If the late submission is for any other required data or
                    report, and the HMO responds with a submission of the data
                    in the required format within five (5) business days from
                    the deadline, the Department will rescind liquidated damages
                    and immediately process the data or report.

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               e.   If the HMO repeatedly fails to submit required data or
                    reports, or data that cannot be processed, the Department
                    will require the HMO to develop an action plan to comply
                    with the contract requirements that must meet Department
                    approval.

               f.   If the HMO, after a corrective action plan has been
                    implemented, continues to submit data beyond the deadline,
                    or continues to submit data that cannot be processed, the
                    Department will invoke the remedies under Article IX,
                    section A (SUSPENSION OF NEW ENROLLMENT), from section B
                    (DEPARTMENT-INITIATED ENROLLMENT REDUCTIONS), or both, in
                    addition to liquidated damages that may have been imposed
                    for a current violation.

               g.   If an HMO notifies the Department it is discontinuing
                    contracting with the Department at the end of a contract
                    period, but reports or data are due for a contract period,
                    the Department retains the right to withhold up to two
                    months of capitation payments otherwise due the HMO which
                    will not be released to the HMO until all required reports
                    or data are submitted and accepted after expiration of the
                    contract. Upon determination by the Department that the
                    reports and data are accepted, the Department will release
                    the monies withheld.

     E.   Inappropriate Payment Denials

          HMOs that inappropriately fail to provide or deny payments for
          services may be subject to suspension of new enrollments, withholding,
          in full or in part, of capitation payments, contract termination, or
          refusal to contract in a future time period, as determined by the
          Department. The Department will select among these sanctions based
          upon the nature of the services in question, whether the failure or
          denial was an isolated instance or a repeated pattern or practice, and
          whether the health of an enrollee was injured, threatened or
          jeopardized by the failure or denial. This applies not only to cases
          where the Department has ordered payment after appeal, but also to
          cases where no appeal has been made (i.e., the Department is
          knowledgeable about the documented abuse from other sources).

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     F.   Sanctions

          Section 1903(m)(5)(B)(ii) of the Social Security Act vests the
          Secretary of the Department of Health and Human Services with the
          authority to deny Medicaid payments to an HMO for enrollees who enroll
          after the date on which the HMO has been found to have committed one
          of the violations identified in the federal law. State payments for
          enrollees of the contracting organization are automatically denied
          whenever, and for so long as, Federal payment for such enrollees has
          been denied as a result of the commission of such violations.

     G.   Sanctions and Remedial Actions

          The Department may pursue all sanctions and remedial actions with HMOs
          that are taken with Medicaid FFS providers, including any civil
          penalties not to exceed the amounts specified in the Balanced Budget
          Amendment of 1997 P.L. 105-33 Sec. 4707(a) [42 U.S.C. 1396v(d)(2)].

                                    ARTICLE X

X.   TERMINATION AND MODIFICATION OF CONTRACT

     A.   Mutual Consent

          This Contract may be terminated at any time by mutual written
          agreement of both the HMO and the Department.

     B.   Unilateral Termination

          This Contract between the parties may be terminated only as follows:

          1.   This Contract may be terminated at any time, by either party, due
               to modifications mandated by changes in Federal or State laws,
               rules or regulations, that materially affect either party's
               rights or responsibilities under this Contract. In such case, the
               party initiating such termination procedures must notify the
               other party, at least 90 days prior to the proposed date of
               termination, of its intent to terminate this Contract.
               Termination by the Department under these circumstances shall
               impose an obligation upon the Department to pay the Contractor's
               reasonable and necessarily incurred termination expenses.

          2.   This Contract may be terminated by either party at any time if it
               determines that the other party has substantially failed to
               perform any of its functions or duties under this Contract. In
               such event, the party exercising this option must notify the
               other party, in writing, of this intent to terminate this

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               Contract and give the other party 30 days to correct the
               identified violation, breach or non-performance of Contract. If
               such violation, breach or non-performance of Contract is not
               satisfactorily addressed within this time period, the exercising
               party may terminate this Contract. The termination date shall
               always be the last day of a month. The Contract may be terminated
               by the Department sooner than the time period specified in this
               paragraph if the Department finds that enrollee health or welfare
               is jeopardized by continued enrollment in the HMO. A "substantial
               failure to perform" for purposes of this paragraph includes any
               violation of any requirement of this Contract that is repeated or
               ongoing, that goes to the essentials or purpose of the Contract,
               or that injures, jeopardizes or threatens the health, safety,
               welfare, rights or other interests of enrollees.

          3.   By either party, in the event Federal or State funding of
               contractual services rendered by the Contractor become or will
               become permanently unavailable. In the event it becomes evident
               State or Federal funding of claims payments or contractual
               services rendered by the Contractor will be temporarily suspended
               or unavailable, the Department shall immediately notify the
               Contractor, in writing, identifying the basis for the anticipated
               unavailability or suspension of funding. Upon such notice, the
               Department or the Contractor may suspend performance of any or
               all of the Contractor's obligations under this Contract if the
               suspension or unavailability of funding will preclude
               reimbursement for performance of those obligations. The
               Department or Contractor shall attempt to give notice of
               suspension of performance of any or all of the Contractor's
               obligations by 60 calendar days prior to said suspension, if this
               is possible; otherwise, such notice of suspension should be made
               as soon as possible. In the event funding temporarily suspended
               or unavailable is reinstated, the Contractor may remove
               suspension hereunder by written notice to the Department, to be
               made within 30 calendar days from the date the funds are
               reinstated. In the event the Contractor elects not to reinstate
               services, the Contractor shall give the Department written notice
               of its reasons for such decision, to be made within 30 calendar
               days from the date the funds are reinstated. The Contractor shall
               make such decision in good faith and will provide to the
               Department documentation supporting its decision. In the event of
               termination under this Section, this Contract shall terminate
               without termination costs to either party.

     C.   Obligations of Contracting Parties

          When termination of the Contract occurs, the following obligations
          shall be met by the parties:

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          1.   Where this Contract is terminated unilaterally by the Department,
               due to non-performance by the HMO or by mutual consent with
               termination initiated by the HMO:

               a.   The Department shall be responsible for notifying all
                    enrollees of the date of termination and process by which
                    the enrollees will continue to receive contract services;
                    and

               b.   The HMO shall be responsible for all expenses related to
                    said notification.

               c.   The Department shall grant the HMO a hearing before
                    termination occurs. The Department shall notify the
                    enrollees of the hearing and allow them to disenroll from
                    the HMO without cause.

          2.   Where this Contract is terminated on any basis not given in (1)
               above:

               a.   The Department shall be responsible for notifying all
                    enrollees of the date of termination and process by which
                    the enrollees will continue to receive contract services;
                    and

               b.   The Department shall be responsible for all expenses
                    relating to said notification.

     D.   Where this Contract is terminated for any reason:

          1.   Any payments advanced to the HMO for coverage of enrollees for
               periods after the date of termination shall be returned to the
               Department within the period of time specified by the Department;
               and

          2.   The HMO shall supply all information necessary for the
               reimbursement of any outstanding Medicaid/BadgerCare claims
               within the period of time specified by the Department.

          3.   If a contract is terminated, recoupments will be handled through
               a payment by the HMO within 90 days of contract termination.

     E.   Where this Contract is terminated on any basis not given including
          non-renewal of the contract for a given contract period:

          1.   The Department shall be responsible for notifying all enrollees
               of the date of the termination and the process by which the
               enrollees will continue to receive contract services.

          2.   The HMO shall be responsible for all expenses related to said
               notification.

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          3.   Any payments advanced to the HMO for coverage of enrollees for
               periods after the date of termination shall be returned to the
               Department within the period of time specified by the Department.

          4.   Recoupments will be handled through a payment by the HMO within
               90 days of the termination of the contract.

     F.   Modification

          This Contract may be modified at any time by written mutual consent of
          the HMO and the Department or when modifications are mandated by
          changes in Federal or State laws, rules or regulations. In the event
          that changes in State or Federal law, rule or regulation require the
          Department to modify its contract with the HMO, notice shall be made
          to the HMO in writing. However, the capitation rate to the HMO can be
          modified only as provided in Article V relating to RENEGOTIATION.

          If the Department exercises its right to renew this Contract, as
          allowed by Article XV, the Department will recalculate the capitation
          rate for succeeding calendar years. The HMO will have 30 days to
          accept the new capitation rate in writing or to initiate termination
          of the Contract. If the Department changes the reporting requirements
          during the contract period, the HMO shall have 180 days to comply with
          such changes or to initiate termination of the Contract.

                                   ARTICLE XI

XI.  INTERPRETATION OF CONTRACT LANGUAGE

     A.   Interpretations

          The Department has the right to final interpretation of the contract
          language when disputes arise. The HMO has the right to appeal to the
          Department or invoke the procedures outlined in Chapter 788, Wis.
          Stats. if it disagrees with the Department's decision. Until a
          decision is reached, the HMO shall abide by the interpretation of the
          Department.

                                   ARTICLE XII

XII. CONFIDENTIALITY OF RECORDS

     A.   The parties agree that all information, records, and data collected in
          connection with this Contract shall be protected from unauthorized
          disclosure as provided in Chapter 19, Subchapter II, Wis. Stats., HFS
          108.01, Wis. Admin. Code, and 42 CFR 431 Subpart F. Except as
          otherwise required by law, rule or regulation,

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          access to such information shall be limited by the HMO and the
          Department to persons who, or agencies which, require the information
          in order to perform their duties related to this Contract, including
          the U.S. Department of Health and Human Services and such others as
          may be required by the Department.

          With respect to the services provided under this contract, the HMO
          will comply with all applicable health data and information privacy
          and security policies, standards and regulations as may be adopted or
          promulgated under the Health Insurance Portability and Accountability
          Act (HIPAA)of 1996 in final form, and as amended or revised from time
          to time. This includes cooperating with the Department in amending
          this contract, or developing a new agreement, if the Department deems
          it necessary to meet the Department's obligations under HIPAA.

     B.   The HMO agrees to forward to the Department all media contacts
          regarding Medicaid/BadgerCare enrollees or the Medicaid/BadgerCare
          program.

                                  ARTICLE XIII

XIII. DOCUMENTS CONSTITUTING CONTRACT

     A.   Current Documents

          The contract between the parties to this Contract shall include, in
          addition to this document, existing Medicaid Provider Publications
          addressed to HMOs, the terms of the most recent HMO Certification
          Application issued by this Department for Medicaid/BadgerCare HMO
          Contracts, any Questions and Answers released pursuant to said HMO
          Certification Application by this Department, and an HMO's signed
          application. The terms of the HMO Certification Application are also
          part of this Contract even if the HMO had a Medicaid/BadgerCare HMO
          Contract in the prior contract period and consequently did not have to
          answer all the questions in the HMO Certification Application. In the
          event of any conflict in provisions among these documents, the terms
          of this Contract shall prevail. The provisions in any Question and
          Answer Document shall prevail over the HMO Certification Application.
          And the HMO Certification Application terms shall prevail over any
          conflict with an HMO's actual signed application. In addition, the
          Contract shall incorporate the following Addenda:

                I.      Subcontracts and Memoranda of Understanding

                II.     Policy Guidelines for Mental Health/Substance Abuse and
                        Community Human Service Programs

                III.    Risk-Sharing for Inpatient Hospital Services (if the HMO
                        has elected to risk-share with the Department)

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                IV.     Contract Specified Reporting Requirements

                V.      Standard Enrollee Handbook Language

                VI.     COB Report Format

                VII.    Actuarial Basis

                VIII.   Compliance Agreement: Affirmative Action/Civil Rights

                IX.     Model MOU for Prenatal Care Coordination

                X.      Bureau of Milwaukee Child Welfare MOU

                XI.     HealthCheck Worksheet

                XII.    Common Carrier Transportation MOU for Milwaukee County

                XIII.   Model MOU for School Districts or CESAs

                XIV.    Guidelines for Coordination of Services between HMOs,
                        Targeted Case Management Agencies, and Child Welfare
                        Agencies

                XV.     Performance Improvement Project Outline

                XVI.    Targeted Performance Improvement Measures Data Set

                XVII.   Medicaid/BC HMO Newborn Report

                XVIII.  Recommended Childhood Immunization Schedule

                XIX.    Reporting Requirements for NICU Risk-Sharing

                XX.     Specific Terms of the Medicaid/BC HMO Contract

                XXI.    Formal Grievance Experience Summary Report

                XXII.   Guidelines for the Coordination of Services Between
                        Medicaid HMOs and County Birth to Three (B-3) Agencies

                XXIII.  Wisconsin Medicaid HMO Report on Average Birth Cost by
                        County

                XXIV.   Local Health Departments and Community-Based Health
                        Organizations - A Resource for HMOs

                XXV.    General Information About the WIC Program, Sample
                        HMO-to-WIC Referral Form, and Statewide List of WIC
                        Agencies

     B.   Future Documents

          The HMO is required, by this Contract, to comply with all future
          Medicaid Provider Publications addressed to the HMOs and Contract
          Interpretation Bulletins issued pursuant to this Contract.

     The documents listed above constitute the entire Contract between the
     parties and no other expression, whether oral or written, constitutes any
     part of this Contract.

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                                   ARTICLE XIV

XIV. MISCELLANEOUS

     A.   Indemnification

          The HMO agrees to defend, indemnify and hold the Department harmless,
          with respect to any and all claims, costs, damages and expenses,
          including reasonable attorney's fees, which are related to or arise
          out of:

          1.   Any failure, inability, or refusal of the HMO or any of its
               subcontractors to provide contract services;

          2.   The negligent provision of contract services by the HMO or any of
               its subcontractors; or

          3.   Any failure, inability or refusal of the HMO to pay any of its
               subcontractors for contract services.

     B.   Independent Capacity of Contractor

          Department and HMO agree that HMO and any agents or employees of HMO,
          in the performance of this Contract, shall act in an independent
          capacity, and not as officers or employees of Department.

     C.   Omissions

          In the event that either party hereto discovers any material omission
          in the provisions of this Contract which such party believes is
          essential to the successful performance of this Contract, said party
          may so inform the other party in writing, and the parties hereto shall
          thereafter promptly negotiate in good faith with respect to such
          matters for the purpose of making such reasonable adjustments as may
          be necessary to perform the objectives of this Contract.

     D.   Choice of Law

          This Contract shall be governed by and construed in accordance with
          the laws of the State of Wisconsin. HMO shall be required to bring all
          legal proceedings against Department in Wisconsin State courts.

     E.   Waiver

          No delay or failure by either party hereto to exercise any right or
          power accruing upon noncompliance or default by the other party with
          respect to any of the terms

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          of this Contract shall impair such right or power or be construed to
          be a waiver thereof. A waiver by either of the parties hereto of a
          breach of any of the covenants, conditions, or agreements to be
          performed by the other shall not be construed to be a waiver of any
          succeeding breach thereof or of any other covenant, condition, or
          agreement herein contained.

     F.   Severability

          If any provision of this Contract is declared or found to be illegal,
          unenforceable, invalid or void, then both parties shall be relieved of
          all obligations arising under such provision; but if such provision
          does not relate to payments or services to Medicaid/BadgerCare
          enrollees and if the remainder of this Contract shall not be affected
          by such declaration or finding, then each provision not so affected
          shall be enforced to the fullest extent permitted by law.

     G.   Force Majeure

          Both parties shall be excused from performance hereunder for any
          period that they are prevented from meeting the terms of this Contract
          as a result of a catastrophic occurrence or natural disaster including
          but not limited to an act of war, and excluding labor disputes.

     H.   Headings

          The article and section headings used herein are for reference and
          convenience only and shall not enter into the interpretation hereof.

     I.   Assignability

          Except as allowed under subcontracting, the Contract is not assignable
          by the HMO either in whole or in part, without the prior written
          consent of the Department.

     J.   Right to Publish

          The Department agrees to allow the HMO to write and have such writing
          published provided the HMO receives prior written approval from the
          Department before publishing writings on subjects associated with the
          work under this Contract.

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                                     -106-

<PAGE>
                                                                    EXHIBIT 10.1

                                   ARTICLE XV

XV.  HMO SPECIFIC CONTRACT TERMS

     A.   Initial Contract Period

          The respective rights and obligations of the parties as set forth in
          this Contract shall commence on January 1, 2002, and, unless earlier
          terminated under Article X, shall remain in full force and effect
          through December 31, 2003. The specific terms for enrollment, rates,
          risk-sharing, dental coverage, and chiropractic coverage are as
          specified in C.

     B.   Renewals

          By mutual written agreement of the parties, there may be one (1)
          one-year renewal of the term of the Contract. An agreement to renew
          must be effected at least forty-five (45) calendar days prior to the
          expiration date of any contract term. The terms and conditions of the
          Contract shall remain in full force and effect throughout any renewal
          period, unless modified under the provision of Article X, Section D.

     C.   Specific Terms of the Contract

          The specific terms of the Medicaid/BadgerCare HMO Contract that the
          HMO is agreeing to are indicated by the Department in a completed
          Addendum VII -Actuarial Basis of the Medicaid/BadgerCare HMO Contract.
          These specific terms include the following items: the service area to
          be covered; and, whether dental services and chiropractic services
          will be provided by the HMO and the HMO's maximum enrollment level for
          each area; finally, whether the HMO, on a Statewide basis. The
          Department has completed Addendum VII based on the information
          supplied the Department by the HMO in the HMO Certification
          Application.

     In WITNESS WHEREOF, the State of Wisconsin has executed this agreement:

<Table>
<Caption>
--------------------------------------                 --------------------------------------
           (Name of HMO)                                          State of Wisconsin
--------------------------------------                 --------------------------------------
<S>                                                    <C>
Official Signature                                     Official Signature

/s/ Kathleen R. Crampton                               /s/ Peggy Bartells
--------------------------------------                 --------------------------------------
Title                                                  Title

President and Chief Executive Officer                  Deputy Administrator
--------------------------------------                 --------------------------------------
Date
--------------------------------------                 --------------------------------------
</Table>

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                                     -107-

<PAGE>

     NOTE: The following subcontract with the Department for Chiropractic
     Services is not effective unless signed below.

                      SUBCONTRACT FOR CHIROPRACTIC SERVICES

     A.   THIS AGREEMENT is made and entered into by and between the HMO and the
          Department of Health and Family Services.

          The parties agree as follows:

          1.   The Department agrees to be at risk for and pay claims for
               chiropractic services covered under this Contract.

          2.   The HMO agrees to a deduction from the capitation rate of an
               amount of money based on the cost of chiropractic services. This
               deduction is reflected in the Contract that is being signed on
               the same date.

     B.   This is the only subcontract for services that the Department is
          entering into with the HMO.

     C.   The provisions of the Contract regarding subcontracts, in Addendum I,
          do not apply to this subcontract.

     D.   The term of this subcontract is for the same period as the Contract
          between HMO and Department for medical services.

     Signed:

<Table>
<S>                                            <C>
        FOR                                    FOR
        HMO: /s/ Kathleen R. Crampton          STATE: /s/ Peggy Bartells
            --------------------------------         --------------------------------
        TITLE: President and CEO               TITLE: Deputy Administrator
              ------------------------------         --------------------------------
        DATE:                                  DATE:
             -------------------------------        ---------------------------------
</Table>

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                                     -108-

<PAGE>

                                   ADDENDUM I

                   SUBCONTRACTS AND MEMORANDA OF UNDERSTANDING

     NOTE: This Addendum does not apply to subcontracts between the Department
           and the HMO. The Department shall have sole authority to determine
           the conditions and terms of such subcontracts.

     1.    Original Review and Approval for HMOs that did not have a
           Medicaid/BadgerCare HMO Contract in the Prior Contract Period, or
           that are going to accept enrollment of recipients in a new county.

           a.  The Department may approve, approve with modification, or deny
               subcontracts under this Contract at its sole discretion. The
               Department may, at its sole discretion and without the need to
               demonstrate cause, impose such conditions or limitations on its
               approval of a subcontract as it deems appropriate. The Department
               may consider such factors as it deems appropriate to protect the
               interests of the State and recipients, including but not limited
               to the proposed subcontractor's past performance. DHFS will give
               the HMO (1) 120 days to implement a change that requires the HMO
               to find a new subcontractor, and (2) 60 days to implement any
               other change required by DHFS. DHFS will acknowledge the approval
               or disapproval of a subcontract within 14 days after its receipt
               from the HMO.

           b.  The Department will review and approve or disapprove each
               subcontract before contract signing. Any disapproval of
               subcontracts may result in the application by the Department of
               remedies pursuant to Article IX of this Contract. The
               Department's subcontract review will assure that the HMO has
               inserted the following standard language in subcontracts (except
               for specific provisions that are inapplicable in a specific HMO
               management subcontract):

           c.  Subcontractor (hereafter identified as subcontractor) agrees to
               abide by all applicable provisions of the (HMO's NAME)'s contract
               with the Department of Health and Family Services, hereafter
               referred to as the Medicaid/BadgerCare HMO Contract.
               Subcontractor compliance with the Medicaid/HMO Contract
               specifically includes but is not limited to the following
               requirements:

               1)   Subcontractor uses only Medicaid-certified providers in
                    accordance with Article III. AA. of the Medicaid/BadgerCare
                    HMO Contract.

               2)   No terms of this subcontract are valid which terminate legal
                    liability of HMO in accordance with Article III.Y. of the
                    Medicaid/BadgerCare HMO Contract.

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                                     -109-

<PAGE>

               3)   Subcontractor agrees to participate in and contribute
                    required data to HMO Quality Assessment/Performance
                    Improvement programs as required in Article III. W. of the
                    Medicaid/BadgerCare HMO Contract.

               4)   Subcontractor agrees to abide by the terms of the
                    Medicaid/BadgerCare HMO Contract (Article III. D.) for the
                    timely provision of emergency and urgent care. Where
                    applicable, subcontractor agrees to follow those procedures
                    for handling urgent and emergency care cases stipulated in
                    any required hospital/emergency room MOUs signed by HMO in
                    accordance with Article III. J. of the Medicaid/BadgerCare
                    HMO Contract.

               5)   Subcontractor agrees to submit HMO encounter data in the
                    format specified by the HMO, so the HMO can meet the
                    Department specifications required by Article VI and
                    Addendum IV of the Medicaid/ BadgerCare HMO Contract. HMOs
                    will evaluate the credibility of data obtained from
                    subcontracted vendors' external databases to ensure that any
                    patient-reported information has been adequately verified.

               6)   Subcontractor agrees to comply with all non-discrimination
                    requirements in Article III. O. of the Medicaid/BadgerCare
                    HMO Contract.

               7)   Subcontractor agrees to comply with all record retention
                    requirements and, where applicable, the special reporting
                    requirements on abortions, sterilizations, hysterectomies,
                    and HealthCheck requirements.

               8)   Subcontractor agrees to provide representatives of the HMO,
                    as well as duly authorized agents or representatives of DHFS
                    and the Federal Department of Health and Human Services,
                    access to its premises and its contract and/or medical
                    records in accordance with Article III and Article IX of the
                    Medicaid/BadgerCare HMO Contract. Subcontractor agrees
                    otherwise to preserve the full confidentiality of medical
                    records in accordance with Article XII of the
                    Medicaid/BadgerCare HMO Contract.

               9)   Subcontractor agrees to the requirements for maintenance and
                    transfer of medical records stipulated in Article III. W. of
                    the Medicaid/BadgerCare HMO Contract.

               10)  Subcontractor agrees to ensure confidentiality of family
                    planning services in accordance with Article III. B. of the
                    Medicaid/BadgerCare HMO Contract.

               11)  Subcontractor agrees not to create barriers to access to
                    care by imposing requirements on recipients that are
                    inconsistent with the provision of medically necessary and
                    covered Medicaid benefits (e.g., COB recovery procedures
                    that delay or prevent care).

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                                     -110-

<PAGE>

               12)  Subcontractor agrees to clearly specify referral approval
                    requirements to its providers and in any sub-subcontracts.

               13)  Subcontractor agrees not to bill a Medicaid/BadgerCare
                    enrollee for medically necessary services covered under the
                    Medicaid/BadgerCare HMO Contract and provided during the
                    enrollee's period of HMO enrollment. Subcontractor also
                    agrees not to bill enrollees for any missed appointments
                    while an enrollee is eligible under the Medicaid/BadgerCare
                    Program. This provision shall continue to be in effect even
                    if the HMO becomes insolvent. However, if an enrollee agrees
                    in writing to pay for a non-Medicaid covered service, then
                    the HMO, HMO provider, or HMO subcontractor can bill.

                    The standard release form signed by the enrollee at the time
                    of services does not relieve the HMO and its providers and
                    subcontractors from the prohibition against billing a
                    Medicaid enrollee in the absence of a knowing assumption of
                    liability for a non-Medicaid covered service. The form or
                    other type of acknowledgment relevant to Medicaid/
                    BadgerCare enrollee liability must specifically state the
                    admissions, services, or procedures that are not covered by
                    Medicaid.

               14)  Subcontractors must forward to the HMO medical records
                    pursuant to grievances, within 15 working days of the HMO's
                    request. If the subcontractor does not meet the 15 day
                    requirement, the subcontractor must explain why and indicate
                    when the medical records will be provided.

               15)  Subcontractor agrees to abide by the terms of Article III.
                    H. regarding appeals to the HMO and to the Department for
                    HMO non-payment of service providers.

               16)  Subcontractor agrees to abide by the HMO marketing/informing
                    requirements. Subcontractor will forward to the HMO for
                    prior approval all flyers, brochures, letters, and pamphlets
                    the subcontractor intends to distribute to its
                    Medicaid/BadgerCare enrollees concerning its HMO
                    affiliation(s), changes in affiliation, or relates directly
                    to the Medicaid/BadgerCare population. Subcontractor will
                    not distribute any "marketing" or recipient informing
                    materials without the consent of the HMO and the Department.

     2.   The Department will also review HMO management subcontracts to assure
          that rates are reasonable.

          a.   Subcontracts for HMO management must clearly describe the
               services to be provided and the compensation to be paid.

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                                     -111-

<PAGE>

          b.   Any potential bonus, profit-sharing, or other compensation not
               directly related to costs of providing goods and services to the
               HMO, shall be identified and clearly defined in terms of
               potential magnitude and expected magnitude during the
               Medicaid/BadgerCare HMO Contract period.

          c.   Any such bonus or profit-sharing shall be reasonable compared to
               services performed. The HMO shall document reasonableness.

          d.   A maximum dollar amount for such bonus or profit-sharing shall be
               specified for the contract period.

          e.   Requirements A through D do not have to relate to
               non-Medicaid/BadgerCare enrollees if the HMO wishes to have
               separate arrangements for these Medicaid enrollees.

     3.   Subcontract Review for HMOs that have had a Medicaid/BadgerCare HMO
          Contract in the Previous Contract Period and are Not Expanding into
          New Service Areas during the Current Contract Period.

          a.   The HMO shall submit, and the Department shall review, before
               signing this Contract, an affidavit that the contract language
               required above in all Medicaid/ BadgerCare HMO subcontracts is
               included in all the HMO's subcontracts for medical services (and
               dental care, if covered). The affidavit shall specify the
               expiration date of all subcontracts.

          b.   These HMOs shall submit the HMO management subcontract for review
               as specified for new contractors above.

     4.   Review and Approval of New Subcontracts and Changes in Approved
          Subcontracts During the Contract Period.

          a.   New subcontracts and changes in approved subcontracts shall be
               reviewed and approved by the Department before taking effect.
               This requirement will be considered met if the Department has not
               responded within 15 consecutive days of the date of Departmental
               receipt of request.

          b.   This review requirement applies to changes which affect the
               amount, duration, scope, location, or quality of services. In
               other words, technical changes do not have to be approved.

          c.   Changes in rates paid do not have to be approved, with the
               exception of changes in the amounts paid to HMO management
               services subcontractors.

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                                     -112-

<PAGE>

          d.   The HMO shall submit notice within 10 days to the Department of
               addition or deletion of subcontracts involving: (i) a clinic or
               group of physicians, (ii) an individual physician (iii) a mental
               health provider and/or clinic.

          e.   The HMO shall notify the Department's enrollment broker within 10
               days of additions to, and deletions from, the provider network.

          f.   The HMO shall submit to the enrollment broker an electronic
               listing of all network Medicaid providers, facilities and
               pharmacies within the first 10 days of each calendar quarter in a
               mutually agreed upon format approved by the Department. This
               listing will include, but is not limited to, provider name,
               provider number, address, phone number, and specialty as well as
               indicators designating whether a provider can be selected as a
               PCP, and whether the PCP is accepting new patients. The listing
               shall include only Medicaid certified providers who are
               contracted with the HMO to provide contract services to
               Medicaid/BadgerCare enrollees.

          g.   The HMO must send timely written notification to enrollees whose
               PCP, mental health provider, gatekeeper or dental clinic
               terminates a contract with the HMO. The Department must approve
               notifications before they are sent to enrollees.

          h.   The HMO shall be required to submit transition plans when a
               primary care provider(s), mental health provider(s), gatekeeper
               or dental clinic terminates their contractual relationship with
               the HMO. The transition plan will address continuity of care
               issues, enrollee notification and any other information required
               by the Department to assure adequate enrollee access. The
               Department will either approve, deny, or modify the transition
               plan prior to the effective date of the subcontract change.

     5.   Disclosure Statements

          Ownership

          The HMO agrees to submit to the Department within 30 days of contract
          signing full and complete information as to the identity of each
          person or corporation with an ownership or controlling interest in the
          HMO, or any subcontractor in which the HMO has a 5 percent or more
          ownership interest.

          a.   Definition of "Person with an Ownership or Controlling
               Interest."--A "person with an ownership or controlling interest"
               means a person or corporation that:

               1)   Owns, directly or indirectly, 5 percent or more of the HMO's
                    capital or stock or receives 5 percent or more of its
                    profits (see subsection B);

               2)   Has an interest in any mortgage, deed of trust, note, or
                    other obligation secured in whole or in part by the HMO or
                    by its property or assets, and

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                                     -113-

<PAGE>

                    that interest is equal to or exceeds 5 percent of the total
                    property and assets of the HMO; or

               3)   Is an officer or director of the HMO (if it is organized as
                    a corporation) or is a partner in the HMO (if it is
                    organized as a partnership).

          b.   Calculation of 5 percent Ownership or Receipt of Profits.--The
               percentage of direct ownership or control is calculated by
               multiplying the percent of interest, which a person owns, by the
               percent of the HMO's assets used to secure the obligation. Thus,
               if a person owns 10 percent of a note secured by 60 percent of
               the HMO's assets, the person owns 6 percent of the HMO.

               The percentage of indirect ownership or control is calculated by
               multiplying the percentages of ownership in each organization.
               Thus, if a person owns 10 percent of the stock in a corporation
               which owns 80 percent of the stock of the HMO, the person owns 8
               percent of the HMO.

          c.   Information to be Disclosed -- The following information must be
               disclosed:

               1)   The name and address of each person with an ownership or
                    controlling interest of 5 percent or more in the HMO or in
                    any subcontractor in which the HMO has direct or indirect
                    ownership of 5 percent or more;

               2)   A statement as to whether any of the persons with ownership
                    or controlling interest is related to any other of the
                    persons with ownership or controlling interest as spouse,
                    parent, child, or sibling; and

               3)   The name of any other organization in which the person also
                    has ownership or controlling interest. This is required to
                    the extent that the HMO can obtain this information by
                    requesting it in writing. The HMO must keep copies of all of
                    these requests and responses to them, make them available
                    upon request, and advise the Department when there is no
                    response to a request.

          d.   Potential Sources of Disclosure Information -- This information
               may already have been reported on Form HCFA-1513, "Disclosure of
               Ownership and Controlling Interest Statement." Form HCFA-1513 is
               likely to have been completed in two different cases. First, if
               an HMO is Federally qualified and has a Medicare contract, it is
               required to file Form HCFA-1513 with HCFA within 120 days of the
               HMO's fiscal year end. Secondly, if the HMO is owned by or has
               subcontracts with Medicaid providers which are reviewed by the
               State survey agency, these providers may have completed Form
               HCFA-1513 as part of the survey process. If Form HCFA-1513 has
               not been completed, the HMO may supply the ownership and
               controlling information on a separate report or submit reports
               filed with the

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                                     -114-

<PAGE>

               State's insurance or health regulators as long as these reports
               provide the necessary information for the prior 12 month period.

          e.   As directed by the Center for Medicaid/Medicare Services (CMS)
               Regional Office (RO), this Department must provide documentation
               of this disclosure information as part of the prior approval
               process for contracts. This documentation must be submitted to
               the Department and the RO prior to each contract period. If an
               HMO has not supplied the information that must be disclosed, a
               contract with the HMO is not considered approval for this period
               of time and no FFP is available for the period of time preceding
               the disclosure.

          f.   A managed care entity may not knowingly have a person who is
               debarred, suspended, or otherwise excluded from participating in
               procurement activities under the Federal Acquisition Regulation
               or from participating in non-procurement activities as a
               director, officer, partner, or person with beneficial ownership
               of more than 5 percent of the entity's equity, or have an
               employment, consulting, or other agreement for the provision of
               items and services that are significant and material to the
               entity's obligations under its contract with the State.

          g.   Business Transactions

               All HMOs which are not Federally qualified must disclose to the
               Department information on certain types of transactions they have
               with a "party in interest" as defined in the Public Health
               Service Act. (See Sections 1903(m)(2)(A)(viii) and 1903(m)(4) of
               the Act.):

               1)   Definition of a Party in Interest -- As defined in Section
                    1318(b) of the Public Health Service Act, a party in
                    interest is:

                    a)   Any director, officer, partner, or employee responsible
                         for Management or administration of an HMO and HIO; any
                         person who is directly or indirectly the beneficial
                         owner of more than 5 percent of the equity of the HMO;
                         any person who is the beneficial owner of more than 5
                         percent of the HMO; or, in the case of an HMO organized
                         as a nonprofit corporation, an incorporator or member
                         of such corporation under applicable State corporation
                         law;

                    b)   Any organization in which a person described in
                         subsection 1 is director, officer or partner; has
                         directly or indirectly a beneficial interest of more
                         than 5 percent of the equity of the HMO; or has a
                         mortgage, deed of trust, note, or other interest
                         valuing more than 5 percent of the assets of the HMO;

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                                     -115-

<PAGE>

                    c)   Any person directly or indirectly controlling,
                         controlled by, or under common control with an HMO; or

                    d)   Any spouse, child, or parent of an individual described
                         in subsections 1, 2, or 3.

               2)   Types of Transactions Which Must Be Disclosed. Business
                    transactions which must be disclosed include:

                    a)   Any sale, exchange or lease of any property between the
                         HMO and a party in interest;

                    b)   Any lending of money or other extension of credit
                         between the HMO and a party in interest; and

                    c)   Any furnishing for consideration of goods, services
                         (including management services) or facilities between
                         the HMO and the party in interest. This does not
                         include salaries paid to employees for services
                         provided in the normal course of their employment.

               3)   The information which must be disclosed in the transactions
                    listed in subsection b. between an HMO and a party in
                    interest includes:

                    a)   The name of the party in interest for each transaction;

                    b)   A description of each transaction and the quantity or
                         units involved;

                    c)   The accrued dollar value of each transaction during the
                         fiscal year; and

                    d)   Justification of the reasonableness of each
                         transaction.

               4)   If this Medicaid/BadgerCare HMO Contract is being renewed or
                    extended, the HMO must disclose information on these
                    business transactions which occurred during the prior
                    contract period. If the Contract is an initial contract with
                    Medicaid, but the HMO has operated previously in the
                    commercial or Medicare markets, information on business
                    transactions for the entire year preceding the initial
                    contract period must be disclosed. The business transactions
                    which must be reported are not limited to transactions
                    related to serving the Medicaid enrollment. All of these HMO
                    business transactions must be reported.

     6.   The HMO shall notify Department within seven days of any notice by the
          HMO to a subcontractor, or any notice to the HMO from a subcontractor,
          of a subcontract

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                                     -116-

<PAGE>
         termination, a pending subcontract termination, or a pending
         modification in subcontract terms, that could reduce
         Medicaid/BadgerCare enrollee access to care.

          a.   If the Department determines that a pending subcontract
               termination or pending modification in subcontract terms will
               jeopardize enrollee access to care, then the Department may
               invoke the remedies provided for in Article IX and Article X of
               this Contract. These remedies include contract termination
               (notice to HMO and opportunity to correct are provided for),
               suspension of new enrollment, and giving enrollees an opportunity
               to enroll in a different HMO.

     7.   The HMO shall submit MOUs referred to in this Contract to the
          Department upon the Department's request and during the certification
          process if required by the Department.

     8.   The HMO shall submit to the Department copies of new MOUs, or changes
          in existing MOUs within 15 days of signing.

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                                     -117-

<PAGE>

                                   ADDENDUM II

             POLICY GUIDELINES FOR MENTAL HEALTH/SUBSTANCE ABUSE AND
                        COMMUNITY HUMAN SERVICE PROGRAMS

          The HMO shall develop a working relationship with community agencies
          that are involved in the provision of non-medical services to
          enrollees. The HMO may under certain conditions be exempted from
          taking on or continuing to provide services to Medicaid/BadgerCare HMO
          enrollees who require highly specialized or extensive treatment and/or
          non-medical services for mental illness, methadone treatment,
          developmental disabilities, or due to child abuse and neglect or
          domestic violence. The extent of HMO responsibility for working
          cooperatively with other community agencies, for treating the medical
          aspects of the above conditions as legitimate health care problems and
          the terms under which enrollee exemption may be obtained are specified
          as follows:

          1.   CONDITIONS ON COVERAGE OF MENTAL HEALTH/SUBSTANCE ABUSE TREATMENT
               FOR DISABLED PERSONS----On the effective date of this Contract,
               unless waived by DHFS, the HMO shall, in compliance with the
               provision of s. 632.89 Wis. Stats.:

               a.   be certified as an outpatient Mental Health and/or Substance
                    Abuse treatment facility; or

               b.   have contracted with a certified facility or other certified
                    providers under s. 632.89, Wis. Stats., for the treatment of
                    mental health/substance abuse problems.

               Regardless of whether a. or b., above, is chosen, such treatment
               facilities and/or providers must provide transitional treatment
               arrangements in addition to other outpatient mental health and/or
               substance abuse services; such transitional treatment
               arrangements are defined as Adult Mental Health Day Treatment,
               Child/Adolescent Mental Health Day Treatment and Substance Abuse
               Day Treatment.

               Decisions to waive this requirement shall be based solely on
               whether there is a certified clinic that is geographically or
               culturally accessible to enrollees, and whether the use of
               psychiatrists or psychologists alone improves either the quality
               or the cost-effectiveness of care.

               In compliance with said provisions, the HMO shall further
               guarantee all enrolled Medicaid/BadgerCare enrollees access to
               all medically necessary outpatient mental health/substance abuse
               treatment. No limit may be placed on the number of hours of
               outpatient treatment which the HMO shall provide or reimburse
               where it has been determined that treatment for mental disorders
               and substance abuse is medically necessary.

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<PAGE>
               The HMO shall not establish any monetary limit or limit on the
               number of days of inpatient hospital treatment where it has been
               determined that this treatment is medically necessary.

          2.   MENTAL HEALTH/SUBSTANCE ABUSE ASSESSMENT REQUIREMENTS----The HMO
               shall further assure that authorization for mental
               health/substance abuse treatment to its enrollees shall be
               governed by the findings of an assessment performed promptly by
               the HMO upon request of a client or referral from a primary care
               provider or physician in the HMO's network. Such assessments
               shall be conducted by qualified staff in a certified program, who
               are experienced in mental health/substance abuse treatment. All
               denials of service and the selection of particular modalities of
               service shall be governed by the findings of this assessment and
               the medical necessity of treatment. The lack of motivation of an
               enrollee to participate in treatment shall not be considered a
               factor in determining medical necessity and may not be used as a
               rationale for withholding or limiting treatment of a
               client/enrollee. HMOs will use Wisconsin Uniform Placement
               Criteria (WI-UPC) or placement criteria developed by the American
               Society of Addiction Medicine (ASAM) as mandated for AODA
               providers in HFS 75. The requirement in no way obligates the HMOs
               to provide care options included in the placement criteria, but
               not paid for by fee-for-service Medicaid.

               The HMO shall involve and engage the enrollee in the process used
               to select a provider and treatment option. The purpose of the
               participation is to get a good match between the enrollee's
               condition, cultural preference (see Article III. Q), medical
               needs and the provider who will seek to meet these needs. This
               section does not require HMOs to use providers who are not
               qualified to treat the individual enrollee or who are not
               contracted providers.

          3.   MEMORANDA OF UNDERSTANDING REQUIRED AND RELATIONS WITH OTHER
               HUMAN SERVICE AGENCIES DEFINED----Listed below are the minimum
               standards to be addressed in an MOU with counties. HMOs and
               counties may develop alternative MOU language, if both parties
               agree. However, all elements of the MOU (items a. through b.)
               must be addressed in the MOU. As an alternative to an MOU, HMOs
               may enter into a contract with the counties. If the HMO enters
               into a contract with the county, those contracts must be in
               compliance with Addendum I and would supercede any MOU
               requirements.

               In addition, HMOs must make a "good faith" attempt to negotiate
               either an MOU or a contract with the county(ies) in their service
               area(s). A "good faith" attempt is defined as a minimum of one
               face-to-face meeting between the HMO and the county in an attempt
               to develop either an MOU or a contract. If a face-to-face meeting
               is not possible, the HMO must maintain a written record of their
               attempt to negotiate either an MOU or a contract with the
               county(ies). The MOU(s), contract(s) or written documentation of
               a good faith attempt must be available during the certification
               process and when requested by the Department. Failure of the HMO
               to have an MOU, contract or demonstrate a good faith effort, as
               specified by the Department, may result in the application by the
               Department of remedies specified under Article IX of this
               Contract.

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                                     -119-
<PAGE>

               a.   Boards created under SS. 51.42, 51.437 or 46.23, Wis.
                    Stats., specifying, at a minimum, the conditions under which
                    the HMO will either reimburse the Board(s) or another
                    contract provider, or directly cover medical services,
                    including, but not limited to, examinations ordered by a
                    court, specified by the Board's designated assessment agency
                    in an enrollee's driver safety plan as provided under HFS
                    62. It is the responsibility of both the HMO and the Board
                    to assure that courts order the use of the HMO's providers.
                    If the court orders a non-HMO source to provide the
                    treatment or evaluation, the HMO is liable for the cost up
                    to the full Medicaid rate if the HMO could not have provided
                    the service through its own provider arrangements. If the
                    service was such that the HMO could reasonably have been
                    expected to provide it through its own provider
                    arrangements, the HMO is not liable. Reasonable
                    arrangements, in this situation, are certified providers
                    with facilities and services to safely meet the medical and
                    psychiatric needs of the recipient within a prompt and
                    reasonable time frame. The MOU shall further specify
                    reimbursement arrangements between the HMO and the Board's
                    provider for assessments performed by the Board's designated
                    assessment agency under HFS 62, Intoxicated Driver Program
                    rules. The MOU shall also specify other reporting and
                    referral relationships if required by the Board or the HMO.

               b.   The Department of Social Services (DSS) created under
                    S. 46.21 or 46.22, Wis. Stats., or the Human Service
                    Department created under S. 46.23, Wis. Stats.,
                    specifying, at a minimum, that the HMO will reimburse the
                    DSS or its provider if the HMO cannot provide the treatment,
                    or will directly cover medical services including
                    examinations and treatment which are ordered by a court. It
                    is the responsibility of both the HMO and the DSS to assure
                    that courts order the use of the HMO's providers. If the
                    court orders a non-HMO source to provide the treatment or
                    evaluation, the HMO is liable for the cost up to the full
                    Medicaid rate if the HMO could not have provided the service
                    through its own provider arrangements. If the service was
                    such that the HMO could reasonably have been expected to
                    provide it through its own provider arrangements, the HMO is
                    not liable. The MOU will also specify the reporting and
                    referral relationships for suspected cases of child abuse or
                    neglect pursuant to S. 48.981, Wis. Stats. The MOU
                    shall also specify a referral agreement for HMO enrollees
                    who are physically disabled and who may be in need of
                    Supportive Home Care or other programming provided or
                    purchased by the county agency. The MOU may specify that
                    evaluations for substitute care will be provided by a
                    provider acceptable to both parties; the DSS may require in
                    the MOU that the HMO specify expert providers acceptable to
                    the DSS and the HMO in dealing with court-related children's
                    services, victims of child abuse and neglect, and domestic
                    abuse.

          4.   ASSURANCE OF EXPERTISE FOR CHILD ABUSE AND NEGLECT AND DOMESTIC
               VIOLENCE----The HMO shall arrange for the provision of
               examination and treatment services by providers with expertise
               and experience in dealing with the medical/psychiatric aspects of
               caring for victims and perpetrators of child abuse and

HMO Contract for January 1, 2002 - December 31, 2003

                                     -120-
<PAGE>

               neglect and domestic violence. Such expertise shall include the
               identification of possible and potential victims of child abuse
               and neglect and domestic violence, statutory reporting
               requirements, and local community resources for the prevention
               and treatment of child abuse and neglect and domestic violence.
               The HMO shall consult with human service agencies on appropriate
               providers in their community.

               The HMO shall notify all persons employed by or under contract to
               the HMO who are required by law to report suspected child abuse
               and neglect, and ensure they are knowledgeable about the law and
               about the identification requirements and procedures. Services
               provided shall include and are not limited to court-ordered
               physical, psychological and mental or developmental examinations
               and psychiatric treatment appropriate for victims and
               perpetrators of child abuse and neglect.

               The HMO shall further assure that providers with appropriate
               expertise and experience in dealing with perpetrators and victims
               of domestic abuse and incest are utilized in service provision.

          5.   COURT-RELATED CHILDREN'S SERVICES----The HMO shall be liable for
               the cost of providing assessments under the Children's Code,
               S. 48.295, Wis. Stats., and shall be responsible for
               reimbursing for the provision of medically necessary treatment if
               unable to itself provide for such treatment ordered by a juvenile
               court. The medical necessity of court-ordered evaluation and
               treatment is assumed to be established and the HMO may be allowed
               to provide the care through its network, if at all possible. The
               HMO may not withhold or limit services unless or until the court
               has agreed.

          6.   COURT-RELATED SUBSTANCE ABUSE SERVICES----The HMO shall be liable
               for the cost of providing medically necessary substance abuse
               treatment, as long as the treatment occurs in an HMO-approved
               facility or by an HMO-approved provider ordered in the subject's
               Driver Safety Plan, pursuant to Chapter 343, Wis. Stats., and HFS
               62 of the Wis. Administrative Code. The medical necessity of
               services specified in this plan is assumed to be established, and
               the HMO shall provide those services unless the assessment agency
               agrees to amend the enrollee's Driver Safety Plan. This is not
               meant to require HMO coverage of substance abuse educational
               programs, or the initial assessment used to develop the Driver
               Safety Plan. Necessary HMO referrals or treatment authorizations
               by providers must be furnished promptly. It is expected that no
               more than five days will elapse between receipt of a written
               request by an HMO and the issuance of a referral or authorization
               for treatment. Such referral or authorization, once determined to
               be medically necessary, will be retroactive to the date of the
               request. After the 5th day, an assumption will exist that an
               authorization has been made until such time as the HMO responds
               in writing.

          7.   EMERGENCY CARE COVERAGE----The HMO shall be liable for the cost
               of all mental health/substance abuse treatment, including
               involuntary commitment or stipulated voluntary commitment
               provided by non-HMO providers to HMO enrollees where the time
               required to obtain such treatment at the HMO's facilities, or the
               facilities of a provider

HMO Contract for January 1, 2002 - December 31, 2003

                                     -121-
<PAGE>

               with which the HMO has arrangements, would have risked permanent
               damage to the enrollee's health or safety, or the health or
               safety of others. The extent of the HMO's liability for
               appropriate emergency treatment shall be the current Medicaid
               fee-for-service rate for such treatment. Where appropriate
               emergency treatment is provided by a non-HMO provider to an HMO
               enrollee, the non-HMO provider must notify the HMO within three
               business days of the initiation of service excluding weekends and
               holidays. The HMO is liable for the cost of the first 72 hours of
               care. Upon notification within 72 hours the HMO shall be
               responsible for payment of the first three business days, plus
               any intervening weekend days and/or holidays. The HMO is
               responsible for payment of additional care only if given the
               opportunity to provide such care. Such referral or authorization,
               is medically necessary, and will be retroactive to the date of
               the request. After the 5th day following the date of request, an
               assumption will exist that an authorization has been made until
               such time as the HMO responds in writing.

               In addition, the HMO shall be liable for the provision of crisis
               intervention benefit. To the extent that counties provide the
               crisis intervention service, the HMO will be liable to the extent
               that FFS would pay except where contractual arrangements include
               the crisis intervention service. The crisis intervention provider
               must inform the HMO within twenty-four hours of initiation of
               treatment care if the enrollee is stabilized. The HMO has the
               option to transfer care in-plan or authorize the county's crisis
               intervention provider to continue to provide the care. Other
               provisions proposed by county human service agencies relating to
               emergency care may be covered in the MOU and required if both
               parties agree.

          8.   COURT-RELATED COMMITMENT COVERAGE----If services are provided in
               an HMO facility, or approved by the HMO for provision in a
               non-contracted facility, the HMO shall be financially liable for
               the enrollee's court ordered assessment and/or treatment where an
               HMO enrollee is defending him/herself or a member of his/her
               Medicaid/BadgerCare case against a mental disability or substance
               abuse commitment.

          9.   INSTITUTIONALIZED CHILDREN, COVERAGE REQUIRED----If inpatient or
               institutional services are provided in an HMO facility, or
               approved by the HMO for provision in a non-contracted facility,
               the HMO shall be financially liable for all children enrolled
               under this Contract for the entire period for which capitation is
               paid. The HMO remains financially liable for the entire period a
               capitation is paid even if the child's medical status code
               changes , or the child's relationship to the original AFDC case
               changes.

          10.  EXEMPTION PRIVILEGE DEFINED----For Medicaid/BadgerCare enrollees
               who are eligible for HMO enrollment under the terms of Article IV
               of this Contract, and who are thought to meet one or more of the
               criteria in 11 a-d of this addendum, the AFDC/BadgerCare case
               head shall be given the option of enrolling the enrollee who
               meets one or more criteria in an HMO or applying to have the
               affected person remain in the Medicaid FFS system. The same
               privilege applies to HMO enrollees who are identified after
               enrollment as meeting one or more of the criteria described in 11
               a-d of this

HMO Contract for January 1, 2002 - December 31, 2003

                                     -122-

<PAGE>

               addendum. The AFDC/BadgerCare case head shall be given the option
               of having the affected person remain in the HMO or applying to be
               exempted at any point during the terms of this Contract. Where
               the conditions in requirement 11 a-d of this addendum might
               apply, the HMO, upon confirmation of this, shall promptly inform
               the AFDC/BadgerCare case heads of their options as described
               above. Beyond the obligation to inform, the HMO shall not counsel
               or otherwise influence an enrollee or potential enrollee in such
               a way as to encourage exemption from enrollment or continued
               enrollment. The Department, the local boards, and the county
               social service departments may notify enrollees or potential
               enrollees of their options independently where such notification
               is deemed appropriate. County Birth to Three programs may apply,
               on behalf of enrollees, for exemption for children who are
               thought to meet the criteria in 11 (d) of this addendum.

          11.  CRITERIA FOR EXEMPTION----The HMO shall not be liable, at the
               point in time commencing with the month for which the `
               enrollee's voluntary exemption becomes effective, except as
               provided in 9 above, for providing contract services to
               Medicaid/BadgerCare cases in which there is an HMO enrollee who
               meets one or more of the following criteria as provided in
               requirement 11 of this addendum:

               a.   a person with recurrent or persistent psychosis and/or a
                    major disruption in mood, cognition or perception;

               b.   a child from birth through two years of age (i.e., including
                    2 year olds), who is severely developmentally disabled or
                    suspected of a severe developmental delay, or who is
                    admitted to a 0-3 program;

               c.   a person participating in a methadone treatment program, or
                    who has been determined to need methadone treatment unless
                    the person declines to receive such treatment;

               d.   a person who has extensive non-medical programming needs
                    which the 51.42, 51.437, and social/human services system
                    are typically best equipped to provide or coordinate.

          12.  DISPUTE RESOLUTION----The Department shall be the sole arbitrator
               of disputes concerning the criteria described in 11 a - d of this
               addendum and all other requirements of this addendum and of
               disputes arising out of MOUs negotiated. A local board, county
               social or human service department, recipient, or advocate for an
               enrollee, may request a review of complaints regarding denial of
               access to medically necessary Medicaid-covered services after
               they have utilized the HMO dispute resolution process. The
               Department shall review the complaint and make a final
               determination. The Department will accept written comments from
               all parties to the dispute prior to making a decision. Failure to
               pay providers promptly within 30 days for properly referred care
               will be considered as a denial of access to such care. Where a
               Departmental ruling is invoked in any dispute relating to the
               terms of this addendum, the Department's decision shall be
               communicated to the

HMO Contract for January 1, 2002 - December 31, 2003

                                     -123-
<PAGE>

               HMO, and when appropriate, to the 51.42, 51.437, or 46.23 Board
               and/or to the county social service or human service department,
               in writing and within 30 days of receipt of the request. The HMO
               shall abide by all decisions of the Department.

          13.  LIVING IN A PUBLIC INSTITUTION----The HMO shall be liable for the
               cost of providing all medically necessary services to enrollees
               who are living in a public institution as defined in Article I,
               during the month in which they first enter the public
               institution. Enrollees who remain in a public institution after
               the last day of the month are no longer eligible for Medical
               Assistance/BadgerCare and HMOs are not liable for providing care
               after the end of the first month.

          14.  TRANSFER FROM A PUBLIC INSTITUTION TO A MEDICAL
               FACILITY----Enrollees who are living in a public institution and
               go directly from the public institution to a medical facility,
               court ordered or voluntarily, are no longer living in a public
               institution and remain eligible for Medicaid/BadgerCare. The HMO
               shall be responsible for reimbursing for the provision of
               medically necessary treatment if treatment is at the HMO's
               facilities, or if unable to itself provide for such treatment.

          15.  TRANSPORTATION FOLLOWING EMERGENCY DETENTION----The HMO shall be
               liable for the provision of medical transportation to an
               HMO-affiliated provider when the enrollee is under emergency
               detention or commitment and the HMO requires the enrollee to be
               moved to a participating provider, provided the transfer can be
               made safely. If a transfer requires a secured environment by
               local law enforcement officials, i.e., Sheriff Department, Police
               Department, etc., the HMO shall not be liable for the cost of
               transfer. Nothing precludes the HMO from entering into an MOU or
               agreement with local law enforcement agencies or with county
               agencies for such transfer.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -124-
<PAGE>

                                  ADDENDUM III
                                    (DELETED)

                  RISK-SHARING FOR INPATIENT HOSPITAL SERVICES

HMO Contract for January 1, 2002 - December 31, 2003

                                     -125-
<PAGE>

                                   ADDENDUM IV

                    CONTRACT SPECIFIED REPORTING REQUIREMENTS

     PART A. REPORTS AND DUE DATES

<Table>
<Caption>
  DUE                                                    REPORTING
 DATE*            TYPE OF REPORT                          PERIOD                  DUE TO         REPORT FORMAT      REPORTING UNIT
 -----            --------------                         ---------                ------         -------------      --------------
<S>           <C>                                     <C>                     <C>              <C>                  <C>
 Within 15    Affirmative Action Plan                 Contract period          Managed Care
 days of
 contract
 signing

 Within 30    Disclosure Statements                     As of present           Managed Care
 days of                                                    time
 contract
 signing

YEAR 2002

Jan 1        Encounter Data File (AFDC/HS &              Dec., 2001              EDS-MEDS       Electronic Media       Encounter
             BC)

Jan 15       Dental Utilization Data **                Oct - Dec, 2001         Managed Care        Hardcopy             Dental
                                                                                                                      Preventive
                                                                                                                       Encounter

Feb 1        Encounter Data File (AFDC/HS & BC)          Jan., 2002              EDS-MEDS       Electronic Media       Encounter

Feb 1        AIDS/Ventilator Dependent                 Oct - Dec, 2001             EDS          Hardcopy & Disc       HMO Service
             (AFDC/HS & BC)                                                                                              Area

Feb 7        Abortions/Sterilization/Hysterectomi      Oct - Dec, 2001             EDS             Hardcopy           Entire HMO
             es (AFDC/HS & BC)

Feb 15       Federally Qualified Health Centers        Oct - Dec, 2001         Managed Care     Hardcopy - no         By FQHC/RHC
             & Rural Health Centers (AFDC/HS &                                                      form
             BC)

Feb 15       Formal/Informal Grievance                 Oct - Dec, 2001         Managed Care       Hardcopy            Entire HMO
             Experience Summary report
             (AFDC/HS & BC)

Feb 15       Coordination of Benefits Report           Oct - Dec, 2001             EDS            Hardcopy            Entire HMO
             (AFDC/HS & BC)

Mar 1        Encounter Data File AFDC/HS and             Feb., 2002              EDS-MEDS      Electronic Media        Encounter
             BC)

Mar 1        ***Physician Incentive Plan -            Jan - Dec, 2001         Managed Care        Hardcopy            Entire HMO
             Disclosure Form (AFDC/HS & BC)

Apr 1        Encounter Data File (AFDC/HS &              March 2002             EDS -MEDS      Electronic Media        Encounter
             BC)

Apr 15       Dental Utilization Data **                Jan - Mar 2002         Managed Care        Hardcopy              Dental
                                                                                                                      Preventive
                                                                                                                      Encounter

Apr 30       Formal/Informal Grievance                Jan - Mar, 2002         Managed Care        Hardcopy             Entire HMO
             Experience Summary report
             (AFDC/HS & BC)

May 1        Neonatal ICU Patient Care Data           Jan - Dec, 2001             EDS             Hardcopy               HMO By
             (AFDC/HS & BC)                                                                                              County

May 1        Encounter Data File (AFDC/HS & BC)       Jan - Apr, 2002          EDS-MEDS        Electronic Media         Encounter

May 1        AIDS/Ventilator Dependent                Jan - Mar, 2002             EDS          Hardcopy & Disc         HMO Service
             (AFDC/HS & BC)                                                                                               Area

May 7        Abortion/Sterilization/Hysterectomies    Jan - Mar, 2002             EDS              Hardcopy            Entire HMO
             (AFDC/HS & BC)

<Caption>

 DUE             CONTRACT
 DATE*           REFERENCE
 -----           ---------
<S>            <C>
 Within 15      Art. III, P
 days of
 contract
 signing

 Within 30       Add. I, V
 days of
 contract
 signing

YEAR 2002

Jan 1           Art. VI, B;
                Add. IV, B

Jan 15        Art. III, B, 8 d

Feb 1           Art. VI, B;
                Add. IV, B

Feb 1           Art. V, K;
                Add. IV, D

Feb 7           Art. VI, E

Feb 15         Art. III, FF

Feb 15       Art VIII, A. 10-11;
                  Add. XXI

Feb 15         Art. VI, B.1;
             Art V, H; Add. VI

Mar 1           Art. VI, B;
                Add IV, B

Mar 1          Art. III, HH

Apr 1           Art. VI, B;
                Add IV, B

Apr 15       Art. III, B, 8 d

Apr 30       Art. VIII, A. 10-11;
                Art. VIII, E;
                 Add. XXI

May 1           Art. V, E
                Add. XIX

May 1          Art. VI, B;
               Add. IV, B

May 1          Art. V, J
               dd. IV, D

May 7          Art. VI, E
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -126-
<PAGE>

<Table>
<Caption>
 DUE                                                    REPORTING
DATE*                  TYPE OF REPORT                    PERIOD             DUE TO        REPORT FORMAT      REPORTING UNIT
-----                  --------------                   ---------           ------        -------------      --------------
<S>           <C>                                    <C>                 <C>            <C>                  <C>
May 15        Federally Qualified Health Centers      Jan - Mar, 2002     Managed Care    Hardcopy - no        By FQHC/RHC
              & Rural Health Centers (AFDC/HS &                                                form
              BC)
May 15        Coordination of Benefits Report         Jan - Mar, 2002         EDS            Hardcopy           Entire HMO
              (AFDC/HS & BC)
Jun 1         Encounter File (AFDC/HS & BC)              May, 2002          EDS-MEDS     Electronic Media       Encounter

Jul 1         Encounter File (AFDC/HS & BC)              Jun, 2002          EDS-MEDS     Electronic Media       Encounter

Jul 15        Dental Utilization Data                  Mar - Jun 2002     Managed Care       Hardcopy             Dental
                                                                                                                Preventive
                                                                                                                Encounter
Jul 30        Formal/Informal Grievance               Apr - Jun, 2002     Managed Care       Hardcopy           Entire HMO
              Experience Summary report
              (AFDC/HS & BC)
Aug 1         AIDS/Ventilator Dependent               Apr - Jun, 2002         EDS        Hardcopy & Disc       HMO Service
              (AFDC/HS & BC)                                                                                       Area
Aug 1         Encounter File (AFDC/HS & BC)              Jul, 2002          EDS-MEDS     Electronic Media       Encounter

Aug 7         Abortions/Sterilization/                Apr - Jun, 2002         EDS            Hardcopy           Entire HMO
              Hysterectomies (AFDC/HS & BC)
Aug 15        Federally Qualified Health Centers      Apr - Jun, 2002     Managed Care    Hardcopy - no        By FQHC/RHC
              & Rural Health Centers (AFDC/HS &                                                form
              BC)
Aug 15        Coordination of Benefits Report         Apr - Jun, 2002         EDS            Hardcopy           Entire HMO
              (AFDC/HS & BC)
Sept 1        Encounter File (AFDC/HS & BC)              Aug, 2002          EDS-MEDS     Electronic Media       Encounter

Sept 1        Birth Cost Reporting (AFDC/HS &         Jan - Dec, 2001     Managed Care       Hardcopy           Entire HMO
              BC)
Oct 1         Targeted Performance Improvement        Jan - Dec, 2001     Managed Care   Electronic Media          Per
              Measures (AFDC/HS & BC)                                                                            Project
Oct 1         Performance Improvement Projects        Jan - Dec, 2001     Managed Care       Hardcopy        Per Improvement
              (AFDC/HS & BC)                                                                                     Project
Oct 1         Encounter File (AFDC/HS & BC)              Sep, 2002          EDS-MEDS     Electronic Media       Encounter

Oct 15        Dental Utilization Data                  Jul - Sep 2002     Managed Care       Hardcopy             Dental
                                                                                                                Preventive
                                                                                                                Encounter
Oct 30        Formal/Informal Grievance               Jul - Sep, 2002     Managed Care       Hardcopy           Entire HMO
              Experience Summary report
              (AFDC/HS & BC)
Nov 1         AIDS/Ventilator Dependent               Jul - Sep, 2002         EDS        Hardcopy & Disc       HMO Service
              (AFDC/HS & BC)                                                                                       Area
Nov 1         ***Physician Incentive Plan              Jan - Dec 2001     Managed Care       Hardcopy           Entire HMO
              Provider Risk Survey Report
Nov 1         Encounter File (AFDC/HS & BC)              Oct, 2002          EDS-MEDS     Electronic Media       Encounter

Nov 7         Abortions/Sterilization/                Jul - Sep, 2002         EDS            Hardcopy           Entire HMO
              Hysterectomies (AFDC/HS & BC)
Nov 15        Federally Qualified Health Centers      Jul - Sep, 2002     Managed Care    Hardcopy - no        By FQHC/RHC
              & Rural Health Centers (AFDC/HS &                                                form
              BC)
Nov 15        Coordination of Benefits Report         Jul - Sep, 2002         EDS            Hardcopy           Entire HMO
              (AFDC/HS & BC)

<Caption>
 DUE                CONTRACT
DATE*               REFERENCE
-----               ---------
<S>            <C>
May 15             Art. III, FF

May 15              Art. V, H;
                     Add. VI
Jun 1              Art. VI, B;
                    Add. IV, B
Jul 1              Art. VI, B;
                    Add. IV, B
Jul 15           Art. III, B, 8 d

Jul 30         Art. VIII, A. 10-11;
                  Art. VIII, E;
                     Add. XXI
Aug 1               Art. V, J;
                    Add. IV, D
Aug 1              Art. VI, B;
                    Add. IV, B
Aug 7               Art. VI, E

Aug 15             Art. III, FF

Aug 15              Art. V, H;
                     Add. VI
Sept 1             Art. VI, B;
                    Add. IV, B
Sept 1            Art. VI, B. 4;
                    Add. XXIII
Oct 1            Art. III, W 13;
                     Add. XVI
Oct 1            Art. III, W 13;
                   Add. XV, XVI
Oct 1              Art. VI, B;
                    Add. IV, B
Oct 15          Art. III, B, 8 d.

Oct 30         Art. VIII, A. 10-11;
                   Art.VIII, E;
                     Add. XXI
Nov 1               Art. V, J;
                    Add. IV, D
Nov 1              Art. III, HH

Nov 1              Art. VI, B;
                    Add. IV, B
Nov 7               Art. VI, E

Nov 15             Art. III, FF

Nov 15              Art. V, H;
                     Add. VI
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -127-
<PAGE>

<Table>
<Caption>
 DUE                                                    REPORTING
DATE*           TYPE OF REPORT                            PERIOD              DUE TO         REPORT FORMAT       REPORTING UNIT
-----           --------------                          ---------             ------         -------------       --------------
<S>             <C>                                  <C>                  <C>              <C>                  <C>
Dec 1           Encounter File (AFDC/HS & BC)           Nov, 2002            EDS-MEDS       Electronic Media       Encounter

YEAR 2003
Jan 1           Encounter File (AFDC/HS & BC)           Dec, 2002            EDS-MEDS       Electronic Media       Encounter

Jan 15          Dental Utilization Data               Oct - Dec 2002       Managed Care         Hardcopy             Dental
                                                                                                                   Preventive
                                                                                                                   Encounter
Jan 30          Formal/Informal Grievance            Oct - Dec, 2002       Managed Care         Hardcopy           Entire HMO
                Experience Summary report
                (AFDC/HS & BC)
Jan 31          Provider List on Tape                 Dec. 31, 2002        Managed Care           Disc            HMO Service
                                                                                                                      Area
Feb 1           AIDS/Ventilator Dependent            Oct - Dec, 2002           EDS          Hardcopy & Disc       HMO Service
                (AFDC/HS & BC)                                                                                        Area
Feb 1           Encounter File (AFDC/HS & BC)           Jan, 2003            EDS-MEDS       Electronic Media       Encounter

Feb 7           Abortions/Sterilization/             Oct - Dec, 2002           EDS              Hardcopy           Entire HMO
                Hysterectomies (AFDC/HS & BC)
Feb 15          Federally Qualified Health Centers   Oct - Dec, 2002       Managed Care      Hardcopy - no        By FQHC/RHC
                & Rural Health Centers (AFDC/HS &                                                 form
                BC)
Feb 15          Coordination of Benefits Report      Oct - Dec, 2002           EDS              Hardcopy           Entire HMO
                (AFDC/HS & BC)
Mar 1           ***Physician Incentive Disclosure    Jan - Dec, 2002       Managed Care         Hardcopy           Entire HMO
                Form (AFDC/HS & BC)
Mar 1           Encounter File (AFDC/HS & BC)           Feb, 2003            EDS-MEDS       Electronic File        Encounter

Apr 1           Encounter File (AFDC/HS & BC)           Mar, 2003            EDS-MEDS       Electronic File        Encounter

Apr 15          Dental Utilization Data               Jan - Mar 2003       Managed Care         Hardcopy             Dental
                                                                                                                   Preventive
                                                                                                                   Encounter
Apr 30          Formal/Informal Grievance            Jan - Mar, 2003       Managed Care         Hardcopy           Entire HMO
                Experience Summary report
                (AFDC/HS & BC)
May 1           Neonatal ICU Patient Care Data       Jan - Dec, 2002           EDS              Hardcopy             HMO By
                (AFDC/HS & BC)                                                                                       County
May 1           Encounter File (AFDC/HS & BC)           Apr, 2003            EDS-MEDS       Electronic File        Encounter

May 1           AIDS/Ventilator Dependent            Jan - Mar, 2003           EDS          Hardcopy & Disc       HMO Service
                (AFDC/HS & BC)                                                                                        Area
May 7           Abortions/Sterilization/             Jan - Mar, 2003           EDS              Hardcopy           Entire HMO
                Hysterectomies (AFDC/HS & BC)
May 15          Federally Qualified Health Centers   Jan - Mar, 2003       Managed Care      Hardcopy - no        By FQHC/RHC
                & Rural Health Centers (AFDC/HS &                                                 form
                BC)
May 15          Coordination of Benefits Report      Jan - Mar, 2003           EDS              Hardcopy           Entire HMO
                (AFDC/HS & BC)
Jun 1           Encounter File (AFDC/HS & BC)           May, 2003            EDS-MEDS       Electronic File        Encounter

Jul 1           ***Physician Incentive Plan           Jan - Dec 2002       Managed Care         Hardcopy           Entire HMO
                Provider Risk (AFDC/HS and BC)
Jul 1           Encounter File (AFDC/HS & BC)           Aug, 2003            EDS-MEDS       Electronic File        Encounter

<Caption>
 DUE                  CONTRACT
DATE*                 REFERENCE
-----                 ---------
<S>             <C>
Dec 1                Art. VI, B;
                      Add. IV, B
YEAR 2003
Jan 1                Art. VI, B;
                      Add. IV, B
Jan 15            Art. III, B, 8 d.

Jan 30           Art. VIII, A. 10-11;
                    Art. VIII, E;
                       Add. XXI
Jan 31                Add. IV, C

Feb 1                 Art. V, J;
                      Add. IV, D
Feb 1                Art. VI, B;
                      Add. IV, B
Feb 7                 Art. VI, E

Feb 15               Art. III, FF

Feb 15                Art. V, H;
                       Add. VI
Mar 1                Art. III, HH

Mar 1                Art. VI, B;
                      Add. IV, B
Apr 1                Art. VI, B;
                      Add. IV, B
Apr 15            Art. III, B, 8 d.

Apr 30           Art. VIII, A. 10-11;
                    Art. VIII, E;
                       Add. XXI
May 1                 Art. V, E;
                       Add. XIX
May 1                Art. VI, B;
                      Add. IV, B
May 1                 Art. V, J;
                      Add. IV, D
May 7                 Art. VI, E

May 15               Art. III, FF

May 15                Art. V, H;
                       Add. VI
Jun 1                Art. VI, B;
                      Add. IV, B
Jul 1                Art. III, HH

Jul 1                Art. VI, B;
                      Add. IV, B
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -128-
<PAGE>

<Table>
<Caption>
 DUE                                                     REPORTING
DATE*           TYPE OF REPORT                            PERIOD               DUE TO         REPORT FORMAT       REPORTING UNIT
-----           --------------                           ---------             ------         -------------       --------------
<S>             <C>                                  <C>                   <C>               <C>                 <C>
Jul 15          Dental Utilization Data               Apr - Jun 2003        Managed Care         Hardcopy             Dental
                                                                                                                    Preventive
                                                                                                                    Encounter
Jul 30          Formal/Informal Grievance            Apr - Jun, 2003        Managed Care         Hardcopy           Entire HMO
                Experience Summary report
                (AFDC/HS & BC)
Aug 1           AIDS/Ventilator Dependent            Apr - Jun, 2003            EDS          Hardcopy & Disc       HMO Service
                (AFDC/HS & BC)                                                                                         Area
Aug 1           Encounter File (AFDC/HS & BC)           Jul, 2003             EDS-MEDS       Electronic File        Encounter

Aug 7           Abortions/Sterilization/             Apr - Jun, 2003            EDS              Hardcopy           Entire HMO
                Hysterectomies (AFDC/HS & BC)
Aug 15          Federally Qualified Health Centers   Apr - Jun, 2003        Managed Care      Hardcopy - no        By FQHC/RHC
                & Rural Health Centers (AFDC/HS &                                                  form
                BC)
Aug 15          Coordination of Benefits Report      Apr - Jun, 2003            EDS              Hardcopy           Entire HMO
                (AFDC/HS & BC)
Sep 1           Birth Cost Reporting (AFDC/HS &      Jan - Dec, 2002        Managed Care         Hardcopy           Entire HMO
                BC)
Sep 1           Encounter File (AFDC/HS & BC)           Aug, 2003             EDS-MEDS       Electronic File        Encounter

Oct 1           Performance Improvement Projects     Jan - Dec, 2002        Managed Care         Hardcopy        Per Improvement
                (AFDC/HS & BC)                                                                                       Project
Oct 1           Encounter File (AFDC/HS & BC)           Sep, 2003             EDS-MEDS       Electronic File        Encounter

Oct 15          Dental Encounter Data                Jul - Sep, 2003        Managed Care         Hardcopy             Dental
                                                                                                                    Preventive
                                                                                                                    Encounter
Oct 30          Formal/Informal Grievance            Jul - Sep, 2003        Managed Care         Hardcopy           Entire HMO
                Experience Summary report
                (AFDC/HS & BC)
Nov 1           AIDS/Ventilator Dependent            Jul - Sep, 2003            EDS          Hardcopy & Disc       HMO Service
                (AFDC/HS & BC)                                                                                         Area
Nov 1           Encounter File (AFDC/HS & BC)           Oct, 2003             EDS-MEDS       Electronic File        Entire HMO

Nov 7           Abortions/Sterilization/             Jul - Sep, 2003            EDS              Hardcopy           Entire HMO
                Hysterectomies (AFDC/HS & BC)
Nov 15          Federally Qualified Health Centers   Jul - Sep, 2003        Managed Care      Hardcopy - no        By FQHC/RHC
                & Rural Health Centers (AFDC/HS &                                                  form
                BC)
Nov 15          Coordination of Benefits Report      Jul - Sep, 2003            EDS              Hardcopy           Entire HMO
                (AFDC/HS & BC)
Dec 1           Encounter File (AFDC/HS & BC)           Nov, 2003             EDS-MEDS       Electronic File        Encounter

<Caption>
 DUE                  CONTRACT
DATE*                 REFERENCE
-----                 ---------
<S>             <C>
Jul 15            Art. III, B, 8 d

Jul 30          Art. VIII, A. 10-11;
                   Art. VIII, E;
                      Add. XXI
Aug 1                Art. V, J;
                     Add. IV, D
Aug 1               Art. VI, B;
                     Add. IV, B
Aug 7                Art. VI, E

Aug 15              Art. III, FF

Aug 15               Art. V, H;
                      Add. VI
Sep 1              Art. VI, B 4;
                     Add. XXIII
Sep 1               Art. VI, B;
                     Add. IV, B
Oct 1             Art. III, W 13;
                    Add. XV, XVI
Oct 1               Art. VI, B;
                     Add. IV, B
Oct 15            Art III, B, 8 d.

Oct 30          Art. VIII, A. 10-11;
                   Art. VIII, E;
                      Add. XXI
Nov 1                Art. V, J;
                     Add. IV, D
Nov 1               Art. VI, B;
                      Add. IV
Nov 7                Art. VI, E

Nov 15              Art. III, FF

Nov 15               Art. V, H;
                      Add. VI
Dec 1               Art. VI, B;
                     Add. IV, B
</Table>

Any reports that are due on a weekend or holiday are due the following workday.

** Only HMOs who are certified to provide dental are required to submit
preventive dental encounter data for the service areas in which the HMO is
certified to provide dental.

<Table>
<S>                 <C>                               <C>                                      <C>
  REPORT MAILING    EDS-MEDS                          Bureau of Managed Care Programs          EDS
         ADDRESS:   10 E. Doty Street, Suite 200      P.O. Box 309                             6406 Bridge Road
                    Madison, WI  53703                Madison, WI  53701-0309                  Madison WI  53713
</Table>

*** This report is due only for HMOs with substantial financial risk as shown in
the PIP Disclosure Form for the reporting period. Surveys must include enrollees
and disenrollees.

HMO Contract for January 1, 2002 - December 31, 2003

                                      -129-

<PAGE>

PART B.        WISCONSIN MEDICAID/BADGERCARE HMO SUMMARY AND
               ENCOUNTER DATA SET

          Encounter Data Reporting

          1.   All HMOs that contract with the Wisconsin Department of Health
               and Family Services (DHFS) to provide Medicaid services must
               submit monthly encounter data files according to the
               specifications and submission protocols published in the
               Wisconsin Medicaid HMO Encounter Data User Manual.

          2.   Encounter data should be reported using the following
               specifications:

               a.   The rules governing the level of detail when reporting
                    encounters should be those rules established by the
                    following classification schemes: ICD-9-CM (or ICD-10-CM)
                    diagnosis codes and procedure codes CPT procedure codes
                    (HCPCS level I codes), level II HCPCS codes, level III HCPCS
                    codes, National Drug Codes (NDC), CDT-2 codes, Hospital
                    revenue codes for inpatient and outpatient hospital
                    services, and hospital inpatient Diagnostic Related Group
                    (DRG) codes.

                    Multiple encounters can occur between a single provider and
                    a single recipient on a day. For example, if a physician
                    provides a limited office visit, administers an
                    immunization, and takes a chest x-ray, and the provider
                    submits a claim or report specifically identifying all three
                    services, then there are three encounters, and the HMO will
                    report three encounters to the Wisconsin Medicaid Program.

          Testing Encounter Data

          1.   New HMOs must test the encounter data set until the Department is
               satisfied that the HMO is capable of submitting valid, accurate,
               and timely encounter data according to the schedule and timetable
               in this addendum.

          2.   Each HMO must specify to the DHFS the name of the primary contact
               person assigned responsibility for submitting and correcting HMO
               encounter and utilization data, and a secondary contact person
               that should be contacted in the event the primary contact person
               is not available.

          HMO Encounter Technical Workgroup

          1.   All HMOs must assign staff to participate in HMO encounter
               technical workgroup meetings periodically scheduled by the
               Department. This workgroup's purpose is to enhance the HMO and
               Medicaid data submission protocols and improve the accuracy and
               completeness of the data. The HMO encounter technical workgroup
               is also responsible for planning the implementation of the
               electronic transaction

HMO Contract for January 1, 2002 - December 31, 2003

                                     -130-
<PAGE>

               formats mandated by the Health Insurance Portability and
               Accountability Act (HIPAA).

          Encounter Data Completeness and Accuracy

          1.   The Department has established a goal for the encounter data set
               of 98 percent completeness and accuracy. The HMO encounter
               technical workgroup will develop the mechanism to achieve this
               goal by the end of the contract period.

          2.   The Department will conduct data validity and completeness audits
               during the contract period. At least one of these audits will
               include a review of the HMO's encounter data system and system
               logic.

          Analysis of Encounter Data

          1.   The Department retains the right to analyze encounter data and
               use it for any purpose it deems necessary. However, the
               Department will make every effort to ensure that the analysis
               does not violate the integrity of the reported data submitted by
               the HMO.

PART C.   PROVIDER LIST ON TAPE

          All HMOs that contract with the Department to provide Medicaid
          services must submit the provider data requested on the HMO Provider
          List once per contract period, based on the HMO files as of December
          31, 2002. The tape should be submitted by January 31, 2003, according
          to the schedule in Part A of Addendum IV. This data must be submitted
          in computer readable format. Data must be included for physicians,
          dentists, pharmacies, optometrists, transportation providers,
          hospitals, Substance Abuse and/or mental health providers, and
          freestanding urgent care centers.

                           PROVIDER DATA RECORD LAYOUT

<Table>
<Caption>
           FIELD NAME          TYPE        WIDTH       POSITION                              NOTES
           ----------          ----        -----       --------                              -----

<S>                            <C>         <C>         <C>          <C>
a. HMO_ID                      Num         8           1-8          Right justified. This field represents the base
                                                                    HMO Medicaid provider number with the two-digit
                                                                    suffix that indicates an HMO's service area.

b. CTY                         Num         2           9-10         County Code (1-72)

c. PROV_LAST                  Char        13          11-23         Provider's last name

d. PROV_FIRST                 Char        10          24-33         Provider's first name

e. ADDRESS                    Char        26          34-59         Practice address

f. CITY                       Char        18          60-77

g. ZIPCODE                    Char        10          78-87         Left justified
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -131-
<PAGE>

                           PROVIDER DATA RECORD LAYOUT

<Table>
<Caption>
           FIELD NAME           TYPE       WIDTH       POSITION                             NOTES
           ----------           ----       -----       --------                             -----

<S>                             <C>        <C>         <C>          <C>
h. PROV_ID                      Num        8           88-95        Provider's Medicaid ID number

i. PROV_TYPE                    Char       2           96-97        Provider type

j. SPEC                         Char       3           98-100       Provider's specialty

k. CLINIC_AFFIL                 Char       26          101-126      Clinic affiliation

l. IPA_AFFIL                    Char       26          127-152      IPA affiliation

m. #MAX_PAT                     Num        4           153-156      If you assign Medicaid patients to this provider,
                                                                    what number is currently assigned?

n. MAX                          Char       1           157          Is this provider taking more Medicaid patients?
                                                                    (Y = Yes, N = No)
</Table>

To help provide this information, HMOs are encouraged to refer to the monthly
file of Medicaid-certified providers that they receive.

HMOs must enter data in field m. #MAX_PAT for primary care physicians, dentists,
Substance Abuse and mental health providers. If HMOs do not assign enrollees to
other provider types (for example, pharmacies), they do not make entries here.

For providers who practice in more than one location, the HMOs must list all of
the information for each location.

The HMO must provide the address where the provider practices, not a billing
address or a post office address.

In a memo that accompanies the provider list, the HMO must identify the name and
phone number of a contact person for this tape.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -132-
<PAGE>

            PART D: AIDS AND VENTILATOR DEPENDENT ENROLLEE QUARTERLY
                                     REPORTS

     AIDS COST SUMMARY

HMO NAME:
         ----------------------------------

REPORT PERIOD:
              -----------------------------

NUMBER OF CASES REPORTED:
                         ------------------

<Table>
<Caption>
      CATEGORY OF SERVICE                      AMOUNT BILLED                           AMOUNT PAID
      -------------------                      -------------                           -----------
<S>                                            <C>                                     <C>
  Inpatient

  Outpatient

  Physician

  Pharmacy

  All Other

  TOTAL
</Table>

     VENTILATOR COST SUMMARY

HMO NAME:
         ----------------------------------

REPORT PERIOD:
              -----------------------------

NUMBER OF CASES REPORTED:
                         ------------------

<Table>
<Caption>
      CATEGORY OF SERVICE                      AMOUNT BILLED                           AMOUNT PAID
      -------------------                      -------------                           -----------
<S>                                            <C>                                     <C>
  Inpatient

  Outpatient

  Physician

  Pharmacy

  All Other

  TOTAL
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -133-
<PAGE>

                   AIDS AND VENTILATOR DEPENDENT DETAIL REPORT

The detail report must be provided on disk and must be in the following layout:

<Table>
<Caption>
             FIELD NAME            TYPE        WIDTH      DEC     POSITION      EXPLANATION
             ----------            ----        -----      ---     --------      -----------
<S>          <C>                   <C>         <C>        <C>     <C>          <C>
1            HMO_ID                Num         8          0       1-8           Right justified (HMO Service
                                                                                Area Provider Number)

2            MA_ID                 Num         10         0       9-18          Recipient Medicaid ID

3            LNAME                 Char        13                 19-31         Recipient Last Name - Left
                                                                                justified

4            FNAME                 Char        10                 32-41         Recipient First Name - Left
                                                                                justified

5            ELIG_CODE             Char        1                  42            A = AIDS;
                                                                                N = NICU vent dependent;
                                                                                V = Vent dependent, non-NICU

6            DOB                   Date        8                  43-50         mmddyyyy

7            SEX                   Char        1                  51            F or M

8            PROV_ID               Num         8          0       52-59         Medicaid Provider Number

9            FROM_DATE             Date        8                  60-67         mmddyyyy

10           TO_DATE               Date        8                  68-75         mmddyyyy

11           DIAG_1                Char        5                  76-80         Left justified, ICD-9, implied
                                                                                decimal

12           DIAG_2                Char        5                  81-85         Left justified, ICD-9, implied
                                                                                decimal

13           QTY                   Num         4          0       86-89         Right justified (do not zero fill)

14           PROC_CODE             Char        5                  90-94         Left justified, CPT-4, UB92

15           PROC_DESC             Char        10                 95-104

16           DRUG_CODE             Num         11         0       105-115       National drug code

17           AMT_BILL              Num         9          2       116-124       Include decimal (do not zero fill)

18           AMT-PAID              Num         9          2       125-133       Include decimal (do not zero fill)

19           ADMIT_DATE            Date        8                  134-141       Hospital admission date:
                                                                                mmddyyyy

20           DIS_DATE              Date        8                  142-149       Hospital discharge date:
                                                                                mmddyyyy
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -134-
<PAGE>

                                   ADDENDUM V

                       STANDARD ENROLLEE HANDBOOK LANGUAGE

INTERPRETER SERVICES

English - For help to translate or understand this, please call [1-800-xxx-xxxx]
          (TTY).

Spanish - Si necesita ayuda para traducir o entender este texto, por favor llame
          al telefono [1-800-xxx-xxxx] (TTY).

Russian - ? ??? ??? ?? ??? ??????? ? ???? ????? ????, ?? ??????? ?? ?????
          ??? [1-800-xxx-xxx] (?? Y).

Hmong -   Yog xav tau kev pab txhais cov ntaub ntawv no kom koj totaub, hu rau
          [1-800-xxx-xxxx] (TTY).

Laotian - GRNJV-J;P.ODKOCX S]NG0QK.9GONVSK.OOUF DTI5OK3MITLA[SK
          [1-800-xxx-xxxx] (TTY).

Interpreter services are provided free of charge to you.

IMPORTANT [HMO NAME] PHONE NUMBERS

<Table>
<S>                                 <C>                       <C>
Customer Service                    [1-800-xxx-xxxx]          [Hours/Days Available]

Emergency Number                    [1-800-xxx-xxxx]          Call 24 hours a day, 7 days a week

TDD/TTY                             [1-800-xxx-xxxx]

</Table>

WELCOME

Welcome to [HMO NAME]. As a member of [HMO NAME], you will receive all your
health care from [HMO NAME] doctors, hospitals, and pharmacies. See [HMO NAME]
Provider Directory for a list of these providers. You may also call our Customer
Service Department at [1-800-xxx-xxxx]. Providers not accepting new patients are
marked in the Provider Directory.

YOUR FORWARD ID CARD

Always carry your Forward ID card with you, and show it every time you get care.
You may have problems getting care or prescriptions if you do not have your card
with you. Also bring any other health insurance cards you may have.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -135-
<PAGE>

PRIMARY CARE PHYSICIAN (PCP)

It is important to call your primary care physician (PCP) first when you need
care. This doctor will manage all your health care. If you think you need to see
another doctor, or a specialist, ask your PCP. Your PCP will help you decide if
you need to see another doctor, and give you a referral. Remember, you must get
approval from your PCP before you see another doctor.

You can choose your primary care physician (PCP) from those available (NOTE: For
women you may also see a women's health specialist (for example a OB/GYN doctor
or a nurse midwife) without a referral, in addition to choosing your PCP).There
are HMO doctors who are sensitive to the needs of many cultures. To choose a
PCP, or to change to a different PCP, call our Customer Service Department at
[1-800-xxx-xxxx].

EMERGENCY CARE

Emergency care is care needed right away. This may be caused by an injury or a
sudden illness. Some examples are:

                  Choking                       Severe or unusual bleeding
                  Trouble breathing             Suspected poisoning
                  Serious broken bones          Suspected heart attack
                  Unconsciousness               Suspected stroke
                  Severe burns                  Convulsions
                  Severe pain                   Prolonged or repeated seizures

If you need emergency care, go to a [HMO NAME] provider for help if you can.
BUT, if the emergency is severe, go to the nearest provider (hospital, doctor or
clinic). You may want to call 911 or your local police or fire department
emergency services if the emergency is severe.

If you must go to a [non-HMO NAME] hospital or provider , call [HMO NAME] at
[1-800-xxx-xxxx] as soon as you can and tell us what happened. This is important
so we can help you get follow up care.

Remember, hospital emergency rooms are for true emergencies only. Call your
doctor or our 24-hour emergency number at [1-800-xxx-xxxx] before you go to the
emergency room, unless your emergency is severe.

URGENT CARE

Urgent Care is care you need sooner than a routine doctor's visit. Urgent care
is not emergency care. Do not go to a hospital emergency room for urgent care
unless your doctor tells you to go there. Some examples of urgent care are:

HMO Contract for January 1, 2002 - December 31, 2003

                                     -136-
<PAGE>

                  Most broken bones                  Minor cuts
                  Sprains                            Bruises
                  Non-severe bleeding                Most drug reactions
                  Minor burns

If you need urgent care, call [insert instructions here--call clinic, doctor,
24-hour number, nurse line, etc.] We will tell you where you can get care. You
must get urgent care from [HMO NAME] doctors unless you get our approval to see
a [non-HMO NAME] doctor. Remember, do not go to a hospital emergency room for
urgent care unless you get approval from [HMO NAME] first.

OUT-OF-AREA MEDICAL CARE

Out-of-area means more than 50 miles away from our service area. Our service
area is:

HMOs MAY USE A MAP TO EXPLAIN WHAT THE HMO SERVICE AREA IS, MAY LIST MAJOR
CITIES, MAJOR CLINICS, OR A COMBINATION THEREOF TO EXPLAIN SERVICE NETWORK.

For help with out-of-area services, call HMO NAME customer service line at
1-800-xxx-xxxx or the enrollment specialist at 1-800-291-2002.

HOW TO GET MEDICAL CARE WHEN YOU ARE AWAY FROM HOME

Follow these rules if you need medical care but are too far away from home to go
to your assigned primary care physician (PCP) or clinic.

For severe emergencies, go to the nearest hospital, clinic, or doctor.

For urgent or routine care away from home, you must get approval from us to go
to a different doctor, clinic or hospital. This includes children who are
spending time away from home with a parent or relative. Call us at
[1-800-xxx-xxxx] for approval to go to a different doctor, clinic, or hospital.

PREGNANT WOMEN AND DELIVERIES

You must go to a [HMO NAME] hospital to have your baby. Talk to your [HMO NAME]
doctor to make sure you understand which hospital you are to go to when it's
time to have your baby.

Also, talk to your doctor if you plan to travel in your last month of pregnancy.
Because we want you to have a healthy birth and a good birthing experience, it
may not be a good time for you and your unborn child to be traveling. We want
you to have a healthy birth and your [HMO Name] doctor knows your history and is
the best doctor to help you have a healthy birth. Do not go out of area to have
your baby unless you have [HMO NAME] approval.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -137-
<PAGE>

You may also wish to pick a doctor for your child before you give birth. We will
be able to help you pick a doctor for your unborn child.

WHEN YOU MAY BE BILLED FOR SERVICES

It is very important to follow the rules when you get medical care so you are
not billed for services. You must receive your care from [HMO NAME] providers,
hospitals, and pharmacies unless you have our approval. The only exception is
for severe emergencies.

IF YOU ARE BILLED

If you receive a bill for services, call our Customer Service Department at
[1-800-xxx-xxxx]. You do not have to pay for services that [HMO NAME] is
required to provide you.

OTHER INSURANCE

If you have other insurance in addition to [HMO NAME], you must tell your doctor
or other provider. Your health care provider must bill your other insurance
before billing [HMO NAME]. If your [HMO NAME] doctor does not accept your other
insurance, call the HMO Enrollment Specialist at 1-800-291-2002. The Enrollment
Specialist can tell you how to match your HMO enrollment with your other
insurance so you can use both insurance plans.

SERVICES COVERED BY [HMO NAME]

[HMO NAME] provides all medically necessary covered services. Some services may
require a doctor's order or a prior authorization. Covered services include:

o    Prescription drugs and certain over-the-counter drugs when ordered by a
     doctor

o    Services by doctors and nurses, including nurse practitioners and nurse
     midwives

o    Inpatient and outpatient hospital services

o    Laboratory and X-ray services

o    HealthCheck for members under 21 years of age, including referral for other
     medically necessary services

o    Certain podiatrists' (foot doctors) services

o    Inpatient care at institutions for mental disease (care for persons 22-64
     years of age is not included)

HMO Contract for January 1, 2002 - December 31, 2003

                                     -138-
<PAGE>

o    Optometrists' (eye doctors) or opticians' services, including eyeglasses

o    Mental health treatment

o    Substance abuse (drug and alcohol) services

o    Family planning services and supplies

o    The following services when a doctor gives a written order:

     >>   Prostheses and other corrective support devices

     >>   Hearing aids and other hearing services

     >>   Home health care

     >>   Personal care

     >>   Independent nursing services

     >>   Medical supplies and equipment

     >>   Occupational therapy

     >>   Physical therapy

     >>   Speech therapy

     >>   Respiratory therapy

     >>   Nursing home services

     >>   Medical Nutrition Counseling

     >>   Hospice care

     >>   Appropriate transportation to obtain medical care by ambulance or
          specialized medical vehicles

o    Certain dental services (not all dental services are covered) [Eliminate if
     HMO does not provide dental]

o    Certain chiropractic services [Eliminate if HMO does not provide
     chiropractic]

MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES

[HMO NAME] provides mental health and substance abuse (drug and alcohol)
services to all enrollees. If you need these services, call [PCP, gatekeeper,
Customer Service, as appropriate].

FAMILY PLANNING SERVICES

We provide confidential family planning services to all enrollees. This includes
minors. If you don't want to talk to your primary care doctor about family
planning, call our Customer Service Department at [1-800-xxx-xxx]. We will help
you choose a [HMO NAME] family planning doctor who is different from your
primary care doctor.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -139-
<PAGE>

You can also go to any family planning clinic that will accept your Forward ID
card even if the clinic is not part of [HMO NAME]. But we encourage you to
receive family planning services from a [HMO NAME] doctor. That way we can
better coordinate all your health care.

DENTAL SERVICES

[Note to HMO: Use statement 1. if you provide dental services. Use statement 2.
if you do not provide dental services. If you provide dental services in only
part of your service area, use both statements and list the appropriate counties
with each statement.]

1.   [HMO NAME] provides all covered dental services. But you must go to a [HMO
     NAME] dentist. See the Provider Directory or call the Customer Service
     Department at [1-800-xxx-xxxx] for the names of our dentists.

2.   You may get dental services from any dentist who will accept your Forward
     ID card. Your dental services are provided by the State, not [HMO NAME]. If
     you are enrolled in the State dental managed care program, you must get
     your dental services from that program.

DENTAL EMERGENCY:

A dental emergency is an immediate dental service needed to treat dental pain,
swelling, fever, infection, or injury to the teeth.

WHAT TO DO IF YOU OR YOUR CHILD HAS A DENTAL EMERGENCY

1.   If you already have a dentist who is with HMO name:

     >>   Call the dentist's office.

     >>   Identify yourself or your child as having a dental emergency.

     >>   Tell the dentist's office what the exact dental problem is. This may
          be something like a toothache or swollen face. Make sure the office
          understands that you or your child is having a "dental emergency."

     >>   Call us if you need help with transportation to your dental
          appointment.

2.   If you do not currently have a dentist who is with HMO Name

     >>   Call {HMO specific dental gatekeeper or HMO}. Tell us that you/your
          child is having a dental emergency. We can help you get dental
          services.

     >>   Tell us if you need a ride to the dentist's office.

     >>   Alternative language for HMO's whose dental gatekeeper handles
          appointment for emergencies. Call HMO NAME if you need help with
          transportation to the dentist's office. We can help with
          transportation.

For help with a dental emergency call xxx-xxx-xxxx.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -140-
<PAGE>

CHIROPRACTIC SERVICES

[Note to HMO: Use statement 1. if you provide chiropractic services. Use
statement 2. if you do not provide chiropractic services.]

1.   [HMO NAME] provides covered chiropractic services. But you must go to a
     [HMO NAME] chiropractor. See the Provider Directory or call the Customer
     Service Department at [1-800-xxx-xxxx] for the names of our chiropractors.

2.   You may get chiropractic services from any chiropractor who will accept
     your Forward ID card. Your chiropractic services are provided by the State,
     not [HMO NAME].

HEALTHCHECK

HealthCheck is a preventive health checkup program for members under the age of
21. The HealthCheck program covers complete health checkups. These checkups are
very important for children's health. Your child may look and feel well, yet may
have a health problem. Your doctor wants to see your children for regular
checkups, not just when they are sick.

The HealthCheck health program has three purposes:

1.   To find and treat children's health problems early,

2.   To let you know about the special child health services you can receive,
     and

3.   To make your children eligible for some health care not otherwise covered.

The HealthCheck program covers the care for any health problems found during the
checkup including medical care, eye care and dental care.

The HealthCheck checkup includes:

     >>   a health history

     >>   physical exam

     >>   developmental assessment

     >>   hearing and vision test

     >>   blood and urine lab tests

     >>   complete immunizations (shots)

Children age three and older will be referred to a dentist. You will receive
help in choosing and getting to a dentist.

[HMO NAME] will help arrange for transportation for HealthCheck visits. Call our
Customer Service Department a [1-800-xxx-xxxx].

HMO Contract for January 1, 2002 - December 31, 2003

                                     -141-
<PAGE>

Ask your child's primary care doctor (PCP) when your child should have his/her
next HealthCheck exam or call our Customer Service Department at
[1-800-xxx-xxxx] for more information.

TRANSPORTATION

(Note to HMO: Use statement 1. if you arrange transportation for your enrollees.
Use statement 2. if you do not arrange transportation for your enrollees. Use
statement 3. if you arrange transportation in only part of your service area.)

1.   Bus or taxi rides to receive care are arranged by [HMO NAME]. Call our
     Customer Service Department at [1-800-xxx-xxxx] if you need a ride.

2.   Bus or taxi rides to receive care are arranged by your county Department of
     Social or Human Services Call them for information.

3.   Bus or taxi rides to receive care are arranged by [HMO NAME] if you live in
     [INSERT COUNTIES]. Call our Customer Service Department at [1-800-xxx-xxxx]
     if you need a ride. If you live in a county that is not listed, please call
     your county Department of Social or Human Services for information about
     arranging a ride.

AMBULANCE

[HMO NAME] covers ambulance service for Emergency Care. We may also cover this
service at other times, but you must have approval for all non-emergency
ambulance trips. Call our Customer Service Department at [1-800-xxx-xxxx] for
approval.

SPECIAL MEDICAL VEHICLE (SMV)

[HMO NAME] covers transportation by special vehicle for those in wheelchairs. We
may also cover this service for others if your doctor asks for it. Call our
Customer Service Department at [1-800-xxx-xxxx] if you need this service.

IF YOU MOVE

If you are planning to move, contact your county Department of Social or Human
Services. If you move to a different county, you must also contact the
Department of Social or Human Services in your new county to update your
eligibility.

If you move out of [HMO NAME'S] service area, call the HMO Enrollment Specialist
at 1-800 291-2002. [HMO NAME] will only provide emergency care if you move out
of our service area. The Enrollment Specialist will help you choose an HMO that
serves your area.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -142-
<PAGE>

HEALTH INSURANCE AFTER YOUR ELIGIBILITY ENDS

You have the right to purchase a private health insurance policy from [HMO NAME]
when your eligibility ends. Call our Customer Service Department at
[1-800-xxx-xxxx]. If you decide to purchase a policy from us, you have 30 days
after the date your eligibility ends to apply.

SECOND MEDICAL OPINION

A second medical opinion on recommended surgeries may be appropriate in some
cases. Contact your doctor or our Customer Service Department for information.

HMO EXEMPTIONS

An HMO exemption means you are not required to join an HMO to receive your
health care benefits. Most exemptions are granted for only a short period of
time so you can complete a course of treatment before you are enrolled in an
HMO. If you think you need an exemption from HMO enrollment, call the HMO
Enrollment Specialist at 1-800-291-2002 for more information.

LIVING WILL OR POWER OF ATTORNEY FOR HEALTH CARE

You have a right to make decisions about your medical care. You have a right to
accept or refuse medical or surgical treatment. You also have the right to plan
and direct the types of health care you may receive in the future if you become
unable to express your wishes. You can let your doctor know about your feelings
by completing a living will or power of attorney for health care form. Contact
your doctor for more information.

RIGHT TO MEDICAL RECORDS

You have the right to ask for copies of your medical record from your
provider(s). We can help you get copies of these records. Please call
[1-800-xxx-xxxx] for help. Please note: You may have to pay to copy your medical
record. You also may correct wrong information in your medical records if your
doctor agrees to the correction.

[HMO NAME'S] MEMBER ADVOCATE

[HMO NAME] has a Member Advocate to help you get the care you need. The Advocate
can answer your questions about getting health care from [HMO NAME]. The
Advocate can also help you solve any problems you may have getting health care
from [HMO NAME]. You can reach the Advocate at [1-800-xxx-xxxx].

STATE OF WISCONSIN HMO OMBUD PROGRAM

The State has Ombuds who can help you with any questions or problems you have as
an HMO member. The Ombuds can tell you how to get the care you need from your
HMO. The Ombuds

HMO Contract for January 1, 2002 - December 31, 2003

                                     -143-
<PAGE>

can also help you solve problems or complaints you may have about the HMO
Program or your HMO. Call 1-800-760-0001 and ask to speak to an Ombud.

COMPLAINTS

We would like to know if you have a complaint about your care at [HMO NAME].
Please call [HMO NAME'S] Member Advocate at [1-800-xxx-xxxx] if you have a
complaint. Or you can write to us at:

                         [HMO name and mailing address]

If you want to talk to someone outside of [HMO NAME] about the problem, call the
HMO Enrollment Specialist at 1-800-291-2002. The Enrollment Specialist may be
able to help you solve the problem, or can help you write a formal complaint to
[HMO NAME] or to the State HMO Program. The address to complain to the State HMO
Program is:

                                            EDS
                                            HMO Ombuds
                                            P. O. Box 6470
                                            Madison, WI  53716

We cannot treat you differently than other members because you file a complaint.
Your health care benefits will not be affected.

WHEN BENEFITS ARE DENIED (FAIR HEARINGS)

You may appeal to the State if you believe your benefits are unfairly denied,
limited, reduced, delayed or stopped by [HMO NAME]. An appeal must be made not
later than 45 days after the date of the action being appealed.

To appeal to the State, call the HMO Ombuds at 1-800-760-0001. Or you can write
to the HMO Ombuds at:

                                            EDS
                                            HMO Ombuds
                                            P. O. Box 6470
                                            Madison, WI  53716

You have the right to appeal to the State of Wisconsin Division of Hearings and
Appeals (DHA) for a Fair Hearing if you believe your benefits are unfairly
denied, limited, reduced, delayed or stopped by [HMO NAME]. An appeal must be
made no later than 45 days after the date of the action being appealed. If you
appeal this action to DHA before the effective date, the service may continue.
You may need to pay for the cost of services if the hearing decision is not in
your favor.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -144-
<PAGE>

If you want a Fair Hearing, send a written request to:

                                    Department of Administration
                                    Division of Hearings and Appeals
                                    P. O. Box 7875
                                    Madison, WI  53707-7875

The hearing will be held in the county where you live. You have the right to
bring a friend or be represented at the hearing. If you need a special
arrangement for a disability, or for English language translation, please call
(608) 266-3096 (voice) or (608) 264-9853 (hearing impaired).

We cannot treat you differently than other members because you request a Fair
Hearing. Your health care benefits will not be affected.

If you need help writing a request for a Fair Hearing, please call:

           EDS Ombuds                                           1-800-760-0001
                                       or
           HMO Enrollment Specialist                            1-800-291-2002

PHYSICIAN INCENTIVE PLAN

You are entitled to ask if we have special financial arrangements with our
physicians that can affect the use of referrals and other services you might
need. To get this information, call our Customer Service Department at
[1-800-xxx-xxxx] and request information about our physician payment
arrangements.

PROVIDER CREDENTIALS

You have the right to information about our providers that includes the
provider's education, Board certification and recertification. To get this
information, call our Customer Service Department at [1-800-xxx-xxxx].

MEMBER RIGHTS

You have the right to ask for an interpreter and have one provided to you during
any Medicaid/BadgerCare covered service.

You have the right to receive the information provided in this member handbook
in another language or another format.

You have the right to receive health care services as provided for in Federal
and State law. All covered services must be available and accessible to you.
When medically appropriate, services must be available 24 hours a day, 7 days a
week.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -145-
<PAGE>

You have the right to receive information about treatment options including the
right to request a second opinion.

You have the right to make decisions about your health care.

You have the right to be treated with dignity and respect.

You have the right to be free from any form of restraint or seclusion used as a
means of force, control, ease or reprisal.

YOUR CIVIL RIGHTS

[HMO NAME] provides covered services to all eligible members regardless of:

o    Age

o    Race

o    Religion

o    Color

o    Disability

o    Sex

o    Sexual Orientation

o    National Origin

o    Marital Status

o    Arrest or Conviction Record

o    Military Participation

All medically necessary covered services are available to all members.

All services are provided in the same manner to all members.

All persons or organizations connected with [HMO Name] who refer or recommend
members for services shall do so in the same manner for all members.

Translating or interpreting services are available for those members who need
them. This service is free.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -146-
<PAGE>
                                   ADDENDUM VI

                               STATE OF WISCONSIN
                               MEDICAID/BADGERCARE
                     HMO REPORT ON COORDINATION OF BENEFITS

Name of HMO                                  Mailing Address
           -----------------------------                    -------------------

Office Telephone
                ------------------------                    -------------------

Provider Number
               -------------------------                    -------------------

Please designate below the quarter period for which information is given in this
report.

____________________________, 20____ through _________________________, 20______

                                  INSTRUCTIONS

For the purposes of this report, an enrollee is any Medicaid recipient listed on
the monthly enrollment reports coming from the fiscal agent, and who is an ADD
or CONTINUE.

Subrogation may include collections from auto, homeowners, or malpractice
insurance, as well as restitution payments from the Division of Corrections. In
addition, subrogation should include collections from Workers' Compensation.

Birth costs or delivery costs (e.g., routine delivery and associated hospital
charges) are not to be included in this report. Recovery of birth costs are
collected through the county agencies.

Coordination of Benefits Reports are to be completed on a calendar quarterly
basis.

The report is to be for the entire HMO, aggregating all separate service areas
if the HMO has more than one service area.

Please complete and return this report within 45 days of the end of the quarter
being reported to:

                                   DHFS - Managed Care Section
                                   P.O. Box 309
                                   Madison, WI 53701-0309

                                   Attn: COB Report from ____________________HMO

HMO Contract for January 1, 2002 - December 31, 2003

                                     -147-
<PAGE>

                                   COB REPORT

The following information is REQUIRED in order to comply with CMS (formerly
HCFA) reporting requirements:

                                 Cost Avoidance

Indicate the dollar amount of the claims you denied as a result of your
knowledge of other insurance being available for the enrollee. The provider did
not indicate at the time of the claim submission (with an EOB, etc.) that the
other insurance was billed prior to submitting the claim to you. Therefore, you
denied the claim. Please indicate the dollar amount of these denials.

Amount Cost Avoided:
                    -----------------------------------------------------------

Including claims denied for third party liability.

                   RECOVERIES (POST-PAY BILLING/PAY AND CHASE)

Indicate the dollar amount you recovered as a result of billing an enrollee's
other insurance:
                ---------------------------------------------------------------

Subrogation/Worker's
Compensation:
             ------------------------------------------------------------------

Amount of other recoveries (Dollars) This Quarter:
                                                  -----------------------------

     I HEREBY CERTIFY that to the best of my knowledge and belief, the
information contained in this report is a correct and complete statement
prepared from the records of the HMO, except as noted on the report.

Signed:
       ------------------------------------------------------------------------
                     Original Signature of Director or Administrator

Title:
      -------------------------------------------------------------------------

Date Signed:
            -------------------------------------------------------------------

HMO Contract for January 1, 2002 - December 31, 2003

                                     -148-
<PAGE>

                                  ADDENDUM VII

                                 ACTUARIAL BASIS

HMO Contract for January 1, 2002 - December 31, 2003

                                     -149-
<PAGE>

                                  ADDENDUM VIII

              COMPLIANCE AGREEMENT AFFIRMATIVE ACTION/CIVIL RIGHTS

THE HMO HEREBY AGREES THAT it will comply with the following.

1.   The HMO agrees to comply with Public Law 103-227, also known as the
     Pro-Children Act of 1994, which prohibits tobacco-smoke in any portion of a
     facility owned or leased or contracted for by an entity which receives
     federal funds, either directly or through the State, for the purpose of
     providing services to children under the age of 18.

2.   The HMOs shall implement and adhere to rules and regulations prescribed by
     the United States, Department of Labor and in accordance with 41 Code of
     Federal Regulations, Chapter 60.

3.   The HMO shall comply with regulations of the United States Department of
     Labor recited in 20 Code of Federal Regulations, Part 741 and the Federal
     Rehabilitation Act of 1973. The HMO shall ensure compliance by any and all
     subcontractors engaged by Contractor under the Contract with said
     regulations.

Affirmative Action Plan/Civil Rights

1.   The HMO assures that they have submitted to the Department Affirmative
     Action/Civil Rights Compliance Office a current copy of an Affirmative
     Action Plan and Civil Rights Compliance Action Plan for Meeting Equal
     Opportunity Requirements under Title VI of the Civil Rights Act of 1964,
     Section 504 of the Rehabilitation Act of 1973, Title VI and XVI of the
     Public Service Health Act, the Age Discrimination Act of 1975, the Omnibus
     Budget Reconciliation Act of 1981 and the Americans with Disabilities Act
     (ADA) of 1990, the Wisconsin Fair Employment Act, and any or all applicable
     Federal and State nondiscrimination statutes as may be in effect during the
     term of this Contract. If an approved plan has been reviewed during the
     previous calendar year, a plan update must be submitted during this
     contract period. The plan may cover a two-year period.

     a.   No otherwise qualified person shall be excluded from participation in,
          be denied the benefits of, or otherwise subject to discrimination in
          any manner on the basis of race, color, national origin, sexual
          orientation, religion, sex, disability or age. This policy covers
          eligibility for and access to service delivery, and treatment in all
          programs and activities.

     b.   No otherwise qualified person shall be excluded from employment, be
          denied the benefits of employment or otherwise be subject to
          discrimination in employment in any manner or term of employment on
          the basis of age, race, religion, color, sex, national origin, or
          ancestry, handicap [as defined in Section 504 and the American

HMO Contract for January 1, 2002 - December 31, 2003

                                     -150-
<PAGE>

          With Disabilities Act (ADA)], physical condition, developmental
          disability [as defined in s. 51.05(5) Wis. Stats.], arrest or
          conviction record [in keeping with s.111.32 Wis. Stats.], sexual
          orientation, marital status, or military participation. All employees
          are expected to support goals and programmatic activities relating to
          nondiscrimination in employment.

2.   The HMO shall post the Equal Opportunity Policy, the name of the Equal
     Opportunity Coordinator and the discrimination complaint process in
     conspicuous places available to applicants and clients of services, and
     applicants for employment and employees. The complaint process will be
     according to Department standards and made available in languages and
     formats understandable to applicants, clients and employees. The HMO will
     continue to provide appropriate translated State procedures, mandated
     brochures and forms for local distribution.

3.   The HMO agrees to comply with guidelines in the Civil Rights Compliance
     Standards and a Resource Manual for Equal Opportunity in Service Delivery
     and Employment for the Wisconsin Department of Health and Family Services,
     its Service Providers and their Subcontractors (September 1997 Edition).

4.   Requirements herein stated apply to any subcontracts. The HMO has primary
     responsibility to take constructive steps, as per the CRC Standards and
     Resource Manual, to ensure compliance of subcontractors. However, where the
     Department has a direct contract with another community agency or vendor,
     the HMO need not obtain a Subcontractor Affirmative Action Plan and Civil
     Rights Compliance Action Plan or monitor that agency or vendor.

5.   The Department will monitor the Civil Rights Compliance of the HMO and will
     conduct reviews to ensure that the HMO is ensuring compliance of its
     subcontractors in compliance with guidelines in the CRC Standards and
     Resource Manual. The HMO agrees to comply with Civil Rights monitoring
     reviews, including the examination of records and relevant files maintained
     by the HMO, as well as interviews with staff, clients, applicants for
     services, subcontractors and referral agencies.

6.   The HMO agrees to cooperate with the Department in developing, implementing
     and monitoring corrective action plans that result from complaint
     investigations or other monitoring efforts.

Access to Agency

1.   The HMO agrees to hire staff, contract with, or identify community
     individuals with special translation or sign language skills and/or provide
     staff with special translation or sign language skills training or find
     persons who are available within reasonable time and who can communicate
     with non-English speaking or hearing impaired clients; train staff in human
     relations techniques, sensitivity to persons with disabilities and
     sensitivity to cultural characteristics; and make programs and facilities
     accessible, as appropriate,

HMO Contract for January 1, 2002 - December 31, 2003

                                     -151-
<PAGE>

     through outstations, authorized representatives, adjusted work hours,
     ramps, doorways, elevators or ground floor rooms, and Braille, large print
     or taped information for the visually impaired. Informational materials
     will be posted and/or available in languages and formats appropriate to the
     needs of the client population.

2.   The HMO shall ensure the establishment of safeguards to prevent employees,
     consultants or members of governing bodies from using their positions for
     purposes that are, or give the appearance of being, motivated by a desire
     for private gain for themselves or others, such as those with whom they
     have family, business, or other ties as specified in Wisconsin Statutes
     946.10 and 946.13.

3.   The applicant gives assurance that he/she will immediately take any
     measures necessary to effectuate this agreement.

4.   The applicant shall comply with Conflict of Interest (Section 946.10 and
     946.13 Wis. Stats. and DHFS Employee Guidelines DMB-Pers. 102-7/1/71).

HMO Contract for January 1, 2002 - December 31, 2003

                                     -152-
<PAGE>

                                   ADDENDUM IX

                        MODEL MEMORANDUM OF UNDERSTANDING
                                     BETWEEN
                         HEALTH MAINTENANCE ORGANIZATION
                                       AND
                        PRENATAL CARE COORDINATION AGENCY

Prenatal care coordination services are paid FFS by the Wisconsin Medical
Assistance Program (Wisconsin Medicaid) for all recipients, including those
enrolled in HMOs. The prenatal care coordination agencies (PNCC) are responsible
for services which include outreach, risk assessment, care planning, care
coordination and follow-up to support high-risk pregnant women. The HMOs are
responsible for providing and managing medically necessary services. Successful
provision of the services to individual enrollees requires cooperation,
coordination and communication between the HMO and the PNCC.

The HMO and the PNCC agree to facilitate effective communication between
agencies, work to resolve inter-agency coordination and communication problems,
and inform staff from both the HMO and the PNCC about the policies and
procedures for this cooperation, coordination and communication.

Recognizing that these "clients-in-common" are at high risk for poor birth
outcomes, the HMO and the PNCC agree to cooperate in removing access barriers,
coordinating care and providing culturally competent services.

This agreement becomes effective on the date the PNCC is certified by WISCONSIN
MEDICAID or on the date when both HMO and PNCC have signed, whichever is later.
It may be terminated in writing with two weeks notice by either signer.

<Table>
<Caption>
------------------------------------                     ------------------------------------
                 HMO                                                    PNCC
------------------------------------                     ------------------------------------
<S>                                                      <C>
Authorizing Signature                                    Authorizing Signature

------------------------------------                     ------------------------------------
Title                                                    Title

------------------------------------                     ------------------------------------
Date                                                     Date

------------------------------------                     ------------------------------------
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -153-
<PAGE>

                                   ADDENDUM X

                       MEMORANDUM OF UNDERSTANDING BETWEEN
                              MILWAUKEE COUNTY HMOS
                                       AND
                        BUREAU OF MILWAUKEE CHILD WELFARE

HMO RIGHTS AND RESPONSIBILITIES:

o    The HMO must designate at least one individual to serve as a contact person
     for the Bureau of Milwaukee Child Welfare (BMCW) agency(ies). If the HMO
     chooses to designate more than one contact person, the HMO should identify
     the service area for which each contact person is responsible.

o    The HMO must provide all Medicaid covered mental health and substance abuse
     services to individuals identified as clients of the BMCW agency. Disputes
     in the medical necessity of services identified in the Family Treatment
     Plan will be adjudicated using the dispute process outlined in this MOU,
     except that HMOs will provide court ordered services in accordance with
     Addendum II.

o    The HMO liaison, or other appropriate staff as designated by the HMO, will
     participate in case conference with BMCW upon the request of the BMCW
     agency. The planning session may be done through telephone contact or other
     means of communication when attending a formal case conference is not
     feasible.

o    The HMO liaison and the BMCW agency will discuss who will be responsible
     for ensuring that the recipient receives the services authorized and
     provided through the HMO. The HMO must have a mechanism in place for
     notifying the BMCW agency of missed appointments or family crisis
     situations that could potentially lead to an out-of-home placement by the
     BMCW agency. The notification will be within three business days of
     occurrence or sooner if possible.

o    The HMO agrees to participate in dispute resolution using the following
     process:

o    The BMCW and the HMO designated personnel will meet or teleconference to
     discuss the case and attempt to resolve issues of dispute.

If the BMCW designees and the HMO designees (known as the team) are unable to
resolve the issues, the BMCW and the HMO will schedule a meeting or a
teleconference of representatives with expertise in the area of dispute to look
at outstanding issues within 2 days of the teleconference or sooner if
indicated.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -154-
<PAGE>

If the team is unable to resolve the issues to both party's satisfaction, either
party may appeal to the Department. It will be the disputing party's
responsibility to supply the necessary documentation for the Department to
adjudicate the dispute.

o    The HMO will work with the BMCW in developing lists of providers and
     fostering a provider network which has expertise in:

     >>   Working with adults and children effectively.

     >>   Working with dual diagnosed clients effectively.

     >>   Understanding adult functioning problems in the context of parenting,
          child safety and child well-being.

     >>   Recognizing the interrelationship of the problems BMCW families
          experience and, therefore, the value of close collaboration among the
          various service providers working with the family.

o    The HMO will share with the BMCW agency(ies) the procedure and process for
     prior authorization and out-of-plan referrals.

MILWAUKEE CHILD CARE COORDINATION AGENCY'S RIGHTS AND RESPONSIBILITIES:

o    It is the Bureau of Milwaukee Child Welfare Agencies' responsibility to
     initiate contact with the HMO regarding child welfare families and/or
     individuals in need of service. BMCW will provide (through court order
     and/or signed release of information) completed assessment information
     which supports the request for HMO services.

o    The BMCW will complete and involve the HMO in the development of a
     comprehensive case plan, which identifies the outcomes to be achieved, the
     services to be provided and the measures to be used for evaluation.

o    The BMCW will utilize the HMO's provider network for routine services
     whenever possible and will attempt to utilize the HMO provider network for
     emergency services. BMCW will obtain criteria from the HMO concerning
     BMCW's ability to utilize non-participating providers and the mechanism for
     authorizing non-participating providers.

o    The BMCW will evaluate the progress of the case plan at 90-day intervals,
     including the effectiveness of services and will forward those results to
     the HMO within ten days of completion.

o    The BMCW will be responsible for informing the HMO of the status of the
     case, including court-ordered revisions within two business days of the
     revisions.

o    The BMCW agrees to participate in dispute resolution using the following
     process:

HMO Contract for January 1, 2002 - December 31, 2003

                                     -155-
<PAGE>

The BMCW and the HMO designated personnel will meet or teleconference to discuss
the case and attempt to resolve issues of dispute.

If the BMCW designees and the HMO designees (known as the team) are unable to
resolve the issues the BMCW and the HMO will schedule a meeting of
representatives to look at outstanding issues within two (2) days of the meeting
or teleconference or sooner if indicated.

If the team is unable to resolve the issues to both parties' satisfaction,
either party may appeal to the Department. It will be the disputing party's
responsibility to supply the necessary documentation for the Department to
adjudicate the dispute.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -156-
<PAGE>

                                   ADDENDUM XI
                              HEALTHCHECK WORKSHEET

HMO:                              HMO Provider Number:
    ----------------------                            --------------------------

<Table>
<Caption>
                                                                                              Age Groups
                                                                                    ------------------------------
                                             Calculation                            < 1       1-5   6-14     15-20    Total
                                             -----------                            ---       ---   ----     -----    -----

<S>         <C>                              <C>                                    <C>       <C>   <C>      <C>      <C>
1           Number of eligible months        Entered
            for enrollees under age 21       (Total is sum of age groups.)

2           Number of unduplicated           Entered
            enrollees under age 21

3           Ratio of recommended             Given                                  5.00      1.4   0.56     0.50
            screens per age group
            member

4           Average period of eligibility    Line 1 / line 2 / 12
            (in years)                       (Total is calculated by formula.)

5           Adjusted ratio of                Line 3 x line 4
            recommended screens per
            age group member

6           Expected number of screens       Line 2 x line 5
            (100% of required screens        (Total is sum of age groups.)
            for ages and months of
            eligibility)

7           Number of screens in goal        Line 6 x 0.80
            (80%)                            (Total is calculated by formula.)

8           Actual number of screens         Entered
            completed                        (Total is sum of age groups.)

9           Difference between goal and      Line 8 - line 7
            actual                           (Positive result means goal is
                                             met; negative result means goal is
                                             not met.)

10          Percent of the HMO
            discount or premium if
            applicable except for
            Milwaukee, Dane, Eau
            Claire, Kenosha and
            Waukesha Counties.

11          Amount per screen to be          FFS maximum allowable fee
            recouped                         *(Article III. B. 10) x line 10

12          Total recoupment                 Line 11 x line 9
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -157-
<PAGE>

HMO RATE REGIONS AND ESTABLISHED COUNTIES

<Table>
<Caption>
        REGION 1: DULUTH/SUPERIOR                              REGION 2: WAUSAU/RHINELANDER

<S>                         <C>                           <C>                      <C>
02 Ashland                  85 Red Cliff RNIP             21 Forest                60   Taylor
04 Bayfield                 89 Bad River                  34 Langlade              63   Vilas
07 Burnett                  94 Lac Courte RNIP            35 Lincoln               86   Stockbridge RNIP
16 Douglas                  95 St Croix RNIP              37 Marathon              87   Potawatomi RNIP
26 Iron                                                   43 Oneida                88   Lac du Flambeau RNIP
57 Sawyer                                                 50 Price                 91   Sokaogon RNIP
65 Washburn                                               58 Shawano
</Table>

<Table>
<Caption>
         REGION 3: GREEN BAY                                     REGION 4: TWIN CITIES

<S>                         <C>                           <C>                      <C>
05 Brown                    38 Marinette                  03 Barron                47   Pierce
15 Door                     42 Oconto                     09 Chippewa              48   Polk
19 Florence                 72 Menominee                  17 Dunn                  54   Rusk
31 Kewaunee                 84 Menominee RNIP             46 Pepin                 55   St Croix
36 Manitowoc
</Table>

<Table>
<Caption>
    REGION 5: MARSHFIELD/STEVENS POINT                          REGION 6: APPLETON/OSHKOSH

<S>                         <C>                           <C>                      <C>
01 Adams                    39 Marquette                  08 Calumet               92   Oneida RNIP
10 Clark                    49 Portage                    20 Fond Du Lac
24 Green Lake               69 Waushara                   44 Outagamie
27 Jackson                  71 Wood                       68 Waupaca
29 Juneau                                                 70 Winnebago
</Table>

<Table>
<Caption>
         REGION 7: LACROSSE                                    REGION 8: MADISON/SOUTH CENTRAL

<S>                         <C>                           <C>                      <C>
06 Buffalo                  61 Trempealeau                11 Columbia              28   Jefferson
12 Crawford                 62 Vernon                     14 Dodge                 33   Lafayette
32 LaCrosse                                               22 Grant                 53   Rock
41 Monroe                                                 23 Green                 56   Sauk
52 Richland                                               25 Iowa
</Table>

<Table>
<Caption>
      REGION 9: SOUTHEAST WISCONSIN                                 ESTABLISHED COUNTIES

<S>                         <C>                           <C>                      <C>
45 Ozaukee                                                13 Dane
51 Racine                                                 18 Eau Claire
59 Sheboygan                                              30 Kenosha
64 Walworth                                               40 Milwaukee
66 Washington                                             67 Waukesha
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -158-
<PAGE>

                                  ADDENDUM XII

                          COMMON CARRIER TRANSPORTATION

                           MEMORANDUM OF UNDERSTANDING
                                     BETWEEN
                    MILWAUKEE COUNTY MEDICAID/BADGERCARE HMOS
                                       AND
                  MILWAUKEE COUNTY DEPARTMENT OF HUMAN SERVICES

All Milwaukee County Medicaid Health Maintenance Organizations (HMOs) will
provide common carrier transportation for their Medicaid/BadgerCare enrollees.
Transportation services will be limited to:

o    Transportation of Medicaid/BadgerCare HMO members only.

o    Transportation of Medicaid/BadgerCare HMO members to and from Medicaid
     covered services only.

The HMO is responsible for arranging for the common carrier transportation and
providing monthly costs to Milwaukee County Department of Human Services (DHS),
of common carrier transportation provided. Monthly costs will include
information specified in the attachment. The DHS is responsible for reimbursing
the HMO for mileage and an administration fee.

The HMO and DHS agree to facilitate effective communication between agencies,
work together to resolve inter-agency coordination and communication problems,
and inform staff from both the HMO and DHS about the policies and procedures for
this cooperation, coordination and communication.

This agreement becomes effective when both the HMO and DHS have signed.

<Table>
<Caption>
      Milwaukee County Department of                                  Milwaukee County
              Human Services                                 Health Maintenance Organization
  -------------------------------------                   -------------------------------------
<S>                                                       <C>
  Signature                                               Signature

  -------------------------------------                   -------------------------------------
  Title                                                   Title

  -------------------------------------                   -------------------------------------
  Date                                                    Date

  -------------------------------------                   -------------------------------------
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -159-
<PAGE>

           Milwaukee County Medicaid/HMO Common Carrier Transportation
                       Monthly Invoice from HMO to County

(DATE)

Milwaukee County DHS
Financial Assistance Division Administrator
1220 West Vliet Street
Milwaukee, WI  53205

Dear Sir:

(HMO NAME)'s total transportation costs for the month of (MONTH, YEAR) was
($_____________). This amount includes transportation and administration fees.

Please remit the above dollar amount to:

                                    (HMO NAME)
                                    (AUTHORIZED INDIVIDUAL)
                                    (ADDRESS)

Thank you.

Sincerely,

(NAME/HMO)

HMO Contract for January 1, 2002 - December 31, 2003

                                     -160-
<PAGE>

                                  ADDENDUM XIII

                        MODEL MEMORANDUM OF UNDERSTANDING
                                     BETWEEN
                         HEALTH MAINTENANCE ORGANIZATION
                                       AND
         SCHOOL DISTRICT OR CESA MEDICAID-CERTIFIED FOR THE SCHOOL BASED
                                SERVICES BENEFIT

School based services is a benefit paid FFS by the Wisconsin Medicaid Program
for all school enrolled recipients, including those enrolled in HMOs. The School
Based Service (SBS) provider is responsible for services which include
occupational/physical/speech therapies, private duty or home care individualized
nursing services, mental health services, testing services, school Individual
Education Plan (IEP) services, and Individualized Family Service Program (IFSP)
services, when provided in the school. The HMOs are responsible for providing
and managing medically necessary services outside of school settings. However,
there are some situations where schools cannot provide services, such as after
school hours, during school vacations, and during the summer. Therefore,
avoidance of duplication of services and promotion of continuity of care for
Medicaid/BadgerCare HMO enrollees requires cooperation, coordination and
communication between the HMO and the SBS provider.

The HMO and the SBS provider agree to facilitate effective communication between
agencies, work to resolve inter-agency coordination and communication problems,
and inform staff from both the HMO and the SBS provider about the policies and
procedures for this cooperation, coordination and communication. Recognizing
that these "clients-in-common" could receive duplicate services and could suffer
with problems in continuity of care (e.g., when the school year ends in the
middle of a series of treatments), the HMO and the SBS provider agree to
cooperate in communicating information about the provision of services and in
coordinating care.

This agreement becomes effective on the date the SBS provider is certified by
the Wisconsin Medicaid Program or on the date when both the HMO and the SBS
provider have signed, whichever is later. It may be terminated in writing with
two weeks notice by either signer. The SBS provider is the School District or
the CESA.

<Table>
<Caption>
------------------------------------                     ------------------------------------
               HMO                                                  SBS Provider
------------------------------------                     ------------------------------------
<S>                                                      <C>
Authorizing Signature                                    Authorizing Signature

------------------------------------                     ------------------------------------
Title                                                    Title

------------------------------------                     ------------------------------------
Date                                                     Date

------------------------------------                     ------------------------------------
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -161-
<PAGE>

                                  ADDENDUM XIV

       GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOS, TARGETED
           CASE MANAGEMENT (TCM) AGENCIES, AND CHILD WELFARE AGENCIES

(The same language will be incorporated as an Appendix in the case management
provider handbook, ensuring that both HMOs and case management providers have
the same language available to them.)

HMO RIGHTS AND RESPONSIBILITIES

1.   The HMO must designate at least one individual to serve as a contact person
     for case Management providers. If the HMO chooses to designate more than
     one contact person, the HMO should identify the target populations for
     which each contact person is responsible.

2.   The HMO may make referrals to case management agencies when they identify
     an enrollee from an eligible target population who they believe could
     benefit from case management services.

3.   If the enrollee or case manager requests the HMO to conduct an assessment,
     the HMO will determine whether there are signs and symptoms indicating the
     need for an assessment. If the HMO finds that assessment is needed, the HMO
     will determine the most appropriate level for an assessment to be conducted
     (e.g., primary care physician, specialist, etc.). If the HMO determines
     that no assessment is needed, the HMO will document the rationale for this
     decision.

4.   The HMO must determine the need for medical treatment of those services
     covered under the HMO Contract based on the results of the assessment and
     the medical necessity of the treatment recommended.

5.   The HMO case management liaison, or other appropriate staff as designated
     by the HMO, must participate in case planning with the case management
     agency, unless no services provided through the HMO are required.

     o    The case planning may be done through telephone contact or means of
          communication other than attending a formal case planning meeting.

     o    The HMO must informally discuss differences in opinion regarding the
          HMO's determination of treatment needs if requested by the recipient
          or case manager.

     o    The HMO case management liaison and the case manager must discuss who
          will be responsible for ensuring that the enrollee receives the
          services authorized by and provided through the HMO.

 HMO Contract for January 1, 2002 - December 31, 2003

                                     -162-
<PAGE>

     o    The HMO's role in the case planning may be limited to a confirmation
          of the services the HMO will authorize if the enrollee and case
          manager find these acceptable.

CASE MANAGEMENT AGENCY RIGHTS AND RESPONSIBILITIES

1.   The case management agency is responsible for initiating contact with the
     HMO to coordinate services to recipient(s) they have in common and provide
     the HMO with the name and phone number of the case Manager(s).

2.   If the HMO refers an enrollee to the case management agency, the case
     management agency must conduct an initial screening based on their usual
     procedures and policies. The case management agency must determine whether
     or not they will provide case management services and notify the HMO of
     this decision.

3.   The case management agency must complete a comprehensive assessment of the
     enrollee's needs in accordance with the requirements in the Part U provider
     handbook. This includes a review of the enrollee's physical and dental
     health needs.

4.   If the case management agency requires copies of the enrollee's medical
     records, the case Management agency must obtain the records directly from
     the service provider, not from the HMO.

5.   The case manager must identify whether the enrollee has additional service
     or treatment needs. As a part of this process, the case manager and the
     enrollee may seek additional assessment of conditions which the HMO may be
     expected to treat under the terms of its contract, if the HMO determines
     there are specific signs and symptoms indicating the need for an
     assessment.

6.   The case management agency may not determine the need for specific medical
     care covered under the HMO Contract, nor may the case management agency
     make referrals directly to specific providers of medical care covered
     through the HMO.

7.   The case manager must complete a comprehensive case plan in accordance with
     the requirements of the Part U provider handbook. The plan must include the
     medical services the enrollee requires as determined by the HMO.

8.   If the case management agency specifically requests the HMO liaison to
     attend a planning meeting in person, the case management agency must
     reimburse the HMO for the costs associated with attending the planning
     meeting. These are allowable costs for case management reimbursement
     through Wisconsin Medicaid.

     Nothing in these guidelines precludes the HMO and the case management
     agency from entering into a formal contract or Memorandum of Understanding
     to address issues not outlined here.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -163-
<PAGE>

                                   ADDENDUM XV

                     PERFORMANCE IMPROVEMENT PROJECT OUTLINE

The report for each performance improvement project must address each of the
following points in order for the Department to evaluate the reliability and
validity of the data and the conclusions described in the study:

1.   Topic

     a.   Is the topic important to the enrolled population?

     b.   Can it be affected by the actions of the HMO?

     c.   Was the process of the topic selection described?

2.   Method

     a.   Was the method and procedure used to study the topic clear?

     b.   Study question:

          o    Was the study question clearly stated and consistent throughout
               the study?

          o    Is the study question specific?

3.   Data Collection

     a.   Was the data fully described in detail?

     b.   Was the data appropriate to answer the study question?

     c.   Was the data collection process fully described?

     d.   Was the data collection appropriate to answer the study question?

     e.   Were the data collectors appropriate to collect the data?

     f.   Was interrater reliability adequate?

     g.   Did the loss of data or subjects affect validity?

     h.   Was the study time clear?

4.   Intervention (not applicable if the project is to establish a baseline
     only)

     a.   Was the intervention fully described?

     b.   Was the intervention practical (can it be widely implemented?)

     c.   Was the implementation of the intervention monitored and reported to
          ensure that it was done properly?

5.   Results and interpretation

     a.   Was the data collected fully reported?

     b.   Did the study include comparisons to give meaning to the results?

     c.   Is the norm or standard expressed in a specific numerical manner?

     d.   Is the goal, norm or standard appropriate to this population and
          study?

     e.   Was the comparison group (if applicable) as close as possible to the
          population under study and were any differences acknowledged?

     f.   If pre-and-post measures were used, was an explanation for the
          differences between the measures considered?

HMO Contract for January 1, 2002 - December 31, 2003

                                     -164-
<PAGE>

     g.   Was assignment to groups random?

     h.   Did the study appropriately use statistical testing? (x2 t-test,
          regression analysis, etc.)?

     i.   Were the conclusions consistent with the results?

     j.   Were data tables, figures and graphs consistent with the text?

     k.   Did the study consider its limitations?

     l.   Did the study conclude or imply causality when the supporting data is
          only correlational?

     m.   Did the study include how to improve the study?

     n.   Did the study present recommendations on the results?

     o.   Did the report clearly state whether performance improvement goals
          were met (if an intervention was carried out), and if the goals were
          not met, was there an analysis of why not and a plan for future
          action?

6.   Miscellaneous

     a.   Was enrollee confidentiality protected?

     b.   Did consumers participate in the study (other than as the subjects)?

     c.   Did the study include cost/benefit analysis or some other
          consideration of financial impact?

     d.   Were next steps described in detail? (Dates and timelines).

     e.   Were the results and conclusions distributed throughout the HMO?

     f.   Did table, figures and graphs convey their information clearly without
          reference to the report text?

     g.   Did the study report include an accurate summary?

     h.   Was the study clearly written?

HMO Contract for January 1, 2002 - December 31, 2003

                                     -165-
<PAGE>

                                  ADDENDUM XVI

               TARGETED PERFORMANCE IMPROVEMENT MEASURES DATA SET

The Quality Assessment/Performance Improvement section of the Contract requires
each Medicaid/BadgerCare contracted HMO to report their activity in targeted
care areas. The data reporting guidelines and specifications to be used for
reporting 2001 data are defined in "1999 Preventive Care Objectives and 2000
Targeted Performance Improvement Measures Reporting Documentation Reporting
Periods 1999 and 2000." The HMOs must use these guidelines and specifications
unless the HMO has worked with the Department in developing alternative
reporting arrangements. The Targeted Performance Improvement Measures for
calendar year 2001 must be reported to the Department by October 1, 2002.
Starting in calendar year 2002, the Department will use the MEDDIC-MS system.
(See Article III W 13 for a description of the MEDDIC-MS system.)

HMO Contract for January 1, 2002 - December 31, 2003

                                     -166-
<PAGE>

                                  ADDENDUM XVII

                     MEDICAID/BADGERCARE HMO NEWBORN REPORT

PLEASE PRINT, TYPE, OR COMPLETE IN A LEGIBLE MANNER.

1.   HMO NAME
              -----------------------------------------------------------------

     HMO PROVIDER NUMBER
                        -------------------------------------------------------

     TELEPHONE NUMBER
                     ----------------------------------------------------------

2.   NEWBORN NAME
                 --------------------------------------------------------------
                            (First)            (M.I.)           (Last)

     DATE OF BIRTH                                      SEX
                  --------------------------------         --------------------

     TWIN:             NO             YES          IF YES, COMPLETE TWO FORMS
                          ------          ------

     DATE OF DEATH
                  -------------------------------------------------------------

3.   MOTHER'S NAME
                  -------------------------------------------------------------
                            (First)            (M.I.)           (Last)

     ADDRESS
             ------------------------------------------------------------------
                                (Street Address)

        -----------------------------------------------------------------------
                     (City)                            (State)       (Zip Code)

4.   MOTHER'S MEDICAID/BADGERCARE ID NUMBER
                                            -----------------------------------

THIS INFORMATION IS ACCURATE TO THE BEST OF MY KNOWLEDGE.

---------------------------------          ----------------------------------
             SIGNATURE                                     DATE

MAIL TO:                                   FAX TO:
      EDS                                       EDS
      ATTN:  HMO UNIT                           ATTN:  HMO UNIT
      6406 BRIDGE ROAD                          (608) 221-8815
      MADISON, WI  53784

HMO Contract for January 1, 2002 - December 31, 2003

                                     -167-
<PAGE>

INSTRUCTIONS FOR COMPLETING THE MEDICAID/BADGERCARE HMO NEWBORN REPORT

This report should be completed for infants born to mothers who are
Medicaid/BadgerCare eligible and enrolled in the HMO at the time of birth of the
infant.

<Table>

<S>   <C>                            <C>
1.    HMO Name:                      In this field enter the name of the HMO reporting.

      HMO Provider Number:           In this field enter the 8 digit Medicaid provider number of the
                                     HMO reporting.

      Telephone Number:              In this field enter the telephone number of the HMO that fiscal
                                     agent can call with questions about submitted Newborn reports.

2.    Newborn Name:                  In this field enter the name of the newborn infant.  It is a fairly
                                     frequent occurrence that the mother has not given a first and
                                     middle name to the baby at the time the report is completed.  In
                                     these situations, you should still enter the last name of the
                                     newborn as the mother's last name; the first name/middle initial
                                     can be entered as "baby male" or "baby female."

      Date of Birth:                 In this field enter the date of birth of the newborn infant, in
                                     MM/DD/YY format.

      Sex:                           In this field enter the sex of the newborn infant, M=Male,
                                     F=Female.

      Twin:                          In this field check no if the newborn infant is not a twin, check
                                     yes if the newborn infant is a twin.  If the newborn infant is a
                                     twin, complete one Newborn Report for each twin.

      Date of Death:                 In this field enter the date of death of the newborn infant, if it has
                                     occurred, in MM/DD/YY format.

3.    Mother's Name:                 In this field enter the first name, middle initial, and last name of
                                     the mother of the newborn infant.

      Address:                       In this field enter the address of the mother of the newborn
                                     infant - street address, city, state, and zip code.

      Mother's Medicaid ID           In this field enter the 10 digit Medicaid/BC ID number of the
      Number:                        mother of the newborn infant.
</Table>

The HMO staff person completing the report should sign and date the form and
send it to the address listed at the bottom of the report.

The particular format of the form shown in Addendum XVII does not have to be
used by the HMO if a more efficient format has been designed by the HMO.
However, whatever format is used, the information described above is the
necessary information that must be sent to EDS.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -168-
<PAGE>

                                 ADDENDUM XVIII
                                    (DELETED)

                   RECOMMENDED CHILDHOOD IMMUNIZATION SCHEDULE

HMO Contract for January 1, 2002 - December 31, 2003

                                     -169-
<PAGE>

                                  ADDENDUM XIX

             REPORTING REQUIREMENTS FOR NEONATAL INTENSIVE CARE UNIT
                                  RISK-SHARING

HMO reporting of NICU costs should follow the requirements listed below, and are
due at the Department before May 1 of the year following the previous calendar
year. Department risk-sharing for NICU is based on Level II, Level III, and
Level IV neonatal intensive care unit facilities and services only. HMO
reporting shall be by HMO service area.

 HMO:                               Reporting Period:
     ---------------------------       January 1, 200___ - December 31, 200___

Medicaid Provider (Payee) Number:

A.   HMO SUMMARY DATA BY COUNTY

     1.   Hospital Inpatient Costs for Level II, III, and IV NICU Services*

<Table>
<Caption>
              NUMBER                 NUMBER OF                   AMOUNT                   AMOUNT
              OF DAYS                ADMISSIONS                  BILLED                   PAID
              -------                ----------                  ------                   ------
<S>                                  <C>                         <C>                      <C>

</Table>

   * NICU Level II, III, and IV facilities and services are described in
     Article V.E.(3) of the Contract.

     2.   Physician Services Associated with Level II, III, and IV NICU Services

<Table>
<Caption>
                      AMOUNT BILLED:                             AMOUNT PAID
                      --------------                             -----------
<S>                                                              <C>

</Table>

B.   HMO DETAILED DATA (for costs summarized in Part A) Data must be reported by
     month, by county, and by year (i.e., if an enrollee is in NICU for two or
     more months the dollar amounts and other data must be separated by the
     month in which it occurred). Amounts paid should include payments made the
     following year, as long as the service was provided during the reporting
     period.

<Table>
<Caption>
             ENROLLEE
            MEDICAID/B               NICU       NICU      NUMBER        AMOUNT       AMOUNT       AMOUNT         AMOUNT
ENROLLEE      C ID                   ADMIT    DISCHARGE   OF DAYS     BILLED-HOSP   PAID-HOSP     BILLED-         PAID-
  NAME        NUMBER      MONTH      DATE       DATE      BILLED        (UB-92)      (UB-92)     PHYSICIAN      PHYSICIAN
--------    ----------    -----      -----    ---------   -------     -----------   ---------    ---------      ---------
<S>         <C>           <C>        <C>      <C>         <C>         <C>           <C>          <C>            <C>

</Table>

  HMO Contract for January 1, 2002 - December 31, 2003

                                     -170-
<PAGE>

               Neonatal Intensive Care Unit Risk-Sharing Worksheet

<Table>
<Caption>
                       CALCULATION

<S>    <C>                                                       <C>                  <C>
1.     HMO enrollee months:
                                                                                      -------------------

2.     Enrollee years:                                           (line 1/12)
                                                                                      -------------------

3.     Threshold:  75 days per 1000 enrollee years               (75 x line 2/1000)
                                                                                      -------------------

4.     NICU days reported by HMO:
                                                                                      -------------------

5.     NICU days over threshold to be reimbursed:                (line 4 - line 3)
                                                                                      -------------------

6.     Inpatient paid:
                                                                                      -------------------

7.     Physician paid:
                                                                                      -------------------

8.     Total cost:                                               (line 6 + line 7)
                                                                                      -------------------

9.     Average cost per day:                                     (line 8 /line 4)
                                                                                      -------------------

10.     90% of cost/day:  (Not to exceed $1,443)                 (0.9 x line 9)
                                                                                      -------------------

11.     Reimbursement amount:  Days x 90% cost                   (line 5 x line 10)
                                                                                      -------------------
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -171-

<PAGE>
                                   ADDENDUM XX
                                    (DELETED)

             SPECIFIC TERMS OF THE MEDICAID/BADGERCARE HMO CONTRACT

HMO Contract for January 1, 2002 - December 31, 2003

                                     -172-
<PAGE>

                                 ADDENDUM XXI-A

                   FORMAL GRIEVANCE EXPERIENCE SUMMARY REPORT

SUMMARIZE EACH MEDICAID/BADGERCARE GRIEVANCE REVIEWED IN THE PAST QUARTER.

I.   GRIEVANCES RELATED TO PROGRAM ADMINISTRATION

<Table>
<Caption>
                                                                                               Administrative
      Member            Date                                               Summary of           Changes as a
 Identification       Grievance         Nature of           Date           Grievance              Result of
      Number            Filed           Grievance         Resolved         Resolution         Grievance Review
 --------------       ---------         ---------         --------         ----------         ----------------
<S>                   <C>               <C>               <C>              <C>                <C>

</Table>

II.  GRIEVANCES RELATED TO BENEFITS DENIALS/REDUCTION

<Table>
<Caption>
                                                                                              Administrative
      Member            Date                                               Summary of           Changes as a
 Identification       Grievance         Nature of           Date           Grievance              Result of
      Number            Filed           Grievance         Resolved         Resolution         Grievance Review
 --------------       ---------         ---------         --------         ----------         ----------------
<S>                   <C>               <C>               <C>              <C>                <C>

</Table>

III. SUMMARY

     SUBTOTAL:  PROGRAM ADMINISTRATION   _________
     SUBTOTAL:  BENEFITS DENIALS         _________
     TOTAL NUMBER OF GRIEVANCES:         _________

     RETURN THE COMPLETED FORM TO:

                  BUREAU OF MANAGED HEALTH CARE PROGRAMS
                  P.O. BOX 309
                  MADISON, WI  53701-0309
                  FAX:     (608) 266-7729

HMO Contract for January 1, 2002 - December 31, 2003

                                     -173-
<PAGE>

                                 ADDENDUM XXI-B

                   HMO REPORTING FORM FOR INFORMAL GRIEVANCES

--------------------------------------------------------------------------------
                                    HMO NAME

        [ ]     First Quarter
        [ ]     Second Quarter
        [ ]     Third Quarter
        [ ]     Fourth Quarter
        [ ]     Calendar Year 2002
        [ ]     Calendar Year 2003

<Table>
<Caption>
TYPE OF INFORMAL GRIEVANCE                         TOTAL NUMBER OF GRIEVANCES
--------------------------                         --------------------------

<S>                                                <C>
ACCESS PROBLEMS

BILLING ISSUES

QUALITY OF CARE

DENIAL OF SERVICE

OTHER SPECIFY:
</Table>

General Definitions

Access problems include any problem identified by the HMO that causes an
enrollee to have difficulties getting an appointment, receiving care or
receiving culturally appropriate care including the provision of interpreter
services in a timely manner.

Billing issues include the denial of a claim or a recipient receiving a bill for
a Medicaid covered service in which the HMO is responsible for providing or
arranging for the provision of that service.

Qualify of care includes long waiting time in the reception area of providers'
offices, rude providers or provider staff or any other complaint related
directly to patient care.

Others as identified by each HMO.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -174-
<PAGE>

                                  ADDENDUM XXII

        GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN MEDICAID HMOS
                    AND COUNTY BIRTH TO THREE (B-3) AGENCIES

I.   The Birth to Three (B-3) Program is an entitlement program established by
     the Federal Individual with Disabilities Education Act (IDEA). The goal of
     the program is to provide Early Intervention (EI) services to children from
     birth up to the age of three who have developmental disabilities or delays.
     The intended outcome of the program is to ensure maximum amelioration of
     the impact of developmental disabilities or delays on infants and toddlers
     by early and ongoing provision of rehabilitation services.

     A.   The B-3 program is a program funded by Federal, state, and local
          funds. Early Intervention services under Part C (previously Part H) of
          the Individuals with Disabilities Education Act (IDEA) are
          administered in Wisconsin under Administrative Code HSF 90 by county
          Health and Human Services Departments' Birth to Three programs. B-3
          agencies arrange for provision of rehabilitative services (including
          needed physical therapy, occupational therapy, speech-language
          pathology, special instruction, audiology, certain nursing,
          psychological and other services), service coordination, and related
          parent education. Regulations require that B-3 services are delivered
          in a "natural" environment, frequently the child's home. Federal rules
          designate that IDEA, Part C funds are a payer of last resort after all
          other private and public funds, including Medicaid funds.

     B.   There are HMO enrollees that either are or will be in the B-3 program.

     C.   For the purpose of summarizing the B-3 program process for ease of HMO
          understanding, we can consider that the B-3 program has 4 stages.
          These "stages" are only a conceptual tool.

          1.   Stage 1 is the identification of a child as potentially eligible
               and in need of evaluation of whether the child is developmentally
               delayed. This can be done simply by a parent who believes the
               child is not developing normally, or more formally though a
               medical evaluation by the HMO provider. The child is then
               referred to the HMO for evaluation of eligibility and assessment
               of medically necessary services for the Individual Family Service
               Plan (IFSP). If the HMO originated the referral to the B-3
               agency, then any evaluations already completed by the HMO can be
               used as part of the eligibility decision process.

          2.   Stage 2 is the evaluation for eligibility by the B-3 program
               according to State and Federal rules and the assessment of needed
               medical and developmental services for the IFSP.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -175-
<PAGE>

          3.   Stage 3 is the coordinated development of an IFSP that describes
               the integrated set of services that the child and family should
               receive. The HMO, the family, the B-3 agency, and other relevant
               agencies are involved in the development of the IFSP.

          4.   Stage 4 is the provision of services based on the IFSP.

     D.   The HMO is involved with the B-3 program throughout all of the above
          stages. The HMO can identify and refer a child to the B-3 program
          based on the physician's determination that the child is not
          developing normally. The HMO will receive referrals from the B-3
          program. The HMO will be involved in performing evaluation/assessment
          for eligibility determination and needed IFSP services. The HMO will
          be involved in planning a course of rehabilitative treatment and other
          services for the IFSP in conjunction with the family members, B-3
          program staff, and other agencies. Finally, the HMO will be providing
          the services in the IFSP that meet medical necessity per Medicaid
          guidelines.

     E.   Federal and state regulations require an evaluation for eligibility,
          an assessment of needs and the development of an IFSP within 45 days
          of an EI referral to the B-3 agency. A child eligible for B-3 receives
          services according to the IFSP document.

     F.   Regulations require that Medicaid pay for covered IFSP services that
          meet Medicaid's definition of medical necessity. Services meeting
          Medicaid's coverage requirement are to be paid by Medicaid funds
          before county, state or federal IDEA funds are used to pay for the
          services. Wisconsin Medicaid requires HMOs to seek payment from a
          recipient's health insurance first. However, in the B-3 program,
          parents do not have to allow their Medicaid HMO to bill their health
          insurance for B-3 services. In this situation, where the enrollee has
          other insurance but the parents do not allow billing of their health
          insurance for B-3 services, the HMO should bill the B-3 agency. The
          B-3 agencies have established an "average insurance liability amount"
          per month for IFSP therapy services for these situations and will
          reimburse the HMO this amount. HMOs would be responsible for the cost
          of services after the county pays the average insurance liability. The
          B-3 agency will inform the HMOs of those recipients participating in
          the B-3 program for whom the parents/ guardians do not allow billing
          of their health insurance. The B-3 agency will inform the HMOs of the
          alternative billing procedures for these recipients.

     G.   The following guidelines have been developed to establish the
          complementary roles of the HMO and the B-3 agency for clients they
          have in common and to identify the mutual activities of each party
          that will promote effective communication and coordination between the
          two parties. This language will also be incorporated as an Appendix in
          the county B-3 provider materials ensuring that both HMOs and county
          B-3 providers have the same information available to

HMO Contract for January 1, 2002 - December 31, 2003

                                     -176-
<PAGE>

          them. All actions by B-3 are governed by HSF 90, and HMOs are required
          to make a reasonable attempt to assure:

             That HSF 90 standards are met (e.g., two-day referral).

II.  HMO Rights and Responsibilities

     A.   The HMO must designate at least one individual to serve as a contact
          person for county B-3 agencies. If the HMO chooses to designate more
          than one contact person, the HMO should identify the counties which
          each contact person is responsible for. The contact person will work
          toward achieving a close, cooperative relationship between the HMO and
          the B-3 agency. The contact person will work with the B-3 agency to
          establish a mechanism to identify and refer eligible recipients for
          services and for the distribution of appropriate paperwork.

     B.   The HMO will make referrals to county B-3 agencies when they identify
          a recipient who may meet the eligibility guidelines of the Wisconsin
          Administrative Code, Chapter 90 HFS for B-3 services, within 2 days. A
          child under the age of three can be identified and referred to the B-3
          agency based on the judgment of the HMO provider that the child is not
          developing normally.

     C.   If the parent of a child requests the HMO to conduct an
          evaluation/assessment, the HMO will determine the need for such
          evaluation/assessment in accordance with the Medicaid and Chapter 90
          HFS definition of medical necessity. If the evaluation/assessment
          warrants eligibility for B-3 services, a referral should be made to
          the B-3 agency as soon as possible. The HMO evaluation/assessment may
          be used by the B-3 agency for eligibility determination. If additional
          information is needed, the HMO and B-3 program will coordinate a B-3
          evaluation of eligibility and an assessment of IFSP services needed.
          The evaluation and assessment results should be completed within 35
          days from the date of the parent request. Results should be sent to
          the B-3 agency with the parent/guardian consent at the time of
          referral. This provides the B-3 agency sufficient time to complete the
          IFSP within the 45-day time limit mandated by HSF Chapter 90.

     D.   If the county B-3 agency requests a B-3 eligibility determination
          evaluation and assessment of IFSP service needs, the agency will
          provide a copy of the recipient screening tool to assist the HMO in
          determining the need for a full evaluation/assessment. If the HMO
          agrees with the agency request, the HMO will conduct a complete
          evaluation/assessment of the recipient's rehabilitative needs. Federal
          regulations under Chapter 90 HFS require the HMO to forward a copy of
          the findings to the county B-3 agency within 35 days from the date of
          the parent/guardian request. This allows the B-3 agency sufficient
          time to complete the IFSP within the 45-day deadline required by
          federal regulations under Chapter 90 HFS. If the HMO determines that
          no medically necessary

HMO Contract for January 1, 2002 - December 31, 2003

                                     -177-
<PAGE>

          evaluation/assessment is needed, the HMO will document the rationale
          for this decision.

     E.   If the HMO requires copies of the recipient's early intervention
          records held by the county B-3 agency, the HMO may request the records
          directly from the B-3 agency with the parents'/guardians' consent.

          1.   The HMO case management liaison and the county B-3 case manager
               must establish feasible administrative procedures for obtaining
               parents'/guardians' consent for release of such records.

          2.   If the parents'/guardians' consent is not obtained, then any
               further actions on the part of the HMO requiring such records may
               cease.

     F.   The HMO must determine the need for medical treatment related to B-3
          services covered under the HMO contract based on the results of the
          evaluation/assessment and the HMO determination of medical necessity.
          The HMO will not have final say on the entire IFSP, but only on
          whether the EI services indicated in the IFSP are the HMO's
          responsibility.

     G.   The HMO shall work cooperatively with the B-3 agency so that the
          provision of medically necessary services identified in the IFSP plan
          do not suffer interruption due to delays caused by HMO prior
          authorization and/or utilization management procedures.

     H.   The HMO B-3 liaison, or other appropriate staff as designed by the
          HMO, must participate in case planning for the development of the IFSP
          with the county B-3 agency, unless no services are provided through
          the HMO:

          1.   The case planning may be done through telephone contact or
               written communication rather than attending a formal case
               planning meeting.

          2.   The HMO is encouraged to recommend the type, frequency, and
               amount of services that might be on the IFSP.

          3.   The HMO must informally discuss differences in opinion regarding
               the HMO's determination of medically necessary treatment needs if
               requested by the recipient or case manager.

          4.   The HMO case management liaison and the county B-3 manager must
               discuss the follow-up to be undertaken so that IFSP services
               authorized by the HMO according to the criteria of medical
               necessity are made available and accessible to the recipient, and
               work with B-3 agencies to assist in scheduling recipient
               appointments.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -178-
<PAGE>

          5.   The HMO's role in the case planning may be limited to a
               confirmation of the services the HMO will authorize if the
               recipient and county B-3 case manager find these acceptable.

     I.   The parent/guardian of a B-3 recipient may chose to receive B-3
          services from the recipient's HMO or may elect to disenroll the child
          from the HMO as allowed by Medicaid. However, HMOs may not restrict in
          any way the right of the recipient to remain enrolled in the HMO and
          to receive medically necessary services through the HMO.

     J.   HMOs must arrange for providers with expertise appropriate to treat
          the infant and toddler population to meet the medically necessary
          needs of B-3 recipients enrolled in the HMO.

III. County B-3 Agency Rights and Responsibilities

     A.   The county B-3 agency is responsible for the initial contact with the
          HMO to coordinate services to recipient(s) they have in common, and
          will provide the HMO with the name and phone number of the county B-3
          agency.

     B.   If the HMO refers a recipient to the county B-3 agency, the county B-3
          agency must conduct an eligibility evaluation/assessment based on
          their usual procedures and policies in collaboration with the HMO.

     C.   If the county B-3 agency requires copies of the recipient's medical
          records, the B-3 agency may request the records directly from the HMO
          with the consent of the parent/guardian.

     D.   The B-3 case manager (service coordinator) may also identify whether
          the recipient has service or treatment needs over and above what is
          included in the child's IFSP. As a part of this process, the county
          B-3 agency and the recipient may seek additional assessment for
          treatment of medical conditions not included in the IFSP which the HMO
          may be expected to assess and treat under the terms of its contract.
          In these cases, the HMO will determine if there are specific signs and
          symptoms indicating the medical necessity for the assessment and
          treatment. The B-3 agency must refer and coordinate
          evaluation/assessment with the HMO within 2 days of identifying a
          potentially eligible child.

     E.   The county B-3 agency may not determine the need for specific medical
          care covered under the HMO contract, nor may the county B-3 agency
          make referrals directly to specific providers of medical care covered
          through the HMO.

     F.   The county B-3 agency must complete an IFSP in accordance with the
          requirements of HSF 90.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -179-
<PAGE>

     G.   If the county B-3 agency specifically requests the HMO liaison to
          attend a planning meeting in person, the county B-3 agency may
          coordinate with the HMO for the costs associated with attending the
          planning meeting. These are not separately allowable costs for
          reimbursement through Wisconsin Medicaid.

     H.   The county B-3 agency is responsible for making timely referrals to
          School Based Services (SBS) providers for recipients participating in
          B-3 programs, who turn the age of 3 and are therefore losing
          eligibility for B-3 services, and are likely to be eligible for the
          SBS program.

     I.   Nothing in these guidelines precludes the HMO and the county B-3
          agency from entering into a formal contract or Memorandum of
          Understanding to address issues not outlined here.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -180-
<PAGE>

                                 ADDENDUM XXIII

                               WISCONSIN MEDICAID
                   HMO REPORT ON AVERAGE BIRTH COSTS BY COUNTY

County Child Support Agencies (CSA) obtain court orders requiring fathers to
repay birth costs that have been paid by Medicaid FFS as well as Medicaid Health
Maintenance Organizations (HMO). The purpose of this report is to provide CSAs
with appropriate HMO birth cost payment information.

1.   Data must be reported annually. The submission schedule can be found in
     Addendum IV, Part A, of the HMO contract.

2.   Data must be reported for one full year beginning January 1, of the prior
     year through December 31, of that year (i.e., for contract year 2002, data
     would accumulated and reported for the period January 1, 2001, through
     December 31, 2001).

3.   Data must reflect claims/encounters with dates of service January 1 through
     December 31 and not claims paid through the reporting deadline.

4.   Data must be reported individually for each county the HMO has been
     certified by the Department to serve. Do not leave any column of the HMO
     birth cost chart blank. Use NA if the data is not available.

5.   Average dollar amounts paid must include professional and hospital (UB-92)
     services for the categories defined in the HMO birth cost chart. Do not
     include high risk delivery costs in the average payments (i.e., NICU
     related charges).

6.   HMO birth cost chart:

          MEDICAID HEALTH MAINTENANCE ORGANIZATION AVERAGE BIRTH COSTS
                   January 1, ____, through December 31, ____

<Table>
<Caption>
                        Average Paid          Average Paid        Average Paid       Average Paid      Average Paid
                          Hospital              Hospital             Newborn       Vaginal Delivery  Cesarean Section
HMO         County    (UB-92) - Mother      (UB-92) - Newborn      (Physician)       (Physician)       (Physician)
---         ------    ----------------      -----------------     ------------     ----------------  ----------------
<S>         <C>       <C>                   <C>                   <C>              <C>               <C>
 XXX        Dane              $                   NA                   $                  $                 $

 XXX        Door              $                    $                   $                  $                 $
</Table>

7.   In some counties, judges will not assign birth costs to the father based
     upon average figures. Upon request of the EDS Contract Monitor, the HMO
     must provide actual charges less any payments made by a third party payer
     for the use by the court in setting actual birth and related costs to be
     paid by the father. Birth cost information must be submitted to the EDS
     Contract Monitor within fourteen (14) days from the date the request was
     received by the HMO. Refer to the next page for the reporting requirements.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -181-
<PAGE>

                  MEDICAID/BADGERCARE HMO BIRTH COST REQUEST

                  PART I:  LOCAL CHILD SUPPORT AGENCY PORTION

PART I IS TO BE COMPLETED BY THE LOCAL CHILD SUPPORT AGENCY. PLEASE PRINT, TYPE
OR COMPLETE IN A LEGIBLE MANNER.

1.   HMO NAME
              -----------------------------------------------------------------

2.   NEWBORN NAME
                 --------------------------------------------------------------
                            (First)            (M.I.)           (Last)

     *(If multiple births, please list all names)

     DATE OF BIRTH                                      SEX
                  --------------------------------         --------------------

3.   MOTHER'S NAME
                  -------------------------------------------------------------
                            (First)            (M.I.)           (Last)

     MEDICAID/BADGERCARE ID NUMBER
                                   --------------------------------------------

     ADDRESS
             ------------------------------------------------------------------
                                (Street Address)

        -----------------------------------------------------------------------
                     (City)                            (State)       (Zip Code)

4.   I certify this information is accurate to the best of my knowledge:

     Name of Local Child Support Agency
     Name (Please Print)
     Signature
     Title
     Date
     Phone Number:                              FAX Number:

     MAIL THE FORM TO:                            FAX THE FORM TO:
              EDS                                          EDS
              ATTN:  HMO UNIT                              ATTN:  HMO UNIT
              6406 BRIDGE ROAD                             (608) 221-8815
              MADISON, WI  53784

HMO Contract for January 1, 2002 - December 31, 2003

                                     -182-
<PAGE>

                             PART II:  HMO PORTION

PART II IS TO BE COMPLETED BY THE HMO. PLEASE PRINT, TYPE OR COMPLETE IN A
LEGIBLE MANNER.

1.   The actual payment for birthing costs for the mother and her baby.

     MOTHER'S NAME                                 ID#
                   --------------------------------    -------------------

     HOSPITAL/BIRTHING CENTER PAYMENT (MOTHER)                  $
                                                                 ------------

     HOSPITAL/BIRTHING CENTER PAYMENT (NEWBORN)                 $
                                                                 ------------

     PHYSICIAN PAYMENT (MOTHER)                                 $
                                                                 ------------

     PHYSICIAN PAYMENT (NEWBORN)                                $
                                                                 ------------

     AMOUNT PAID BY OTHER INSURANCE                             $
                                                                 ------------

2.   COMMENTS: (i.e., retroactively disenrolled from [HMO NAME]) effective
     [DATE], services denied

     [STATE DENIAL REASON]:
                           -------------------------------------------------

     -----------------------------------------------------------------------

3.   I certify this information is accurate to the best of my knowledge.

     Name of HMO
     Name (Please Print)
     Signature
     Title
     Date

4.   MAIL OR FAX PART I AND PART II WITHIN 14 OF RECEIPT TO:

         MAIL THE FORM TO:                          FAX THE FORM TO:
                  EDS                                        EDS
                  ATTN:  HMO UNIT                            ATTN:  HMO UNIT
                  6406 BRIDGE ROAD                           (608) 221-8815
                  MADISON, WI  53784

HMO Contract for January 1, 2002 - December 31, 2003

                                     -183-
<PAGE>

                                  ADDENDUM XXIV

                          LOCAL HEALTH DEPARTMENTS AND
                      COMMUNITY-BASED HEALTH ORGANIZATIONS
                               A RESOURCE FOR HMOs

                            LOCAL HEALTH DEPARTMENTS

Local Health Departments (LHDs) throughout the state have an essential role in
promoting the health of citizens of Wisconsin. They have general and specific
statutory authority to prevent disease, promote health and protect the health of
the citizens. They work in collaboration with community-based organizations,
medical care facilities, and local community agencies to develop and coordinate
systems of care so that the public's health can be protected. Specific statutory
authority includes the three public health core functions of assessment, policy
development and assurance:

ASSESSMENT: means the regular, systematic collection, assembly, analysis and
dissemination of information on the health of the community. This includes
incidence and prevalence data, and morbidity, mortality and environmental data
in areas that include: communicable disease, chronic disease and environmental
health.

POLICY DEVELOPMENT: means the exercise of responsibility to serve the public's
interest by fostering shared ownership with the community in the development of
comprehensive public health plans, programs, services and guidelines.

ASSURANCE: means to take reasonable and necessary action to assure citizens that
services necessary to achieve public health goals are available. This is done by
encouraging the actions of others in the private, public and/or voluntary
sectors, and by requiring action through enforcement or by directly providing
services.

DESCRIPTION OF PUBLIC HEALTH SERVICES: LHDs' capacities may vary, however, LHDs
are required to provide or assure five basic public health services. These
include: communicable disease surveillance, prevention and control; health
promotion; disease prevention; human health hazard control; and generalized
public health nursing programs. Although LHDs serve the population as a whole,
they have established traditions of working with population groups at increased
risk of illness, disability and premature death. The following specific services
have been delineated with the hope of linking Medicaid Managed Care Plans with
Local Health Departments. Linking primary care and public health is an essential
strategy to strengthen the health of local communities and thus benefit the
population of the state as a whole.

o    LHDs have access to population data that may be very useful to managed care
     organizations in determining their services and quality studies.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -184-
<PAGE>

o    LHDs closely collaborate their programs with key community agencies that
     serve the Medicaid population. These include: WIC, Prenatal Care
     Coordination, School Health Services, Birth to Three Programs, Family
     Planning, and Developmental Disabilities.

o    LHDs promote and provide health education programs on topics that include:
     Domestic Abuse/Violence Prevention, Smoking Cessation, Breast Feeding,
     Cardiovascular Risk Reduction, Prenatal/Postpartum Education, Nutrition,
     and Self-Care Skills.

o    LHDs provide health-related home/community inspections in areas that
     include Lead Poisoning, Asbestos, Indoor Air Quality, Home Safety, and
     Drinking Water Safety.

o    LHDs monitor communicable disease incidence/prevalence, provide information
     to the public on prevention, and conduct epidemiological investigations of
     outbreaks/unusual conditions.

ACCESS TO SPECIAL POPULATIONS

Wisconsin's LHDs perform many public health services, including the provision of
direct services to Medicaid recipients. Some local health departments provide
Medicaid reimbursable services for which HMOs may contract, such as:

o    HealthCheck screening, outreach and follow-up;

o    Immunizations;

o    Blood lead screening;

o    Extended case management of medical conditions such as asthma, diabetes,
     hypertension and children with special health care needs; and

o    Home health and personal care services.

Some important considerations to remember are that LHDs provide:

o    Clinics serving high-risk populations;

o    Culturally competent staff experienced in dealing with diverse, high risk
     populations;

o    Direct access to outreach and follow up at-risk population groups in home
     and community settings;

o    Environmental inspection and case management for children with elevated
     blood lead levels;

o    Ability to reach hard-to-reach people to assist HMOs in achieving required
     rates, such as the HealthCheck screening rate;

HMO Contract for January 1, 2002 - December 31, 2003

                                     -185-
<PAGE>

o    Experience in family-centered care;

o    Linkages with other community based providers and advocacy groups; and

o    Highly skilled staff who emphasize prevention and public health.

                      COMMUNITY BASED HEALTH ORGANIZATIONS

Throughout the state, the health care network includes many nonprofit community
based health organizations including: private HealthCheck providers, family
planning clinics, and WIC clinics. These organizations may provide some of the
same Medicaid reimbursable services as LHDs and are an essential element to
advance the health of community. They may also have the same access to special
populations as LHDs. (ADDENDUM XXIV.)

       COLLABORATION WITH PUBLIC AND COMMUNITY BASED HEALTH ORGANIZATIONS

HMOs should consider how to utilize the LHDs and community based health
organizations through:

o    IDENTIFYING AND UTILIZING THE RESOURCES THEY PROVIDE; AND

o    WHERE APPROPRIATE, CONTRACTING WITH LHDS AND OTHER COMMUNITY
     HEALTH AGENCIES FOR MEDICAID REIMBURSABLE SERVICES.

The complementary roles of managed care and public health are significant and
evolving. Communities will be healthier and health care costs will be reduced if
health care providers work together. To find out the names of key contacts at
LHDs and community based health organizations in your area, contact your LHD.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -186-
<PAGE>

                                  ADDENDUM XXV

                   GENERAL INFORMATION ABOUT THE WIC PROGRAM,
                      SAMPLE HMO-TO-WIC REFERRAL FORM, AND
                         STATEWIDE LIST OF WIC AGENCIES

GENERAL INFORMATION ABOUT THE WIC PROGRAM AND ITS RELATIONSHIP TO MEDICAID HMOS

The Special Supplemental Nutrition Program for Women, Infants, and Children
(WIC) program is a program enacted as an amendment to the Child Nutrition Act of
1996, and is funded by USDA. WIC provides supplemental nutritious foods,
nutrition education, and referrals to pregnant and breastfeeding women, infants
and children up to age five, who are determined to be at nutritional risk.
Income eligibility is determined by family size and gross income (185 percent of
the poverty level). WIC uses "adjunctive" eligibility which means that any
recipient of Medicaid (including Healthy Start and BadgerCare) is eligible for
WIC.

The State Division of Public Health contracts with 68 local agencies to provide
WIC benefits. In Wisconsin, most WIC agencies are local health departments, but
other community-based organizations are contracted with WIC to provide WIC
benefits, including community action programs and other private non-profit
health agencies.

WIC serves approximately 106,000 women, infants and children each month.
Approximately thirty-five (35) percent of all Wisconsin births are on WIC.
Approximately half of all WIC participants were enrolled in a Medicaid HMO.
Sixty-eight (68) percent of all participants have incomes below the poverty
level; thirty-five (35) percent have less than a high school education.

Section 1902(a)(11)(C) of the Social Security Act requires coordination between
Medicaid HMOs and WIC. This coordination includes the referral of potentially
eligible women, infants, and children to the WIC program and the provision of
medical information by providers working within Medicaid managed care plans to
the WIC program if requested by WIC agencies. Typical types of medical
information requested by WIC agencies include information on nutrition related
metabolic disease, diabetes, low birth weight, failure to thrive, prematurity,
infants of alcoholic, mentally retarded, or drug addicted mothers, AIDS, allergy
or intolerance that affects nutritional status, and anemia.

For more information, refer to the WIC Referral Forms, WIC Project Directory and
the partnership pamphlet that are part of this addendum. Multiple copies of the
WIC Referral Form may be obtained from local WIC agencies.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -187-
<PAGE>

<Table>
<S>                                                                           <C>
DEPARTMENT OF HEALTH AND FAMILY SERVICES                                                       STATE OF WISCONSIN
Division of Public Health                                                     Bureau of Family & Community Health
DOH 4024 (Rev. 02/99)                                                               WIC Program, Federal Reg. 246
</Table>

                            WIC MEDICAL REFERRAL FORM
                                       FOR
        PREGNANT AND BREASTFEEDING AND NONBREASTFEEDING POSTPARTUM WOMEN

Completion of this form is voluntary. Information gathered on this form is used
              for WIC certification and for food package issuance.

Patient's First and Last Name:                      Birthdate:
                              --------------------            ----------------

Address:                                            Telephone:
        ------------------------------------------            ----------------

<Table>
<Caption>
ALL WOMEN:                                                   PREGNANT:                    POSTPARTUM:

<S>                              <C>                         <C>                          <C>
Present weight:                  Hct:                 %      E.D.D.:                      Del. date:
               -----------------     -----------------              ----------------                ------------------
                                 And/or
Present height:                  Hgb:                 gm     Wks gest:                    Prepreg. wt.:
               -----------------     -----------------                --------------                   ---------------

Date taken:                      Date taken:                 Prepreg. wt:                 Wt. gained:
           ---------------------            ----------                   -----------                 -----------------

Vit/Min Rx:
           ---------------------

ALL WOMEN.

Current nutrition-related health problems:

    food allergy or intolerance (specify):
---                                        ----------------------------

    recent major surgery, trauma, or burns:
---                                        ----------------------------

    infectious disease in last 6 months:
---                                     -------------------------------

           pneumonia                                                     HIV or AIDS                   parasitic infection
       ---                                                           ---                           ---

           bronchiolitis (# episodes in last 6 mos:    )                 meningitis                    tuberculosis
       ---                                                           ---                           ---

       nutrition-related chronic disease, genetic or central nervous system
---    disorder, or other medical condition (specify):
                                                      -------------------------

Obstetrical history in any previous pregnancy (if currently pregnant) or most
recent pregnancy (if currently postpartum):

    gestational diabetes                                                 large for gestational age infant
---                                                                  ---

    low birth weight or preterm infant                                   fetal or neonatal death
---                                                                  ---

    infant with nutrition-related birth defect (specify):
---                                                       --------------------------------

PREGNANT WOMEN:

Current nutrition-related health problems:

    gestational diabetes                                                 hyperemesis gravidarum
---                                                                  ---

    pregnancy-induced hypertension                                       fetal growth restriction
---                                                                  ---

MEDICAL NUTRITIONAL PRESCRIBED:

    Ensure(R)        Ensure w/Fiber(R)         Ensure Plus(R)         Sustacal(R)         Sustacal w/Fiber(R)       Boost Plus(R)
---              ---                       ---                    ---                 ---                       ---

    Additional Diagnoses/Health Concerns/Diet Orders:  Physician or Health Professional's Name:
                                                                                                -----------------------------------

    Medical Office/Clinic:
                           --------------------------------------------------------------------------------------------------------

    Address:                                                        Telephone:
            ------------------------------------------------                  -----------------------------------------------------

    Signature:                                                      Date:
              ----------------------------------------------             ----------------------------------------------------------

    LOCAL WIC PROJECT:

</Table>

  HMO Contract for January 1, 2002 - December 31, 2003

                                     -188-
<PAGE>

                           WIC MEDICAL REFERRAL FORM
                                      FOR
                 INFANTS AND CHILDREN (THROUGH 4 YEARS OF AGE)
          Completion of this form is voluntary. Information gathered on this
form is used for WIC certification and for food package issuance.

Patient's First and Last Name:                      Birthdate:
                              --------------------            ----------------

Address:                                            Telephone:
        ------------------------------------------            ----------------

Parent/Caregiver's First and Last Name:
                                       ---------------------------------------

<Table>
<Caption>
ALL INFANTS AND CHILDREN:                                                               INFANTS ONLY:

<S>                   <C>                        <C>                                    <C>
Present Wt:           Length/height:             (    recumbent  or      standing)      Birth weight:
             -------                  ---------   ---                ---                             -------------------
Date measurements taken:
                          ---------------------------------
                                                                                        Birth length:
                                                                                                     -------------------
Hct:         %   and/or   Hgb:         gm    Date taken:
     -------                   -------                  -----------------------

Blood lead:                                Date taken:                                  Gestational age:
           ---------------------------                -------------------------                         ----------------

Vitamin/Mineral Rx:
                   -----------------------------

INFANTS.  Medical conditions the mother had prenatally:
      anemia                                                    high blood lead
----                                                       ----
      pregnancy-induced hypertension                             gestational diabetes
----                                                       ----
      food allergy or intolerance (specify):
----                                         -----------------------------------
      nutrition-related infectious disease, chronic disease, genetic or
----  central nervous system disorder, or other medical condition (specify):

      --------------------------------------------------------------------------

INFANTS AND CHILDREN.  Current nutrition-related health problems:
Infants:      pyloric stenosis        GI reflux        LGA at birth        currently LGA         head circumference <5th percentile
          ---                     ---              ---                 ---                   ---

Infants and Children:
    SGA at birth                                               food allergy or intolerance (specify):
---                                                        ---
    currently SGA                                              recent surgery, trauma, or burns (specify):
---                                                        ---
    failure to thrive
---
    infectious disease in last 6 months:
---
           pneumonia                                           HIV or AIDS                 tuberculosis
       ---                                                 ---                         ---
           bronchiolitis (# episodes in last 6 mos:    )       meningitis                  parasitic infection
       ---                                          ---    ---                         ---
       nutrition-related chronic disease, genetic or central nervous system
---    disorder, or other medical condition (specify):
                                                      -------------------------

FORMULA PRESCRIBED.  Special formula for infants and children:
    Similac NeoSure(R)               Enfamil AR(R)             Kindercal(R)                        Neocate One+(R)
---                              ---                       ---                                 ---
    Enfamil 22(R)                    Neocate(R)                PediaSure(R)                        EleCare(R)
---                              ---                       ---                                 ---
    Nutramigen(R)                    Similac PM 60/40(R)       PediaSurew/Fiber(R)                 Portagen(R)
---                              ---                       ---                                 ---
    Alimentum(R)                     Pregestimil(R)
---                              ---

Standard formula for children:       Similac with Iron(R)      Isomil(R)                           Similac Lactose Free(R)
                                 ---                       ---                                 ---

Intended length of use:
                       ---------------------------------------------------------------------------------------------------

    Additional Diagnoses/Health Concerns/Diet Orders:

    Physician or Health Professional's Name:
                                            ---------------------------------------------------------------------------------------

    Medical Office/Clinic:
                           --------------------------------------------------------------------------------------------------------

    Address:                                                        Telephone:
            ------------------------------------------------                  -----------------------------------------------------

    Signature:                                                      Date:
              ----------------------------------------------             ----------------------------------------------------------

    LOCAL WIC PROJECT:

</Table>

 HMO Contract for January 1, 2002 - December 31, 2003

                                     -189-
<PAGE>
                                  Partnerships
                                       for
                                     Healthy
                                      Kids

                                    [GRAPHIC]

                                    Wisconsin
                            Division of Public Health

                              Immunization Program
                   Childhood Lead Poisoning Prevention Program
                                   WIC Program

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                                     -190-
<PAGE>

                                Table of Contents
<Table>
<S>                                                                                                  <C>
A.   INTRODUCTION ................................................................................    192

B.   EXPANDING THE PARTNERSHIP ...................................................................    193

C.   WHY THE THREE PROGRAMS WORK TOGETHER ........................................................    193

APPENDIX
PROGRAM DESCRIPTIONS:
IMMUNIZATION PROGRAM .............................................................................    195
1.   What is the Immunization Program? ...........................................................    195
2.   Does the Immunization Program have educational materials? ...................................    196
3.   Does Wisconsin have a statewide Immunization Registry? ......................................    196
4.   Are children in Wisconsin well immunized? ...................................................    197
5.   Who are the contact people for the Immunization Program? ....................................    198

CHILDHOOD LEAD POISONING PREVENTION PROGRAM ......................................................    198
1.   What is the Wisconsin Childhood Lead Poisoning Prevention Program? ..........................    198
2.   What is lead poisoning? .....................................................................    198
3.   Is childhood lead poisoning a problem in Wisconsin? .........................................    199
4.   How is screening for lead poisoning done? ...................................................    199
5.   Are Wisconsin children being screened adequately? ...........................................    200
6.   Why are children enrolled in or eligible for Medicaid at higher risk for lead poisoning? ....    200
7.   What can be done for children with lead poisoning? ..........................................    200

WIC (WOMEN, INFANTS, AND CHILDREN) PROGRAM .......................................................    201
1.   What is WIC? ................................................................................    201
2.   Who is eligible and what is provided? .......................................................    201
3.   Who are WIC participants? ...................................................................    202
4.   How are services provided? ..................................................................    204
5.   Is WIC effective? ...........................................................................    204
</Table>

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<PAGE>

A.   INTRODUCTION

     The state and federally funded Women's, Infant, and Children Nutrition
     Program (WIC), the Immunization Program (IP), and the Wisconsin Childhood
     Lead Poisoning Prevention Program (WCLPPP) all carry the mandate to assure
     that the children of Wisconsin are well nourished, and are protected from
     vaccine-preventable diseases and lead poisoning.

     These public health functions are to assure the health of all the citizens
     of the community. Historically, public health, physicians, and other health
     care providers work together, often as silent partners, to accomplish this.
     Within the partnership, it often fell to public health to assess and
     provide these services to children who may be most vulnerable to a number
     of health and environmental threats: those who are poor, and/or whose
     access to "traditional" insurers and providers was limited.

     Today, care for many of these children has been assumed by a new partner:
     the managed care and health maintenance organizations. In collaboration
     with the Wisconsin Medicaid Program, these insurers/provider groups have
     renewed their commitment to providing health care services to children
     enrolled in Medicaid in a more organized and structured way. The model of
     all children having a "medical home," a setting in which consistent care
     over time is given by one, or selected health care providers, has been
     adopted. This model increases the opportunities for providing education,
     assessments, and interventions that can prevent illness and injury or treat
     it in the earliest stages.

     Our programs, within the Wisconsin Division of Public Health, believe that
     strong collaboration between the public and private sectors will strengthen
     our will and abilities to meet the nutrition, immunization and lead
     poisoning prevention goals for Wisconsin children.

     WHY ARE WE HERE?

     There are many effective collaborative efforts already in place around the
     state and we hope to build on these successes and help facilitate working
     on problem areas. We don't assume to know how each agency or county or HMO
     works; all are so different and there are varying levels of collaboration
     taking place. We also don't assume to know how each county, program, agency
     should or could work together. Our goal in being here is to start (or in
     many cases, expand) the discussion between the programs and the HMO's at
     the local levels. This is obviously the best place to work out the many
     details associated with collaborative efforts. Perhaps there is a good
     working relationship with one program, but the community could benefit from
     further collaborations. Perhaps this will simply affirm and celebrate the
     collaborative efforts, which we can then share with others. In either case,
     we look forward to joining you on this venture.

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<PAGE>

B.   EXPANDING THE PARTNERSHIP

     WIC, WCLPPP, and IP would like to build and expand on the public/private
     partnerships that already exist to provide health care for Wisconsin
     children, especially those for whom access to consistent health care
     resources may be inadequate or underutilized. We believe that WIC clinics
     can provide a pathway that can facilitate not only entrance into the
     healthcare system, but also the assurance that needed and/or required
     services (nutrition counseling/support, immunizations, and lead testing)
     are obtained by all families.

     As new partnerships are defined, and old ones revised, our public health
     programs are looking to private providers and managed care organizations to
     begin to discuss how some of the following concerns may be addressed:

     1.   Increase understanding of the need, requirements for, and services
          available to meet children's nutritional needs, recommended
          immunizations and blood lead screening schedules.

     2.   To facilitate billing and information sharing practices between public
          health, providers, and managed care organizations so that services can
          be provided at all points of contact with children and are not
          duplicated.

     3.   To assure that reimbursement for services provided by local health
          departments and programs is obtainable in a timely and cost-effective
          manner.

     4.   To strengthen and coordinate outreach and referral for WIC services
          when appropriate, and to establish and support a medical home for all
          clients.

     5.   To clarify the roles of managed care and public health in assuring
          (providing and documenting service) the delivery of nutrition,
          immunization and blood lead screening to Wisconsin children.

     By addressing these topics, our programs can be of assistance in providing
     needed services for children, while complementing the work of private
     health care providers.

C.   WHY THE THREE PROGRAMS COLLABORATE

     The Immunization, Lead Poisoning Prevention, and WIC Programs all have a
     common goal: healthy kids in Wisconsin. Even though the programs focus on
     specific objectives, e.g. improve nutritional status, improve immunization
     rates, decrease lead poisoning, they are often positioned in the community
     to best serve this high-risk population.

     Many public health agencies administer all three programs and often share
     space, information, staff and other resources. It is logical for the three
     programs to collaborate because all are seeing a similar target group:

HMO Contract for January 1, 2002 - December 31, 2003

                                     -193-
<PAGE>

     o    children age five and under,

     o    families that are either at risk or high risk,

     o    low-moderate income,

     o    uninsured or underinsured and often receiving sporadic health care.

     Enhancing collaboration between the programs only serves to enhance
     accessibility to these health services, and provides them in a convenient
     and familiar setting.

     WIC IS A LOGICAL PARTNER

     WIC provides a comfortable and convenient setting for receiving benefits.
     WIC has early and late hours, and many projects have Saturday hours to
     better serve working families and students.

     The Wisconsin Immunization, Lead and WIC Programs have been working
     together these past years to enhance services to children and advance the
     objectives of each program. Memorandums of Understanding (MOU) for sharing
     information are in place, as well as policies and procedures for local WIC
     projects to follow. For example, it is a requirement of the WIC Program to
     screen the immunization records of all children, and refer children to
     their provider for immunizations as needed. Immunization dates are entered
     onto either the WIC data system or immunization data system. Another
     example is blood lead screening. During each certification appointment,
     children will have a hemoglobin or hematocrit taken. With a minor
     adjustment of that procedure, the child can also be tested for lead.

     As described in the Appendix, WIC Program, WIC sees many at-high risk
     families in Wisconsin. They return to WIC frequently for recertification
     and food voucher pick-up. Enhancing WIC services with immunization and lead
     screening fits well into certification process, as well as the follow-up
     visits. WIC also provides frequent opportunities to reinforce health
     messages through education sessions and materials. WIC has an elaborate
     data collection system, which collects immunization and lead data, and has
     the capacity to provide informative outcome reports.

     Children at risk for lead poisoning require screening and referral for
     lead, and nutrition information to decrease the toxic effects of lead. WIC
     can do both.

     Children at risk for under-immunization require screening and referral to
     their immunization provider. WIC can and is doing this.

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                                     -194-
<PAGE>

     THE PARTNERSHIP IS WORKING

     Studies show that WIC improves immunization status and screening rates for
     lead poisoning.

     In the current 1998-99 grant cycle, 89 percent of local health departments
     receiving state funding for childhood lead poisoning prevention programs
     identified WIC as a screening location. In 1996-97, 21 percent of children
     with severe lead poisoning (blood lead levels >20(MU)g/dL) were screened in
     WIC clinic settings.

                                    APPENDIX

The following provides a Question and Answer description of each program, along
with data that reflects the health needs of the children we serve. We trust that
you will recognize similarities between some of your clients.

                              IMMUNIZATION PROGRAM
                                 (608)267-9959

1.   WHAT IS THE IMMUNIZATION PROGRAM?

     The purpose of the immunization program is to eliminate vaccine preventable
     diseases by maintaining high immunization levels among infants, preschool
     and school age children. This includes vaccines against the following
     diseases: diphtheria, tetanus, pertussis, polio, haemophilus influenza b
     (Hib), measles, mumps, rubella, hepatitis B and varicella (chicken pox).
     The Immunization Program distributes vaccine to local health departments
     (LHDs), federally qualified community health centers (FQHCs), tribal health
     clinics and private providers throughout the state. The use of state
     supplied vaccine by private providers is limited to children who are
     uninsured, on medical assistance or Native American or Alaskan natives. The
     Program distributes federal Immunization Action Plan (IAP) funds to LHDs to
     support efforts to improve vaccine delivery such as outreach and education
     programs, tracking and recall systems to keep children on the recommended
     immunization schedule and immunization clinic expansion when current
     efforts do not meet identified need.

     Collaborative efforts with other infant and child oriented programs are
     also funded through IAP funds. The State WIC and Immunization Programs have
     received national attention for the cooperative efforts taking place
     between the two programs. Program staff, assigned to the Regional Offices,
     monitors the IAP Grants and offer consultation and technical assistance to
     all providers regarding safe and effective methods to immunize children.

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                                     -195-
<PAGE>

     The Immunization Program coordinates the investigation of all reported
     cases of vaccine preventable diseases. Cases are followed up to determine
     source and appropriate control measures are initiated to limit spread.

     The Wisconsin Immunization Law mandates that children attending day care
     and schools in the state meet minimum immunization requirements. The
     Immunization Program works with day care centers, schools, local health
     departments and physicians to ensure these requirements are met.

     Hepatitis B vaccine is the only vaccine that is recommended at birth. In a
     collaborative effort with LHDs, the state chapters of the AAP and the AAFP,
     the State Medical Society, the Wisconsin Hospital Association and the
     Association of Wisconsin HMO Directors, the Immunization Program was
     successful in promoting infant hepatitis B immunization at hospital
     birthing centers prior to discharge. Recent chart reviews indicate that 75
     percent of infants born in 1996 received their initial hepatitis B vaccine
     at birth.

     Hospital labor and delivery personnel play a critical role in preventing
     perinatal hepatitis B virus transmission from an infected mother to her
     infant at birth. Without preventive treatment, the infant has a 40 percent
     chance of becoming infected. In 1996, 95 percent of infants born to
     infected mothers were correctly treated.

2.   DOES THE IMMUNIZATION PROGRAM HAVE EDUCATIONAL MATERIALS?

     Educational materials promoting on schedule immunization are produced by
     the immunization program and available upon request. These materials are
     used by public and private providers, community based organizations and
     others interested in promoting immunization. One pamphlet titled "The Bear
     Necessity - Immunization" (enclosed) is designed for new mothers and is
     distributed by birthing centers in hospitals throughout the state.

3.   DOES WISCONSIN HAVE A STATEWIDE IMMUNIZATION REGISTRY?

     The Wisconsin Immunization Registry (WIR) is being developed as a tool to
     assist providers in their efforts to properly immunize children. Many
     parents seek immunizations for their children from more than one provider.
     Coupled with the fact that parents may not keep their child's immunization
     record up-to-date makes it very difficult for the new provider to determine
     which immunizations are needed. The WIR will be a repository for all
     immunizations given by any public or private provider in the state. This
     system will enable the provider to determine what was previously given and
     immunize accordingly. The WIR will also be capable of tracking children to
     remind parents when children are due for immunizations or to recall them if
     the child falls behind schedule.

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<PAGE>

4.   ARE CHILDREN IN WISCONSIN WELL IMMUNIZED?

     The state's school aged children are well immunized. School immunization
     law reports indicate that over 90 percent of Wisconsin's school children
     meet the "minimum requirements" of the immunization law. The minimum
     requirements reflect the dose specific requirements for the individual
     vaccines that are covered under the law. Parents may opt for a waiver to
     the vaccine requirements for medical, religious or personal conviction
     reasons. Less than 2 percent (2%) of the total Wisconsin school enrollment
     have opted for the three waivers combined.

                      WISCONSIN IMMUNIZATION LAW COMPLIANCE

<Table>
<Caption>
         SCHOOL YEAR        94-95     95-96     96-97     97-98*
         -----------        -----     -----     -----     ------
<S>                         <C>       <C>       <C>       <C>
       MEET MIN. REQ.       94.7%     94.7%     96.3%      90.4%
       IN PROCESS            1.6%      1.7%      0.8%       3.5%
       BEHIND SCHEDULE       1.5%      1.4%      0.8%       3.5%
       NO RECORD             0.6%      0.6%      0.6%       0.9%
       MED. WAIVER           0.2%      0.3%      0.3%       0.2%
       RELIGIOUS WAIVER      0.1%      0.1%      0.1%       0.1%
       PER. CONV. WAIVER     0.9%      1.0%      1.0%       1.0%
</Table>

     * Effective for the 1997-98 school year, the Administrative Rules for the
       immunization law were changed to include a requirement for hepatitis B
       vaccine.

     The pre-school population has been found to be at greatest risk for not
     receiving their immunizations according to the recommended schedule. The
     state and national goals for childhood immunization are that 90 percent of
     all children complete their primary series of immunizations by their second
     birthday. The 1997 National Immunization Survey indicates that only 79
     percent of Wisconsin's children have attained this goal. It is through
     collaboration and partnering efforts, such as those described here, that
     may best help us realize these goals.

                         WISCONSIN IMMUNIZATION LEVELS *
                             CHILDREN 2 YEARS OF AGE

<Table>
<Caption>
                           YEAR         1995     1996     1997
                           ----         ----     ----     ----
<S>                                      <C>      <C>      <C>
                      Wisconsin          74%      76%      79%
                      Milw. Co.          68%      70%      70%
                      WI minus Milw.     76%      78%      81%
                      U.S.               77%      77%      76%
</Table>

          * Proportion of 2 year olds that have completed 4 DTP/3 Polio/1 MMR/3
            Hib by 24 months of age

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5.   WHO ARE THE CONTACT PEOPLE FOR THE IMMUNIZATION PROGRAM?

     Dan Hopfensperger, Immunization Program Director: (608)266-1339
     Jim Zanto, Western/Eau Claire Region: (715)836-2499
     Jean Zastro, Northeastern/Green Bay Region: (920)448-5231
     Jerry Gabor, Southern/Madison Region: (608)243-2366
     Jackie Kowalski, Southeastern/Milwaukee Region: (414)227-4876
     Bill Sheeley, Southeastern/Milwaukee Region: (414)227-3995
     Jane Dunbar, Northern/Rhinelander Region: (715)365-2709

         WISCONSIN CHILDHOOD LEAD POISONING PREVENTION PROGRAM (WCLPPP)
                                 (608) 266-5817

1.   WHAT IS WISCONSIN CHILDHOOD LEAD POISONING PREVENTION PROGRAM (WCLPPP)?

     The WCLPPP, in the Wisconsin Department of Health and Family Services,
     Division of Public Health, works collaboratively with local health
     departments, private, public, and voluntary sectors to reduce childhood
     lead morbidity and assure lead safe environments for children, their
     families, and communities. Lead poisoning prevention activities are
     supported by federal agency grants (HUD, EPA, CDC) and Wisconsin general
     purpose revenue funds.

2.   WHAT IS LEAD POISONING?

     Lead poisoning is a blood lead level in a child of more then 10(MU)g/dL.
     The primary sources of lead poisoning for children are lead-based paint
     chips and dust found in pre-1950 homes, or in homes built before 1978
     undergoing renovation, remodeling, or paint removal.

     Research has found that even at the most common low levels of lead exposure
     (blood lead levels between 10-19 (MU)g/dL) lead poisoning can impair a
     child's ability to learn, alter behavior, and can have long lasting
     effects. At higher levels, effects of lead poisoning can include decreases
     in growth, hearing, Vitamin D metabolism, anemia, gastrointestinal
     complaints, coma and death.

     Most children with lead poisoning show no symptoms. The only way to know a
     blood lead level is elevated is to draw a blood sample on the child.

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3.   IS CHILDHOOD LEAD POISONING A PROBLEM IN WISCONSIN?

     Yes. Wisconsin rates of lead poisoning exceed the national average. The
     following table indicates Lead Poisoning In Wisconsin* and the Nation**

<Table>
<Caption>
                                                  Wisconsin     United States
                                                  ---------     -------------
<S>                                               <C>           <C>
          BLL > or = to 10 (MU)g/dL       10.1%           4.4%
          BLL > or = to 15 (MU)g/dL        2.2            1.3
          BLL > or = to 20 (MU)g/dL        1.8            0.4
</Table>

     *Source: Fiscal Year 96/97 Annual Report of Childhood Lead Poisoning in
              Wisconsin

     *Source: Third National Health and Nutrition Examination Survey-Phase 2
              (1991-1994), MMWR, Vol. 46, No. 7, February 21, 1997.

     Factors in Wisconsin that place children at risk for lead poisoning include
     the number of young children in poverty and the age of the housing stock.
     In a 1996 report from the Center for Health Statistics, 36 percent of
     Wisconsin children age 0-4 years live below 185 percent of poverty.
     According to the 1990 census 37 percent of Wisconsin housing was built
     prior to 1950.

4.   HOW IS SCREENING FOR LEAD POISONING DONE?

     Blood lead screening is an important element of a comprehensive program to
     eliminate childhood lead poisoning. The goal of such screening is to
     identify children who need individual interventions to reduce their blood
     lead levels.

     Testing children for lead poisoning should occur at ages 1 and 2 years,
     when their behavior is most likely to expose them to sources of lead, and
     brain development is most vulnerable to lead toxicity. In the cities of
     Milwaukee and Racine, where risk factors for lead poisoning and current
     prevalence rates are high, all children are tested around 12 and 24 months
     of age, and older children if assessment indicates a risk of exposure. For
     the rest of Wisconsin, an assessment of the child's risk for lead exposure
     is done and a test performed if indicated (call WCLPPP @ (608) 266-5817 for
     more information on Wisconsin Screening Recommendations).

     Testing for lead should be available at any contact point where children
     receive health related services. In Wisconsin, testing for lead poisoning
     is done by physicians in private clinics, at health department clinics and
     at WIC sites. In FY 1996/97, of children with blood lead levels
     > or = to 20(MU)g/dL, 57 percent were diagnosed in private clinics, 14
     percent in health department clinics, and 21 percent at public or private
     WIC clinics.

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                                     -199-
<PAGE>

5.   ARE WISCONSIN CHILDREN BEING SCREENED ADEQUATELY?

     No. For a variety of reasons, Wisconsin children are not being screened for
     lead poisoning in adequate numbers. It is feared that children are not
     routinely having their risk for lead exposure assessed.

         PERCENT OF WISCONSIN CHILDREN TESTED FOR LEAD POISONING BY AGE
                               FISCAL YEAR 1996-97

<Table>
<Caption>
                         Wisconsin Population*     Number Tested (% Pop)
                         ---------------------     ---------------------
<S>                      <C>                       <C>
              Age 1             71,276                  19,029 (27%)
              Age 2             71,947                   9,922 (14%)
            Ages 3-5           224,311                  16,178 (7%)
              Total            367,534                  45,129 (12%)
</Table>

          * 1990 United State Census, Modified Age, Race, Sex (MARS) File,
            U. S. Bureau of the Census,

6.   WHY ARE CHILDREN ENROLLED IN OR ELIGIBLE FOR MEDICAID AT HIGHER RISK FOR
     LEAD POISONING?

     National and Wisconsin data show that children who are enrolled in federal
     assistance programs (Medical Assistance, WIC, Head Start) have higher rates
     of lead poisoning. For this reason, the federal and state Medical
     Assistance programs require that blood lead tests be done at around 12 and
     24 months of age. The reasons for increased lead poisoning among children
     on MA is unclear, but is most likely attributed to the accessibility of
     affordable, well maintained housing.

7.   WHAT CAN BE DONE FOR CHILDREN WITH LEAD POISONING?

     The detection and treatment of lead poisoning involves the entire family,
     and collaboration between physicians and public health for effective
     interventions. The following lead poisoning prevention and treatment
     services are needed for families screened and those with lead poisoning:

     o    Assessment of lead exposure, and screening of children at risk at ages
          1 and 2 years, and for children ages 3-5 if never done.

     o    For families of children receiving a blood lead test, education about
          nutrition that can decrease lead absorption, hand-washing, and
          cleaning techniques to decrease lead exposure.

     o    For all children with blood lead levels over 10 (MU)g/dL, an
          assessment of what the source of lead may be, and information about
          how to decrease the exposure.

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     o    Referral to local health departments for all children with blood lead
          levels over 20(MU)g/dL for a risk assessment of their home and case
          management and follow-up. Many health departments become involved at
          lower blood lead levels; consult your local health department to find
          out at what level they intervene.

     o    Chelation therapy for children with blood lead levels over 45(MU)g/dL.

     o    Ongoing assessment of learning delays and behavioral problems, with
          referral for early intervention or other educational support or
          behavioral modification programs as needed.

                    WIC (WOMEN, INFANTS AND CHILDREN) PROGRAM
                                 (608) 266-9824

1.   WHAT IS WIC?

     WIC is the Special Supplemental Nutrition Program for Women, Infants and
     Children. WIC was enacted in 1972 as an amendment to the Child Nutrition
     Act of 1966. It is administered in Wisconsin by the Department of Health
     and Family Services, Division of Public Health. It is administered at the
     local level by sixty eight (68) public and private non-profit agencies.
     Fifty-one (51) of the sixty eight (68) are in local health departments.

     It is funded primarily by the US Department of Agriculture - Food and
     Nutrition Service, and some State General Purpose Revenue (GPR). The annual
     budget is approximately $74 million, to provide food benefits, nutrition
     services and administration funds.

2.   WHO IS ELIGIBLE AND WHAT IS PROVIDED?

     WIC provides supplemental nutritious foods, nutrition education, and
     referrals to health care to low-income pregnant and breastfeeding women,
     mothers with children under 6 months, and infants and children up to age
     five, who are determined by a nutritionist or nurse to be at nutritional
     risk.

     Income eligibility is determined by family size (or economic unit) and the
     gross income. Family income must be less than 185 percent of the poverty
     level (for example, a family of four may make up to $30,432 to be income
     eligible for WIC). Income levels are adjusted each July.

     WIC also uses "adjunctive" income eligibility, which means if a participant
     receives or is eligible for Food Stamps, Medical Assistance or W-2, they
     are automatically income eligible for WIC.

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                                     -201-
<PAGE>

     WIC benefits include:

     o    Basic nutrition information and counseling at certifications and draft
          pick-up, in groups or individually.

     o    Health and nutrition screening for WIC eligibility determinations
          (health history questions, height/length, weight,
          hematocrit/hemoglobin, diet screening). Projects also screen
          immunization status.

     o    Through collaboration with other programs, many WIC projects also
          offer blood lead testing, Prenatal Care Coordination, HealthCheck and
          immunizations.

     o    Supplemental nutritious foods, which include milk, cheese, fruit
          juices, high iron cereals, peanut butter, dried beans/peas, eggs,
          iron-fortified infant formula, tuna and carrots for breastfeeding
          women.

     o    Referral to other health and family services. This includes prenatal
          care, immunizations, blood lead testing, well-baby checks, and
          HealthCheck for ongoing health care and additional nutrition services
          (e.g., medical nutrition therapy, special formulas).

3.   WHO ARE WIC PARTICIPANTS?

     WIC currently serves approximately 106,000 women, infants and children each
     month with a food package. The following chart describes the statewide
     total by race and category. (June 1998)

<Table>
<Caption>
                 %     Pregnant   Brstfdng   Post-partum   Infants    Children
               -----   --------   --------   -----------   -------    --------
<S>            <C>     <C>        <C>        <C>           <C>        <C>
Black          23.5      2,322       568        2,084        5,814     14,027
Hispanic       11.3      1,242       785          688        2,860      6,429
Asian           6.2        471       170          416        1,166      4,361
Native Am       2.4        239       109          175          574      1,423
White          56.5      6,629     2,929        5,009       14,424     30,801
TOTAL                   10,917     4,562        8,356       24,849     57,054
</Table>

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                                     -202-
<PAGE>

Using the 1996 total births in Wisconsin, this chart shows that approximately
35% of the mothers were on the WIC Program during their pregnancy.

WIC also serves a very high percentage of the births to Black, Hispanic,
American Indian, or Asian mothers.

                           PERCENT OF 1996 BIRTHS BY
                            RACE/ETHNIC IN WISCONSIN

                                    [GRAPH]
<Table>
<Caption>
                                        PERCENT OF BIRTHS

                 1996 Birth Records     on WIC Prenatal    on WIC Postpartum
                 ------------------     ---------------    -----------------
<S>              <C>                    <C>                <C>
State                   100%                 35%                   9%
White                   82%                  25%
Black                   10%                  81%
Hispanic                 5%                  71%
Am. Indian               1%                  60%
Asian/other              3%                  69%
</Table>

     WIC also serves a large number of high risk individuals. The following
     chart provides some statistics regarding income levels, age and education
     levels.

<Table>
<Caption>
     Income by % Poverty              Age at Certification             Education Level
-----------------------------     ---------------------------    ----------------------------
<S>          <C>        <C>       <C>        <C>        <C>      <C>         <C>        <C>
   <100%     79,704     68.0%        <1      29,786     25.4%    0-7 yrs     10,747      9.2%
101-124      13,272     11.3%      1 yr      19,694     16.8        8-11     29,883     25.5
125-149      11,603      9.9%      2 yr      15,977     13.6      12 yrs     54,017     46.0
150-174       8,504      7.3%      3 yr      15,018     12.8       13-15     16,701     14.2
175-185       2,375      2.0%      4 yr      11,639      9.9         16+      4,074      3.5
   >185%      1,683      1.4%     11-14         132       .1         unk      1,961      1.7
                                  15-18       3,890      3.3
                                  19-35      20,017     17.0
                                     36+      1,178      1.0
</Table>

                                 1996 WI BIRTHS
                                 WOMEN <20 YEARS

                                     [GRAPH]

<Table>
<Caption>
                                                      Women <20
                                                      on WIC
                Total Births      Women <20         Prenatal & PP
                ------------      ---------         -------------
<S>                               <C>               <C>
                     100%              11%                 10%
                  67,150            7,106               6,592
</Table>

                                 1996 WI BIRTHS
                          WOMEN <HIGH SCHOOL EDUCATION

                                     [GRAPH]
<Table>
<Caption>
                                                    Educ<HS on WIC
                Total Births       Educ<HS          Prenatal & PP
                ------------      ---------         --------------
<S>                               <C>               <C>
                     100%             16%                  14%
                  67,150          10,795                9,693
</Table>

WIC screens each applicant to determine where they are receiving their health
services. The following indicates that over half of the participants are
receiving Medical Assistance.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -203-
<PAGE>

<Table>
<Caption>
                        Health Care Source
        --------------------------------------------------
<S>                                       <C>        <C>
        MA/HS, non-HMO                    21,835     19.1%
        MA/HS, HMO                        50,267     43.9
        Indian/Migrant Hlth Service        1,725      1.5
        Health Insurance, Full cov         6,748      5.9
        Health Insurance, co-pay/ded      29,533     25.8
        No Insurance                       9,889      8.6
        Unknown                            2,317      2.0
</Table>

4.   HOW ARE SERVICES PROVIDED?

     Each participant must be certified as eligible to receive WIC benefits. At
     this certification appointment, WIC staff checks income and collects the
     necessary data, including immunization records for all children. A health
     screener or aide then weighs and measures the woman or child and plots the
     result on a growth grid. A hemoglobin or hematocrit is also taken to assess
     blood iron levels. Many WIC projects are also drawing samples for blood
     lead at the same time.

     A registered dietitian or other nutrition professional reviews the health
     and nutrition questionnaires and medical data and determines the risk
     factors and whether the applicant is eligible to participate. Nutrition
     information is provided which is specific to each participant's risk,
     follow-up visits are planned, and referrals are made.

     Participants pick up food drafts every 1,2, or 3 months and purchase the
     nutritious foods at WIC authorized stores. The participants are recertified
     every six months to determine whether they are still eligible to
     participate.

     The food draft pick-up appointment is a very important point of contact for
     WIC participants. This is when they receive additional nutrition
     information, follow up on high risk factors, and can have access to other
     available services within the agency, for example, immunizations and lead
     screening follow-up.

5.   IS WIC EFFECTIVE?

     There are numerous local, state and federal evaluations of the WIC Program
     which document the benefits of the program. These studies found that WIC
     participation was associated with an improved outcome of pregnancy,
     including reduction in late fetal death rates, increased head size of
     infants, longer pregnancies and fewer premature births, and increases in
     the number of women seeking prenatal care early in pregnancy. With respect
     to children, the report shows that:

     o    WIC participation leads to better cognitive performance of four and
          five year olds.

HMO Contract for January 1, 2002 - December 31, 2003

                                     -204-
<PAGE>

     o    Children participating in WIC are better immunized and more likely to
          have a regular source of medical care.

     o    WIC has a major impact on reducing anemia among children.

     Other research shows WIC to be cost-effective. In May 1992, a General
     Accounting Office (GAO) study was released showing that the provision of
     WIC benefits to pregnant women has a cost-benefit ratio of approximately
     3:1. According to GAO, providing WIC benefits to pregnant women has
     resulted in a 25 percent reduction in the incidence of low birthweight
     babies and a reduction of 44 percent in "very low birthweight" babies (<3.3
     pounds). Nine previous studies that examined Medicaid payments to WIC
     families showed cost-benefit ratios of $1.92 to $4.21 for every dollar
     spent.

     Wisconsin data also indicates that WIC benefits provided to pregnant women
     has a positive impact on the outcome of pregnancy. The incidence of low
     birthweight (<5.5 pounds) decreases the longer the pregnant mother is
     enrolled in WIC.

<Table>
<Caption>
       10/97, WIC 814     0 months     1-3 mo     4-6 mo     7-8 mo
       --------------     --------     ------     ------     ------
        Birthweight
<S>                       <C>          <C>        <C>        <C>
       < 5.5 lbs           10.1%        8.9        8.3         4.4
       > 5.5 lbs           89.9         91.1       91.7       95.6
</Table>

     Enclosures:

     o    WIC Outreach Brochure (also available in Spanish and Hmong)

     o    Health Care Providers and Wisconsin WIC brochure

HMO Contract for January 1, 2002 - December 31, 2003

                                     -205-
<PAGE>
                                 ADDENDUM XXVII

                      STATEWIDE LIST OF LOCAL WIC AGENCIES

HMO Contract for January 1, 2002 - December 31, 2003

                                     -206-
<PAGE>

                             WISCONSIN WIC PROGRAM
                               PROJECT DIRECTORY

                         WISCONSIN WIC & FMNP PROGRAMS
                                 CENTRAL OFFICE
                                 (608) 266-9824
                               FAX: (608) 266-3125
                     1414 East Washington Avenue, Room 167
                             Madison, WI 53703-3043
                          WIC VENDOR MANAGEMENT SECTION
                                 (608) 266-6912
                               FAX: (608) 266-1514
                              1 West Wilson Street
                                   PO Box 309
                 Madison, WI 53701 MCH/WIC Hotline: 800-722-2295
                                PDA: 800-488-8799

<Table>
<S>                                                                                     <C>
STATE WIC STAFF

PATTI H. HERRICK, RD, MPA, Director .................................................   266-3821

CONNIE WELCH, MPH, RD, Nutrition Coordinator ........................................   267-7320

VACANT, MCH Nutritionist/Breastfeeding Coordinator ..................................

DEBORAH GRENIER, RD, MPA, Program Operations Coordinator ............................   266-2148

NANCY BROWN-JOYCE, Fiscal Manager ...................................................   261-6383

GLENN THOMPSON, DAISy Systems Manager ...............................................   267-2201

JUDY HOENISCH, Program Assistant ....................................................   261-6381

VI SCHOMBERG, Program Assistant .....................................................   266-9824

JUDY ALLEN, Local Contracts/Farmers' Market Coordinator .............................   261-8867

VENDOR MANAGEMENT SECTION

CHRIS MADSEN, RD, WIC Vendor Section Supervisor .....................................   261-6382

DONNA DUSSO, Vendor Relations Manager ...............................................   261-9431

GREG MCNEELY, Compliance Manager ....................................................   266-3748

JANA STEINMETZ, JD, Monitoring & Food Center Coordinator ............................   267-9002

SANDRA GAGLIANO, Program Assistant ..................................................   266-6912

VACANT, Milwaukee Vendor Coordinator ................................................
</Table>

                                     -207-
<PAGE>

                         FY `99 WISCONSIN WIC PROJECTS

                                     [MAP]

                                     -208-
<PAGE>

                            DIVISION OF PUBLIC HEALTH
                      BUREAU OF FAMILY & COMMUNITY HEALTH
                              REGIONAL OFFICE STAFF

NORTHERN REGIONAL OFFICE
Public Health Nutrition Consultant
Paula Lickteig, RD (715) 365-2715
        Projects-01,10,13,17,46,51
        e-mail: lickpj@dhfs.state.wi.us
Barbara Pevytoe, RD (715) 365-2719
        Projects-01,25,30,41,47,49
        e-mail: pevytba@dhfs.state.wi.us
1853 North Stevens Street
Rhinelander, WI 54501
FAX: (715) 365-2705

SOUTHERN REGIONAL OFFICE
Public Health Nutrition Consultant
Dan Cash, RD MBA(608) 243-2353
        Projects-07,21,32,38,53,54,57,67,71
        e-mail: cashd@dhfs.state.wi.us
Terrell Brock, MPH, RD (608) 243-2368
        e-mail: brockta@dhfs.state.wi.us 3518
Memorial Drive, Building 4
Madison, WI 53704
FAX: (608) 243-2365

SOUTHEASTERN REGIONAL OFFICE
Public Health Nutrition Consultant
Marilyn Bolton, RD (414) 227-5042
        Projects-04,06,33,34,35,36,52,62,63
        e-mail: boltoml@dhfs.state.wi.us
Sandra Poehlman, RD, MPH (414) 227-4795
        Projects-05,15,29,37,40,64
        e-mail: poehlse@dhfs.state.wi.us
819 North Sixth Street, Room
860 Milwaukee, WI 53203-1697
FAX: (414) 227-2010

WESTERN REGIONAL OFFICE
Public Health Nutrition Consultant
Linda Petersen, RD, MPH (715) 836-3826
        Projects-16,18,22,24,26,56,60,69
        e-mail: peterlj@dhfs.state.wi.us
JoAnn Wegenke, RD (715) 836-6689
        Projects-09,20,23,28,31,39,48,58,59,68
        e-mail: wegenjr@dhfs.state.wi.us
312 South Barstow Street, Suite 2
Eau Claire, WI 54701-3679
FAX: (715) 836-6686

NORTHEASTERN REGIONAL OFFICE
Public Health Nutrition Consultant
Diane Moreau-Stodola, MS, RD (920) 448-5228
        Projects-11,12,14,19,42,45,50,65
        e-mail: moreadm@dhfs.state.wi.us
Mary Silha, RD (920) 448-0113
        Projects-02,03,08,27,43,44,61,66
        e-mail: silhamj@dhfs.state.wi.us
Nutrition Surveillance
Linda Spaans-Esten (920) 448-5346
        e-mail: spaanln@dhfs.state.wi.us
200 North Jefferson Street, Room 126
Green Bay, WI 54301
FAX: (920) 448-5265

HMO Contract for January 1, 2000 - December 31, 2001

                                     -209-
<PAGE>

                                                                 State WIC Staff
                                                         Areas of Responsibility
                                                              WHO SHOULD I CALL?

ADMINISTRATION AND NUTRITION

FIRST POINT OF CONTACT:
REGIONAL NUTRITION CONSULTANTS/CONTRACT ADMINISTRATORS

     WIC and other MCH nutrition (Gladys Kubitz is
     the back-up for non-WIC nutrition)
     Program operations
     Training and consultation
     Performance review
     Budget revisions
     Fiscal management
     Equipment requests
     Workplans
     Caseload Management, Deviations in caseload counts
     Contract Administration
     Site Description Chart revisions
     Clinic Activities/Responsibilities
     Chart revisions
     Back-up: State WIC Office Staff

ADMINISTRATION / OPERATIONS

PATTI HERRICK:  DIRECTOR
     Phone 608/266-3821
     e-mail:  herriph@dhfs.state.wi.us
     Funding
     National issues
     Service area issues
     Other miscellaneous issues and concerns
     Immunization coordination
     Back-up:  Nancy Brown-Joyce, Deb Grenier

DEB GRENIER:  PROGRAM OPERATIONS COORDINATOR
     Phone: 608/266-2148
     e-mail:  grenidm@dhfs.state.wi.us
     Program operations, policies and procedures
     Staffing patterns, Time Studies
     Caseload, Caseload mgmt, participation counts
     Outreach
     Draft issuance policies
     Accessibility
     ADP reports
              Questionable Issuance
              Dual Participation
              Enrollment and Participation (801)
              Other management reports
     Infant Formula Samples
     Back-up:  Patti Herrick

NANCY BROWN JOYCE:  FISCAL MANAGER
     Phone: 608/261-6383
     e-mail:  brownnj@dhfs.state.wi.us
     Fiscal management
     Allowable expenditures
     Local Salary information
     ADP/Rebate Contracts
     Back-up:  Patti Herrick

JUDY ALLEN:  ADMINISTRATIVE ASSISTANT/FARMERS' MARKET COORDINATOR
     Phone: 608/261-8867
     e-mail:  allenjl@dhfs.state.wi.us
     Contract amendments and budget revisions
     Farmers' Market Nutrition Program

HMO Contract for January 1, 2000 - December 31, 2001

                                     -210-
<PAGE>

NUTRITION SERVICES

CONNIE WELCH:  NUTRITION COORDINATOR
         Phone: 608/267-7320
         e-mail:  welchcl@dhfs.state.wi.us

         Nutrition Services:
                  Certification; eligibility determination
                  Secondary nutrition education,
                           scheduling, evaluation
                  Model Nutrition Services
                  Care Guidelines
                  Risk Factors/Flow Sheets
                  Risk Factor Rationale
                  Screening and assessment; tools
                  High risk
         Confidentiality
         Supplemental Foods
                  Authorized food list
                  Food packages
                  Draft messages
         Infant formula questions and problems
         Coordination with Other Programs
                  Birth to 3
                  HealthCheck
                  Nutrition Surveillance
         ADP reports
                  Nutrition (excluding Breastfeeding)
                  Birthweight by Trimester
                  Secondary education
                  Food Package

         Back-up:  Regional Nutrition Consultant

HMO Contract for January 1, 2000 - December 31, 2001

                                     -211-
<PAGE>

VACANT:  MCH & WIC BREASTFEEDING COORDINATOR
         Phone: 608/267-3694
         e-mail:

         Breastfeeding promotion and support activities
         MCH Nutrition and breastfeeding education materials,      tools
         ADP reports
                  Breastfeeding
                  Smoking and Drinking Behavior
         Alcohol, Tobacco and Other Drug Abuse information and referral

         Back-up:  Gladys Kubitz, MCH Nutritionist
         Phone: 608/266-2003, FAX: 608/267-3824
         e-mail:  kubitgk@dhfs.state.wi.us

LINDA SPAANS-ESTEN:  NUTRITION SURVEILLANCE
         Phone: 920/448-5346
         e-mail:  spaanln@dhfs.state.wi.us

         MCH Data system
         PNSS

         Gladys Kubitz:  MCH Nutrition Consultant
         Phone: 608/266-2003
         e-mail:  kubitgk@dhfs.state.wi.us

         MCH Nutrition
         5-A-Day
         FMNP Nutrition
         DAISy

HMO Contract for January 1, 2000 - December 31, 2001

                                     -212-
<PAGE>

GLENN THOMPSON:  WIC SYSTEM MANAGER
         Phone: 608/267-2201
         e-mail:  thompge@dhfs.state.wi.us

         PDA and the ADP system
         DAISy support
         DAISy enhancements
         Mass changes
         Creating and running special reports
         WordPerfect, Word
         QuattroPro, Excel
         Computer purchase information

         Back up:  PDA

PDA HELPDESK:
         Phone: 800/488-8799  X3922

         DAISy support
         Hardware problems; maintenance

JUDY HOENISCH:  PROGRAM ASSISTANT
         Phone: 608/261-6381
         e-mail:  hoenija@dhfs.state.wi.us
VI SCHOMBERG:  PROGRAM ASSISTANT
         Phone: 608/266-9824
         e-mail:  schomva@dhfs.state.wi.us

         Forms and Publications (ordering and availability)
         Project Directory (update and distribution)
         Monthly Updates and other mailings
         Equipment Inventory and stickers
         Receptionist and phone messages for WIC staff
         Caseload Status Reports

MAILING

Central WIC Office
Questionable Issuance Report - Deb
Dual Participation Report - Deb
Forms and Publications (DMS-25) - Vi, Judy
Equipment Inventory - Vi
Caseload Status Report - Vi
Computer purchase requests - Glenn

Vendor Management Section
Complaints regarding vendors - Greg
Vendor Monitoring Reports - Jana
Vendor site visit materials - Sandra
Proof of Training Affidavit - Sandra
Vendor supply orders - Sandra

Regional Offices - Regional Nutrition Consultants
Budget revisions
Equipment requests
Site Description Chart revisions
Clinic Activities/Responsibilities Chart revisions

HMO Contract for January 1, 2000 - December 31, 2001

                                     -213-
<PAGE>

VENDOR RELATIONS

CHRIS MADSEN:  WIC VENDOR SECTION CHIEF
         Phone: 608/261-6382
         e-mail:  madseca@dhfs.state.wi.us

         Vendor Section Supervision
         Administrative Rules
         Miscellaneous Issues & Concerns

Back-up:  Donna Dusso

DONNA DUSSO:  VENDOR RELATIONS MANAGER
         Phone: 608/261-9431
         e-mail:  dussodm@dhfs.state.wi.us

         Vendor management, policies and procedures
         Vendor authorization and reauthorization process
         Vendor training
         Replacements for drafts rejected to vendors
         Vendor reports Draft status or look-up

         Back-up:  Chris Madsen

GREG MCNEELY:  COMPLIANCE MANAGER
         Phone: 608/266-3748
         e-mail:  mcneegt@dhfs.state.wi.us

         Vendor fraud and abuse, policies and procedures
         Vendor complaints
         Vendor Training

         Back-up:  Chris Madsen

JANA STEINMETZ:  MONITORING COORDINATOR
         Phone: 608/267-9002
         e-mail:  steinjd@dhfs.state.wi.us

         Participant fraud and abuse
         Lost/Stolen Drafts
         Food package/draft redemption amount for repayment purposes
         Vendor monitoring

         Back-up:  Chris Madsen

SANDRA GAGLIANO:  VENDOR PROGRAM ASSISTANT
         Phone: 608/266-6912
         e-mail:  gaglisl@dhfs.state.wi.us

         Vendor applications (request, information,
         status)
         Vendor supplies
         Vendor status

         Back-up:  Donna Dusso

VACANT:  MILWAUKEE VENDOR COORDINATOR
         Phone:

         Site visits & Vendor monitoring, Milwaukee County vendors
         Vendor questions, Milwaukee County vendors
         Vendor Training
         Back-up:  Greg McNeely (compliance issues)
                     Donna Dusso (vendor issues)

HMO Contract for January 1, 2000 - December 31, 2001

                                     -214-
<PAGE>
<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
01      1130     Great Lakes Inter-Tribal Council, Inc.                Bad River                   A. Elaine Valliere
                 WIC Project                                           Lac du Flambeau             B. Paula Havisto
                 2932 Hwy 47 North                                     Lac Courte Oreilles         C. Michael Allen
                 P.O. Box 9                                            Mole Lake                   D. Paula Havisto
                 Lac du Flambeau, WI 54538                             Potawatomi-Forest County    E. Elaine Valliere
                                                                       Red Cliff                   F. Elaine Valliere
                 (715) 588-3324       FAX: (715) 588-7900              St. Croix                   G. Paula Lickteig/Barbara Pevytoe
                                                                       Stockbridge-Munsee
                                                                       Ho Chunk

02      4260     Northeastern Wisconsin Community Clinic, LTD          Brown County                A. Judy Brose
                 East WIC Project                                                                  B. Judy Brose
                 622 Bodart Way                                                                    C. Bonnie Kuhr (920) 437-9773
                 Green Bay, WI 54301                                                               F. Bonnie Kuhr
                                                                                                   G. Mary Silha
                 (920) 437-8368       FAX: (920) 437-0984
                                                                                                   D. Carol Evans
                 N.E.W. Community Clinic West                                                      E. Jamie North
                 610 South Broadway
                 Green Bay, WI 54303

                 (920) 431-0243       FAX: (920) 431-0248
                 e-mail: newcomm@netnet.net
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -215-
<PAGE>
<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
03       520     Menominee Indian Tribe of WI                          Menominee County            A. Scott Krueger
                 WIC Project                                                                       B. Scott Krueger
                 P.O. Box 970                                                                      D. Deb Prijic
                 Keshena, WI 54135-0970                                                            E. Scott Krueger
                                                                                                   F. Karen Page
                 (715) 799-5444       FAX: (715) 799-3099                                          G. Mary Silha
                                                                                                   C. Betty Jo Wozniak
                 Menominee Indian Tribe of WI
                 PO Box 910
                 Keshena, WI 54135

                 (715) 799-5154
                 e-mail: skruege2@mail.wiscnet.net
04      1515     Milwaukee Health Services, Inc                       Milwaukee County             A. Nancy Castro
                 MLK-Heritage Health Center WIC Project                                            B. Nancy Castro
                 2555 N. Dr. Martin Luther King Drive                                              C. Zettie D. Page (Acting)
                 Milwaukee, WI 53212                                                               D. Karen Miller
                                                                                                   E.
                 (414) 372-9029       FAX: (414) 372-5758                                          F. Nancy Castro
                                                                                                   G. Marilyn Bolton
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -216-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
05      2120     Waukesha Co Dept of Health & Human Services           Waukesha County             A. Merrie Baltramonas
                 WIC Project                                                                       B. Merrie Baltramonas
                 615 W Moreland Boulevard                                                          C. Nancy Healy (414) 896-8433
                 Waukesha, WI 53188                                                                D. Mary Callan
                                                                                                   E. Merrie Baltramonas
                 (414) 896-8440       FAX: (414) 896-8387                                          F. Joyce Ernst/Lonnie Strasen
                                                                                                   G. Sandra Poehlman
06      6295     Milwaukee Indian Health Board Inc.                    Milwaukee County            A. Beth Sadowski
                 Rainbow Community Health Center                                                   B. Vacant
                 WIC Project                                                                       C. Richard Grzybowski
                 2733 W. Wisconsin Ave., Suite 200                                                 D. Beth Sadowski
                 Milwaukee, WI 53208                                                               E. Beth Sadowski
                                                                                                   F. Laurie Dye
                 (414) 931-8606       FAX: (414) 937-3065                                          G. Marilyn Bolton

                 Milwaukee Indian Health Board                                                     C. Richard Grzybowski
                 PO Box 04065
                 Milwaukee, WI 53204

                 (414) 389-3880 Ext: 126
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -217-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
07       970     Southwestern Wisconsin Community Action               Crawford County             A. Amy Graber
                 Program (SWCAP)                                       Iowa County                 B. Amy Graber
                 WIC Project                                           Lafayette County            C. Richard Strand
                 149 North Iowa Street                                 Richland County             D. Amy Graber
                 Dodgeville, WI 53533                                                              E. Amy Graber
                                                                                                   F. Jody Kitelinger
                 (608) 935-2326                                                                    G. Dan Cash
                 STS 7-7963           FAX: (608) 935-2876
                 e-mail: swcap@mhtc.net
08      1310     La Clinica de los Campesinos, Inc.                    Adams County                A. Lois Schmedeke
                 Family Health WIC Project                             Green Lake County           B. Lois Schmedeke
                 P.O. Box 1440                                         Marquette County            C. Ted Kay (920) 787-5514 x7101
                 400 S. Townline Road                                  Waushara County             D. Lois Schmedeke
                 Wautoma, WI 54982                                     Migrant Population          E. Amy Mann
                                                                                                   F. Aurora Grimm
                 (920) 787-1340 ext. 7107                                                          G. Mary Silha
                 (920) 787-5514       FAX: (920) 787-2746
                 FAX: (920) 787-4737
                 e-mail: fhlc@wirural.net
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -218-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
09      2290     Northwest Wisconsin Community Service                 Ashland County              A. Grace Gee
                 Agency, Inc (NWCSA),                                  Bayfield County             B. Grace Gee
                 WIC Project                                           Douglas County              D. Mary Mahan (Superior)
                 2231 Catlin Avenue                                    Iron County                 E. Sandy Swanson (Ashland)
                 Superior, WI 54880                                                                F. Sandy Swanson (Ashland)
                                                                                                   G. JoAnn Wegenke
                 (715) 394-2750 (Superior)
                 (715) 682-6661 (Ashland)

                 FAX: (715) 394-7414 (Superior)
                 (0475 (Ashland)

                 NWCSA                                                                             C. Richard Monson
                 1118 Tower Avenue
                 Superior, WI 54880

                 (715) 392-5127
10       495     Taylor County Health Department                       Taylor County               A. Patty Krug
                 WIC Project                                                                       B. Brenda Herrell
                 Courthouse                                                                        C. Patty Krug
                 224 S Second Street                                                               D. Michele Armbrust
                 Medford, WI 54451                                                                 E. Brenda Herrell
                                                                                                   F. Jacky Peterson
                 (715) 748-1410       FAX: (715) 748-1415                                          G. Paula Lickteig
                 e-mail: krug101w@wonder.em.cdc.gov
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -219-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
11      2130     Outagamie County Dept of Health & Human Serv          Outagamie County            A. Sue Kamien
                 WIC Project                                                                       B. Sue Kamien
                 410 South Walnut Street                                                           D. Cindy Brylski
                 Appleton, WI 54911                                                                E. Melissa Rentmeester
                                                                                                   F. Neu Yang
                 (920) 832-5109            FAX: (920) 832-5110                                     G. Diane Moreau-Stodola

                 Outagamie County Health & Human Serv Dept
                 401 S Elm Street                                                                  C. Barb Thiel, Acting Director
                 Appleton, WI 54911

                 (920) 832-5100
12       430     Oneida Tribe of Indians of Wisconsin                   Oneida Reservation         A. Susan Beck
                 Community Health Center WIC Project                                               B. Elizabeth Schwantes
                 P.O. Box 365                                                                      C. Deanna Bauman (920) 869-2711
                 Oneida, WI 54155                                                                     x4806
                                                                                                   D. Susan Beck
                 (920) 869-4829            FAX: (920) 869-1077                                     E.
                 (920) 869-2711 ext 4829                                                           F. Kelly Skenandore
                                                                                                   G. Diane Moreau-Stodola
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -220-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
13      2850     Family Planning Health Services, Inc.                 Langlade County             A. Kay Perkins
                 WIC Project                                           Lincoln County              B. Kay Perkins
                 719 North Third Avenue                                Marathon County             C. Lon Newman (715) 675-9858
                 Wausau, WI 54401                                                                  D. Mary Fischer
                                                                                                   E. Kay Perkins
                 (715) 675-5449       FAX: (715) 675-5475                                          F. Kay Perkins
                 e-mail: perk104w@wonder.em.cdc.gov                                                G. Paula Lickteig
14      1685     Fond du Lac County Health Dept                        Fond du Lac County          A. Colleen Deanovich
                 WIC Project                                                                       B. Colleen Deanovich
                 160 South Macy Street                                                             C. Diane Cappozzo (920) 929-3093
                 Fond du Lac, WI 54935                                                             D. Kathy Behlke
                                                                                                   E. Cheryl Callis
                 (920) 929-3104       FAX: (920) 929-3102                                          F. Barb Roloff
                                                                                                   G. Diane Moreau-Stodola
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -221-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
15      2915     Racine/Kenosha Community Action Agency Inc.           Kenosha County              A. Michael Lill
                 WIC Project                                                                       B. Pamela Halbach
                 2000 63rd Street                                                                  D. Pamela Halbach
                 Kenosha, WI 53143                                                                 E. Michael Lill
                                                                                                   F. Michael Lill
                 (414) 657-0840       FAX: (414) 657-1631                                          G. Sandra Poehlman
                 e-mail: maxchaos@execpc.com

                 R/K Community Action Agency                                                       C. Thomas White
                 72 Seventh Street
                 Racine, WI 53403

                 (414) 637-8377
16      2255     La Crosse County Health Department                    La Crosse County            A. Linda Lee
                 WIC Project                                                                       B. Cheryl Levendoski
                 300 Fourth Street North                                                           C. Doug Mormann (608) 785-9807
                 La Crosse, WI 54601                                                               D. Cheryl Levendoski
                                                                                                   E. Linda Lee
                 (608) 785-9865              FAX: (608) 785-9846                                   F. Judy deBack
                                                                                                   G. Linda Petersen
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -222-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
17      1030     Portage County Health & Human Services Dept           Portage County              A. Suzanne Oehlke
                 WIC Project                                                                       B. Suzanne Oehlke
                 817 Whiting Avenue                                                                C. Judy Bablitch (715) 345-5700
                 Stevens Point, WI 54481                                                           D. Rosemary Dobbe
                                                                                                   E. Suzanne Oehlke
                 (715) 345-5775       FAX: (715) 345-5966                                          F. Cathy McCorkell
                                                                                                   G. Paula Lickteig
18       510     Jackson County Dept of Health & Human Serv            Jackson County              A. Heidi Nighbor
                 WIC Project                                                                       B. Amy Modjeski
                 420 Hwy 54 West                                                                   C. Kevin Mannell
                 P.O. Box 457                                                                      D. Heidi Nighbor
                 Black River Falls, WI     54615                                                   E. Heidi Nighbor
                                                                                                   F. Diane Milnthorpe
                 (715) 284-4301       FAX: (715) 284-7713                                          G. Linda Petersen
                 e-mail: byrn100w@wonder.em.cdc.gov
19       460     Door County Public Health Dept                        Door County                 A. Teresa Pasewald
                 WIC Project                                                                       B. Teresa Pasewald
                 421 Nebraska Street                                                               C. Rhonda Kolberg (920) 746-2234
                 P.O. Box 670                                                                      D. Teresa Pasewald
                 Sturgeon Bay, WI 54235                                                            E. Patricia Gosser
                                                                                                   F. Teresa Pasewald
                 (920) 746-2237       FAX: (920) 746-2320                                          G. Diane Moreau-Stodola
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -223-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
20      1030     Pepin County Health Dept                              Pepin County                A. Anne Bauch
                 Pepin-Dunn WIC Project                                Dunn County                 B. Anne Bauch
                 740 7th Avenue West                                                               C. Sharon Prissel
                 P.O. Box 39                                                                       D. Anne Bauch
                 Durand, WI 54736                                                                  E. Anne Bauch
                                                                                                   F. Cindy Holmstadt
                 (715) 672-5984       FAX: (715) 672-5920                                          G. JoAnn Wegenke
                 (888) 332-5768
                 e-mail: bies100w@wonder.em.cdc.gov
21       720     Juneau County Health Dept                             Juneau County               A. Kris Willey
                 WIC Project                                                                       B. Amy Podmolik
                 Courthouse Annex                                                                  C. Barbara Theis (608) 847-9373
                 220 LaCrosse Street                                                               D. Teresa Field
                 Mauston, WI 53948-1395                                                            E. Kris Willey
                                                                                                   F. Jennifer Frosh
                 (608) 847-9375       FAX: (608) 847-9407                                          G. Dan Cash
                 e-mail: jccecii@mwt.net
22      1995     Eau Claire City-County Health Department              Eau Claire County           A. Cheryl Yarrington
                 WIC Project                                                                       B. Cheryl Yarrington
                 720 Second Avenue                                                                 C. James Ryder (715) 839-4718
                 Eau Claire, WI 54703                                                              D. Cheryl Yarrington
                                                                                                   E. Jackie Hawkenson
                 (715) 839-5051       FAX: (715) 839-1674                                          F. Sandy Nordlund
                 e-mail: yarr0415@wonder.em.cdc.gov                                                G. Linda Petersen
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -224-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
23      1190     Chippewa County Department of Public Health           Chippewa County             A. Judy Fedie
                 WIC Project                                                                       B. Judy Fedie
                 711 North Bridge Street, Room 222                                                 C. Jean Durch
                 Chippewa Falls, WI 54729                                                          D. Judy Fedie
                                                                                                   E. Judy Culver
                 (715) 726-7903       FAX: (715) 726-7910                                          F. Deb Blum
                 e-mail: fedi100w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
24       835     Monroe County Health Department                       Monroe County               A. Theresa Kleinertz
                 WIC Project                                                                       B. Theresa Kleinertz
                 Community Service Bldg A                                                          C. Sharon Nelson (608) 269-8666
                 14301 Cty Hwy B Box 18                                                            D. Rebecca Campbell
                 Sparta, WI 54656                                                                  E. Theresa Kleinertz
                                                                                                   F. Theresa Kleinertz
                 (608) 269-8671       FAX: (608) 269-8872                                          G. Linda Petersen
25       515     Price County Health Dept                              Price County                A. Vickie Petrashek
                 WIC Project                                                                       B. Vickie Petrashek
                 104 South Eyder Avenue                                                            C. Mary Hahn
                 Phillips, WI 54555                                                                D. Vickie Petrashek
                                                                                                   E  Laurie McKuen
                 (715) 339-3054       FAX: (715) 339-3057                                          F. Laurie McKuen
                                                                                                   G. Barbara Pevytoe
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -225-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
26       750     Trempealeau County Health Dept                        Trempealeau County          A. Joan Smedberg
                 WIC Project                                                                       B. Ellen Blumer
                 36245 Main Street                                                                 C. Eileen Gutknecht (ext 231)
                 P.O. Box 67                                                                       D. Ellen Blumer
                 Whitehall, WI 54773                                                               E. Joan Smedberg
                                                                                                   F. Tammie Coburn
                 (715) 538-2311, Ext. 233                                                          G. Linda Petersen
                 FAX: (715) 538-4861
                 e-mail: nepe100w@wonder.em.cdc.gov
27      2005     Winnebago County Health Department                    Winnebago County            A. Barbara Sheldon
                 WIC Project                                                                       B. Barbara Sheldon
                 220 Washington Ave., P.O. Box 2808                                                D. Christine Possell
                 Oshkosh, WI 54901                                                                 E. Barbara Sheldon
                                                                                                   F. Barbara Sheldon
                 (920) 236-4991       FAX: (920) 303-4792                                          G. Mary Silha

                 Winnebago County Health Department                                                C. Susan Huelsbeck
                 725 Butler Ave., P.O. Box 68
                 Winnebago, WI 54985

                 (920) 232-3029
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -226-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
28      1140     Barron County Health Dept                             Barron County               A. Marla Prytz
                 WIC Project                                                                       B. Marla Prytz
                 1443 East Division Avenue                                                         C. Kathleen Newman (414) 741-3133
                 Barron, WI 54812                                                                  D. Marla Prytz
                                                                                                   E. Shirley Glaser
                 (715) 537-6580       FAX: (715) 537-6274                                          F. Shirley Glaser
                 e-mail: pryt100w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
29      1175     Walworth County Public Health Nursing Serv            Walworth County             A. Patricia Grove
                 WIC Project                                                                       B. Teresa Rutkowski
                 W3929 Highway NN                                                                  C. Patricia Grove
                 P.O. Box 1006                                                                     D. Teresa Rutkowski
                 Elkhorn, WI 53121                                                                 E. Pat Grove
                                                                                                   F. Kathleen Ludtke
                 (414) 741-3146       FAX: (414) 741-3757                                          G. Sandra Poehlman
                 e-mail: walcophn@elknet.net
30       285     Vilas County Health Services, Inc.                    Vilas County                A. Phyllis Dicka
                 WIC Project                                                                       B. Jennifer Mikulich
                 226 Highway 70                                                                    C. Phyllis Dicka
                 P.O. Box 456                                                                      D. Jennifer Mikulich
                 St. Germain, WI 54558                                                             E. Phyllis Dicka
                                                                                                   F. Nancy Minx
                 (715) 479-3357       FAX: None                                                    G. Barbara Pevytoe
                 e-mail: vicohlth@bfm.org
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -227-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
31       680     St. Croix County Dept of Health & Human Serv          St. Croix County            A. Melinda Hanson
                 WIC Project                                                                       B. Ruth Lehmann
                 1445 North Fourth Street                                                          C. John Borup (715) 246-8223
                 New Richmond, WI 54017                                                            D. Cindy Gulyash
                                                                                                   E. Ellen Rominski
                 (715) 246-8359       FAX: (715) 246-8225                                          F. Shirley Peterson
                 e-mail: hans122w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
32       665     Columbia County Health Department                     Columbia County             A. Linda Cromheecke
                 WIC Project                                                                       B. Linda Cromheecke
                 711 East Cook Street                                                              C. Terry Kruse (608) 742-9250
                 Portage, WI 53901                                                                 D. Linda Cromheecke
                                                                                                   E. Linda Cromheecke
                 (608) 742-9254       FAX: (608) 742-9759                                          F. Gail Benz
                                                                                                   G. Dan Cash
33       475     Sinai Samaritan Medical Center                        Milwaukee County            A. Jen Agnello
                 WIC Project                                                                       B. Jen Agnello
                 945 N 12th Street, RE 120                                                         C. William Jenkins (414) 219-7273
                 Milwaukee, WI 53233                                                               D. Teri Kodrich
                                                                                                   E.
                 (414) 219-3210       FAX: (414) 219-3123                                          F. Jen Agnello
                                                                                                   G. Marilyn Bolton
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -228-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
34       790     West Allis Health Department                          City of West Allis          A. Jennifer Vaclav
                 WIC Project                                                                       B. Jennifer Vaclav
                 7120 West National Avenue                                                         C. Terry Brandenburg
                 West Allis, WI 53214                                                                 (414) 302-8637
                                                                                                   D. Cheryl Davies
                                                                                                   E. Jennifer Vaclav
                 (414) 302-8642       FAX: (414) 302-8628                                          F. Jennifer Vaclav
                                                                                                   G. Marilyn Bolton
35      5485     Sixteenth Street Community Health Center              Milwaukee County            A. Sue Denman
                 WIC Project                                                                       B. Diane Dankert
                 1337 South Cesar Chavez Drive                                                     C. John Bartkowski
                 Milwaukee, WI 53204                                                                  (414) 672-1315 x342
                                                                                                   D. Sally Callan
                                                                                                   E. Vacant
                 (414) 643-7554       FAX: (414) 643-1899                                          F. Lizbeth Garcia
                 e-mail: denman@sschc.org                                                          G. Marilyn Bolton
36      4870     Seeds of Health, Inc.                                Milwaukee County             A. Marcia Spector
                 WIC Project                                          (concentration on Hispanic   B. Lisa Hanson
                 1445 S 32nd Street                                   population), South Suburbs,  C. Marcia Spector (414) 672-3364
                 Milwaukee, WI 53215                                  City of Wauwatosa            D. Brenda Kalchbrenner/
                                                                                                      Monica Janza
                                                                                                   E. Lisa Hanson
                 (414) 672-3430       FAX: (414) 672-3845                                          F. Lisa Hanson
                 e-mail: mspector@execpc.com                                                       G. Marilyn Bolton
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -229-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
37      1200     Jefferson County Health Dept                          Jefferson County\           A. Ann Lynch
                 WIC Project                                           All City of Watertown       B. Vacant
                 N3995 Annex Road                                                                  C. Gail Chamberlain(920) 674-7228
                 Jefferson, WI 53549                                                               D. Vacant
                                                                                                   E. Vacant
                 (920) 674-7275       FAX: (920) 674-7477                                          F. Terry Meloy
                 e-mail: cham100w@wonder.em.cdc.gov                                                G. Sandra Poehlman
38      3755     Nutrition and Health Associates, Inc.                 Rock County                 A. Cathy Dean
                 Rock County WIC Project                               Green County                B. Mary Pesik
                 32 East Racine Street                                                             C. Cathy Dean
                 Janesville, WI 53545                                                              D. Mary Pesik
                                                                                                   E. Bonnie Bohr
                 (608) 754-3722       FAX: (608) 754-3132                                          F. Mary Pesik
                 e-mail: nha@jvlnet.com                                                            G. Dan Cash
39       275     Buffalo County Dept of Health & Human Services        Buffalo County              A. Heather Repinski
                 WIC Project                                                                       B. Claudia Cater
                 407 S 2nd Street                                                                  C. Stuart Berg
                 PO Box 517                                                                        D. Claudia Cater
                 Alma, WI 54610                                                                    E. Heather Repinski
                                                                                                   F. Barb Bauman
                 (608) 685-4412       FAX: (608) 685-3342                                          G. JoAnn Wegenke
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -230-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
40      2880     Health and Nutrition Service of Racine, Inc.          Racine County               A. Margie Carrington
                 WIC Project                                                                       B. Kathy Bible
                 2316 Rapids Drive                                                                 C. Margie Carrington
                 Racine, WI 53404                                                                  D. Tracy Steh
                                                                                                   E. Rae Jean Vistain
                 (414) 637-7750       FAX: (414) 637-7926                                          F. Kathy Bible
                                                                                                   G. Marilyn Bolton
41      685      Oneida County Health Department                       Oneida County               A. Kathryne Sutliff
                 WIC Project                                                                       B. Valerie Klave
                 Courthouse                                                                        C. Kathryne Sutliff(715) 369-6111
                 P.O. Box 400                                                                      D. Debra Durchslag
                 Rhinelander, WI 54501                                                             E. Valerie Klave
                                                                                                   F. Debra Drake
                 (715) 369-6109       FAX: (715) 732-7646                                          G. Barbara Pevytoe
                 e-mail: sutl100w@wonder.em.cdc.gov
42      885      Marinette County Health Department                    Marinette County            A. Mary Mursau
                 WIC Project                                                                       B. Sherry Stender
                 2500 Hall Avenue, Suite C                                                         C. Robert Jarentowski
                 Marinette, WI 54143                                                                 (715) 732-7700
                                                                                                   D. Sherry Stender
                                                                                                   E. Sherry Stender
                 (715) 732-7670       FAX: (715) 732-7646                                          F. Sherry Stender
                 e-mail: murs101w@wonder.em.cdc.gov                                                G. Diane Moreau-Stodola
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -231-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
43       800     Shawano County Health Department                      Shawano County              A. Linda Waggoner
                 WIC Project                                                                       B. Linda Waggoner
                 Courthouse                                                                        C. Janet Lewellyn (715) 526-4805
                 311 North Main Street                                                             D. Linda Waggoner
                 Shawano, WI 54166                                                                 E. Susan Larson
                                                                                                   F. Susan Larson
                 (715) 526-2822       FAX: (715) 524-5157                                          G. Mary Silha
                 (715) 526-3040
                 e-mail: lewe100w@wonder.em.cdc.gov
44      1520     Sheboygan County Health & Human Services              Sheboygan County            A. Jean Beinemann
                 WIC Project                                                                       B. Laura Graney
                 1011 North Eighth Street                                                          C. Gary Johnson (920) 459-3213
                 Sheboygan, WI 53081                                                               D. Marcia Beauchaine
                                                                                                   E. Karin Gunderson
                 (920) 459-3417       FAX: (920) 459-4353                                          F. Karin Gunderson
                 e-mail: jmbeinem@sheboygan.wi.us                                                  G. Mary Silha
45      1210     Manitowoc County Health Department                    Manitowoc County            A. Jeanne Gauthier
                 WIC Project                                                                       B. Jeanne Gauthier
                 823 Washington Street                                                             C. James Blaha (920) 683-4453
                 Manitowoc, WI 54220                                                               D. Barbara Redmer
                                                                                                   E. Sandy Hollen
                 (920) 683-4526       FAX: (920) 683-4156                                          F. Sandy Hollen
                                                                                                   G. Diane Moreau-Stodola
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -232-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
46       140     Florence County Health Dept                           Florence County             A. Karen Wertanen
                 WIC Project                                                                       B. Barbara Pevytoe
                 Courthouse, PO Box 17                                                             C. Karen Wertanen
                 501 Lake Avenue                                                                   D. Karen Wertanen
                 Florence, WI 54121                                                                E. Karen Wertanen
                                                                                                   F. Mary Jo Bomberg
                 (715) 528-4837       FAX: (715) 528-5269                                          G. Paula Lickteig
                 e-mail: wert101w@wonder.cdc.em.gov
47       225     Forest County Health Dept                             Forest County               A. Linda Kortbein
                 WIC Project                                                                       B. Vacant
                 Courthouse                                                                        C. Linda Kortbein
                 200 E Madison Street                                                              D. Stephanie Mattson
                 Crandon, WI 54520                                                                 E. Lillie Erdmann
                                                                                                   F. Anne Loduha
                 (715) 478-3371       FAX: (715) 478-5171                                          G. Barbara Pevytoe
48       350     Burnett County Health Department                      Burnett County              A. Nancy Osterberg
                 WIC Project                                                                       B. Nancy Osterberg
                 7410 County Road K, No. 114                                                       C. Daniel Brown
                 Siren, WI 54872                                                                   D. Nancy Osterberg
                                                                                                   E. Amy Erickson
                 (715) 349-2141       FAX: (715) 349-2140                                          F. Amy Erickson
                 e-mail: oste101w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -233-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
49       345     Sawyer County Health & Human Services                 Sawyer County               A. Karla Arrigoni
                 WIC Project                                                                       B. Karla Arrigoni
                 105 East Fourth Street                                                            C. Pat Harrington
                 PO Box 528                                                                        D. Karla Arrigoni
                 Hayward, WI 54843                                                                 E. Karla Arrigoni
                                                                                                   F. Lois Downey
                 (715) 634-4874       FAX: (715) 634-3580                                          G. Barbara Pevytoe
50       600     Oconto County Department of Human Services WIC        Oconto County               A. Paulette Watermolen
                 Project                                                                           B. Paulette Watermolen
                 501 Park Avenue                                                                   C. Dennis Tomchek (920) 834-7000
                 Oconto, WI 54153                                                                  D. Paulette Watermolen
                                                                                                   E. Paulette Watermolen
                 (920) 834-7072       FAX: (920) 834-6889                                          F. Paulette Watermolen
                 e-mail: konitde@co.oconto.wi.us                                                   G. Diane Moreau-Stodola
51      1210     Wood County Health Department                         Wood County                 A. Mary Arnold
                 WIC Project                                                                       B. Connie Eisch
                 184 Second Street North                                                           C. Robert Newman (715) 421-8911
                 Wisconsin Rapids, WI 54494                                                        D. Mary Arnold
                                                                                                   E. Pam Killian
                 (715) 421-8950       FAX: (715) 421-8962                                          F. Pam Killian
                                                                                                   G. Paula Lickteig
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -234-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
52     10260     City of Milwaukee Health Department                   City of Milwaukee           C. Seth Foldy (414) 286-3521
                 WIC Project                                                                       E. Clarice Hall Moore
                 841 North Broadway                                                                G. Marilyn Bolton
                 Milwaukee, WI 53202-3653

                 (414) 286-3616              FAX: (414) 286-8174
52-01            Isaac Coggs Community Health Center
                 WIC Project
                 2770 North Fifth Street
                 Milwaukee, WI 53212

                 (414) 286-8819 (Staff)      FAX: (414) 286-2368
52-02            Johnston Community Health Center                                                  A. Clarice Hall Moore
                 WIC Project                                                                          (414) 286-8804
                 1230 West Grant Street                                                            D. Bonnie Brower (414) 286-8820
                 Milwaukee, WI 53215                                                               F. Shirley Newby (414) 286-8737

                 (414) 286-8805 (Staff)
52-03            Northwest Health Center                                                           B. Yvonne Greer (414) 286-3619
                 WIC Project
                 7630 West Mill Road
                 Milwaukee, WI 53218

                 (414) 286-8807 (Staff)      FAX: (414) 286-5479
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -235-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
52-04            Keenan Health Center
                 WIC Project
                 3200 North 36th Street
                 Milwaukee, WI 53216

                 (414) 286-8803 (Staff)      FAX: (414) 286-2112
53      2915     City of Madison/Madison Dept of Public Health         City of Madison             A. Janet Daniel
                 WIC Project                                                                       B. Sue Marshall
                 2202 S Park Street                                                                D. Janet Daniel
                 Madison, WI 53713                                                                 E. Janet Daniel
                                                                                                   F. Julann Esse/Kathy Boldt
                 (608) 267-1111              FAX: (608) 261-9606                                    G. Dan Cash
                 e-mail: jdaniel@ci.madison.wi.us
                 smarshall@ci.madison.wi.us

                 City of Madison/Madison Dept of Public Health                                     C. Patricia Gadow
                 City-County Building Room 507
                 210 Martin Luther King Jr Blvd
                 Madison, WI 53710

                 (608) 266-4821
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -236-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
54      1885     Dane County Department of Human                       Dane County                 A. Laura Snyder
                 Services/Division of Public Health                                                B. Carol Johnson-Hohol
                 WIC Project                                                                       C. Gareth Johnson (608) 242-6511
                 1202 Northport Drive                                                              D. Laura Snyder
                 Madison, WI 53704                                                                 E. Laura Snyder
                                                                                                   F. Barb Bailey
                 (608) 242-6525            FAX: (608) 242-6256                                     G. Dan Cash
56       415     Vernon County Health Department                       Vernon County               A. Elizabeth Johnson
                 WIC Project                                                                       B. Shyamala Ganesh
                 Rt 3, Hwy BB                                                                      C. Elizabeth Johnson
                 PO Box 209                                                                           (608) 637-2233
                 Viroqua, WI 54665-0209                                                            D. Janet Reed
                                                                                                   E. Shyamala Ganesh
                                                                                                   F. Shyamala Ganesh
                 (608) 637-6488            FAX: (608) 637-8750                                     G. Linda Petersen
                 e-mail: john125w@wonder.em.cdc.gov
57      1025     Sauk County Dept of Health                            Sauk County                 A. Linda Bormann
                 WIC Project                                                                       B. Linda Bormann
                 505 Broadway                                                                      C. Beverly Muhlenbeck
                 Baraboo, WI 53913                                                                    (608) 355-4300
                                                                                                   D. Linda Bormann
                                                                                                   E. Linda Bormann
                 (608) 355-4302            FAX: (608) 355-3469                                     F. Sonja Schyvinch
                 (608) 355-4320                                                                    G. Dan Cash
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -237-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
58       390     Washburn County Public Health/Home Care               Washburn County             A. Billie La Bumbard
                 WIC Project                                                                       B. Sarah Fry
                 222 Oak Street                                                                    C. Billie La Bumbard
                 Spooner, WI 54801                                                                 D. Sarah Fry
                                                                                                   E. Sarah Fry
                 (715) 635-7616              FAX: (715) 635-6475                                   F. Cindy Duffy
                 e-mail: labu100w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
59       525     Rusk County Health Dept                               Rusk County                 A. Claudia Cater
                 WIC Project                                                                       B. Claudia Cater
                 311 Miner Avenue East                                                             C. Kathleen Mai
                 Suite C220                                                                        D. Claudia Cater
                 Ladysmith, WI 54848                                                               E. Audrey Tinder
                                                                                                   F. Audrey Tinder
                 (715) 532-2177              FAX: (715) 532-2217                                   G. JoAnn Wegenke
60       580     Clark County Health Department                        Clark County                A. Diane Roach
                 WIC Project                                                                       B. Diane Roach
                 517 Court Street                                                                  C. Cindy Woldt-Schmidt
                 Neillsville, WI 54456                                                                (715) 743-5105
                                                                                                   D. Diane Roach
                                                                                                   E. Diane Roach
                 (715) 267-5001              FAX: (715) 267-5001                                   F. Bev Reynolds
                                                                                                   G. Linda Petersen
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -238-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
61       295     Kewaunee County Public Health Dept                    Kewaunee County             A. Lynn Drzewieski
                 WIC Project                                                                       B. Lynn Drzewieski
                 510 Kilbourn Street                                                               C. Mary Halada (920) 388-7161
                 Kewaunee, WI 54216                                                                D. Lynn Drzewieski
                                                                                                   E. Lynn Drzewieski
                 (920) 388-7166             FAX: (920) 388-2122                                    F. Alisa Herrick
                 e-mail:kcpublichealth@itol.com                                                    G. Mary Silha
62      1250     Washington County Health Department                   Washington County           A. Kimber Baars
                 Washington/Ozaukee WIC Project                        Ozaukee County              B. Kimber Baars
                 333 East Washington Street, Suite 1100                                            C. Delores Harder (414) 335-4462
                 West Bend, WI 53095                                                               D. Kimber Baars
                                                                                                   E. Carol Frank
                 (414) 335-4466 (Washington)                                                       F. Jackie Henderleiter
                 (414) 284-8172 (Ozaukee)                                                          G. Marilyn Bolton
                 FAX: (414) 335-4705 (Washington)
                 e-mail: chnmichell@co.washington.wi.us
63      5650     Wee Care Day Care, Inc                                City of Milwaukee/          C. Nate Jefferson
                 WIC Project                                           Central City North          G. Marilyn Bolton
                 4355 N Richards St Suite 205
                 Milwaukee, WI 53212

                 (414) 964-9621             FAX: (414) 964-0683
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -239-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
63-01            Wee Care                                                                          A. Ann White
                 3882 North Teutonia Avenue                                                        B. Jodi Klement
                 Milwaukee, WI 53206                                                               D. Jodi Klement
                                                                                                   E. Ann White
                 (414) 449-8460       FAX: (414) 449-8465                                          F. Sheila Lampley
                 e-mail: whiteam@aol.com
63-02            Wee Care                                                                          F. Theresa Scott
                 5825 West Capitol Drive
                 Milwaukee, WI 53216

                 (414) 449-8470       FAX: (414) 449-8475
                 whiteam@aol.com
64      1430     Racine Health Department                             City of Racine               A. Amy Brieske
                 WIC Project                                                                       B. Amy Brieske
                 730 Washington Avenue                                                             C. Diane S Muri (414) 636-9495
                 Racine, WI 53403                                                                  D. Amy Brieske
                                                                                                   E. Amy Brieske
                 (414) 636-9494       FAX: (414) 636-9504                                          F. Kris Nevarez
                                                                                                   G. Sandra Poehlman
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -240-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
65       830     Waupaca County Dept of Hlth & Human Serv              Waupaca County              A. Gail Yest
                 WIC Project                                                                       B. Gail Yest
                 Courthouse                                                                        C. Barbara Black (715) 258-6385
                 811 Harding Street                                                                D. Gail Yest
                 Waupaca, WI 54981                                                                 E. Debbie Meidl
                                                                                                   F. Debbie Meidl
                 (715) 258-6391             FAX: (715) 258-6409                                    G. Diane Moreau-Stodola
66       345     Calumet County Health Dept                            Calumet County              A. Jennifer Colla
                 WIC Project                                                                       B. Jennifer Colla
                 206 Court Street                                                                  C. Rosemary Roy
                 Chilton, WI 53014                                                                 D. Barbara Schaefer
                                                                                                   E. Jennifer Colla
                 (920) 849-1432             FAX: (920) 849-1476                                    F. Shari Holterman
                 e-mail: royl105w@wonder.em.cdc.gov                                                G. Mary Silha
67       855     Dodge County Human Serv & Hlth Dept                   Dodge County                A. Carol Schwab
                 WIC Project                                                                       B. Kathy Campbell
                 143 East Center Street                                                            C. David Titus (920) 386-3534
                 Juneau, WI 53039                                                                  D. Carol Schwab
                                                                                                   E. Kathy Campbel
                 (920) 386-3680             FAX: (920) 386-3533                                    F. Sharon Kok
                 e-mail: phndodge@globaldialog.com                                                 G. Dan Cash
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                     -241-
<PAGE>

<Table>
<Caption>
                                                                                                   A. PROJECT DIRECTOR
                                                                                                   B. PROJECT NUTRITIONIST
                                                                                                   C. AGENCY DIRECTOR
                                                                                                   D. BREASTFEEDING COORDINATOR
                                                                                                   E. VENDOR CONTACT
PROJ   FY '99                                                               AREA OR                F. DAISY CONTACT PERSON
NO.   CASELOAD   PROJECT NAME                                          POPULATION SERVED           G. REGIONAL NUTRITIONIST
----  --------   ------------                                          -----------------           ----------------------------
<S>   <C>        <C>                                                   <C>                         <C>
68       610     Pierce County Public Health                           Pierce County               A. Ann Rosenthal
                 WIC Project                                                                       B. Diane H-Robinson
                 412 West Kinne Street, PO Box 238                                                 C. Jane Bruggeman (715) 273-6755
                 Ellsworth, WI 54011                                                               D. Ann Rosenthal
                                                                                                   E. Mary Halls
                 (715) 273-6760             FAX: (715) 273-6854                                    F. Mary Halls
                 e-mail: rose101w@wonder.em.cdc.gov                                                G. JoAnn Wegenke
69       835     Polk County Health Dept                               Polk County                 A. Andrea Seifert
                 WIC Project                                                                       B. Andrea Seifert
                 300 Polk County Plaza, Suite 10                                                   C. Gretchen Sampson
                 Balsam Lake, WI 54810                                                             D. Andrea Seifert
                                                                                                   E. Ardis Kelly
                 (715) 485-8520: (715) 485-8501                                                    F. Ardis Kelly
                 e-mail: seif104w@wonder.em.cdc.gov                                                G. Linda Petersen
71      1025     Grant County Health Dept                              Grant County                A. Danielle Varney
                 WIC Project                                                                       B. Danielle Varney
                 125 S Monroe Street                                                               C. Linda Adrian (608) 723-6416
                 Lancaster, WI 53813                                                               D. Ann Jenkins
                                                                                                   E. Charlotte Brandt
                 (608) 723-6758             FAX: (608) 723-6501                                    F. Kelly Stadele
                 e-mail: adrilw@wonder.em.cdc.gov                                                  G. Dan Cash
</Table>

HMO Contract for January 1, 2002 - December 31, 2003

                                      -242-

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