Document:

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                                                                   EXHIBIT 10.09

             (Contract Period January 1, 2000 to December 31, 2000 )

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

                           CONTRACT (P______________)

                                     Between

     Health Care Financing Administration (hereinafter referred to as HCFA)

                                       and

                -------------------------------------------------
                (hereinafter referred to as the M+C Organization)

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

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

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                                    Article I

                                Term of Contract

A. Term: The term of this contract shall be from January 1, 2000 through
   December 31, 2000.
      [422.504]

                                   Article II

                              Coordinated Care Plan

A. The Medicare+Choice Organization agrees to operate the following coordinated
care plans (as defined in 42 CFR Section 422.4(a)(1)) in compliance with the
requirements of this contract, and the Federal statutes, regulations, and rules
applicable to the Medicare+Choice program:

__________________________________            __________________________________
"H" Number/Service Area                       "H" Number/Service Area

__________________________________            __________________________________
"H" Number/Service Area                       "H" Number/Service Area

B. YEAR 2000 READINESS: In the event that the M+C Organization's information
technology is not Year 2000 compliant, such non-compliance shall not in any case
excuse the M+C Organization from assuring that beneficiaries have access to all
benefits covered under this contract. Year 2000 compliant means information
technology that accurately processes date and time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and between the
nineteenth, twentieth, and twenty-first centuries, and the years 1999 and 2000
and leap year calculations. Furthermore, Year 2000 compliant information
technology, when used in combination with other information technology, must
accurately process date and time data if the other information technology
properly exchanges date and time data with it.
        [422.502(j)]

                                   Article III

            Functions To Be Performed By Medicare+Choice Organization

A.  PROVISION OF BENEFITS

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

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standards stated in Section 422.112.
        [422.502(a)(3)]

B.  ENROLLMENT REQUIREMENTS

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

2. The M+C Organization shall comply with the provisions of Section 422.110
concerning prohibitions against discrimination in beneficiary enrollment.
        [422.502(a)(1)]

C.  BENEFICIARY PROTECTIONS

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

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

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

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

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

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

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

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

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

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

        (i) Contractual arrangements;

        (ii) Insurance acceptable to HCFA;

        (iii) Financial reserves acceptable to HCFA; or

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

D.  PROVIDER PROTECTIONS

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

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limits on physician incentive plans. [422.502(a)(6)]

2. Prompt Payment.

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

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

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

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

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

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

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

E. QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM

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

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

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

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

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

        (i) The clinical areas include:

        (aa) prevention and care of acute and chronic conditions

        (bb) high-volume services

        (cc) high-risk services

        (dd) continuity and coordination of care

        (ii) The non-clinical areas include:

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        (aa) appeals, grievances and other complaints

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

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

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

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

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

        (iv) perform ongoing measurement of performance:

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

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

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

        (vi) improve performance; and

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

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

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

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

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

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

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

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

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

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make its determinations, and

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

6. Compliance Deemed on the Basis of Accreditation: HCFA may deem the M+C
Organization to have met the quality assessment and performance improvement
requirements of Section 422.152 and the confidentiality and accuracy of enrollee
records requirements of Section 422.118 if the M+C Organization is fully
accredited (and periodically reaccredited) by a private, national accreditation
organization approved by HCFA and the accreditation organization used the
standards approved by HCFA for the purposes of assessing the M+C Organization's
compliance with Medicare requirements. The provisions of Section 422.156 shall
govern the M+C Organization's use of deemed status to meet M+C program
requirements.

F. COMPLIANCE PLAN

1. The M+C Organization agrees to implement a compliance plan that includes the
following elements.

        (a) Written policies, procedures, and standards of conduct that
articulate the M+C Organization's commitment to comply with all applicable
Federal and State standards.

        (b) The designation of a compliance officer and compliance committee
that are accountable to senior management.

        (c) Effective training and education between the compliance officer and
organization employees.

        (d) Effective lines of communication between the compliance officer and
the organization's employees.

        (e) Enforcement of standards through well-publicized disciplinary
guidelines.

        (f) Provision for internal monitoring and auditing.

2. The M+C Organization's compliance plan shall operate in such a manner as to
ensure a prompt organizational response to detected offenses and development of
corrective action initiatives. The compliance plan shall also establish an
adhered-to process for reporting to HCFA and/or the Office of the Inspector
General credible information of violations of law by the M+C Organization, plan,
subcontractors or enrollees for a determination as to whether criminal, civil,
or administrative action may be appropriate. With respect to enrollees, this
reporting requirement shall be restricted to credible information on violations
of law with respect to enrollment in the plan, or the provision of, or payment
for, health services. When the potential violation of law concerns potential
false claims or fraud on the United States, the M+C Organization shall report
the information directly to HCFA and/or the OIG and shall not file actions under
the qui tam provisions of the False Claims Act, 31 U.S.C. 3729, et seq.
     [422.501(b)(3)(VI)]

                                   Article IV

                        HCFA Payment to M+C Organization

A. The M+C Organization agrees to develop its annual adjusted community rate
(ACR) proposal

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and submit to HCFA all required information on premiums, benefits, and cost
sharing by July 1 of each year, as required under 42 CFR 422, subpart G.
[422.502(a)(10)]

B. Methodology. HCFA agrees to pay the M+C Organization under this contract in
accordance with the payment rules in subpart F of part 422. HCFA agrees to make
monthly payments based on the greatest of the blended capitation rate under
Section 422.252(a), the minimum amount rate under Section 422.252(b), or the
minimum percentage increase rate under Section 422.252(c), as adjusted by such
demographic risk factors as a beneficiary's age, disability status, sex,
institutional status, and such factors as HCFA determines appropriate per
Section 422.250(a). Beginning in contract year 2000, monthly capitation payments
made by HCFA to M+C Organizations shall be adjusted by both the above-stated
demographic factors and the health status factors as described in Section
422.256(d). The health status factors shall be based on the collection of
encounter data as described in Section 422.257. The demographic and health
status factors shall be combined to calculate payment to the M+C Organization
according to a formula stated in HCFA's Advance Notice of Methodological
Changes, published in January of each year. [422.502(a)(9)]

C. Certification of data that determine payment.

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

2. The CEO or CFO of the M+C Organization shall make a certification on
Attachment B based on best knowledge, information, and belief that the encounter
data the M+C Organization submits to HCFA under Section 422.257 are accurate,
complete, and truthful. The M+C Organization shall make monthly certifications
of encounter data on Attachment B and according to a schedule to be published by
HCFA. If such encounter data are generated by a related entity, contractor, or
subcontractor of the M+C Organization, such entity, contractor, or subcontractor
must similarly certify the accuracy, completeness, and truthfulness of the data.
Beginning October 1, 2000, the M+C Organization shall submit, in addition to the
inpatient data already required starting in 1999, physician encounter data to
HCFA. [422.502(l)]

3. The CEO or CFO of the M+C Organization shall make an annual certification on
Attachment C based on best knowledge, information, and belief, that all
information and documentation comprising the ACR proposal are accurate,
complete, and truthful, and that the benefits described in the HCFA-approved ACR
proposal agree with the benefit package the M+C Organization will

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offer during the period covered by the ACR proposal. The M+C Organization must
submit its ACR proposal(s) to HCFA by July 1 of each year. [422.502(M)]

                                    Article V

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

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

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

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

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

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

        (1) Enrollee protection provisions that provide--

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

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

        (2) Accountability provisions that indicate that--

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

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

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

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

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

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

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

        (4) Written arrangements must specify that either--

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

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

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

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

                                   Article VI

                              Records Requirements

A.  MAINTENANCE OF RECORDS

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

        (a) Are sufficient to do the following:

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

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

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

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

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

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

        (b) Include at least records of the following:

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

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

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

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

        (v) Agreements, contracts, and subcontracts.

        (vi) Franchise, marketing, and management agreements.

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

        (viii) Matters pertaining to costs of operations.

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

        (x) Cash flow statements.

        (xi) Any financial reports filed with other Federal programs or State
authorities.
        [422.502(D)]

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

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

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

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

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

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

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

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

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

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

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

B.  REPORTING REQUIREMENTS

1. The M+C Organization shall have an effective procedure to develop, compile,
evaluate, and

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report to HCFA, to its enrollees, and to the general public, at the times and in
the manner that HCFA requires, and while safeguarding the confidentiality of the
doctor-patient relationship, statistics and other information as described in
the remainder of this section (B). [422.516(A)]

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

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

        (i) The cost of its operations;

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

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

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

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

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

        (v) Requirements for combined financial statements.

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

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

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

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

        (vi) A description of any loans or other special financial arrangements
the M+C Organization makes with contractors, subcontractors, and related
entities.

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

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

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

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

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

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

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

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

        (ii) Information on Medicare enrollee satisfaction;

        (iii) The patterns of utilization of plan services;

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

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

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

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

        (e) Information about beneficiary appeals and their disposition;

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

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

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

5. Reporting and disclosure under ERISA.

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

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

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

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

                                   Article VII

                           Renewal of the M+C Contract

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

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

        (2) The M+C Organization has not provided HCFA with a notice of
intention not to renew. [422.504(C)]

                                       11
<PAGE>   13

B. Nonrenewal of contract:

        (1) Nonrenewal by the Organization.

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

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

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

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

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

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

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

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

        (d) If the M+C Organization does not renew a contract under this
paragraph (1), HCFA will not enter into a contract with the Organization for 5
years from the date of contract separation unless there are special
circumstances that warrant special consideration, as determined by HCFA.
[422.506(A)]

        (2) HCFA decision not to renew.

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

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

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

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

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

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

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

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

        (iii) To the general public at least 90 days before the end of the
current calendar year, by

                                       12
<PAGE>   14

publishing a notice in one or more newspapers of general circulation in each
community or county located in the M+C Organization's service area.

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

                                  Article VIII

                   Modification or Termination of the Contract

A. Modification or Termination of Contract by Mutual Consent

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

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

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

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

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

1. Termination by HCFA.

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

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

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

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

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

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

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

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

        (viii) The M+C Organization fails to implement an acceptable quality
assessment and

                                       13
<PAGE>   15

performance improvement program as required under subpart D of part 422.

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

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

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

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

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

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

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

        (c) Immediate termination of contract by HCFA.

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

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

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

        (d) Corrective action plan

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

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

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

                                       14
<PAGE>   16

2. Termination by the M+C Organization

        (a) Cause for termination. The M+C Organization may terminate this
contract if HCFA fails to substantially carry out the terms of the contract.

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

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

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

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

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

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

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

                                   Article IX

                   Requirements of Other Laws and Regulations

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

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

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

        (3) The Americans With Disabilities Act;

        (4) The Rehabilitation Act of 1973 and

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

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

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

                                       15
<PAGE>   17

        [422.502(H)(2)]

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

                                    Article X

                                  Severability

The M+C Organization agrees that, upon HCFA's request, this contract will be
amended to exclude any M+C plan or State-licensed entity specified by HCFA, and
a separate contract for any such excluded plan or entity will be deemed to be in
place when such a request is made.
        [422.502(K)]

                                       16
<PAGE>   18

In witness whereof, the parties hereby execute this contract.

FOR THE M+C ORGANIZATION

__________________________________            __________________________________
             Printed Name                                 Title

__________________________________            __________________________________
              Signature                                   Date

__________________________________            __________________________________
            Organization

                                              __________________________________
                                                         Address

FOR THE HEALTH CARE FINANCING ADMINISTRATION

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

                                       17
<PAGE>   19

                                  ATTACHMENT A

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

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

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

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

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

                                       18
<PAGE>   20

                                  ATTACHMENT B

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

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

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

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

                                       19
<PAGE>   21

                                  ATTACHMENT C

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

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

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

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

                                       20<PAGE>   1

                                                                   EXHIBIT 10.22

                               THIRD AMENDMENT TO
                                CREDIT AGREEMENT

        THIS THIRD AMENDMENT TO CREDIT AGREEMENT is made and dated as of
December 8, 1999 (the "AMENDMENT") among PACIFICARE HEALTH SYSTEMS, INC., a
Delaware corporation (the "COMPANY"), the Banks party to the Credit Agreement
referred to below, and BANK OF AMERICA, N.A., a national banking association, as
Agent (the "AGENT"), and amends that certain Credit Agreement dated as of
October 31, 1996, as amended by that certain First Amendment to Credit Agreement
dated as of August 15, 1997 and that certain Second Amendment to Credit
Agreement dated as of December 31, 1997 (as so amended, the "CREDIT AGREEMENT").

                                    RECITALS

        WHEREAS, the Company has requested the Agent and the Banks to amend
certain provisions of the Credit Agreement, and the Agent and the Banks are
willing to do so, on the terms and conditions specified herein;

        NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:

        1. Terms. All terms used herein shall have the same meanings as in the
Credit Agreement unless otherwise defined herein.

        2. Amendment. The Credit Agreement is hereby amended as follows:

               2.1 Amendments to Section 1.1.

                      (a) The definitions of the terms "Applicable Level" and
        "Applicable Margin" in Section 1.1 of the Credit Agreement are hereby
        amended and restated to read in their entirety as follows:

               "Applicable Level" means one of the levels set forth below
        determined by the Senior Unsecured Debt Rating as follows:

                      "Level 1" means any period during which the Senior
               Unsecured Debt Rating is better than or equal to (i) BBB+ by S&P
               and/or (ii) Baa1 by Moody's.

                                       1
<PAGE>   2

                      "Level 2" means any period (other than a Level 1 Period)
               during which the Senior Unsecured Debt Rating is better than or
               equal to (i) BBB by S&P and/or (ii) Baa2 by Moody's.

                      "Level 3" means any period (other than a Level 1 Period or
               Level 2 Period) during which the Senior Unsecured Debt Rating is
               better than or equal to (i) BBB- by S&P and/or (ii) Baa3 by
               Moody's.

                      "Level 4" means any period (other than a Level 1 Period,
               Level 2 Period or Level 3 Period) during which the Senior
               Unsecured Debt Rating is better than or equal to (i) BB+ by S&P
               and/or (ii) Ba1 by Moody's.

                      "Level 5" means any period (other than a Level 1 Period,
               Level 2 Period, Level 3 Period or Level 4 Period) during which
               the Senior Unsecured Debt Rating is better than or equal to (i)
               BB by S&P and/or (ii) Ba2 by Moody's.

                      "Level 6" means any period other than a Level 1 Period,
               Level 2 Period, Level 3 Period, Level 4 Period or Level 5 Period.

               For purposes of the foregoing, (a) if the Senior Unsecured Debt
        Ratings fall within different Levels, the Applicable Level shall be
        based upon the higher (numerically lower) of the available Levels unless
        such Levels are more than one Level apart, in which case the Applicable
        Level shall be one Level higher than the lower Level; (b) if only one
        Senior Unsecured Debt Rating exists, the Applicable Level shall be based
        upon the Level in which such rating falls; and (c) if no Senior
        Unsecured Debt Rating shall be available from at least one of S&P or
        Moody's, the Applicable Level shall be Level 6.

               "Applicable Margin" means, in the case of Facility Fees, Base
        Rate Committed Loans or LIBOR Committed Loans, a rate per annum
        determined by reference to the Applicable Level as follows:

<TABLE>
<CAPTION>
                          Applicable Base     Applicable LIBOR
  Applicable Level          Rate Margin         Rate Margin        Facility Fee
---------------------     ---------------     ----------------     ------------
<S>                       <C>                 <C>                  <C>
Level 1                          0.0%               0.625%            0.175%
Level 2                          0.0%               0.800%            0.200%
Level 3                          0.0%               1.000%            0.250%
Level 4                        0.125%               1.125%            0.375%
Level 5                        0.500%               1.500%            0.500%
Level 6                        1.000%               2.000%            0.750%
</TABLE>

                                       2
<PAGE>   3

               Changes in the Applicable Margin shall take effect (i) in the
        case of the Applicable LIBOR Rate Margin for LIBOR Loans, at the
        beginning of the following Interest Period and (ii) otherwise, as of the
        date of public announcement by S&P or Moody's, as applicable.

                      (b) There shall be added to Section 1.1 of the Credit
        Agreement, in appropriate alphabetical sequence, a new definition
        reading in its entirety as follows:

               "Investment Grade Rating Date" means the date upon which the
        Company has received Senior Unsecured Debt Ratings of BBB- or better by
        S&P and Baa3 or better by Moody's.

               2.2 Amendment to Section 2.9. Section 2.9 of the Credit Agreement
is hereby amended by deleting the date "January 1, 2000" and replacing it with
"the effective date of the Third Amendment dated as of December 8, 1999 to this
Agreement".

               2.3 Amendments to Section 7.1. Clauses (a) and (b) of Section 7.1
of the Credit Agreement are hereby amended and restated in their entirety to
read as follows:

                      "(a) prior to the Investment Grade Rating Date, the
        Company or any of its Subsidiaries may make an Approved Acquisition or
        may merge or consolidate with or into another Person in an Approved
        Merger so long as the aggregate value of the cash, stock or other
        consideration (including Indebtedness assumed by the Company or its
        Subsidiaries in connection therewith) for any such Approved Acquisition
        or Approved Merger (exclusive of the acquisition of Harris Methodist
        Hospital) does not exceed $150,000,000 or such greater amount as may be
        approved in writing by the Majority Banks;

                      (b) after the Investment Grade Rating Date, the Company or
        any of its Subsidiaries may make an Approved Acquisition or may merge or
        consolidate with or into another Person in an Approved Merger; provided
        that in the case of an Approved Acquisition or an Approved Merger
        wherein the aggregate value of the cash, stock or other consideration
        (including Indebtedness assumed by the Company or its Subsidiaries in
        connection therewith) exceeds or is expected to exceed $150,000,000 (i)
        the Company shall deliver to the Agent: (A) a written description of
        such Acquisition, merger or consolidation; and (B) if requested by the
        Agent, copies of all agreements and Governmental Approvals relating to
        such Acquisition, merger or consolidation and evidence, that such
        Acquisition, merger or consolidation is an Approved Acquisition or an
        Approved Merger; and (ii) the Company shall calculate and deliver to the
        Agent prior to the consummation of such Acquisition or Approved Merger,
        the covenants set forth in Section 7.10 showing compliance therewith on
        a pro

                                       3
<PAGE>   4

        forma basis as though such Acquisition or Approved Merger had been
        consummated on the first day of the fourth fiscal quarter immediately
        prior to the date of determination;"

               2.4 Amendment to Section 7.7. Section 7.7 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:

               "7.7 Restricted Payments. The Company shall not, and shall not
        suffer or permit any Subsidiary to, declare or make any dividend payment
        or other distribution of assets, properties, cash, rights, obligations
        or securities on account of any shares of any class of its capital
        stock, or purchase, redeem or otherwise acquire for value any shares of
        its capital stock or any warrants, rights or options to acquire such
        shares, now or hereafter outstanding; except that

                      (a) the Company may declare and make dividend payments or
        other distributions payable solely in its common stock;

                      (b) any Subsidiary may declare, pay dividends or make
        other distributions to its shareholders so long as the same is done on a
        nondiscriminatory basis;

                      (c) the Company may purchase, redeem or otherwise acquire
        shares of its common stock or options to acquire any such shares with
        the proceeds received from the substantially concurrent issue of new
        shares of its common stock; and

                      (d) from and after December 1, 1997, the Company may
        expend up to $1,000,000,000 in connection with the repurchase of its
        capital stock, provided, that, immediately after giving effect to such
        proposed action, there exists no Default or Event of Default; and
        provided, further, that the aggregate amount of such repurchases in 2001
        shall not exceed 909,500 shares."

        3. Representations and Warranties. The Company represents and warrants
to the Agent and the Banks that, on and as of the date hereof, and after giving
effect to this Amendment:

               3.1 Authorization. The execution, delivery and performance by the
Company of this Amendment has been duly authorized by all necessary corporate
action, and this Amendment has been duly executed and delivered by the Company.

               3.2 Binding Obligation. This Amendment constitutes the legal,
valid and binding obligations of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws

                                       4
<PAGE>   5

affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.

               3.3 No Legal Obstacle to Amendment. The execution, delivery and
performance by the Company of this Amendment has been duly authorized by all
necessary corporate action, and does not and will not:

                      (a) contravene the terms of any of the Company's
        Organization Documents;

                      (b) conflict with in any material respect or result in any
        material breach or contravention of, or the creation of any Lien under,
        any document evidencing any material Contractual Obligation to which the
        Company is a party or any order, injunction, writ or decree of any
        Governmental Authority to which the Company or its property is subject;
        or

                      (c) violate any material Requirement of Law.

               3.4 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against the Company of
this Amendment other than that which has been obtained.

               3.5 Incorporation of Certain Representations. The representations
and warranties of the Company set forth in Article V of the Credit Agreement are
true and correct in all respects on and as of the date hereof as though made on
and as of the date hereof, except as to such representations made as of an
earlier specified date.

               3.6 Default. No Default or Event of Default under the Credit
Agreement has occurred and is continuing.

        4. Conditions, Effectiveness. The effectiveness of this Amendment shall
be subject to the compliance by the Company with its agreements herein
contained, and to the delivery of the following to Agent in form and substance
satisfactory to Agent:

               4.1 Authorized Signatories. A certificate, signed by the
Secretary or an Assistant Secretary of the Company and dated the date of this
Amendment, as to the incumbency of the person or persons authorized to execute
and deliver this Amendment and any instrument or agreement required hereunder on
behalf of the Company.

               4.2 Authorizing Resolutions. A certificate, signed by the
Secretary or an Assistant Secretary of the Company and dated

                                       5
<PAGE>   6

the date of the Amendment, as to the resolutions of the Company's board of
directors authorizing the transactions contemplated by this Amendment.

               4.3 Amendment Fees. Payment to the Agent, for the pro rata
benefit of each Bank approving this Amendment on or before 3:00 p.m., Pacific
standard time, on December 17, 1999, of an amendment fee in an amount equal to
 .375% of the aggregate amount of the Commitments (after giving effect to the
reduction thereof pursuant to Section 2.2 hereof) held by the Banks that have
executed and delivered this Amendment by such time; payment to the Agent, for
the pro rata benefit of each Bank approving this Amendment from and after 3:00
p.m., Pacific standard time, on December 17, 1999 but on or before 3:00 p.m.,
Pacific standard time, on December 23, 1999, of an amendment fee in an amount
equal to .25% of the aggregate amount of the Commitments (after giving effect to
the reduction thereof pursuant to Section 2.2 hereof) held by the Banks that
have executed and delivered this Amendment during such period; and payment of
all other fees and expenses of the Agent in connection with this Amendment
(including, without limitation, the fees and expenses of the counsel to the
Agent).

               4.4 Guarantor Affirmation. An acknowledgment and reaffirmation
letter in the form of Exhibit A hereto, duly executed by the Guarantor.

               4.5 Other Evidence. Such other evidence with respect to the
Company or any other person as the Agent or any Bank may reasonably request to
establish the consummation of the transactions contemplated hereby, the taking
of all corporate action in connection with this Amendment and the Agreement and
the compliance with the conditions set forth herein.

        5. Miscellaneous.

               5.1 Effectiveness of the Credit Agreement and the Notes. Except
as hereby expressly amended, the Credit Agreement and the Notes shall each
remain in full force and effect, and are hereby ratified and confirmed in all
respects on and as of the date hereof.

               5.2 Waivers. This Amendment is limited solely to the matters
expressly set forth herein and is specific in time and in intent and does not
constitute, nor should it be construed as, a waiver or amendment of any other
term or condition, right, power or privilege under the Credit Agreement or under
any agreement, contract, indenture, document or instrument mentioned therein;
nor does it preclude or prejudice any rights of the Agent or the Banks
thereunder, or any exercise thereof or the exercise of any other right, power or
privilege, nor shall it require the Banks

                                       6
<PAGE>   7

to agree to an amendment, waiver or consent for a similar transaction or on a
future occasion, nor shall any future waiver of any right, power, privilege or
default hereunder, or under any agreement, contract, indenture, document or
instrument mentioned in the Credit Agreement, constitute a waiver of any other
right, power, privilege or default of the same or of any other term or
provision.

               5.3 Counterparts. This Amendment may be executed in any number of
counterparts, and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

               5.4 Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.

                                       7
<PAGE>   8

        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.

                                        PACIFICARE HEALTH SYSTEMS, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANK OF AMERICA, N.A., as Agent

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANK OF AMERICA, N.A., as a Bank

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE CHASE MANHATTAN BANK

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        CITICORP USA, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE BANK OF NEW YORK

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       8
<PAGE>   9

                                        THE BANK OF NOVA SCOTIA

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANQUE NATIONALE DE PARIS

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE DAI-ICHI KANGYO BANK, LTD.,
                                        CHICAGO BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE INDUSTRIAL BANK OF JAPAN, LIMITED,
                                        LOS ANGELES AGENCY

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        COOPERATIEVE CENTRALE RAIFFEISEN-
                                        BOERENLEENBANK B.A., "RABOBANK
                                        NEDERLAND" NEW YORK BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        By: ____________________________________
                                        Name: __________________________________

                                       9
<PAGE>   10

                                        Title: _________________________________

                                        SANWA BANK CALIFORNIA

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE SUMITOMO BANK, LIMITED,
                                        LOS ANGELES BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        WELLS FARGO BANK, N.A.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANCA COMMERCIALE ITALIANA
                                        LOS ANGELES FOREIGN BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       10
<PAGE>   11

                                        BANQUE PARIBAS

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        CIBC INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        COMMERZBANK AKTIENGESELLSCHAFT,
                                        LOS ANGELES BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        CREDIT LYONNAIS NEW YORK BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        CREDIT SUISSE FIRST BOSTON

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       11
<PAGE>   12

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANK ONE, NA

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE FUJI BANK, LIMITED

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        MELLON BANK, N.A.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        PNC BANK, N.A.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       12
<PAGE>   13

                                        THE SAKURA BANK, LTD.,
                                        LOS ANGELES AGENCY

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        SOCIETE GENERALE

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        THE TOKAI BANK, LIMITED,
                                        LOS ANGELES AGENCY

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        UNION BANK OF CALIFORNIA, N.A.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       13
<PAGE>   14

                                        SUNTRUST BANK, CENTRAL FLORIDA, N.A.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       14
<PAGE>   15

                                        THE SANWA BANK, LIMITED,
                                        LOS ANGELES BRANCH

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        MORGAN GUARANTY TRUST COMPANY OF
                                        NEW YORK

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BANK HAPOALIM B.M.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        AIB INTERNATIONAL FINANCE

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       15
<PAGE>   16

                                                                       EXHIBIT A
                                                              TO THIRD AMENDMENT
                                                             TO CREDIT AGREEMENT

                                December 8, 1999

PacifiCare Health Plan Administrators, Inc.,
successor by merger to
FHP International Corporation and
PacifiCare Operations, Inc.
5995 Plaza Drive
Cypress, California 90630

Attention: Chief Financial Officer

        Re:    Credit Agreement dated as of October 31, 1996

Ladies and Gentlemen:

        Please refer to (i) the Credit Agreement dated as of October 31, 1996,
as amended by that certain First Amendment to Credit Agreement dated as of
August 15, 1997 and that certain Second Amendment to Credit Agreement dated as
of December 31, 1997, by and among PacifiCare Health Systems, Inc., as the
borrower, the commercial lending institutions party thereto (the "Banks"),
various co-agents, various managing agents and Bank of America, N.A., as agent
(in such capacity, the "Agent") and (ii) the Guaranty dated as of October 31,
1996 from PacifiCare Operations, Inc. and the Guaranty dated as of February 14,
1997 of FHP International Corporation (each, a "Guaranty" and collectively, the
"Guaranties"). We understand that you are the successor by merger to PacifiCare
Operations, Inc. and FHP International Corporation. Pursuant to an amendment of
even date herewith, certain terms of the Credit Agreement were amended. We
hereby request that you (i) acknowledge and reaffirm all of your obligations and
undertakings under the Guaranties and (ii) acknowledge and agree that the
Guaranties are and shall remain in full force and effect in accordance with the
terms thereof.

<PAGE>   17

PacifiCare Health Plan Administrators, Inc.
December 8, 1999
Page 2

        Please indicate your agreement to the foregoing by signing in the space
provided below, and returning the executed copy to the undersigned.

                                            Very truly yours,

                                            BANK OF AMERICA, N.A., as Agent

                                            By: ________________________________
                                                Title: _________________________

Acknowledged and Agreed to:

PacifiCare Health Plan Administrators, Inc.,
successor by merger to
PACIFICARE OPERATIONS, INC. and
FHP INTERNATIONAL CORPORATION

By: ________________________________________________
    Its: ___________________________________________

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