Document:

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                                                                   EXHIBIT 10.17
                        PACIFICARE HEALTH SYSTEMS, INC.
                         FORM OF STOCK OPTION AGREEMENT
                          UNDER THE 2000 EMPLOYEE PLAN

        THIS AGREEMENT, dated ____________, is made by and between PacifiCare
Health Systems, Inc., a Delaware corporation (the "Company"), and ______________
(the "Optionee"):

        WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock; and

        WHEREAS, the Company wishes to carry out the 2000 Employee Plan of
PacifiCare Health Systems, Inc., as amended, the terms of which are hereby
incorporated by reference and made a part of this Agreement; and

        WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Stock
Options provided for herein to the Optionee as an inducement to remain in the
service of the Company or its Subsidiaries and as an incentive for increased
efforts during such service, and has advised the Company thereof and instructed
the undersigned officers to issue said Option.

        NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

        Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary.

Section 1.1 - Board

        "Board" shall mean the Board of Directors of the Company.

Section 1.2 - Chief Financial Officer

        "Chief Financial Officer" shall mean the Chief Financial Officer of the
Company.

Section 1.3 - Common Stock

        "Common Stock" shall mean the Common Stock, par value $.01 per share, of
the Company.

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Section 1.4 - Option

        "Option" shall mean the Non-Qualified Stock Option to purchase shares of
the Common Stock granted under this Agreement.

Section 1.5 - Plan

        "Plan" shall mean the 2000 Employee Plan of PacifiCare Health Systems,
Inc., as amended.

Section 1.6 - Pronouns

        The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

Section 1.7 - Secretary

        "Secretary" shall mean the Secretary of the Company.

Section 1.8 - Stock Appreciation Right

        "Stock Appreciation Right" or "Right" shall mean a right granted
pursuant to Article VI of the Plan to receive an amount of cash or, in the
discretion of the Committee, a number of shares of Common Stock of the Company
or a combination of shares of Common Stock and cash, based on the increase in
Fair Market Value of the shares of Common Stock subject to the right.

Section 1.9 - Subsidiary

        "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

Section 1.10 - Termination of Employment

        "Termination of Employment" shall mean (a) the time when the Optionee
ceases to be an Employee or an Officer of the Company or a Subsidiary for any
reason, including, but not limited to, a termination by resignation, discharge,
death or retirement, or if Optionee is a consultant, the time when Optionee is
no longer retained by the Company or any Subsidiary of the Company, but
excluding terminations where there is a simultaneous reemployment or
reappointment of the Optionee as an Employee or Officer by the Company or a
Subsidiary or (b) with respect to an Optionee who is an Employee or Officer of a
Subsidiary, the time when such Subsidiary ceases to be a Subsidiary of the
Company. The Committee, in its absolute discretion, shall determine the effect
of all other matters and questions relating to Termination of Employment,
including, but not limited to, the question of whether a Termination of
Employment resulted from a discharge for

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good cause, and all questions of whether particular leaves of absence constitute
Terminations of Employment.

                                   ARTICLE II
                                 GRANT OF OPTION

Section 2.1 - Grant of Option

        In consideration of the Optionee's agreement to render services to the
Company or its Subsidiaries and for other good and valuable consideration, the
Company irrevocably grants to the Optionee the option to purchase any part or
all of an aggregate of ____ shares of its Common Stock upon the terms and
conditions set forth in this Agreement. The date of grant of this Option is
_______________.

Section 2.2 - Purchase Price

        The purchase price of the shares of stock covered by the Option shall be
$_________ per share without commission or other charge.

Section 2.3 - Consideration to Company

        This Option is being granted in consideration of the Optionee's
agreement to render services to the Company or a Subsidiary as an Officer or
Employee of the Company or a Subsidiary, with such duties and responsibilities
as the Company or Subsidiary shall from time to time prescribe for a period of
at least one year from the date the Option is granted. Nothing in this Agreement
or in the Plan shall confer upon the Optionee a right to continue in the employ
of the Company or any Subsidiary or shall interfere with or restrict in any way
the rights of the Company and its Subsidiaries, which are hereby expressly
reserved, to discharge the Optionee or if Optionee is a consultant to terminate
Optionee's service to the Company or any Subsidiary of the Company at any time
for any reason whatsoever, with or without good cause.

Section 2.4 - Adjustments in Option

        In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of shares of
the Company or other securities of the Company or of another corporation by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, or in
the event of extraordinary cash or non-cash dividends being declared with
respect to outstanding shares of Common Stock or similar transactions, the
Committee shall make an appropriate and equitable adjustment in the number and
kind of shares as to which the Option, or portions thereof then unexercised,
shall be exercisable, to the end that after such event the Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in the Option shall be made without change in the total
price applicable to the unexercised portion of the Option (except for any change
in the aggregate price resulting from rounding-off of share quantities or

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prices) and with any necessary corresponding adjustment in the exercise price
per share. Any such adjustment made by the Committee shall be final and binding
upon the Optionee, the Company and all other interested persons; provided,
however, that each such adjustment shall be made in such manner as not to
constitute: (i) a "material modification" to the Option if it is intended to
qualify for treatment as an "existing binding contract" within the meaning of
Section 162(m)(4)(D) of the Code; or (ii) a cancellation and reissuance of the
Option for purposes of 162(m) of the Code, or the regulations promulgated
thereunder to the extent that such reissuance would result in the grant of
Awards in excess of the maximum permitted to be granted to any participant in
any fiscal year.

                                   ARTICLE III
                            PERIOD OF EXERCISABILITY

Section 3.1 - Commencement of Exercisability

        a. Subject to Sections 3.1(b), 3.2, 3.3, and 3.4, the Option shall
become exercisable in four cumulative installments as follows:

               (i) The first installment shall consist of 25 percent of the
        shares covered by the Option and shall become exercisable on the first
        anniversary of the date the Option is granted.

               (ii) The second installment shall consist of 25 percent of the
        shares covered by the Option and shall become exercisable on the second
        anniversary of the date the Option is granted.

               (iii) The third installment shall consist of 25 percent of the
        shares covered by the Option and shall become exercisable on the third
        anniversary of the date the Option is granted.

               (iv) The fourth installment shall consist of all remaining shares
        covered by the Option and shall become exercisable on the fourth
        anniversary of the date the Option is granted.

        b. No portion of the Option which is unexercisable at Termination of
Employment shall thereafter be exercisable.

Section 3.2 - Duration of Exercisability

        The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until such installment becomes unexercisable under Section 3.3. If
the Option is granted in connection with a Stock Appreciation Right and the
Right is exercised by the Optionee in whole or part, all or a portion of the
Option, as the case may be, shall be canceled to the extent of the number of
shares with respect to which the Right is exercised.

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Section 3.3 - Expiration of Option

        The Option may not be exercised to any extent by anyone after the first
to occur of the following events:

        a. The expiration of 10 years from the date the Option was granted;

        b. Optionee's Termination of Employment for cause;

        c. The expiration of 90 days from the date of Optionee's Termination of
Employment for any reason other than being discharged for cause, unless the
Optionee dies within said 90-day period; provided, however, that if Optionee has
a written employment agreement with the Company that provides for a different
exercise period, then Optionee may exercise the Option in accordance with such
exercise period;

        d. The expiration of one year from the date of the Optionee's
Termination of Employment by reason of his disability; or

        e. The expiration of one year from the date of the Optionee's death.

        For purposes of this Section 3.3, "disability" shall mean a medically
determinable physical or mental impairment which has lasted or can be expected
to last for a continuous period of not less than 12 months and which renders the
Optionee substantially unable to function as an Officer or Employee of the
Company or a Subsidiary. Nothing contained herein shall be construed to confer
on any Optionee any right to continue as an officer or employee of the Company
or its Subsidiaries.

Section 3.4 - Acceleration of Exercisability

        a. Notwithstanding anything to the contrary in Section 3.3 hereof or any
provisions in the Plan, Optionee acknowledges and agrees that instead of such
contrary provisions, this Option, if held for at least six months, shall be
exercisable as to all the shares covered hereby immediately upon the effective
date of a "Change of Control" notwithstanding that this Option may not yet have
become fully exercisable under Section 3.1(a); provided, however, that the
acceleration of exercisability shall not take place if this Option becomes
unexercisable under Section 3.3 prior to said effective date.

        b. Notwithstanding anything to the contrary contained in Section 8.2 of
the Plan or any other provision thereof, Optionee acknowledges and agrees that
instead of such contrary provisions, for purposes of this Section 3.4, the term
"Change of Control" shall mean the occurrence of any of the following:

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           (i) the acquisition by any Person (as hereinafter defined) of 20% or
more of the outstanding common stock of the Company (the "Outstanding Company
Stock"), provided that, for purposes of this subsection 3.4(b)(i), the following
acquisitions shall not constitute a Change of Control: (I) any acquisition by
the Company, (II) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Person that controls, is
controlled by or is under common control with, the Company or (III) a
Non-Qualifying Business Combination (as hereinafter defined); or

           (ii) individuals who, as of December 17, 2003 or such subsequent date
as the Board may determine from time to time to be applicable for this Change of
Control definition (the "Base Date"), constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board,
provided that, for purposes of this subsection 3.4(b)(ii), any individual who
becomes a director subsequent to the Base Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
excluding, however any such individual who initially assumes office as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

           (iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets or stock of another corporation (a
"Business Combination"), in each case, unless, following such Business
Combination, the Persons who had Beneficial Ownership of the Outstanding Company
Stock immediately prior to such Business Combination have Beneficial Ownership
immediately following the consummation of such Business Combination, directly or
indirectly, of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in the election of directors
of the corporation resulting or surviving from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business Combination of
the Outstanding Company Stock (a Business Combination that satisfies this
exception shall be deemed to be a "Non-Qualifying Business Combination"); or

           (iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company; or

           (v) the consummation of any other transaction involving a significant
issuance of the Company's securities, a change in the composition of the Board
or other material event that the Board determines to be a Change of Control for
purposes of this section.

        Optionee shall receive at least 10 days notice prior to the effective
date of the Change of Control that the Option will be exercisable upon the
effective date of the Change of Control.

        Notwithstanding the foregoing provisions of this definition, unless
otherwise determined by the Board, no Change of Control shall be deemed to have
occurred if (I) Optionee is a member of a group that first announces a proposal
which, if successful, would result in a Change of Control and

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which proposal (including any modifications thereof) is ultimately successful,
or (II) Optionee acquires a two percent (2%) or more equity interest in the
entity which ultimately acquires the Company pursuant to the transaction
described in subsection (I), above.

        For purposes of this definition, "Person" means an individual,
partnership, joint venture corporation, trust, unincorporated organization,
government (or agency or political subdivision thereof), group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) or any other entity, and "Beneficial Ownership"
means beneficial ownership within the meaning of Rule 13d-3 promulgated under
the Exchange Act.

        c. By a resolution adopted after this Option is granted the Committee
may in its absolute discretion, on such terms and conditions as it may determine
to be appropriate and subject to Sections 3.1, 3.2 and 3.3 accelerate the time
at which such Option or any portion thereof may be exercised.

        d. The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with a Change in Control and acceleration of exercisability, including, without
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction. All such determinations by the Committee shall be
conclusive.

                                   ARTICLE IV
                               EXERCISE OF OPTIONS

Section 4.1 - Person Eligible to Exercise

        During the lifetime of the Optionee, only he, his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Article III, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.

Section 4.2 - Partial Exercise

        Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Article
III; provided, however, that each partial exercise shall be for not less than
100 shares (or the minimum installment set forth in Section 3.1, if a smaller
number of shares) and shall be for whole shares only.

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Section 4.3 - Manner of Exercise

        The Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Secretary or Chief Financial Officer or their respective
offices of all of the following prior to the time when the Option or such
portion becomes unexercisable under Section 3.3:

        a. Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Committee;

        b. (i) Full payment (in cash or by check) for the shares with respect
to which such Option or portion is exercised;

           (ii) With the consent of the Committee, shares of any class of the
        Company's stock owned by the Optionee duly endorsed for transfer to the
        Company with a Fair Market Value (as determinable under Section 1.14 of
        the Plan) on the date of delivery equal to the aggregate Option price of
        the shares with respect to which such Option or portion is exercised
        (which shares shall be owned by the Optionee for more than six months at
        the time they are delivered);

           (iii) With the consent of the Committee and provided the use of the
        following procedure by an Optionee would not violate Rule 16(b) under
        the Exchange Act delivery to the Company of (x) irrevocable instructions
        to deliver the stock certificates representing the shares for which the
        Option is being exercised directly to a broker, and (y) instructions to
        the broker to sell such shares and promptly deliver to the Company the
        portion of the sale proceeds equal to the aggregate Option exercise
        price;

           (iv) With the consent of the Committee, any other form of cashless
        exercise permitted under Section 4.4 hereof; or

           (v) Any combination of the consideration provided in the foregoing
        subparagraphs (i), (ii), (iii) and (iv);

        c. Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option; and

        d. In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.

Section 4.4 - Cashless Exercise Procedures

        The Company, in its sole discretion, may establish procedures whereby
the Optionee, subject to the requirements of Rule 16b-3 under the Exchange Act ,
Regulation T issued by the Board of Governors of the Federal Reserve System
pursuant to the Exchange Act, federal income tax laws, and other federal, state
and local tax and securities laws, can exercise the Option or a

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portion thereof without making a direct payment of the Option price to the
Company. If the Company so elects to establish a cashless exercise program, the
Company shall determine, in its sole discretion and from time to time, such
administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on the Optionee should he elect to
utilize the cashless exercise program.

Section 4.5 - Conditions to Issuance of Stock Certificates

        The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

        a. The admission of such shares to listing on all stock exchanges or
quoted on Nasdaq or successor quotation system on which such class of stock is
then listed or quoted;

        b. The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable;

        c. The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;

        d. The payment to the Company of all amounts which, under federal, state
or local law, it is required to withhold upon exercise of the Option; and

        e. The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for reasons of
administrative convenience.

Section 4.6 - Rights as Stockholder

        The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares receivable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.

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                                    ARTICLE V
                                  MISCELLANEOUS

Section 5.1 - Administration

        The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Optionee, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option.

Section 5.2 - Options Not Transferable

        Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws, including those
of descent and distribution.

Section 5.3 - Shares to Be Reserved

        The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.

Section 5.4 - Withholding

        The provisions of Section 8.4 of the Plan shall govern any withholding
that the Company is required to make with respect to the exercise of the Option.

Section 5.5 - Notices

        Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary or Chief Financial
Officer and any notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.5, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 5.5. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.

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Section 5.6 - Titles

        Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.

Section 5.7 - Inconsistency between Agreement and Plan

        In the event of any inconsistency between the provisions of this
Agreement and the Plan, the provisions of the Plan shall govern.

Section 5.8 - Choice of Law

        This Agreement shall be construed and enforced in accordance with the
laws of the State of California.

Section 5.9 - Integration

        Optionee acknowledges that this Agreement, together with the Plan, sets
forth the complete, final and exclusive understanding between Optionee and the
Company regarding this Option and the acquisition of Common Stock upon the
exercise of this Option and supersedes all prior oral and written agreements on
that subject with the exception of any written employment agreement (executed by
an appropriately authorized officer of the Company) that specifies its intent to
control some or all of the terms of Options granted to Optionee.

        IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.

                                    PACIFICARE HEALTH SYSTEMS, INC.

                                    By:
                                       --------------------------------------

------------------------------
Optionee

------------------------------

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

Social Security Number:

------------------------------

                                                                              11<PAGE>
                                                                   EXHIBIT 10.21

                        PACIFICARE HEALTH SYSTEMS, INC.
                         FORM OF STOCK OPTION AGREEMENT
                         UNDER THE AMENDED AND RESTATED
                     2000 NON-EMPLOYEE DIRECTORS STOCK PLAN

        This Agreement, dated _______________ ("Agreement"), is made by and
between PacifiCare Health Systems, Inc., a Delaware corporation (the "Company"),
and ____________ (the "Optionee"):

        WHEREAS, the terms of the Amended and Restated 2000 Non-Employee
Directors Stock Plan of PacifiCare Health Systems, Inc. (the "Directors Plan"),
the terms of which are hereby incorporated by reference and made a part of this
Agreement, provide for an automatic annual grant of non-qualified stock options
(the "Options") to purchase shares of the Company's Common Stock to non-employee
directors of the Company on June 30th of each year;

        WHEREAS, the Company wishes to carry out the terms of the Directors
Plan; and

        WHEREAS, the Company continues to believe that it is to the advantage
and best interest of the Company and its stockholders that the Optionee receive
the Options provided for herein as an incentive for the Optionee to continue to
serve as a member of the Company's Board of Directors (the "Board") and has
instructed the authorized officers to issue such Options;

        NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

        Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary.

Section 1.1 - Board

        "Board" means the Company's Board of Directors.

Section 1.1 - Chief Financial Officer

        "Chief Financial Officer" means the Chief Financial Officer of the
Company.

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Section 1.2 - Committee

        "Committee" means a committee of the Board comprised of two or more
members of the Board with such members of the committee being non-employee
directors as defined in Rule 16b-3(b) (or any successor provision) promulgated
under the Exchange Act.

Section 1.2 - Common Stock

        "Common Stock" means the Company's common stock, par value $.01 per
share.

Section 1. - Date of Grant

        "Date of Grant" means the date on which the Options are granted to
Optionee pursuant to the terms of this Agreement.

Section 1.6 - Directors Plan

        "Directors Plan" means the Amended and Restated 2000 Non-Employee
Directors Stock Plan of PacifiCare Health Systems, Inc.

Section 1.3 - Employee Plan

        "Employee Plan" means the 1996 Stock Option Plan for Officers and Key
Employees of PacifiCare Health Systems, Inc., as amended.

Section 1.4 - Exchange Act

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

Section 1. - Option Price

        "Option Price" means the purchase price per share of the shares of
Common Stock underlying the Options granted pursuant to this Agreement.

Section 1.5 - Options

        "Options" mean the non-qualified stock options to purchase shares of
Common Stock granted under this Agreement.

Section 1.7 - Pronouns

        The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

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Section 1.8 - Secretary

        "Secretary" means the Secretary of the Company.

Section 1.9 - Subsidiary

        "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

                                   ARTICLE II
                                GRANT OF OPTIONS

Section 2.1 - Grant of Options

        The Company irrevocably grants to the Optionee the Options to purchase
an aggregate of ____________ shares of Common Stock upon the terms and
conditions set forth in this Agreement. The Date of Grant for the Options is
_____________.

Section 2.2 - Option Price

        The Option Price shall be _______ per share without commission or other
charge.

Section 2.3 - Consideration to Company

        The Options are being granted in consideration of the Optionee's
agreement to render services to the Company as a member of the Board.

Section 2.4 - Adjustments in Options

        (a) Changes in Company's Shares. In the event that the outstanding
shares of Common Stock are hereafter changed into or exchanged for a different
number or kind of shares or other securities of the Company, or of another
corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the outstanding shares of Common Stock or other similar
transactions, proportionate adjustments shall be made by the Committee in the
number and kind of shares for the purchase of which options may be granted
(including adjustments of the limitation on the maximum number and kind of
shares which may be issued on exercise of options), which adjustments shall be
consistent with comparable adjustments made pursuant to the corresponding
provision in the Employee Plan.

                                     - 3 -
<PAGE>

        (b) Adjustments in Outstanding Awards. In the event that the outstanding
shares of Common Stock are hereafter changed into or exchanged for a different
number or kind of shares or other securities of the Company, or of another
corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the outstanding shares of Common Stock or other similar
transactions, the Committee shall make proportionate adjustments in the number
and kind of shares as to which all outstanding options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustments shall be consistent with comparable adjustments
made pursuant to the corresponding provision in the Employee Plan. Such
adjustment in an outstanding option shall be made without change in the total
price applicable to the option or the unexercised portion of the option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in option
price per share. Any such adjustment made by the Committee shall be final and
binding upon all optionees, the Company and all other interested persons.

                                   ARTICLE III
                            PERIOD OF EXERCISABILITY

Section 3.1 - Commencement of Exercisability

        Subject to Section 3.3, the Options shall be fully vested and
exercisable on the Date of Grant; provided, however, that the underlying shares
of Common Stock may not be sold within the first six (6) months of the Date of
Grant.

Section 3.2 - Duration of Exercisability

        The Options shall remain exercisable until they become unexercisable
under Section 3.3.

Section 3.3 - Expiration of Options

        The Options may not be exercised to any extent by anyone after the
expiration of 10 years from the Date of Grant.

                                   ARTICLE IV
                               EXERCISE OF OPTIONS

Section 4.1 - Person Eligible to Exercise

                                     - 4 -
<PAGE>

        During the lifetime of the Optionee, only he, his guardian, legal
representative or other person approved by the Committee in its sole discretion
may exercise the Options or any portion thereof. After the death of the
Optionee, any exercisable portion of the Options may, prior to the time when the
Options become unexercisable under Article III, be exercised by his personal
representative or by any person empowered to do so under the Optionee's will or
under the then applicable laws of descent and distribution.

Section 4.2 - Partial Exercise

        Any exercisable portion of the Options or the entire Options may be
exercised in whole or in part at any time prior to the time when the Options or
portion thereof become unexercisable under Article III; provided, however, that
each partial exercise shall be for not less than 100 shares and shall be for
whole shares only.

Section 4.3 - Manner of Exercise

        Any exercisable portion of the Options, or the entire Options may be
exercised solely by delivery to the Secretary or Chief Financial Officer or
their respective offices of all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 3.3:

        a. Notice in writing signed by the Optionee or the other person then
entitled to exercise the Options or portion thereof, stating that such Options
or portion are being exercised, such notice complying with all applicable rules
established by the Committee;

        b. (i) Full payment (in cash or by check) for the shares with respect to
which such Options or portion are exercised;

           (ii) With the consent of the Committee, shares of any class of the
        Company's stock owned by the Optionee duly endorsed for transfer to the
        Company with a Fair Market Value (as determinable under Section 4(c) of
        the Directors Plan) on the date of delivery equal to the aggregate
        Option Price with respect to which such Options or portion being
        exercised (which shares shall be owned by the Optionee for more than six
        months at the time they are delivered);

           (iii) With the consent of the Committee and provided the use of the
        following procedure by an Optionee would not violate Rule 16(b) under
        the Exchange Act delivery to the Company of (x) irrevocable instructions
        to deliver the stock certificates representing the shares for which the
        Options are being exercised directly to a broker, and (y) instructions
        to the broker to sell such shares and promptly deliver to the Company
        the portion of the sale proceeds equal to the aggregate Option Price;

           (iv) With the consent of the Committee, any other form of cashless
        exercise permitted under Section 4.4 hereof; or

                                     - 5 -
<PAGE>

           (v) Any combination of the consideration provided in the foregoing
        subparagraphs (i), (ii), (iii) and (iv);

        c. A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Options or portion, stating that the shares of stock
are being acquired for his own account, for investment and without any present
intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act of 1933, as amended (the "Act"), and then
applicable rules and regulations thereunder, and that the Optionee or other
person then entitled to exercise such Options or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the shares by
such person is contrary to the representation and agreement referred to above.
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with the Act and any other
federal or state securities laws or regulations. Without limiting the generality
of the foregoing, the Committee may require an opinion of counsel acceptable to
it to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of the
Options shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such exercise
have been registered under the Act, and such registration is then effective in
respect of such shares;

        d. Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Options; and

        e. In the event the Options or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Options.

        The date of exercise of the Options shall be deemed to be the date all
of the foregoing conditions are met.

                                     - 6 -
<PAGE>

Section 4.4 - Cashless Exercise Procedures

        The Company, in its sole discretion, may establish procedures whereby
the Optionee, subject to the requirements of Rule 16b-3 under the Exchange Act ,
Regulation T issued by the Board of Governors of the Federal Reserve System
pursuant to the Exchange Act, federal income tax laws, and other federal, state
and local tax and securities laws, can exercise the Option or a portion thereof
without making a direct payment of the Option Price to the Company. If the
Company so elects to establish a cashless exercise program, the Company shall
determine, in its sole discretion and from time to time, such administrative
procedures and policies as it deems appropriate consistent with those of any
cashless exercise program established pursuant to the Employee Plan and such
procedures and policies shall be binding on the Optionee should he elect to
utilize the cashless exercise program.

Section 4.5 - Conditions to Issuance of Stock Certificates

        The shares of stock deliverable upon the exercise of the Options, or any
portion thereof, may be either previously authorized but unissued shares of
Common Stock or issued shares of Common Stock that have then been reacquired by
the Company. Such shares shall be fully paid and nonassessable. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of the Options, or any portion
thereof, prior to fulfillment of all of the following conditions:

        a. The admission of such shares of Common Stock to listing on all stock
exchanges which such class of stock is then listed;

        b. The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable;

        c. The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;

        d. The payment to the Company of all amounts which, under federal, state
or local law, it is required to withhold upon exercise of the Options; and

        e. The lapse of such reasonable period of time following the exercise of
the Options as the Committee may from time to time establish for reasons of
administrative convenience.

                                     - 7 -
<PAGE>

Section 4.6 - Rights as Stockholder

        The holder of the Options shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares of Common
Stock receivable upon the exercise of any part of the Option unless and until
certificates representing such shares of Common Stock shall have been issued by
the Company to such holder.

                                    ARTICLE V
                                  MISCELLANEOUS

Section 5.1 - Administration

        The Committee shall have the power to interpret the Directors Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Directors Plan as are consistent therewith and to
interpret, amend or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon the Optionee, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Directors
Plan or the Options.

Section 5.2 - Options Not Transferable

        Neither the Options nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

Section 5.3 - Shares to Be Reserved

        The Company shall at all times during the term of the Options reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.

Section 5.4 - Withholding

        The provisions of Section 12 of the Plan shall govern any withholding
that the Company is required to make with respect to the exercise of the
Options.

                                     - 8 -
<PAGE>

Section 5.5 - Notices

        Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary or Chief Financial
Officer and any notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.5, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 5.5. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.

Section 5.6 - Titles

        Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.

Section 5.7 - Inconsistency between Agreement and Directors Plan

        In the event of any inconsistency between the provisions of this
Agreement and the Directors Plan, the provisions of the Directors Plan shall
govern.

Section 5.8 - Choice of Law

        This Agreement shall be construed and enforced in accordance with the
laws of the State of California.

                                     - 9 -
<PAGE>

        IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.

                                    PACIFICARE HEALTH SYSTEMS, INC.

                                    By:
                                       ---------------------------------

------------------------------
Optionee

------------------------------

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

Social Security Number:

------------------------------

                                     - 10 -

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