Vice President of Human Resources Employment Agreement

January 22, 1999


Karin Mayhew 23 Cornwall Lane Guilford, Connecticut 06437


Re: Terms of Employment


Dear Karin:


On behalf of Foundation Health Systems, Inc. (hereinafter the "Company"), I would like to confirm our offer to you for the exempt position of Senior Vice President of Human Resources of the Company. The position will be located in Woodland Hills, California and, as we discussed, your anticipated start date will be April 1, 1999. In this position you will report directly to the President and Chief Executive Officer of the Company, and will be considered a "Tier 1" executive officer of the Company. You will earn a monthly salary of $22,916.67. As is our current practice, you will be paid on a bi-weekly basis with 26 pay periods per year. Performance of each of the Company's Associates is generally reviewed on an annual basis, and any adjustment to salary is ordinarily made upon the completion of such performance review. Any adjustment to your compensation must be made with the approval of the Compensation and Stock Option Committee of the Company's Board of Directors (the "Committee"). You will be provided a $1,000 per month automobile allowance subject to normal payroll deductions, and subject to any changes that may be made from time to time to the overall automobile allowance program.


As we discussed, given your delayed start date of April 1, 1999 and the fact that prior to such date you will not be actively employed but will instead be utilizing your accumulated accrued vacation from your prior employer, we would expect you to spend approximately two weeks of your time on the Company's business prior to your start date. The Company will reimburse your reasonable business expenses (including any necessary travel) for your service prior to April 1, 1999. During this time, it is anticipated that you would participate in all meetings of the Company's 401(k) Plan Steering Committee (members of which include Steve Erwin, Curt Westen, and other senior management members) and would also assist in restructuring the Company's Human Resources function including establishing a process to recruit a Corporate Director of Compensation and Benefits.


Offer Letter to Karin Mayhew January 22, 1999 Page 2


Upon commencement of your employment, FHS will provide to you a one-time $300,000 loan (with interest accrued at the Prime Rate and amortized straight-line over a five-year period) payable by you in full upon demand upon termination of your employment with the Company. One-fifth of the principal and any accrued interest of such loan will be forgiven on each of the first through fifth anniversaries of your date of hire subject to your continued employment with the Company. Any accrued interest and principal of such loan will be forgiven in the event you are terminated by the Company without cause or within two years of a change of control. The Company agrees that it will consider your reasonable requests, if any, to restructure the timing, nature and/or characterization of such loan as may be suggested by your tax/financial advisers; provided that such restructuring would not disadvantage the Company and would not result in a modification of your obligation to repay such amount in the instances set forth above.


In addition, you will be eligible to participate in the executive Incentive Plan as it may be modified from time to time by the Committee. Under the Plan, bonus payments are dependent upon Company and individual performance measures. You will be eligible to participate in the Plan in 1999 with a target bonus opportunity of 70 percent of your base salary and a minimum, guaranteed bonus of $50,000 for such 1999 Plan year. The maximum bonus payable to you under provisions of the Plan is 105 percent of base salary.


Any bonus payout for 1999 will be paid in 2000 following outside audit of the Company's performance and determination of your success in accomplishing individual performance objectives. To be eligible for any bonus payment, you must be actively employed and on the Company payroll at the time the bonus is paid. Bonus calculations are based on the base annual salary in effect on December 31st of the respective Plan year (pro-rated for the portion of the year a given participant was an employee of the Company). It is understood that the Committee and the Company will award bonus amounts, if any, as it deems appropriate consistent with the guidelines of the Plan. You acknowledge that in the event you are one of the top five highest paid executive officers of the Company for a given year under applicable federal securities laws, your bonus for that year, if any, will be subject to the Company's Performance-Based 162(m) Plan in li ...