SAFEGUARD HEALTH ENTERPRISES INC
<DOCUMENT>
<TYPE>EX-10.46
<SEQUENCE>5
<FILENAME>doc4.txt
<TEXT>
      EXHIBIT 10.46 TO CURRENT REPORT ON FORM 8-K DATED AS OF APRIL 7, 2003
      ---------------------------------------------------------------------

                        STRATEGIC RELATIONSHIP AGREEMENT

     This  STRATEGIC  RELATIONSHIP  AGREEMENT  ("Agreement") is made and entered
into  this  7th  day of April, 2003, by and between Health Net, Inc., a Delaware
corporation  ("Health  Net")  and SafeGuard Health Enterprises, Inc., a Delaware
corporation  ("SafeGuard").

                                    RECITALS
                                    --------

     WHEREAS,  Health  Net, through its Subsidiaries, is authorized to offer the
Health  Net  Products  (as defined herein) for sale in the Territory (as defined
herein);

     WHEREAS,  SafeGuard  desires  to make the Health Net Products available for
sale  by  the  SafeGuard  Marketing  Force (as defined herein) in the Territory;

     WHEREAS,  Health  Net  is willing to make the Health Net Products available
for  sale  in  the  Territory  by  the  SafeGuard  Marketing  Force;

     WHEREAS,  SafeGuard  through  its  Subsidiaries  is authorized to offer the
SafeGuard  Dental  Products  (as  defined  herein)  for  sale  in the Territory;

     WHEREAS,  SafeGuard  is willing to make the Health Net Branded Products (as
defined herein) available for sale by the Health Net Marketing Force (as defined
herein)  in  the  Territory;  and

     WHEREAS,  pursuant to the Purchase and Sale Agreement by and between Health
Net  and SafeGuard dated April 7, 2003, Health Net and SafeGuard agreed to enter
into a strategic relationship agreement at the Closing to promote and facilitate
the  sale  of Health Net Branded Products through the Health Net Marketing Force
and  the  sale  of  Health  Net  Products through the SafeGuard Marketing Force.

     NOW  THEREFORE, in consideration of the mutual agreements contained herein,
the  sufficiency  of  which  is hereby acknowledged, and in consideration of the
performance  by  the  parties  of  their  obligations  under this Agreement, the
parties  agree  as  follows:

                                    ARTICLE I
                                   DEFINITIONS
                                   -----------

     Capitalized  terms  used  in this Agreement and not otherwise defined shall
have  the  meanings  given  such  terms in the Purchase and Sale Agreement.  For
purposes  of  this  Agreement,  the  following  terms  shall  have  the meanings
specified  below (definitions are applicable to both the singular and the plural
form  of  each  term  defined  herein).

     "Ancillary  SafeGuard  Products"  means dental HMO products, dental PPO and
      ------------------------------
dental  indemnity  products developed by SafeGuard with benefit designs and rate
structures  that  differentiate such products from the SafeGuard Dental Products
offered  generally  by  SafeGuard


                                      -1-
<PAGE>
in the Territory and which shall be sold exclusively by the Health Net Marketing
Force  only  to  Health  Net  Clients.

     "Benchmark  Products"  means  those  SafeGuard  Dental  Products  that  are
      -------------------
determined  by  the  parties  to be materially similar to the Health Net Branded
Products  as  of  the  Effective  Date.

     "Branding"  shall  have  the  meaning  set  forth  in  Section  2.7.
      --------

     "Change  of Control" means the acquisition, in a single transaction or in a
      -------------------
series  of related transactions, by a person, an entity or a group of persons or
entities  acting  in  concert  of  fifty-one percent (51%) or more of the voting
securities of a party, or fifty-one percent (51%) or more of the aggregate value
of  the  assets  of  a  party.

     "Contractholder"  means  an  employer or individual in the Territory who or
      --------------
which  executes  an  enrollment agreement with respect to any Product subject to
this  Agreement.

     "Dispute"  shall  have  the  meaning  set  forth  in  Section  9.1.
      -------

     "Eligible  Employee" means an employee who is eligible to enroll in a group
      ------------------
Product  issued  to  a  Contractholder.

     "Effective  Date" means the Closing Date of the Purchase and Sale Agreement
      ---------------
by  and  between  Health  Net  and  SafeGuard  dated  as  of  April  7,  2003.

     "Health  Net  Branded  Products"  means  SafeGuard  dental  HMO  Products,
      ------------------------------
SafeGuard dental PPO Products or SafeGuard dental indemnity Products selected by
Health  Net  to  market  through the Health Net Marketing Force in the Territory
after  the  Effective  Date  with  the  Branding  of  Health  Net  and  issued,
underwritten  and  administered  by  either  SafeGuard  Health  Plans,  Inc.  or
SafeHealth  Insurance  Company.

     "Health  Net  Clients"  shall  have  the  meaning set forth in Section 2.1.
      --------------------

     "Health  Net  Dental Products" means the dental HMO Products offered in the
      -----------------------------
Territory  as  of  the Effective Date by Health Net Dental, Inc., the dental PPO
Product  offered in Oregon by Health Net Health Plan of Oregon, Inc., the dental
indemnity  Product  offered  in  Arizona  by Health Net of Arizona, Inc. and the
dental  PPO  and  dental  indemnity  Products offered in the Territory as of the
Effective  Date  by  Health  Net  Life  Insurance  Company.

     "Health  Net  Indemnities" shall have the meaning set forth in Section 8.1.
      ------------------------

     "Health  Net  Marketing  Force"  means  (i)  employees of Health Net or its
      -----------------------------
Subsidiaries who are licensed in one or more states within the Territory to sell
Products  in any state within the Territory; (ii) any agents under contract with
any Health Net Subsidiary who or which are licensed in one or more states within
the  Territory  and  authorized  to  sell  Products  on behalf of any Health Net
Subsidiary  in any of the states within the Territory; and (iii) any independent
brokers  who or which are licensed in one or more states within the Territory to
sell  Products  and who or which are authorized to represent specific purchasers
of  Products.


                                      -2-
<PAGE>
     "Health  Net  Mark-Up"  except as otherwise set forth in Section 5.5, means
      --------------------
the dollar amount equal to [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] of the
Net  Price  for Health Net Branded dental HMO Products and [SAFEGUARD-HEALTH NET
PROPRIETARY  INFORMATION] of the Net Price for the Health Net Branded dental PPO
and  dental  indemnity  Products.

     "Health  Net  Products"  means Medical Products, life insurance, vision and
      ---------------------
behavior  health  HMO,  PPO  and  indemnity  products  offered  by  Health  Net
Subsidiaries  in  the  Territory.

     "HMO"  means  a  commercial  contract  for health care services provided by
      ---
Health  Net Subsidiaries to Contractholders in the Territory utilizing a network
of  providers  who  or which are under direct or indirect contract with a Health
Net  Subsidiary to provide health care services. "HMO" includes HMO plans with a
"point-of-service"  feature that permits Enrollees to seek medical services from
providers  outside  the  network  of  providers who or which are under direct or
indirect  contract with a Health Net Subsidiary to provide health care services.

     "JAMS"  shall  have  the  meaning  set  forth  in  Section  9.2.
      ----

     "Medical  Products"  means (i) PPO and indemnity health insurance contracts
      -----------------
covering  the  medical  costs  or  services  of Subscribers and (ii) medical HMO
contacts.

     "Most  Favored  Nation  Price"  means  the  Net  Price  plus the Health Net
      ----------------------------
Mark-Up.

     "Net  Price"  means the amount equal to the estimated health care costs per
      ----------
Subscriber  established  by SafeGuard for Health Net Branded Products multiplied
by  an  administrative  expense  factor  of  [SAFEGUARD-HEALTH  NET  PROPRIETARY
INFORMATION]  for  dental  HMO  Products  and  [SAFEGUARD-HEALTH NET PROPRIETARY
INFORMATION]  for  dental  PPO  and  dental  indemnity  Products.

     "Pooled  Net  Price"  means the amount equal to the pooled estimated health
      ------------------
care  costs  determined  by  SafeGuard  for each Health Net Branded Product plan
design  multiplied  by an administrative expense factor of [SAFEGUARD-HEALTH NET
PROPRIETARY  INFORMATION]  for  dental  HMO  Products  and [SAFEGUARD-HEALTH NET
PROPRIETARY  INFORMATION]  for  dental  PPO  and  dental  indemnity  Products.

     "Producer" means an insurance agent, broker or employee of either SafeGuard
      --------
or  Health  Net  or  any of their Subsidiaries authorized to market and sell the
Products  of  a  party  in  any  state  within  the  Territory.

     "Product"  means  any  Health  Net  Product,  Health  Net  Branded Product,
      -------
SafeGuard  Dental Product or Ancillary Product offered for sale or sold pursuant
to  this  Agreement.

     "SafeGuard  Clients"  shall  have  the  meaning  set  forth in Section 2.4.
      ------------------

     "SafeGuard  Dental  Products"  means the dental HMO products offered in the
      ---------------------------
Territory  by  SafeGuard  Health  Plans,  Inc.,  and  the  dental PPO and dental
indemnity  products  offered  in  the  Territory  by  SafeHealth  Life Insurance
Company.


                                      -3-
<PAGE>
     "SafeGuard  Indemnities"  shall  have the meaning set forth in Section 8.2.
      ----------------------

     "SafeGuard  Subcapitation  Amount"  means  the  dollar amount arrived at by
      --------------------------------
multiplying  the  total  number  of Subscribers covered under Health Net Branded
Products  issued  on  or  after  the  Effective  Date  by the Net Price of their
respective  Health  Net  Branded  Products.  The  number  of Subscribers used to
calculate  the  SafeGuard  Subcapitation  Amount  shall be subject to adjustment
based  on  SafeGuard's  standard  retroactivity  adjustment  policy  as  of  the
adjustment  date.

     "Supplemental  Subcapitation Amount" means that dollar amount calculated in
      -----------------------------------
the  manner  described  in  Section  5.5.

     "Subscriber"  means  the  persons  including,  but not limited to, Eligible
      ----------
Employees,  who  meet  the  eligibility  requirements for a Product and who have
enrolled  in  such  Product.

     "Territory"  means Arizona, Oregon and California for dental PPO and dental
      ---------
indemnity  Products  and  California  for  dental  HMO  Products.

     "Term"  means  that  period  of  time  commencing on the Effective Date and
      ----
ending  on  the  termination  date  of  this  Agreement.

                                   ARTICLE II
                               MARKETING AND SALES
                               -------------------

     Section 2.1 Marketing and Sale of the Health Net Branded Products to Health
Net Clients. Subject to the terms, conditions and limitations of this Agreement,
Health  Net  shall  have  the right to utilize the Health Net Marketing Force to
offer  Health Net Branded Products to existing and prospective individual, small
group  [SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION],  mid-market  group
[SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION],  large  group  and government
clients  of  Health  Net in the Territory (jointly referred to herein as "Health
Net  Clients")  when the Health Net Marketing Force has or is offering to sell a
Medical  Product  to  such  Health  Net  Clients.

     Section  2.2 Development of Ancillary Dental Products. SafeGuard and Health
Net  shall  develop  jointly  Ancillary  SafeGuard  Products  that  Health  Net
reasonably  determines  would provide a marketing opportunity for the Health Net
Marketing  Force  in  the  Territory. Any Ancillary SafeGuard Products developed
jointly  by  Health Net and SafeGuard shall be offered exclusively by the Health
Net Marketing Force only as Health Net Branded Products to Health Net Clients in
the  Territory.

     Section  2.3  Exclusive  Agreement.

     (a)  Except  with Health Net's prior written consent and except as provided
in  this  Section 2.3(a) and Section 7.3(f), during the Term SafeGuard shall not
enter into any agreement substantially similar to this Agreement with any entity
other  than  Health Net for the purpose of offering Medical Products for sale to
SafeGuard  Clients  in  the  Territory,  provided,  however,  that  nothing
                                         --------   -------
contained  in  this  Agreement shall limit SafeGuard's right to market SafeGuard
Dental


                                      -4-
<PAGE>
Products  or  any  other  products  not  subject  to  this Agreement directly to
SafeGuard  Clients  through  the  SafeGuard Marketing Force and provided further
                                                                -------- -------
that the provisions of this Section 2.3(a) shall have no further force or effect
if  Health  Net  or  a  Health  Net  Subsidiary  acquires  ownership,  merges or
consolidates  with  an  entity  that  offers  or operates a dental HMO or dental
insurance  business  in the Territory, or ownership of Health Net is acquired by
an entity that offers or operates a dental HMO or a dental insurance business in
the  Territory  and the dental HMO and dental insurance business of the combined
entities  accounts  for more than [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]
percent  of  the  annual  gross  revenues  of  the  combined  entities.

     (b) Except with SafeGuard's prior written consent and except as provided in
this  Section  2.3(b)  and  Section 7.3(f), during the Term Health Net shall not
enter into any agreement substantially similar to this Agreement with any entity
other  than  SafeGuard for the purpose of offering any dental HMO, dental PPO or
dental  indemnity  insurance  products  for  sale  to  Health Net Clients in the
Territory,  provided,  however,  nothing contained in this Agreement shall limit
            --------   -------
Health  Net's  right  to  market  Health  Net Products or any other products not
subject  to this Agreement directly to Health Net Clients through the Health Net
Marketing  Force and provided further that the provisions of this Section 2.3(b)
                     -------- -------
shall  have  no  further  force or effect if SafeGuard or a SafeGuard Subsidiary
acquires  ownership,  merges  or  consolidates  with  an  entity  that offers or
operates  a  health  insurance  business  that  provides Medical Products in the
Territory,  or  ownership  of  SafeGuard is acquired by an entity that offers or
operates  a  health  insurance  business  that  provides Medical Products in the
Territory  and  the  health insurance business of the combined entities accounts
for more than [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION] of the annual gross
revenues  of  the  combined  entities.

     (c)  Health  Net  shall  have  the option to expand the exclusive strategic
relationship described in this Agreement to additional states in which SafeGuard
is  appropriately  licensed  to  offer the Health Net Branded Products, provided
that  SafeGuard  has  no  prior commitments in such additional states that would
conflict with the obligations of SafeGuard under this Agreement. SafeGuard shall
provide  notice to Health Net of its intent to enter into an exclusive strategic
relationship  in  any  state  outside  the Territory that would be substantially
similar  to its relationship with Health Net described in this Agreement. Health
Net  shall  have  twenty  (20)  days  from  the  date of the SafeGuard notice to
exercise  its  option  to  expand  its  exclusive  strategic  relationship  with
SafeGuard into the states identified in the SafeGuard notice, provided, however,
                                                              --------  -------
Health  Net  shall  not  have  the  option to exercise its option to expand this
strategic relationship in either Texas or Florida unless Health Net has at least
[SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION]  Subscribers  enrolled  in its
Medical  Products  in  the  relevant  state at the time Health Net exercises its
option  to  expand  this  strategic  relationship  to  such  state.

     Section 2.4 Marketing and Sale of Health Net Products by SafeGuard. Subject
to  the  terms  and  conditions of this Agreement, the SafeGuard Marketing Force
shall  have  the right to market Health Net Products to existing and prospective
individual  and  group accounts of SafeGuard Dental Products or SafeGuard vision
products  in  the  Territory  ("SafeGuard  Clients").

     Section  2.5  Identification of Health Net Branded Products. Subject to the
requirements and limitations of Section 2.7 of this Agreement and all applicable
Law,  the  Health


                                      -5-
<PAGE>
Net  Branded Products shall be marketed under the collective designation "Health
Net Dental."  Each Health Net Branded Product shall be assigned a specific trade
name, to be agreed to by the parties.  Notwithstanding the foregoing, the Health
Net  Branded Products shall be marketed in a way that clearly indicates that the
benefits provided under Health Net Branded Products are obligations of SafeGuard
Health  Plans,  Inc.  or  SafeHealth Life Insurance Company, as appropriate, and
does  not suggest that such benefits are obligations of Health Net or any Health
Net  Subsidiary.

     Section  2.6 Marketing Materials. Each party shall bear the cost of its own
marketing and promotional efforts, including but not limited to, the development
and  production  of  any  marketing  and collateral materials used to promote or
market  their  respective  Products.  Any  marketing  and  collateral  materials
developed  by  a  party to promote or market Products pursuant to this Agreement
shall  be  approved  by  the  other  party  prior  to  use.

     Section  2.7  Branding.  Neither  party shall make use of the other party's
trade  marks,  service  marks,  trade  names  or  logos, including domain names,
electric  or written content or other materials, descriptions or representations
of  any  kind  that mentions the other party or its Affiliates, or refers to any
Products or services of the other party (collectively referred to as "Branding")
without  obtaining  the  prior  written consent of such other party. The parties
shall  use  commercially reasonable efforts to provide the other party with such
consent  to utilize their respective Branding where reasonably necessary for the
other  party  to perform its duties and exercise its rights under this Agreement
and  any  such  consent granted to utilize a party's Branding shall constitute a
non-exclusive,  revocable  license that is limited to use of the Branding of the
party  in  the  Territory  consistent  with  this  Agreement.

     Section  2.8  Training.  Health  Net  and  SafeGuard  shall develop jointly
programs  or  prepare  materials to train all necessary Health Net and SafeGuard
personnel  and  the  respective  Marketing  Forces  of the parties regarding the
marketing  and  administration  of  the  Products.

                                   ARTICLE III
                     UNDERWRITING, RATES AND ADMINISTRATION
                     --------------------------------------

     Section  3.1  Authority  Regarding  Products.

     (a)     Except  as  provided  below  and  in  Article  V,  nothing  in this
Agreement confers or is intended to confer on a party any authority with respect
to  the  Products  of  the  other  party,  including  but  not  limited  to  (i)
underwriting  criteria;  (ii)  pricing;  (ii)  participation requirements; (iii)
minimum  employer  contributions;  (iv)  approval  of  applications;  or (v) the
authority  to  issue  policies,  contracts  or  any  other  documents conferring
coverage  under  a  Product  of  the  other party.  Except as otherwise provided
herein,  each party reserves the right, in its sole discretion, to amend, change
or  abolish  coverage  forms,  premium  rates  or fees, underwriting guidelines,
eligibility  criteria  and  other internal rules and regulations with respect to
its  own  Products.

     (b)  Subject  to  any limitations imposed by applicable Law, the respective
Marketing  Forces  of the parties shall be permitted to obligate the other party
to  provide  coverage to their respective Clients under the Products offered for
sale  pursuant  to  this  Agreement  if  such  Clients


                                      -6-
<PAGE>
meet  the  eligibility  and  underwriting  criteria  established  by  the  party
providing  the Product.  In the event a Client does not meet the eligibility and
underwriting  criteria  established  by  the  party  providing  the Product, the
Marketing  Force of the other party shall not have the authority to obligate the
party providing the Product to provide coverage without the prior consent of the
party  providing  the  Product.  Except as provided in this Section 3.1(b), each
party retains the exclusive right, exercisable without permission from the other
party,  to  accept or reject any application or enrollment request, or to cancel
the  coverage  with  respect  to their respective Products.  Notwithstanding the
foregoing,  neither  party shall impose any limitations or criteria with respect
to  a  Product  offered  for  sale  pursuant  to  this  Agreement  that  is more
restrictive  than  the  limitations  and  criteria  applicable  generally to the
Products  offered  for  sale  by  the  party  in  the  Territory.

     Section  3.2  Product  Administration.

     (a) Except as specifically provided herein, each party shall be responsible
for  the design and implementation of all administrative services and procedures
with  respect  to  its  respective  Products,  including  without  limitation,
enrollment,  applications,  setting  the  Net  Price,  underwriting,  reporting,
coverage  determinations,  claims,  grievances, correspondence and communication
with  eligible  and  covered  persons,  employers, Contractholders, Subscribers,
providers  and Governmental Authorities, compliance, record keeping, eligibility
verification,  and  providing  any notices required by applicable Law, provided,
                                                                       --------
however,  the  parties  shall attempt to coordinate enrollment, underwriting and
-------
the  application  process  to the extent possible and permitted by Law under the
circumstances.

     (b)  To  the  extent  permitted by applicable Law, the parties may elect to
coordinate  the  provision  of  one  or  more administrative service to minimize
duplication  of  resources and to promote greater profitability of the Products.
The  fees  payable  for such services, if any, shall be separately negotiated by
the  parties.

     Section  3.3  Enrollment. Health Net shall enroll Health Net Clients in the
Health  Net  Branded  Products  sold by the Health Net Marketing Force when such
Health  Net  Branded  Products are sold to a Health Net Client together with any
Health  Net  Medical  Product. In the event the Health Net Marketing Force sells
any  Health Net Branded Product to a Health Net Client without contemporaneously
selling  such Health Net Client a Health Net Medical Product, SafeGuard shall be
responsible  for  enrolling  the  Eligible  Employees in such Health Net Branded
Products.  Health Net and SafeGuard shall cooperate and coordinate in conducting
employee  on-site  enrollment  meetings.

     Section  3.4  Enrollment Materials. Each party shall be responsible for the
preparation  and  distribution  of  Product  booklets,  certificates,  provider
directories,  identification  cards,  and  all  other  materials relating to the
party's  respective  Products.  All  enrollment  agreements,  forms  and  other
materials,  including  Subscriber  handbooks  and identification cards, used for
Contractholders  and  Subscribers  shall  be  either Health Net's or SafeGuard's
existing  approved  forms,  as appropriate, modified as necessary to reflect the
terms  of  this  Agreement and the administrative requirements of Health Net and
SafeGuard,  respectively.  All  such  materials  shall specify the Subsidiary of
Health  Net  that  is  the  underwriter  of  the  Health  Net  Products, and the


                                      -7-
<PAGE>
Subsidiary of SafeGuard that is the underwriter of SafeGuard Products, including
but  not  limited  to, the Health Net Branded Products.  Neither party shall use
enrollment  materials  using  the  name  of  the  other party, without the other
party's  written  approval.

     Section  3.5  Enrollment  Reports.  Health  Net and SafeGuard shall prepare
periodic  and  timely  reports  showing all Products sold, renewed or terminated
pursuant  to this Agreement, and other enrollment information required by either
party to perform its duties with respect to such Products. Such reports shall be
made  by each party on a periodic and timely basis within five (5) Business Days
following  the  end  of  the  month  in  which the transactions or other matters
occurred,  and  shall  be  transmitted  by  electronic  transmission  in  a form
reasonably  acceptable  to  the  receiving party. Health Net and SafeGuard shall
each  prepare  periodic  reconciliations  of the enrollment information in their
possession.

     Section  3.6 Books and Records. Each party shall keep and maintain true and
complete  records  of  all  transactions  pursuant to this Agreement. Each party
shall  permit  the other party reasonable access during normal business hours to
its  records  related  to  its  rights  and obligations under this Agreement for
inspection  and copying by the other party or its authorized representatives, or
by  a  legally  authorized  and properly identified Governmental Authority. Each
party  shall  furnish  the other party, upon its written request, all reasonably
required  information  in  the party's possession regarding any and all matters,
transactions  or  activities  pertaining  to  the  Products  of  the other party
including  information  required for financial reporting purposes, at such times
and  in  such  formats  as  mutually  agreed  upon  by  the  parties.

                                   ARTICLE IV
                       MANAGED CARE SERVICES AND PRODUCTS
                       ----------------------------------

     Section  4.1  Network  Management.

     (a)  Except  as  otherwise  provided in the Network Access Agreement by and
between  Health Net Life Insurance Company and SafeHealth Life Insurance Company
dated  April  7,  2003,  (i)  all  terms  and  conditions of provider contracts,
including  all  compensation  arrangements  and/or negotiated fees, shall be the
sole  responsibility  of  the  party  contracting  with  the providers, and (ii)
provider  network  recruitment  and management, credentialing protocols, quality
assurance,  utilization  management,  case  management,  and  other managed care
services  with  respect  to each party's Products shall be designed, managed and
performed  by  the party providing the Product with which the services are to be
associated. Each party may recommend to the other additions to or deletions from
such  party's  provider  networks,  provided,  however,  that  the  decision  to
                                    --------   -------
include  or  exclude  any  provider  shall  be  the decision solely of the party
responsible  for  making  the  network  of  providers  available.

     (b)  Neither  party  shall  be  required to disclose to the other party its
proprietary  information, including without limitation, information with respect
to  utilization review, case management, procedure specific protocols, physician
and  provider  profiling,  credentialing criteria, software systems or any other
information which that party, in its sole discretion, designates as proprietary.
If a party elects to disclose any such proprietary information, such information
shall  be  deemed Confidential Information subject to the limitations of Section
10.16.


                                      -8-
<PAGE>
                                    ARTICLE V
                   PRODUCT PRICING, COMPENSATION AND EXPENSES
                   ------------------------------------------

     Section  5.1  Determination  of  Benchmark  Products.  Promptly  after  the
Effective  Date,  SafeGuard  and  Health Net shall compare the Health Net Dental
Products  to the SafeGuard Dental Products and determine which Health Net Dental
Products are materially similar to comparable SafeGuard Dental Products, and any
such SafeGuard Dental Products determined to be materially similar to the Health
Net  Dental  Products  and  selected  by  Health  Net to be a Health Net Branded
Product  shall be considered "Benchmark Products." If, as of the Effective Date,
there  is  no  Health  Net  Dental  Product  materially  similar  to an existing
SafeGuard  Dental Product, at the request of Health Net, SafeGuard shall develop
a  Health  Net  Branded  Product  substantially similar to such SafeGuard Dental
Product.  Health  Net  Branded  dental  HMO products created by SafeGuard at the
request of Health Net to match the SafeGuard Dental Products shall have features
identical  to  the  features of the "Health Net Advantage" suite of products. As
SafeGuard  develops  new  Dental  Products,  Health Net shall have the option to
request  SafeGuard  to  develop  an  identical  Health  Net  Branded  Product. A
SafeGuard Product for which a Health Net Branded Product is created by SafeGuard
at  the request of Health Net pursuant to this Section 5.1 shall be considered a
Benchmark  Product.

     Section 5.2 Pricing of Benchmark Products. During the Term, SafeGuard shall
not  sell  any  Benchmark Product in the Territory for a price less than the Net
Price of the comparable Health Net Branded Products plus the Health Net Mark-Up.

     Section  5.3  Pricing  of  Health  Net  Branded  Products.  The  Health Net
Marketing  Force  shall be permitted to offer the Health Net Branded Products to
individual,  small  group  [SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION] and
mid-market  group  [SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION]  Health Net
Clients  at  prices  to  be  determined  by  Health  Net in its sole discretion.

     Section  5.4  Pricing  of  Large  Group  and  Government  Clients. In those
circumstances  where  the Health Net Marketing Force has or is providing a quote
to  a  Large  Group  or  Government  account  on  one or more Health Net Medical
Products within the Territory, the Health Net Marketing Force shall be permitted
to  offer  the  Health  Net  Branded  Products to such Large Group or Government
account  at  rates  that  are  competitive  in  the  relevant  market within the
Territory and based upon the health care costs of each Large Group or Government
account  offered  the  Health Net Branded Product. The Net Price for such groups
shall  be  established by SafeGuard and based on the estimated health care costs
of  the  Subscribers covered under the Health Net Branded Products issued to the
group  multiplied  by  an administrative expense factor of [SAFEGUARD-HEALTH NET
PROPRIETARY  INFORMATION]  for dental HMO Products and an administrative expense
factor  of  [SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION] for dental PPO and
dental  indemnity  insurance  Products.

     Section  5.5  Replacement  of  Health  Net  Dental  Products.

     (a)  Health  Net  shall  use commercially reasonably efforts to replace any
Health  Net  Dental Product with a Health Net Branded Product for any Health Net
Client  that  also  purchased


                                      -9-
<PAGE>
prior to the Effective Date one or more Health Net Medical Products.  Health Net
shall  receive  an  adjusted  Health  Net  Mark-Up and SafeGuard shall receive a
Supplemental  Subcapitation  Amount  equal  to  the  Supplemental  Subcapitation
percentages  set forth below multiplied by the Pooled Net Price for those Health
Net  Subscribers  set forth in Schedule 5.5 (i) who are covered by both a Health
                               ------------
Net Dental Product and a Health Net Medical Product prior to the Effective Date,
(ii)  who  are covered under both such Products on the Effective Date, and (iii)
whose  Health  Net  Dental  Product  is replaced by a Health Net Branded Product
after  the  Effective  Date  as  follows:

     [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]

     (b)  For  those  Health  Net  Subscribers  set  forth on Schedule 5.5 whose
                                                              ------------
Health  Net  Dental  Products  are not converted to a Health Net Branded Product
after  the  Effective  Date,  all  revenue attributable to the Health Net Dental
Product  less  Producer commissions shall be paid to SafeGuard as a Supplemental
Subcapitation  Amount.

     (c)  Health  Net  shall  use commercially reasonable efforts to replace the
Health  Net  Dental Products with Health Net Branded Products for any Subscriber
of  Health Net Health Plans of Oregon, Inc. who or which also purchased a Health
Net  Medical Product prior the Effective Date. Health Net shall use commercially
reasonable efforts to effect such replacement upon the first renewal date of the
Health  Net  Dental Products following the Effective Date, but in no event later
than  December  31,  2004. The Health Net Marketing Force shall be authorized to
sell  the  Health  Net Branded Products to such Subscribers of Health Net Health
Plan  of  Oregon,  Inc.  at  prices  to  be determined by Health Net in its sole
discretion.  Any  Subscriber  of  Health Net Health Plans of Oregon, Inc. who or
which  purchased  only  a Health Net Dental Product shall be offered a SafeGuard
Dental  Product  upon the first renewal date of such Health Net Dental Products.

     (d)  Health  Net  shall  use commercially reasonable efforts to replace the
Health  Net  Dental Products with Health Net Branded Products for any Subscriber
of  Health Net of Arizona, Inc. or Health Net Life Insurance Company residing in
Arizona  upon the first renewal date of the Health Net Dental Products following
the  Effective  Date. The Health Net Marketing Force shall be authorized to sell
the  Health  Net  Branded  Products  to such Arizona Subscribers at prices to be
determined  by  Health  Net  in  its  sole  discretion.

     (e)  Any Health Net Dental Product purchased prior to the Effective Date by
a  Subscriber of Health Net of California, Inc. in conjunction with a "Seniority
Plus"  plan shall be considered a Health Net Branded Product as of the Effective
Date  and  SafeGuard  shall  be  entitled to receive the SafeGuard Subcapitation
Amount  with  respect  to  such  Health Net Dental Products commencing as of the
Effective  Date.

     Section  5.6 Stand Alone Presentation of Benchmark Products. In the event a
member  of the SafeGuard Marketing Force presents a price quote to a prospective
account  only  for  one or more Benchmark Product and a member of the Health Net
Marketing  Force  also  presents  a  price  quote to the same account for both a
Medical  Product  and  one  or  more Health Net Branded Products which match the
Benchmark  Products  quoted  by  the  SafeGuard  Marketing  Force,


                                      -10-
<PAGE>
Health  Net  shall  be  permitted  to sell the Health Net Branded Products which
match  the Benchmark Products offered by SafeGuard to the account for the lowest
price  SafeGuard  offered  such Benchmark Products to the account.  If SafeGuard
lowers  the  price  of the Benchmark Products offered to an account described in
this  Section  5.6,  SafeGuard  shall  promptly  notify Health Net of such price
reduction and adjust the Net Price of the comparable Health Net Branded Products
offered  to  the  account by the Health Net Marketing Force to match the reduced
price  of  the  Benchmark  Products  offered  to  the  account  by  SafeGuard.

     Section  5.7  Health  Net  Sales of Health Net Branded Products. Health Net
shall  receive  the  Health  Net  Mark-Up  on  any  Health  Net Branded Products
purchased by Health Net Subscribers as a result of the efforts of the Health Net
Marketing  Force subsequent to the Effective Date, provided, however, Health Net
shall  not  be  entitled  to  the  Health  Net  Mark-Up  (i)  for any Health Net
Subscribers who are also SafeGuard Subscribers; (ii) if the Health Net Marketing
Force  sells  a  Medical  Product to an account who or which is a Contractholder
under  a  SafeGuard  Dental  Product;  or  (iii) if SafeGuard sells a Health Net
Medical  Product  together with a SafeGuard Dental Product or a SafeGuard vision
product  to  a  new  SafeGuard  Client  after  the  Effective  Date.

     Section 5.8 Compensation to SafeGuard for Sale of Health Net Products. If a
member  of  the  SafeGuard Marketing Force sells a SafeGuard Subscriber a Health
Net  Product  after  the  Effective  Date,  Health  Net  shall  pay  SafeGuard
[SAFEGUARD-HEALTH  NET  PROPRIETARY  INFORMATION]  of  the  collected first year
premium  (net  of Producer commission) for any such Health Net Product not later
than  the  tenth  (10th)  calendar  day  of  the  month  of  eligibility for the
Subscribers.  The  SafeGuard  Marketing Force shall offer Health Net Products to
SafeGuard  Subscribers  only  at  the  price  authorized  by  Health  Net.

                                   ARTICLE VI
           BILLING AND COLLECTION OF PREMIUMS; PAYMENT OF COMMISSIONS
           ----------------------------------------------------------

     Section  6.1  Billing  and  Collection  of  Premiums.

     (a)  Health  Net  shall  bill and collect premium and contract fees for all
Health  Net  Branded Products sold by the Health Net Marketing Force to a Health
Net  Client.  Health  Net  shall  bill and collect all premium and contract fees
attributable  to  Health Net Products sold to SafeGuard Clients by the SafeGuard
Marketing  Force.

     (b)  Health  Net  shall  notify  SafeGuard if Health Net determines that an
individual  or  group  who  or  which  purchased a Health Net Branded Product is
ineligible  for  any  reason  including,  but  not  limited  to,  failure to pay
premiums.  Any  adjustments  to  the  eligible  Subscribers  and  the  resulting
SafeGuard  Subcapitation  Amount  shall be subject to the standard retroactivity
adjustment  policy  of  SafeGuard  at  the  time  of  the  adjustment.

     Section  6.2  Commissions.

     (a)  Health  Net shall make payment of all commissions (i) owing to members
of the Health Net Marketing Force to the extent that such commissions become due
as  a  result  of  the sale of Health Net Medical Products or Health Net Branded
Products  pursuant  to  this  Agreement,


                                      -11-
<PAGE>
and  (ii)  owing  to  SafeGuard  to  the extent such commissions become due as a
result  of  the  sale  of  Health Net Medical Products to SafeGuard Clients by a
member  of  the  SafeGuard Marketing Force.  SafeGuard shall make payment of all
commissions  to  members  of  the  SafeGuard  Marketing Force to the extent such
commissions become due as a result of the sale of Health Net Medical Products to
SafeGuard  Clients.

     (b)  Each  party  shall be responsible for ensuring that each member of its
respective  Marketing  Force  is  appropriately  licensed  and  appointed,  as
necessary,  to  sell  the Products and to receive commissions. The parties shall
not authorize any person or entity to solicit sales of Products pursuant to this
Agreement in any state unless such person or entity is properly licensed in that
state.  All  payments  of  commissions to members of the marketing forces of the
respective  parties  shall  comply  with  applicable  Law.

     Section  6.3  Subcapitation  Payments  to  SafeGuard.  The  SafeGuard
Subcapitation  Amount  plus  any  Supplemental Subcapitation Amount shall be the
sole  compensation  payable  by  Health  Net to SafeGuard in connection with the
Health  Net  Branded Products sold by the Health Net Marketing Force pursuant to
this Agreement. The SafeGuard Subcapitation Amount shall be paid to SafeGuard no
later  than  the  tenth  (10th) calendar day of the month of eligibility for the
Subscribers  under  the  Health  Net  Branded  Products  sold  pursuant  to this
Agreement.

     Section  6.4  Accounting and Reporting. Each party shall prepare and supply
the  other  party  with  any  accounting  reports and reports of activities with
respect  to  the  Products  and  sales  activities  pursuant  to  this Agreement
reasonably  requested  by  the  other  party.

                                   ARTICLE VII
                              TERM AND TERMINATION
                              --------------------

     Section  7.1  Term.  This Agreement shall become effective on the Effective
Date  and  shall  continue  in  effect  for  sixty (60) months unless terminated
pursuant  to  the  terms  of  this  Article  VII. Unless this Agreement has been
terminated  pursuant to the terms of this Article VII, Health Net shall have the
option  to  extend  this  Agreement  on  the  same  terms  and conditions for an
additional  sixty  (60)  months by providing written notice to SafeGuard no less
than  one  hundred  and eighty (180) days prior to the expiration of the initial
sixty  (60)  months.

     Section 7.2 Termination on Mutual Consent. This Agreement may be terminated
at  any  time  by  mutual  agreement  of  the  parties  hereto  in  writing.

     Section  7.3  Termination  for  Cause.  Either  party  may  terminate  this
Agreement for cause by providing the other party written notice of its intention
to  terminate  upon  the  occurrence  of  any  of  the  following:

     (a)  If  a party fails to remit any amounts due under this Agreement within
twenty-five  (25)  days  of  the  date  such  amount  is  due  and  payable.

     (b)  If  a  party  breaches  a material term, covenant or condition of this
Agreement  and  fails  to  cure such breach within thirty (30) days of receiving
written  notice  of such breach from the non-breaching party. The written notice
of  such  breach  shall  make  specific  reference  to  the


                                      -12-
<PAGE>
action  causing  breach.  If the breaching party fails to cure its breach to the
reasonable  satisfaction  of  the non-breaching party during the thirty (30) day
cure  period,  this Agreement shall terminate at the option of the non-breaching
party.  In the event such cure cannot reasonably be completed within such thirty
(30) day period, then commencement of such cure within such thirty (30) days and
its  diligent  prosecution  to  completion  shall,  subject to the party's other
rights  to  terminate the Agreement, extend the period to cure the breach for an
additional  period  reasonably  necessary  to  complete  the  cure.

     (c)  If  a  party  shall engage in fraudulent, illegal or grossly negligent
conduct  with  respect  to  its duties and obligations under this Agreement, the
other  party  shall have the right to terminate this Agreement, upon delivery of
written  notice  of  such  termination  to  the defaulting party, which shall be
effective  upon  receipt,  without  prejudice  to  any  other rights or remedies
available  to  the  non-defaulting  party  by  reason  of the defaulting party's
conduct.

     (d)  If  a party shall become unable to perform its obligations under their
respective  Products because of financial impairment or loss of authority to act
under  Law,  or  by  action of any Governmental Authority, the other party shall
have  the  right  to  terminate  this  Agreement  immediately.

     (e) In the event of a Change of Control of one party, the other party shall
have the right to terminate this Agreement effective as of the effective date of
the  Change  of  Control.

     (f)  If  the parties fail to reach the membership acquisition targets for a
state  other  than California set forth in Schedule 7.3, either party shall have
                                           ------------
the right to enter into an agreement with a third party substantially similar to
this  Agreement  with  respect  to  such state and the exclusivity provisions of
Section  2.3  (a) and (b) with respect to such state shall have no further force
and  effect.  If the parties fail to reach the membership acquisition target for
California  specified  in  Schedule  7.3,  either  party shall have the right to
                           -------------
terminate this Agreement in its entirety upon ninety (90) days written notice to
the  other  party.

     Section  7.4  Post-Termination  Rights and Responsibilities. Termination of
this  Agreement  shall not terminate rights and obligations of the parties which
by  their  nature  extend beyond the term. Termination of this Agreement for any
reason  shall not release any party from any liability which has already accrued
to  another  party  at  the  time of termination. In the event this Agreement is
terminated,  the  parties  shall continue to perform all customary and necessary
services  regarding  their respective Products in accordance with the provisions
of  this  Agreement  until  all  such  Products  have  been completely canceled,
transitioned,  nonrenewed,  or  otherwise  terminated.

                                  ARTICLE VIII
                                 INDEMNIFICATION
                                 ---------------

     Section 8.1      Indemnification  by  SafeGuard.  SafeGuard  shall  defend,
indemnify  and  hold harmless Health Net and its directors, officers, employees,
shareholders, and Affiliates ("Health Net Indemnities") from and against any and
all  loss, claim, damage, liability, or action in respect hereof which is caused
by  or  results  from  the  malfeasance,  negligence,  action  or


                                      -13-
<PAGE>
inaction  of  SafeGuard  of its duties and obligations under this Agreement.  If
any claim, demand, action, suit, or proceeding is made or brought against any of
the  Health Net Indemnities with respect to matters that are the subject of this
indemnity,  SafeGuard  shall  assume the defense thereof with counsel reasonably
satisfactory  to  the  Health  Net  Indemnities  and shall pay all costs of such
defense.

     Section  8.2  Indemnification  by  Health  Net.  Health  Net  shall defend,
indemnify  and  hold  harmless SafeGuard and its directors, officers, employees,
shareholders,  and Affiliates ("SafeGuard Indemnities") from and against any and
all  loss, claim, damage, liability, or action in respect hereof which is caused
by or results from the malfeasance, negligence, action or inaction of Health Net
of  its  duties  and  obligations  under  this  Agreement. If any claim, demand,
action,  suit,  or  proceeding  is  made or brought against any of the SafeGuard
Indemnities  with  respect  to  matters  that are the subject of this indemnity,
Health Net shall assume the defense thereof with counsel reasonably satisfactory
to  the  SafeGuard  Indemnities  and  shall  pay  all  costs  of  such  defense.

     Section  8.3  Liability  under  SafeGuard's  Products.  Health Net is not a
guarantor,  insurer,  or  reinsurer  of,  or  joint venturer with, SafeGuard and
Health  Net  shall  have no risk of loss for, nor provide any indemnification to
SafeGuard,  any  Contractholder  or Subscriber, any provider or any other person
with  respect to any SafeGuard Product. SafeGuard shall indemnify Health Net for
all  liabilities,  losses,  suits,  damages,  costs  and  expenses  (including
reasonable  fees  of  Health Net's attorneys, and other expenses of litigation),
net  of  recoveries  from  third parties, arising in connection with a SafeGuard
Product,  including  action  or failure to act by SafeGuard, or its employees or
agents.

     Section  8.4  Liability  under  Health  Net  Products.  SafeGuard  is not a
guarantor,  insurer,  or  reinsurer  of,  or joint venturer with, Health Net and
SafeGuard  shall have no risk of loss, nor provide any indemnification to Health
Net,  any  Contractholder  or  Subscriber, any provider or any other person with
respect  to  a  Health Net Product. Health Net shall indemnify SafeGuard for all
liabilities,  losses,  suits,  damages, costs and expenses (including reasonable
fees  of  SafeGuard's  attorneys,  and  other  expenses  of  litigation), net of
recoveries  from third parties, arising in connection with a Health Net Product,
including  action  or  failure to act by Health Net, or its employees or agents.

     Section  8.5  Survival  of  Article.  This  Article  VIII shall survive the
termination  of  this  Agreement.

                                   ARTICLE IX
                                   ARBITRATION
                                   -----------

     Section  9.1          Arbitration.  In the event of any dispute between the
parties  hereto relating to, arising out of, or in connection with any provision
of  this  Agreement (hereinafter a "Dispute"), the parties to this Agreement and
their  representatives,  designees,  successors  and assigns agree that any such
Dispute  shall be settled by binding arbitration to take place in Orange County,
California;  provided,  however,  that nothing herein shall preclude the parties
from


                                      -14-
<PAGE>
seeking equitable judicial relief pending arbitration, including but not limited
to  injunctive  or  other  provisional  relief.

     Section  9.2  Selection  of  Arbitrator. Any arbitration hereunder shall be
conducted  by  a  single  arbitrator chosen from the panel of arbitrators of the
Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise
in  the  dental HMO or dental indemnity insurance business. If a JAMS arbitrator
with  specific  experience  in  the  dental  HMO  or  dental indemnity insurance
business  is  not  available, the arbitrator must have general experience in the
health  insurance  industry.  Within  ten  (10) days of notice of a Dispute from
Health  Net  to  SafeGuard or notice from SafeGuard to Health Net, SafeGuard and
Health  Net  shall  use  their  best  efforts  to  choose  a  mutually agreeable
arbitrator.  If  Health  Net  and  SafeGuard  cannot agree on an arbitrator, the
arbitrator  shall  promptly  be  selected  by  JAMS.

     Section  9.3  Procedures.  The  party  submitting  a Dispute to arbitration
hereunder shall present its case to the arbitrator and the other party hereto in
written  form  within  twenty (20) days after the appointment of the arbitrator.
The  other  party  hereto  shall  then have twenty (20) days to submit a written
response  to  the arbitrator and the original party who submitted the Dispute to
arbitration.  After  timely  receipt  of each party's case, the arbitrator shall
have  twenty  (20)  days  to  render  his  or  her  decision.

     Section  9.4  Applicable  Law.  The  arbitrator  is  relieved from judicial
formalities  and,  in  addition to considering the rules of law, the limitations
contained  in  this  Agreement  and the customs and practices of the health care
industry,  shall make his or her award with a view to effectuating the intent of
this  Agreement.  The decision of the arbitrator shall be final and binding upon
the  parties,  and  judgment  may  be  entered  thereon  in a court of competent
jurisdiction.

     Section  9.5  Expenses.  Each party shall bear its own cost of arbitration,
and  the  costs  of the arbitrator shall be shared equally among each party to a
Dispute.

     Section  9.6 Survival of Article. This Article IX shall survive termination
of  this  Agreement.

                                    ARTICLE X
                                  MISCELLANEOUS
                                  -------------

     Section  10.1  Misunderstandings  and  Oversights.  If any delay, omission,
error  or failure to perform any act required by this Agreement is unintentional
and  caused  by  misunderstanding  or  oversight,  the  parties shall adjust the
situation  to  what it would have been had the misunderstanding or oversight not
occurred.  The  party  that first discovers such oversight or incorrect act as a
result  of  the misunderstanding will notify the other party in writing promptly
upon  discovery  of  the misunderstanding or oversight. The parties shall act to
correct the error, omission or oversight within thirty (30) days of notification
of  the  problem. This Section 10.1 shall not be construed as a waiver by either
party  of  its  right  to  enforce  strictly  the  terms  of  this  Agreement.


                                      -15-
<PAGE>
     Section  10.2  Performance  by  Affiliates.  The  parties  acknowledge that
certain  obligations  required  to  be  performed  may, by their nature, require
specific legal authority to perform or will be more effectively performed by the
parties' Affiliates. The parties will, to the extent required in order for their
respective Affiliates to perform the obligations of the respective parties under
this  Agreement,  cause  their respective Affiliates to perform such obligations
hereunder  as  if  such Affiliates were themselves parties hereto. In connection
with  the  performance  of  such obligations, the parties' respective Affiliates
shall  be  subject  to  the  terms  and  conditions of this Agreement as if such
Affiliates  were  themselves  parties  hereto.

     Section  10.3 Regulatory Approval. Performance of the obligations of either
party  under  this  Agreement  shall  be subject to the receipt of any necessary
regulatory  approvals  under  the  applicable  Law and practices of Governmental
Authorities  in  the  Territory.  Health  Net  and  SafeGuard shall cooperate in
attempting  to  obtain  expeditiously  any  necessary  regulatory approvals from
Governmental  Authorities.  Each  party  will bear its own expenses in obtaining
such  approvals.

     Section  10.4 Compliance with Laws. Each party shall, in the performance of
their  obligations  set  forth in this Agreement, comply with all applicable Law
and  the rules and regulations of all Governmental Authorities with jurisdiction
over  the  parties  and  each  party shall maintain all licenses or certificates
necessary  or appropriate for the performance of the functions set forth in this
Agreement.  Each  party  shall  conform  its actions under this Agreement to any
orders  concerning  the  activities  covered  by  this Agreement by Governmental
Authorities having jurisdiction over the parties' Products, business affairs and
operations.  Each party shall take all actions and make all filing, applications
and  provide all notices required by applicable Law to maintain their respective
Products  in  compliance  in  all  material  respects  with  existing and future
applicable  Law.  Each  party  shall  promptly  notify  the  other  party of any
complaint,  inquiry  or  lawsuit  by  any Governmental Authority relating to the
Products  or  to  this  Agreement.

     Section  10.5  Audits.  Each  party  shall  have the right, upon reasonable
notice  to  the other party, and at the requesting party's expense, to audit the
books  and  records of the other party relating to this Agreement during regular
business  hours  at  the  premises  of  the audited party where such records are
normally  maintained,  including but not limited to, verifying that SafeGuard is
providing  Health  Net  Clients the Most Favored Nation Price. The audited party
shall  reasonably  cooperate  in  any  such  audit.

     Section  10.6  Headings and Schedules. Headings used herein are not part of
this  Agreement.  Any  Schedules or Exhibits attached hereto are incorporated by
this  reference  and  made  a  part  of  this  Agreement.

     Section  10.7  Force Majeure. No party hereto shall be liable for any delay
or  failure in the performance of any obligation under this Agreement or for any
loss  or  damage (including indirect or consequential damage) to the extent that
such nonperformance, delay, loss or damage results from any contingency which is
beyond the control of such party, provided such contingency is not caused by the
fault  or negligence of such party. A contingency for purposes of this Agreement
shall  be  acts  of  God,  fires, floods, earthquakes, explosions, storms, wars,
hostilities,  acts  of  terrorism,  blockades,  public  disorders,  quarantines,
restrictions,  embargoes,


                                      -16-
<PAGE>
strikes  or  other  labor  disturbances,  and  compliance with any Law, order or
control  of,  or insistence of any Governmental Authority or military authority.

     Section  10.8  Successors and Assigns; Binding Effect. This Agreement shall
not be assigned by Health Net or SafeGuard without the prior written approval of
the  other  party.  The  provisions  of this Agreement shall be binding upon and
inure  to  the  benefit  of  and  be enforceable by the parties hereto and their
respective  permitted  successors  and  assigns.

     Section 10.9 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be deemed an original, but all of
which  will  constitute  one  and  the  same  agreement.

     Section  10.10  Entire Agreement; Amendment. This Agreement constitutes the
entire  agreement between the parties with respect to the strategic relationship
of  the  parties,  and  supersedes any previous written or oral agreements. This
Agreement shall be amended only by written agreement signed by a duly authorized
officer  of  each  of Health Net and SafeGuard, and any change to this Agreement
shall be null and void unless made by such written agreement; provided, however,
that where, under insurance, health or other applicable Law, the approval of any
such  amendment  to  this  Agreement  by  one  or more Governmental Authority is
required,  the  amendment  shall  not  take  effect  unless  and  until all such
necessary  approvals  have  been  obtained  and  received by both Health Net and
SafeGuard.  In  the  event  that  any  such approval is required, Health Net and
SafeGuard  shall  each  take  all  necessary  actions  in  order  to obtain such
approval.

     Section  10.11  Waivers.  The  waiver by either of the parties of the other
party's  prompt  and  complete  performance,  or  breach  or  violation,  of any
provisions  of  this  Agreement  and  related  documents shall not operate or be
construed  as  a waiver of any subsequent breach or violation, and the waiver by
any  of  the  parties  to  exercise  any  right  or  remedy which it may possess
hereunder  shall  not  operate  or be construed as a bar to the exercise of such
right  or  remedy  by such party upon the occurrence of any subsequent breach or
violation.

     Section  10.12  Governing  Law.  This  Agreement  shall  be governed by and
construed  in accordance with the Law of the state of California, without giving
effect  to  the  principles  of  conflicts  of  laws  thereof.

     Section  10.13  Severability. In the event any section or provision of this
Agreement  or related documents is found to be void and unenforceable by a court
of  competent  jurisdiction,  the  remaining  sections  and  provisions  of this
Agreement  or  related  documents shall nevertheless be binding upon the parties
with  the same force and effect as though the void or unenforceable part had not
been  severed  or  deleted.

     Section  10.14  Notices.  Any  notice  or  other  communication required or
permitted  hereunder  shall  be  in  writing and shall be delivered by certified
process server, certified or registered mail (postage prepaid and return receipt
requested),  by a nationally recognized overnight courier service (appropriately
marked  for  overnight  delivery)  or  by  facsimile (with request for immediate
confirmation  of  receipt  in  a  manner  customary  for  communications of such
respective type). Notices shall be effective upon receipt and shall be addressed
as  follows:


                                      -17-
<PAGE>
     (a) if to SafeGuard to:

                               SafeGuard Health Enterprises, Inc.
                               95 Enterprise, Suite 100
                               Aliso Viejo, California  92656
                               Attn.: James E. Buncher
                               President and Chief Executive Officer
                               Tel: (949) 425-4100
                               Fax: (949) 425-4101

                          with a copy to:

                               Ronald I. Brendzel
                               Senior Vice President and General Counsel
                               SafeGuard Health Enterprises, Inc.
                               95 Enterprise, Suite 100
                               Aliso Viejo, California  92656
                               Tel: (949) 425-4110
                               Fax: (949) 425-4586

                          and

                               David K. Meyercord
                               Strasburger and Price, LLP
                               901 Main Street, Ste. 4300
                               Dallas, Texas  75202-3794
                               Tel: (214) 651-4525
                               Fax: (214) 659-4023

     (b) if to Health Net to:

                               Health Net, Inc.
                               Attn:  General Counsel
                               21650 Oxnard Street
                               Woodland Hills, California  91367
                               Tel: (818) 676-7601
                               Fax: (818) 676-7503

                          with a copy to:

                               Kenneth B. Schnoll
                               Sonnenschein Nath & Rosenthal
                               685 Market Street
                               San Francisco, CA  94105
                               Tel: (415) 882-0210
                               Fax: (415) 543-5472


                                      -18-
<PAGE>
     Section  10.15  Notice  of  Legal  Proceedings.  If either party receives a
notice  of the commencement of any legal proceedings involving the other party's
Products  or  actions  pursuant  to  this  Agreement, any communication from any
Governmental  Authority,  or  any  person  identifying  a  complaint  by  a
Contractholder  or  Subscriber  (other  than  a  routine inquiry not involving a
communication  from  a  Governmental  Authority  or  the suggestion of any legal
action),  the  party  receiving  such  notice shall immediately advise the other
party  of  such  notice and shall thereafter forward promptly to the other party
any  correspondence  or  information  pertaining to any such legal proceeding or
communication.

     Section  10.16  Confidentiality.

     (a)  Neither  Health  Net  nor  SafeGuard shall disclose any proprietary or
confidential information of the other party to a third party without the express
written  consent  of  the  other  party  to this Agreement. For purposes of this
Agreement,  "proprietary  and  confidential"  information  will include, without
limitation,  all  internal  business practices and business records, information
concerning  products  and  pricing, contracts, computer hardware and software or
business  methods  in  any  form  whatsoever, peer review, quality assurance and
grievance  procedures,  any  aspect of utilization review programs, provider fee
schedules,  reimbursement  schedules  or discounts, and advertising or marketing
information,  but  not  including information otherwise available to the public.
Neither  party  shall  use  any  proprietary and confidential information of the
other  party for its own benefit. Upon termination of this Agreement, each party
will  immediately return to the other party any confidential information, except
confidential  information  necessary  for  the  continued  administration of any
Product.

     (b)  The  parties  shall  maintain  the  confidentiality  of  any  personal
information,  including health information, pertaining to Subscribers including,
without  limitation, files, records, reports, and other information prepared and
maintained  in connection with this Agreement, in accordance with all applicable
Law.

     (c)  Each  party  shall  obtain any necessary consent or authorization from
Subscribers  with  respect  to  the release to the other party of any non-public
personal  information,  including  health  information,  relating  to  such
Subscribers,  by  means  of  general  or specific releases, as appropriate. Each
party  shall  notify the other if it becomes aware that proper releases have not
been  obtained.

     (d)  To  the  extent  that  either  of  the  parties  performs  functions,
activities,  or services for, or on behalf of, the other party to this Agreement
involving the use or disclosure of Protected Health Information, as that term is
defined  in 45 CFR 164.501, the parties shall comply with the Business Associate
Addendum  set  forth  in  Schedule  10.16  hereto.
                          ---------------

     Section  10.17  Press  Releases.  No  public  statement  or  press  release
regarding  the existence of this Agreement shall be made by either party without
obtaining  the  prior  written consent of the other party, except as required by
applicable  Law.

     Section  10.18  Relationship  of Parties. The parties to this Agreement are
and shall remain independent contractors. Neither party is the employee or agent
of  the  other  party,  except


                                      -19-
<PAGE>
as  set  forth herein, and neither party has an express or implied right to bind
the  other  party.  The  parties  do  not  intend  to  form  a  joint  venture,
partnership,  or  to  be governed by Law relating to any relationship other than
that  of  independent contractors.  Neither party is authorized to modify, alter
or  waive  the  terms  of  any  Product  issued  by  the  other  party.

     Section  10.19  No Third Party Rights. This Agreement has been made for the
benefit  of  the  parties hereto and respective successors and permitted assigns
and nothing in this Agreement is intended to confer any rights or remedies under
or  by reason of this Agreement on any other person other than the parties to it
and their respective successors and permitted assigns. Nothing in this Agreement
is  intended  to  relieve or discharge the obligations or liability of any third
person  to  any  party  to  this  Agreement.

     Section  10.20  Expenses.  Except  as otherwise provided herein, each party
shall  be  responsible  for  the  expenses  it  incurs  in  connection with this
Agreement.

     IN  WITNESS  WHEREOF,  the  parties hereto have caused this Agreement to be
executed  by  their  duly  authorized representatives as of the date first above
written.

                                        HEALTH NET, INC.

                                        By:  /s/ B. Curtis Westen
                                           -------------------------------------
                                        Name:  B. Curtis Westen
                                        Title: Senior Vice President, General
                                               Counsel and Secretary

                                        SAFEGUARD HEALTH ENTERPRISES, INC.

                                        By:  /s/ James E. Buncher
                                           -------------------------------------
                                        Name:  James E. Buncher
                                        Title: President and Chief Executive
                                               Officer

                                        By: /s/ Stephen J. Baker
                                           -------------------------------------
                                        Name:  Stephen J. Baker
                                        Title: Executive Vice President and
                                               Chief Operating Officer


                                      -20-
<PAGE>
                                  SCHEDULE 5.5

                    REPLACEMENT OF HEALTH NET DENTAL PRODUCTS

To be determined as of the Effective Date




                                      -21-
<PAGE>
                                  SCHEDULE 7.3

                         MEMBERSHIP ACQUISITION TARGETS


STATE                       NET NEW MEMBERS PER YEAR
-----                       ----------------------------

CALIFORNIA                 [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]

OREGON                     [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]

ARIZONA                    [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]

TEXAS (If applicable)      [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]

FLORIDA (If applicable)    [SAFEGUARD-HEALTH NET PROPRIETARY INFORMATION]



                                      -22-
<PAGE>
                                 SCHEDULE 10.16

                           BUSINESS ASSOCIATE ADDENDUM

This Business Associate Addendum (the "Addendum") supplements and is made a part
of  the  Strategic  Relationship  Agreement  by and between Health Net, Inc. and
SafeGuard Health Enterprises, Inc. (the "Agreement"), and is effective as of the
Effective  Date  of  the  Agreement.

RECITALS

A.   The  parties may disclose certain information to each other pursuant to the
     terms  of  the  Agreement,  some  of  which may constitute Protected Health
     Information,  as  defined  below.

B.   The  parties  intend to protect the privacy and provide for the security of
     Protected  Health  Information  in  compliance  with  the  Health Insurance
     Portability  and  Accountability  Act  of  1996,  Public  law  No.  104-191
     ("HIPAA") and the regulations promulgated thereunder by the U.S. Department
     of Health and Human Services (the "HIPAA Regulations") and other applicable
     laws.

C.   The  purpose  of  this  Addendum  is  to  satisfy  certain  standards  and
     requirements of HIPAA and the HIPAA Regulations, including, but not limited
     to,  45  CFR  164.502(e)  and  45  CFR  164.504(e).

In  consideration  of  the mutual promises below and the exchange of information
pursuant  to  the  Agreement  and  this  Addendum, the parties agree as follows:

1.   Definitions

(a)     "Business  Associate"  means the party performing functions, activities,
or  services  for,  or  on behalf of, a Covered Entity pursuant to the Agreement
involving  the  use  or  disclosure  of  Protected  Health  Information.

(b)     "Covered  Entity"  means  the  party  for  whom,  or  on  whose  behalf,
functions,  activities,  or  services  are  performed  pursuant to the Agreement
involving  the  use  or  disclosure  of  Protected  Health  Information.

(c)     "Privacy  Rule"  means  the  Standards  for  Privacy  of  Individually
Identifiable  Health Information at 45 CFR part 160 and part 164, subparts A and
E.

(d)     "Protected  Health  Information"  has  the  same  meaning  as  the  term
"protected  health  information"  in  45 CFR 164.501, limited to the information
created  or  received by Business Associate from or on behalf of Covered Entity.

(e)     Capitalized  terms  used but not otherwise defined in this Addendum have
the  same  meaning  as  those  terms  in  the  Privacy  Rule.


                                      -23-
<PAGE>
2.   Obligations  and  Activities  of  Business  Associate

(a)     Business  Associate  shall  not  use  or  disclose  Protected  Health
Information  other than as permitted or required by this Addendum or as Required
By  Law.

(b)     Business  Associate  shall  use appropriate safeguards to prevent use or
disclosure of the Protected Health Information other than as provided for by the
Agreement  and  this  Addendum.

(c)     Business  Associate  agrees  to mitigate, to the extent practicable, any
harmful  effect  that  is  known to Business Associate of a use or disclosure of
Protected  Health  Information  by  Business  Associate  in  violation  of  the
requirements  of  this  Addendum.

(d)     Business  Associate shall report to Covered Entity any use or disclosure
of  the  Protected Health Information not provided for by this Addendum of which
it  becomes  aware.

(e)     Business  Associate  shall  ensure  that  any  agent,  including  a
subcontractor,  to  whom it provides Protected Health Information received from,
or created or received by Business Associate on behalf of, Covered Entity agrees
to  the  same  restrictions  and  conditions that apply through this Addendum to
Business  Associate  with  respect  to  such  information.

(f)     Business  Associate  shall  provide  access,  at  the request of Covered
Entity,  and  in  the time and manner designated by Covered Entity, to Protected
Health Information in a Designated Record Set, to Covered Entity or, as directed
by  Covered  Entity, to an Individual in order to meet the requirements under 45
CFR  164.524

(g)     Business  Associate  agrees to make any amendment(s) to Protected Health
Information in a Designated Record Set that the Covered Entity directs or agrees
to pursuant to 45 CFR 164.526 at the request of Covered Entity or an Individual,
and  in  the  time  and  manner  designated  by  Covered  Entity.

(h)     Business  Associate  agrees  to  make its internal practices, books, and
records,  including  policies and procedures, relating to the use and disclosure
of  Protected  Health  Information  received  from,  or  created  or received by
Business Associate on behalf of, Covered Entity available to the Secretary, in a
time  and  manner  designated  by  the  Secretary, for purposes of the Secretary
determining  Covered  Entity's  compliance  with  the  Privacy  Rule.

(i)     Business  Associate  agrees  to  document  such disclosures of Protected
Health  Information  and  information  related  to  such disclosures as would be
required  for  Covered  Entity  to  respond to a request by an Individual for an
accounting  of disclosures of Protected Health Information in accordance with 45
CFR  164.528.

(j)     Business  Associate agrees to provide to Covered Entity, in the time and
manner  designated  by  Covered Entity, information collected in accordance with
Section  (2)(i)  of  this  Addendum,  to  permit  Covered Entity to respond to a
request  by  an  Individual for an accounting of disclosures of Protected Health
Information  in  accordance  with  45  CFR  164.528.


3.   Permitted  Uses  and  Disclosures  by  Business  Associate  General Use and
     Disclosure  Provisions


                                      -24-
<PAGE>
     Except as otherwise limited in this Addendum, Business Associate may use or
disclose  Protected  Health  Information  to  perform  functions, activities, or
services  for,  or  on  behalf of, Covered Entity as specified in the Agreement,
provided  that such use or disclosure would not violate the Privacy Rule if done
by  Covered  Entity.

4.   Specific  Use  and  Disclosure  Provisions

(a)     Except as otherwise limited in this Addendum, Business Associate may use
Protected  Health  Information  for  the proper management and administration of
Business  Associate  or  to  carry  out  the  legal responsibilities of Business
Associate.

(b)     Except  as  otherwise  limited  in this Addendum, Business Associate may
disclose  Protected  Health  Information  for  the  proper  management  and
administration  of Business Associate, provided that disclosures are Required By
Law, or Business Associate obtains reasonable assurances from the person to whom
the  information  is  disclosed  that  it  will  remain confidential and used or
further  disclosed  only  as Required By Law or for the purpose for which it was
disclosed  to the person (which purpose shall be consistent with the limitations
imposed  by this Addendum) and the person notifies the Business Associate of any
instances  of  which it is aware in which the confidentiality of the information
has  been  breached.

(c)     Except as otherwise limited in this Addendum, Business Associate may use
Protected  Health  Information  to  provide Data Aggregation services to Covered
Entity  as  permitted  by  42  CFR  164.504(e)(2)(i)(B).

(d)     Business  Associate  may  use  Protected  Health  Information  to report
violations  of law to appropriate Federal and State authorities, consistent with
45  CFR  164.502(j)(1).

5.   Obligations  of  Covered  Entity  Provisions  for  Covered Entity To Inform
     Business  Associate  of  Privacy  Practices  and  Restrictions

(a)     Covered  Entity shall notify Business Associate of any limitation in its
notice  of  privacy  practices  in accordance with 45 CFR 164.520, to the extent
that  such  limitation  may  affect  Business  Associate's  use or disclosure of
Protected  Health  Information.

(b)     Covered  Entity  shall  notify  Business Associate of any changes in, or
revocation  of,  permission by an Individual to use or disclose Protected Health
Information, to the extent that such changes may affect Business Associate's use
or  disclosure  of  Protected  Health  Information.

(c)     Covered Entity shall notify Business Associate of any restriction on the
use or disclosure of Protected Health Information that Covered Entity has agreed
to  in  accordance  with 45 CFR 164.522, to the extent that such restriction may
affect  Business  Associate's use or disclosure of Protected Health Information.

(d)     Covered  Entity  shall not request Business Associate to use or disclose
Protected  Health  Information in any manner that would not be permissible under
the Privacy Rule if done by Covered Entity, except as permitted by Sections 4(b)
and  4(c)  of  this  Addendum.


                                      -25-
<PAGE>
6.   Term  and  Termination

(a)     This  Addendum  shall  be  effective  as  of  the  Effective Date of the
Agreement,  and  shall  terminate  when  all of the Protected Health Information
provided  by  Covered  Entity  to  Business Associate, or created or received by
Business  Associate  on  behalf  of  Covered Entity, is destroyed or returned to
Covered  Entity,  or,  if it is infeasible to return or destroy Protected Health
Information,  protections  are  extended to such information, in accordance with
the  termination  provisions  in  this  Section.

(b)     Upon Covered Entity's knowledge of a material breach of this Addendum by
Business  Associate, Covered Entity shall either: (i) provide an opportunity for
Business  Associate  to  cure the breach or end the violation and terminate this
Addendum,  and  the  provision  for  performance  of  functions,  activities, or
services  for,  or  on behalf of Covered Entity under the Agreement, if Business
Associate  does  not  cure  the  breach  or  end  the  violation within the time
specified  by  Covered Entity; (ii) immediately terminate this Addendum, and the
provision  for  performance  of  functions,  activities,  or services for, or on
behalf of Covered Entity under the Agreement, if Business Associate has breached
a  material  term of this Addendum and cure is not possible; or (iii) if neither
termination  nor  cure  is  feasible,  report  the  violation  to the Secretary.

(c)     Effect  of  Termination.

     (i)  Except as provided in paragraph (ii) of this section, upon termination
     of  this  Addendum,  for  any  reason,  Business  Associate shall return or
     destroy  all  Protected Health Information received from Covered Entity, or
     created  or received by Business Associate on behalf of Covered Entity, and
     shall  retain no copies of the Protected Health Information. This provision
     shall  apply  to  Protected Health Information that is in the possession of
     subcontractors  or  agents  of  Business  Associate.

     (ii)  In  the  event  that  Business Associate determines that returning or
     destroying  the  Protected  Health  Information  is  infeasible,  Business
     Associate  shall  provide  to Covered Entity notification of the conditions
     that  make  return  or  destruction  infeasible. Upon mutual agreement that
     return  or  destruction  of  Protected  Health  Information  is infeasible,
     Business  Associate  shall  extend the protections of this Addendum to such
     Protected Health Information and limit further uses and disclosures of such
     Protected  Health  Information  to  those  purposes that make the return or
     destruction  infeasible,  for  so long as Business Associate maintains such
     Protected  Health  Information.

7.   Miscellaneous

(a)     Regulatory  References. A reference in this Addendum to a section in the
        ----------------------
Privacy  Rule  means  the  section  as  in  effect  or  as  amended.

(b)     Amendment.  The  Parties  agree  to  take such action as is necessary to
        ---------
amend  this  Addendum  from  time  to time as is necessary for Covered Entity to
comply  with  the  requirements  of  the  Privacy  Rule  and  the  HIPAA.

(c)     Survival.  The  respective  rights and obligations of Business Associate
        --------
under  Section  6(c)  of  this  Addendum  shall  survive the termination of this
Addendum.


                                      -26-
<PAGE>
(d)     Interpretation.  The  provisions of this Addendum shall prevail over any
        --------------
provisions  in  the Agreement that may conflict with or appear inconsistent with
any  provision  of  this  Addendum.  Any  ambiguity  in  this  Addendum shall be
resolved  to  permit  Covered  Entity  to  comply  with  the  Privacy  Rule.




                                      -27-
<PAGE>

</TEXT>
</DOCUMENT>
