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                        SPECIAL EXECUTIVE RETIREMENT PLAN


        This Special Executive Retirement Plan ("Plan"), formerly known as the
Excess Benefit Plan for Leonard D. Schaeffer, was adopted effective as of
December 30, 1986 and was amended and restated effective as of July 24, 1989 and
as of January 1, 1993. This document constitutes a complete amendment and
restatement of the Plan effective September 1, 1997.

1.  Purpose

        The Plan is established and maintained by WellPoint Health Networks Inc.
("the Company") as part of a program to provide supplemental retirement benefits
for Leonard D. Schaeffer ("Executive") as partial consideration for his services
to the Company and its predecessors, including Blue Cross of California ("Blue
Cross"), and their Affiliates. Benefits under the Plan are designed to
supplement benefits payable to Executive under the Company's Pension
Accumulation Plan and the Noncontributory Retirement Program for Certain
Employees of Blue Cross of California, including each predecessor, successor or
replacement to each plan (collectively, "Qualified Plan") and under the
Company's Supplemental Pension Plan, including each successor or replacement to
that plan ("Supplemental Plan"), as those plans may be amended from time to
time. All terms used herein shall have the meanings assigned to them under the
provisions of the Pension Accumulation Plan unless otherwise qualified by the
context or specifically defined in a different manner. Executive, a highly
compensated, management employee of the Company, shall be the sole participant
in the Plan.

2.  Normal Retirement Benefit

        (a) Eligibility. If Executive's employment with the Company and all
other Affiliated Companies (as defined in the Qualified Plan) terminates on or
after the date that Executive has attained age 65 (other than due to Executive's
death), Executive will be entitled to a monthly retirement benefit ("Normal
Retirement Benefit") under the Plan for Executive's lifetime. The Normal
Retirement Benefit will become payable in monthly installments commencing on
Executive's "Normal Retirement Beginning Date," which will not be later than
thirty (30) days after Executive's employment with the Company and all other
Affiliated Companies terminates. 


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Such monthly installments shall continue to be paid on the first day of each
month thereafter until the date of payment of the last installment.

        (b) Calculation. Each monthly installment payment of the Normal
Retirement Benefit will equal the monthly Base Amount calculated in (i) below,
reduced by the Offset Amount calculated in (ii) below; provided, however, that
in no event will the aggregate Normal Retirement Benefit payable under the Plan,
the Supplemental Plan and the Qualified Plan be less than Executive's accrued
benefit under the Plan, the Supplemental Plan and the Qualified Plan on December
31, 1992.

        (i) "Base Amount." The Base Amount will be two-thirds (2/3rds) of
Executive's Targeted Annual Compensation. "Targeted Annual Compensation" means
the sum of the following:

        (A) Base Salary. An amount equal to Executive's average monthly base
        salary from the Company and all other Affiliated Companies (including
        base salary paid or reimbursed by Blue Cross or its then subsidiary
        WellPoint Health Networks Inc. ("Old WellPoint") before their merger to
        from the Company) for the 12 consecutive month period of Executive's
        employment with the Company (or Blue Cross or Old WellPoint) and any
        other Affiliated Company (whether occurring before or after June 1,
        1997) for which such average is the highest. For purposes of computing
        this average, Executive's base salary for any calendar month beginning
        after December 31, 1997 shall be deemed to be as follows: (i) on each
        January 1 through January 1, 2001, Executive's monthly base salary,
        starting with Executive's actual monthly base salary as of December 31,
        1997, shall be increased by five percent (5%), (ii) on any date after
        December 31, 1997 and before January 2, 2001 that Executive's actual
        monthly base salary is increased so that the cumulative increase in such
        actual monthly base salary since the most recent December 31 is more
        than five percent (5%), Executive's monthly base salary shall be
        increased by the percentage increase in actual monthly base salary, but
        only to the extent that such increase when added to earlier actual
        increases since the most recent December 31 exceeds five percent (5%),
        and (iii) on any date after January 1, 2001, Executive's monthly base
        salary shall be increased in the same percentage amount and at the same
        time that Executive's actual monthly base salary is increased after that
        date.

        (B) Annual Bonus. An amount equal to one-twelfth (1/12th) of the largest
        annual target incentive bonus established at any time for Executive by
        the board of directors or the compensation committee of the Board of
        Directors of the 


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        Company (including the board of directors and the compensation
        committees of Blue Cross and Old WellPoint) and, if applicable, any
        other Affiliated Company.

        (ii) "Offset Amount." The Offset Amount will be the sum of the following
amounts:

        (A) Qualified Plan. The monthly benefit that would be payable over
        Executive's lifetime as a single life annuity with payments guaranteed
        for a period of ten years under the terms of the Qualified Plan if all
        benefit payments under the Qualified Plan were to begin on the Normal
        Retirement Beginning Date.

        (B) Supplemental Plan. The monthly benefit that would be payable over
        Executive's lifetime as a single life annuity with payments guaranteed
        for a period of ten years under the terms of the Supplemental Plan if
        all benefit payments under the Supplemental Plan were to begin on the
        Normal Retirement Beginning Date.

3.   Early Retirement Benefit

        (a) Eligibility. If Executive's employment with the Company and all
other Affiliated Companies (as defined in the Qualified Plan) terminates (other
than due to Executive's death) before Executive has attained age 65, Executive
will be entitled to a monthly retirement benefit ("Early Retirement Benefit")
under the Plan for Executive's lifetime. The Early Retirement Benefit will
become payable in monthly installments commencing on Executive's "Early
Retirement Beginning Date," which will not be later than thirty (30) days after
Executive's employment with the Company and all other Affiliated Companies
terminates; provided that if Executive terminates employment by reason of
disability and is entitled to disability benefits in accordance with his
employment agreement with the Company or under an employee benefit plan
maintained by the company, Executive may delay his Early Retirement Beginning
Date to the first day of any month after termination of employment and before
the earlier of the date that he attains age 65 or the date that such disability
benefits cease. Such monthly installments shall continue to be paid on the first
day of each month thereafter until the date of payment of the last installment.

        (b) Calculation. Each monthly installment payment of the Early
Retirement Benefit will equal the monthly Base Amount calculated under Section
2(b)(i) above, reduced by one-twelfth of 6.25% for each month (prorated for a
fraction of a month) by which the Early Retirement Beginning Date is earlier
than the date Executive would attain age 60, and reduced further by the sum of
the following:


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        (i) Qualified Plan. The monthly benefit that would be payable over
        Executive's lifetime as a single life annuity with payments guaranteed
        for a period of ten years under the terms of the Qualified Plan if all
        benefit payments under the Qualified Plan were to begin on the Early
        Retirement Beginning Date.

        (ii) Supplemental Plan. The monthly benefit that would be payable over
        Executive's lifetime as a single life annuity with payments guaranteed
        for a period of ten years under the terms of the Supplemental Plan if
        all benefit payments under the Supplemental Plan were to begin on the
        Early Retirement Beginning Date.

4.  Death Benefit for Designated Beneficiary

        (a) Death Before Beginning Date. If Executive terminates employment by
reason of death before commencement of Normal or Early Retirement Benefits,
Executive's Designated Beneficiary will be entitled to a monthly death benefit
that will be payable for 120 months. Each such monthly payment will equal 100%
of the monthly Normal Retirement Benefit. This monthly benefit will become
payable commencing within thirty (30) days after the date of Executive's death.

        (b) Death After Beginning Date. If Executive dies after his Normal or
his Early Retirement Benefits commence, but before Executive has received 120
monthly payments under the Plan, Executive's Designated Beneficiary will be
entitled to a monthly death benefit payable for the balance of this 120 month
period. Each such monthly payment will equal 100% of the monthly amount that
Executive was receiving under the Plan. This death benefit will become payable
commencing within thirty (30) days of the date of Executive's death.

        (c) "Designated Beneficiary." The initial Designated Beneficiary shall
be the person or trustee so designated by Executive by the latest written
instrument delivered to the Company before his death. Upon the death of any
Designated Beneficiary, the Designated Beneficiary shall be the contingent
Designated Beneficiary so designated by Executive by the latest written
instrument delivered to the Company before his death. If no Designated
Beneficiary is designated by Executive, or is living at the date of death of
Executive or of any Designated Beneficiary, the Designated Beneficiary shall be
the duly appointed executor or administrator of Executive's estate. If the
Designated Beneficiary is not Executive's Spouse (defined below), his Spouse
must consent to such designation by Executive, prior to the date of Executive's
death, in writing, to the extent required by the community property laws, if
any, of the state in which Executive is domiciled at the date of designation.


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5.  Spousal Death Benefit

        (a) Death Before Beginning Date. If Executive terminates employment by
reason of death before his Normal or Early Retirement Benefits commence,
Executive's Spouse will be entitled to a monthly Spousal Death Benefit equal to
50% of the Normal Retirement Benefit. The first such monthly installment will be
paid not later than thirty (30) days after the date that the last payment of a
death benefit to a Designated Beneficiary is made pursuant to Section 4(a) and
will continue for the remainder of the Spouse's life.

        (b) Death After Beginning Date. If Executive dies after his Normal or
his Early Retirement Benefits commence, Executive's Spouse will be entitled to a
monthly Spousal Death Benefit for the remainder of her lifetime. This Spousal
Death Benefit will equal 50% of the monthly amount that Executive was receiving
under the Plan. Benefits will become payable commencing within thirty (30) days
after Executive's death, unless Executive dies before receiving one hundred
twenty (120) monthly benefit payments, in which cases the Spousal Death Benefit
will commence within thirty (30) days after the last monthly payment to a
Designated Beneficiary under Section 4(b).

        (c) "Spouse." For purposes of the Plan, Spouse means a spouse who
survives Executive and to whom Executive is legally married on the date of his
death. For purposes of the Plan, the term Spouse does not include any successor
in interest to a Spouse, including but not limited to a Spouse's estate or a
Spouse's beneficiaries.


6.   Actuarial Equivalents

        The actuarial assumptions specified in the Company's Pension
Accumulation Plan as of the date of termination of Executive's employment with
the Company and all other Affiliated Companies, used for purposes of determining
the form of a benefit or the adjustment of a benefit to reflect the timing of
commencement of the benefit thereunder, shall also be used for such purposes
with respect to a benefit under the Plan. All actuarial adjustments required
under the Plan shall be made by the enrolled actuary or firm of enrolled
actuaries acting for the Pension Accumulation Plan at the date of adjustment.

7.  Trust Funding and Obligations

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        (a) Trust Funding and Investment. The Company shall, no later than
February 15 of each calendar year after 1992 (or, in the case of 1993, as soon
as practicable after execution of the Plan) make such contributions to the Trust
as shall be necessary, together with prior contributions, to fund the Early
Retirement Benefit payable hereunder upon Executive's retirement at age 60
(assumed, for this purpose, to be payable in the form of a joint and survivor
annuity that pays 100% of the original monthly amount of Early Retirement
Benefit until the later of (A) the month of Executive's death or (B) the month
in which the 120th monthly payment is made and, thereafter, 50% of the original
monthly amount to Executive's Spouse for her life) under a generally accepted
funding method and reasonable actuarial assumptions determined by the Company,
in its sole discretion, which will result in full funding of such benefits no
later than the date Executive attains age 60. Contributions shall be invested by
the Trustees in their sole discretion.

        (b) Actuarial Adjustments. All actuarial assumptions utilized in making
the actuarial adjustments called for in this Section 7 shall be reasonable
assumptions agreed to by the Company and Executive.

8.  Change in Control

        (a) Effect. In the event of a Change in Control (as defined below), any
benefit to which Executive or his beneficiary becomes entitled hereunder shall
be computed as if Executive had remained employed by the Company through January
2, 2001 or, if later, the date of Executive's actual termination of employment.

        (b) Defined. For purposes of this Plan, a "Change in Control" means:

                      (i) the acquisition, directly or indirectly by any person
        or related group of persons (as such term is used in Sections 13(d) and
        14(d) of the Securities Exchange Act of 1934 (the "Exchange Act", but
        other than the Company or a person that directly or indirectly controls,
        is controlled by, or is under common control with the Company) of
        beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of
        securities of the Company that result in such person or related group of
        persons beneficially owning securities representing 40% or more of the
        combined voting power of the Company's then outstanding securities;
        provided that this provision shall not apply to an acquisition by the
        California HealthCare Foundation that either -

                      (A) is on or before May 20, 1996, or



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                             (B) is both (I) after May 20, 1996 but before the
               first date thereafter, if any, that California HealthCare
               Foundation's beneficial ownership is less than 35% and (II)
               involves securities representing less than 50% (or, if lower, the
               lowest percentage of beneficial ownership by the California
               Healthcare Foundation on or after May 20, 1996 plus 10%) of the
               combined voting power of the Company's then outstanding
               securities.

                      (ii) a merger or consolidation to which the Company is a
        party but is not the surviving entity, if the beneficial owners of the
        Company's securities immediately before the transaction do not,
        immediately after the transaction have beneficial ownership of
        securities of the surviving entity or parent thereof representing at
        least 60% of the combined voting power of the then outstanding
        securities of the surviving entity or parent;

                      (iii) a change in the composition of the Board of
        Directors of the Company ("the "Board") over a period of thirty-six (36)
        consecutive months or less such that a majority of the Board members
        ceases, by reason of one or more contested elections for Board
        membership, to be comprised of individuals who either (A) have been
        Board members continuously since the beginning of such period or (B)
        have been elected or nominated for election as Board members during such
        period by at least a majority of the Board members described in clause
        (A) who were still in office at the time the Board approved such
        election or nomination; or

                      (iv) the sale, transfer or other disposition of all or
        substantially all of the Company's assets in complete liquidation or
        dissolution of the Company unless the beneficial owners of the Company's
        securities immediately before the transaction have, immediately after
        the transaction, beneficial ownership of securities representing at
        least 60% of the combined voting power of the then outstanding
        securities of the entity acquiring the Company's assets.


9.  Administration

        The Retirement Committee that administers the Company's Pension
Accumulation Plan has full discretionary authority, exercised in a reasonable
manner, to administer and interpret the Plan, including discretionary authority,
exercised in a reasonable manner, to determine eligibility for benefits and the
amount of benefits under the terms of the Plan. The Retirement Committee may
delegate its discretionary authority and such duties and responsibilities as it
deems appropriate to facilitate the day-to-day administration of the Plan. No
member of the Retirement Committee and no delegate of the Retirement 


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Committee acting within his or her delegated authority will be liable to any
person for any action taken or omitted in connection with the interpretation and
administration of the Plan unless attributable to willful misconduct or lack of
good faith.

10.  Amendment and Discontinuance

        The Company reserves the right, with the consent of Executive or, if he
is deceased, with the consent of Executive's Spouse, or if there is no Spouse,
with the consent of the Designated Beneficiary, to amend or terminate the Plan
at any time.

11.  Right to Benefits

        (a) Limits. Benefits payable under the Plan shall be payable by the
Company from its own assets and from assets of the Trust and shall not (i)
impose any obligation upon the Trust Fund under the Qualified Plan; (ii) be paid
from the Trust Fund under the Qualified Plan; or (iii) have any effect
whatsoever on the Qualified Plan or the payment of benefits from the Trust Fund
under the Qualified Plan. No person shall have any right to a benefit under the
Plan except in accordance with the terms of the Plan.

        (b) General Creditor Status. The Plan and the Company's obligations
hereunder are intended to be unfunded for purposes of the Internal Revenue Code
of 1986 and the Employee Retirement Income Security Act of 1974, each as
amended. The Plan represents a mere promise to pay benefits in the future, as
detailed herein. Any right of Executive, Executive's Spouse, or Executive's
Designated Beneficiary to receive a benefit under the Plan or from the Trust is
the right of an unsecured general creditor against the Company and neither
Executive nor Executive's Spouse nor Executive's Designated Beneficiary shall
have any preferred rights in or against any specific assets of the Company any
other Affiliated Company or the Trust. All amounts credited to the Trust shall
constitute general assets of the Company and may be disposed of by the Company
pursuant to the terms of the Trust. The Trust established by the Company to
assist it in providing benefits under the Plan and the assets held thereunder
shall conform to the terms of the model trust described in Revenue Procedure
92-64, issued by the Internal Revenue Service.

        (c) Premature Taxation. Notwithstanding anything to the contrary
contained herein; (i) in the event that the Internal Revenue Service prevails in
its claim that amounts contributed to and held in the Trust, and/or earnings
thereon, constitute taxable income to the Executive or his 


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Spouse or Designated Beneficiary for any taxable year of such person, prior to
the taxable year in which such contributions or earnings are distributed to such
person; or (ii) in the event that legal counsel satisfactory to Company and the
Executive or his Spouse or Designated Beneficiary renders an opinion that the
Internal Revenue Service would likely prevail in such a claim, there shall be
distributed from the Trust to the Executive, his Spouse or Designated
Beneficiary (as the case may be), as soon as practicable, as an advance payment
of benefits under the Plan, an amount necessary to satisfy, after taxes on such
amount, the Executive's or his Spouse or Designated Beneficiary's federal, state
and local income and employment tax liability on the amount of the Trust held to
be taxable. Benefits otherwise payable thereafter to Executive, and, to the
extent necessary, his Spouse and\or Beneficiary under the Plan shall be reduced
by the amount of any such distribution.

        The Internal Revenue Service shall be deemed to have prevailed in a
claim if such claim is upheld by a court of final jurisdiction, or if Executive
or his Spouse or Designated Beneficiary (as the case may be), based upon an
opinion of legal counsel satisfactory to Company and the Executive or his Spouse
or Designated Beneficiary (as the case may be), fails to appeal a decision of
the Internal Revenue Service, or a court of applicable jurisdiction, with
respect to such claim, to an appropriate Internal Revenue Service appeals
authority or to a court of higher jurisdiction within the appropriate time
period.

12.  Restrictions on Assignment

        No interest of any person or entity in, or right to receive a benefit
under, the Plan shall be subject in any manner to sale, transfer, assignment,
pledge, attachment, garnishment, or other alienation or encumbrance of any kind;
nor may such interest or right to receive a benefit be taken, either voluntarily
or involuntarily, for the satisfaction of the debts of, or other obligations or
claims against, such person or entity, including claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.

13.  Continued Employment

        Nothing contained in this document shall be construed as conferring on
Executive the right to continue in the employ of the Company or any other
Affiliated Company in any capacity.


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14.  Binding

        The Plan shall be binding on and inure to the benefit of the Company and
its respective successors and assigns and Executive, his heirs, executors,
administrators and legal representatives. In the event of the merger or
consolidation of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company are transferred to another
corporation (other than any direct or indirect subsidiary of the Company in
connection with its formation), the successor corporation resulting from the
merger or consolidation, or the transferee of such assets, as the case may be,
shall, as a condition to the consummation of the merger, consolidation or sale,
assume the obligations of the Company under the Plan and shall be substituted
for the Company under this document.


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15.  Claims

        If the Executive or the Executive's Spouse or Designated Beneficiary
believes that he or she is entitled to a greater benefit or a different form of
benefit under the Plan, he or she may file a signed, written application with
the Retirement Committee. The Executive or the Executive's Spouse or Designated
Beneficiary will generally be notified of the approval or denial of this
application within ninety (90) days of the date that the Retirement Committee
receives the application. If no such notice is received within such time period,
the claim shall be deemed denied. If the claim is denied, the notification will
state specific reasons for the denial and the Executive or the Executive's
Spouse or Designated Beneficiary will have sixty (60) days to file a signed,
written request for a review of the denial with the Retirement Committee.
Executive or Executive's Spouse or Designated Beneficiary shall have the right
to review all documents relevant to his or her claim in connection with such
request for review. This request should include the reasons for requesting a
review, facts supporting the request and any other relevant comments. The
Retirement Committee will generally make a final, written determination with
respect to the claim within sixty (60) days of receipt of the request for
review.

16.  Arbitration

        Any controversy or claim which arises out of or relates to the Plan or
the construction of the Plan (including the denial of a claim for benefits) or
the breach of Plan provisions shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
("AAA"), then in effect, except as otherwise provided in this Section 16. The
proceeding will be held in Los Angeles, California. The prevailing party to such
arbitration shall be entitled to expenses of arbitration, including reasonable
attorneys' fees, as fixed by the arbitrators or a majority of them. As provided
in Section 1283.05 of the Code of Civil Procedure of the State of California,
depositions may be taken and discovery obtained in any such arbitration
proceedings and the provisions of Section 1283.05 shall be deemed to be made a
part of and applicable to the Plan.

        The arbitration proceeding shall be conducted by a single arbitrator
selected as provided in the AAA rules. The arbitrator so appointed shall proceed
to determine the matter in question and the decision or award of said arbitrator
shall be final, conclusive and binding on all persons. Judgement upon the award
of the arbitrator may be entered in any court having jurisdiction thereof.

        Should any litigation be commenced between the parties to compel
arbitration under this Section 16 (including proceedings in trial and appellate
courts) or to confirm an award of the 


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arbitrators (including proceedings in trial and appellate courts), the party
prevailing in such litigation shall be entitled to reimbursement of reasonable
attorneys' fees, expenses and court costs incurred in connection with such
litigation.

17.  Law

        The Plan shall be construed in accordance with and governed by the laws
of the State of California to the extent not preempted by Federal law.


        Agreed to this _____ day of ______, 1997, as of September 1, 1997.


                                             WellPoint Health Networks Inc.

                                             By: /s/ Stephen L. Davenport
                                                --------------------------------
                                             Stephen L. Davenport
                                             Chair, Compensation Committee


        Agreed to this _____ day of ______, 1997, as of September 1, 1997.

                                              /s/ Leonard D. Schaeffer
                                              ----------------------------------
                                              Leonard D. Schaeffer