<PAGE>
                                                                   EXHIBIT 10.20

                           THIRD AMENDED AND RESTATED
                         PACIFICARE HEALTH SYSTEMS, INC.
                      STOCK UNIT DEFERRED COMPENSATION PLAN

      WHEREAS, PacifiCare Health Systems, Inc., (the "Company") has established
a non-qualified stock unit deferred compensation plan to provide supplemental
retirement income benefits for a select group of management and highly
compensated employees through deferrals of salary and bonuses, effective as of
December 18, 1997;

      WHEREAS, it is believed that providing for deferral of compensation at the
election of each executive is in the best interests of the Company; and

      WHEREAS, the Company believes that it is in its best interests to amend
and restate this plan; and

      WHEREAS, the Company intends that this plan shall be maintained as a "top
hat" plan described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA:

      NOW, THEREFORE, it is hereby declared as follows:

                                    ARTICLE I
                                   DEFINITIONS

      Whenever the following words and phrases are used in this Plan, they shall
have the meanings specified below.

Section 1.1 "Beneficiary" or "Beneficiaries" for purposes of this Plan shall
have the meaning set forth in Section 4.5.

Section 1.2 "Board of Directors" or "Board" means the Board of Directors of the
Company.

Section 1.3 "Bonus" means any management incentive plan bonus, long-term bonus,
sign-on bonus, retention bonus, sales commission, or any other bonuses
determined as eligible for the Plan by the Committee payable to a Participant in
addition to the Participant's Salary, other than moving expenses, prior to any
reduction for any deferrals to a plan qualified under Section 125 or Section 401
(k) of the Code.

Section 1.4 "Change of Control" shall have the meaning set forth in Section 4.3.

Section 1.5 "Common Stock" means the Company's Common Stock, par value $0.01 per
share.

Section 1.6 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.


                                       1
<PAGE>
                                                                   EXHIBIT 10.20

Section 1.7 "Committee" means the Committee appointed by the Compensation
Committee to administer the Plan in accordance with Article III.

Section 1.8 "Company" means PacifiCare Health Systems, Inc., a Delaware
corporation, or any successor corporation.

Section 1.9 "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of the Company.

Section 1.10 "Disability." A Participant shall be deemed to be incapacitated or
disabled, if such Participant's incapacity or disability prevents a Participant
from fully performing his or her duties to an Employer for a period in excess of
90 days and, after such 90-day period, the Company and a physician, duly
licensed and qualified in the specialty of the Participant's incapacity or
disability, decide in their reasonable judgments, that such incapacity or
disability will be permanent or of such continued duration as to prevent a
Participant from resuming the rendition of services to the Employer for at least
an additional six-month period.

Section 1.11 "Distributable Amount" shall have the definition set forth in
Section 2.3(a).

Section 1.12 "Eligible Employee" means any Employee of an Employer who the
Company has designated to be in executive salary grade of 15 or above, is a
Senior Vice President or above and is scheduled to work at least 32 hours per
week.

Section 1.13 "Employee" shall mean any employee (as defined in accordance with
the Treasury Regulations and Revenue Rulings then applicable under Section 3401
(c) of the Code) of an Employer, whether such employee is so employed at the
time this Plan is adopted or becomes so employed subsequent to the adoption of
this Plan.

Section 1.14 "Employer" means the Company (or any successor by merger,
consolidation or purchase of substantially all of the Company's assets) and any
and all Subsidiaries of the Company.

Section 1.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

Section 1.16 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

Section 1.17 "Participant" means for purposes of this Plan, any Eligible
Employee who satisfies the requirements of Section 2.1.

Section 1.18 "Payment Eligibility Date" means the first day of the month
following the end of the calendar quarter in which a Participant terminates
employment for any reason with all Employers or dies.


                                       2
<PAGE>
                                                                   EXHIBIT 10.20

Section 1.19 "Plan" means this Third Amended and Restated Stock Unit Deferred
Compensation Plan of PacifiCare Health Systems, Inc., as may be amended from
time to time.

Section 1.20 "Plan Year" means the 12 consecutive month period beginning on
January 1 and ending on December 31 of the same year.

Section 1.21 "Retirement" or "Retire", for purposes of this Plan, mean
termination of a Participant's employment from all Employers, which occurs after
the sum of the following two factors meet or exceed fifty-five (55): (i) the
Participant's age and (ii) the Participant's number of years of service with all
Employers.

Section 1.22 "Salary" shall mean the Participant's Salary prior to any reduction
for deferrals to a plan qualified under Section 125 or Section 401 (k) of the
Code.

Section 1.23 "Stock Unit" means a unit representing the right to receive a share
of Common Stock in accordance with the terms of this Plan.

Section 1.24 "Stock Unit Account" is the cumulative number of Stock Units
assigned to a Participant in accordance with Section 2.2.

Section 1.25 "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

                                   ARTICLE II
                            DEFERRAL OF COMPENSATION

Section 2.1 Eligibility.

      a. The Company's Chief Executive Officer (the "CEO") may elect to defer
(on a pre-tax basis) all, or a portion, of his or her Salary to be paid during a
Plan Year by filing an election to participate in this Plan on a form provided
by the Committee and filed with the Committee no later than December 15 of the
preceding Plan Year. The election form filed by the CEO shall signify the CEO's
acceptance of the terms of this Plan and the portion of Salary that he elects to
defer. Notwithstanding the foregoing, the Committee may, in its sole and
absolute discretion, permit the Chief Executive Officer to file an application
on or after December 15 if, in its judgment, his or her failure to do so prior
to said date was due to reasonable cause, but in no event may such application
be filed after December 31.

      b. The Compensation Committee shall determine at least 60 days prior to
the beginning of each Plan Year, the Eligible Employees, including the CEO, who
may defer all or a portion of Bonus pursuant to the provisions of this Plan for
the next Plan Year.


                                       3
<PAGE>
                                                                   EXHIBIT 10.20

The Committee shall notify each Eligible Employee of his or her eligibility to
participate in this Plan at least 30 days prior to the time he or she must file
an application for participation. The CEO and any Eligible Employee must file a
written application with the Committee no later than December 15 of the
preceding Plan Year to participate in this Plan for the next succeeding Plan
Year. Notwithstanding the foregoing, the Committee may, in its sole and absolute
discretion, permit an Eligible Employee to file an application on or after
December 15 if, in its judgment, his or her failure to do so prior to said date
was due to reasonable cause, but in no event may such application be filed after
December 31.

      c. Any Salary and/or Bonus deferral election made under subsection (a) or
subsection (f) of this Section 2.1 shall be irrevocable and shall apply to the
Salary payable during subsequent Plan Years and/or Bonus payable with respect to
services performed during subsequent Plan Years until a Participant makes a new
election; provided, however, that an election may not be changed for the first
Plan Year after an election is made or for any Plan Year once the Plan Year has
begun. An Eligible Employee may make changes to his or her election, subject to
the limitations set forth in this Section 2.1, to change the deferral under a
previous election by filing with the Committee on forms provided by the
Committee, a new election to defer a percentage of his or her Salary and/or
Bonus on or before the December 15 preceding the Plan Year for which the new
election is to apply. Notwithstanding the foregoing, the Committee may, in its
absolute discretion, permit an Eligible Employee to file an election to defer on
or after December 15, if, in its judgment, his or her failure to do so prior to
said date was due to reasonable cause, but in no event may such election be
filed after December 31. All elections, once made, are irrevocable.

Section 2.2 Stock Account.

      a. Any amount of Salary deferred by the CEO pursuant to Section 2.1 (a)
shall be converted into Stock Units of the Company's Common Stock. The number of
shares of Common Stock into which the deferred amount shall be converted shall
equal the amount of Salary deferred by the CEO multiplied by a risk premium (the
"Risk Premium") determined by the Compensation Committee at least 45 days prior
to the beginning of the next Plan Year, divided by the closing price of the
Common Stock as quoted on Nasdaq on a date selected by the Committee. The Stock
Units deferred pursuant to this provision shall be credited to a bookkeeping
account established for this purpose (the "Stock Unit Account") in the name of
the CEO. The number of Stock Units established by deferrals of Salary under this
Plan shall remain constant over the deferral period, except as provided in
Section 4.4.

      b. Any amount of Bonus deferred pursuant to this Section 2.2 by any
Participant shall be converted into Stock Units of the Company's Common Stock.
The number of shares of Common Stock into which the deferred amount shall be
converted shall equal the amount of Bonus deferred multiplied by the Risk
Premium divided by the closing price of the Common Stock as quoted on Nasdaq on
a date selected by the


                                       4
<PAGE>
                                                                   EXHIBIT 10.20

Committee. The Stock Units deferred pursuant to this provision shall be credited
to the Stock Unit Account in the name of each Participant. The number of Stock
Units established by deferrals of Bonus and Salary under this Plan shall remain
constant over the deferral period, except as provided in Section 4.4.

      c. No fractional shares shall be deferred under this Plan. Accordingly, if
the conversion of Salary and/or a Bonus into Stock Units results in fractional
shares, such unit shall be rounded up to the next highest whole number.

Section 2.3 Distribution of Deferred Compensation.

     (a) In the case of a Participant who terminates employment with all
Employers on or after Retirement or who terminates as a result of a Disability,
the aggregate amount credited to the Stock Unit Account (the "Distributable
Amount") shall be paid to the Participant in the form of substantially equal
annual installments over five years beginning on a date as soon as
administratively possible from his or her Payment Eligibility Date.
Notwithstanding the foregoing, a Participant described in the preceding sentence
may elect one of the following optional forms of distribution provided that his
or her election is filed with the Committee at least one year prior to his or
her termination of employment with all Employers:

            (i) a lump sum of the balance of the Stock Unit Account payable as
      soon as administratively possible from the Participant's Payment
      Eligibility Date; or

            (ii) substantially equal annual installments of the balance of the
      Stock Unit Account over three years beginning on a date as soon as
      administratively possible from the Participant's Payment Eligibility Date.

Notwithstanding this subsection, if the value of the balance of the Stock Unit
Account is $50,000 or less then the entire amount contained in the Stock Unit
Account will be distributed in the form of a single lump sum payment. For all
purposes under this Plan, a Participant shall not be considered terminated from
employment with all Employers if the Participant remains employed by an entity
that is an Employer. However, if the Employee is employed by an Employer and
such Employer ceases to be an Employer as a result of a sale or other corporate
reorganization, such sale or other corporate reorganization shall be treated as
termination of employment with all Employers unless immediately following such
event and without any break in employment the Participant remains employed by an
Employer.

      (b) In the case of a Participant who terminates employment with all
Employers prior to Retirement for reasons other than a Disability, the balance
contained in the Stock Unit Account shall be paid to the Participant (and after
his or her death to his or her Beneficiary) in a lump sum as soon as
administratively possible from the Participant's Payment Eligibility Date.


                                       5
<PAGE>
                                                                   EXHIBIT 10.20

      (c) A Participant who has not terminated employment with all Employers may
change his or her form of payment applicable to the portion of the Stock Unit
Account balance attributable to one or more Plan Years to one of the payment
forms permitted by this Plan at least one year prior to the payment date to be
deferred. The Participant's payment election with respect to a given Plan Year
may not be changed after payment of that portion of the Stock Unit Account
balance has been made or has begun.

Section 2.4 Scheduled Early Distributions.

      Participants may elect to have Salary and/or Bonus deferred during a given
Plan Year be paid on a future date while still employed, provided the payment
date (the "Scheduled Payment Date") is at least two years from the last day of
such Plan Year. This election shall apply to the compensation deferred for the
Plan Year specified by the Participant on his or her payment election. A
Participant may elect a different Payment Date for compensation deferred for
each Plan Year. In addition, Scheduled Payment Dates elected pursuant to this
Section 2.4 may be deferred by at least one year, by filing with the Committee
written notice at least one year prior to the Scheduled Payment Date. A
Participant may elect to defer a Scheduled Payment Date selected by this Section
2.4 once every two years. A distribution pursuant to this Section 2.4 of less
than the Participant's entire interest in the Stock Unit Account shall be made
pro rata from his or her Stock Unit Accounts. All early distributions pursuant
to this Section 2.4 shall be made in either: (i) a lump sum payment; (ii) annual
installments over a period of three years; or (iii) annual installments over a
period of five years. Notwithstanding the foregoing, if a Participant terminates
employment with the all Employers for any reason prior to the date on which a
payment is scheduled to be made pursuant to this Section 2.4, the Participant's
entire Stock Unit Account balance will be paid pursuant to the provisions of
Section 2.3.

Section 2.5 Distributions Upon A Change of Control.

      a. If a Change of Control occurs, the Stock Unit Account balance of each
Participant will be paid to the Participant (or Beneficiary) in a lump sum as
soon as administratively possible after such Change of Control.

      b. Following a Change in Control, no changes in the Plan, or in any
documents evidencing an election to defer compensation, and no adjustments,
determinations or other exercises of discretion by the Compensation Committee,
the Committee or the Company's board of directors that were made subsequent to
the Change in Control and that would have the effect of diminishing a
Participant's rights or payments under this Plan or this Section 2.5, or of
causing a Participant to recognize income (for federal income tax purposes) with
respect to a Participant's Stock Unit Account prior to the actual distribution
to a Participant of such Stock Unit Account, shall be effective.


                                       6
<PAGE>
                                                                   EXHIBIT 10.20

Section 2.6. Form of Distribution

      Upon the occurrence of any event giving rise to a distribution, amounts
deferred under this Plan shall be distributed in shares of Common Stock equal to
the number of Stock Units of Common Stock converted on the date of deferral as
determined by Article II. Such shares shall be distributed as provided in
Sections 2.3, 2.4, 2.5 and 2.7.

Section 2.7 Financial Hardship Withdrawals.

      The Committee may, pursuant to rules adopted by it and applied in a
uniform manner, accelerate the date of distribution of all or any portion of a
Participant's Stock Unit Account, because of a financial hardship. A financial
hardship means an unforeseeable, severe financial emergency resulting from (a) a
sudden and unexpected illness or accident of the Participant or his or her
dependent (as defined in Section 152(a) of the Code); (b) loss of the
Participant's property due to casualty; or (c) other similar extraordinary and
unforeseeable circumstances arising out of event beyond the control of the
Participant, which may not be relieved through other available resources of the
Participant, as determined by the Committee in accordance with uniform rules
adopted by it. Payment of any amount with respect to which a Participant has
filed a request under this Section 2.7 shall be made as soon as practicable
after approval of such request by the Committee, but shall be limited to the
amount necessary to satisfy the financial hardship. Distributions made pursuant
to this Section 2.7 shall be without penalty.

                                   ARTICLE III
                                 ADMINISTRATION

Section 3.1 Committee.

      A number of individuals shall be appointed by, and serve at the pleasure
of, the Compensation Committee as a committee to administer the Plan (the
"Committee"). The number of members comprising the Committee shall be determined
by the Compensation Committee, which may from time to time vary the number of
members. A member of the Committee may resign by delivering a written notice of
resignation to the Compensation Committee. The Compensation Committee may remove
any member by delivering a certified copy of its resolution of removal to such
member. Vacancies in the membership of the Committee shall be filled promptly by
the Compensation Committee.

Section 3.2 Committee Action.

      The Committee shall act at meetings by affirmative vote of a majority of
the members of the Committee. Any action permitted to be taken at a meeting may
be taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter, which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of the
Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee.


                                       7
<PAGE>
                                                                   EXHIBIT 10.20

Section 3.3 Powers and Duties of the Committee.

      a. The Committee, on behalf of the Participants and their Beneficiaries,
shall enforce the Plan in accordance with its terms, shall be the "Plan
Administrator" charged with the general administration of the Plan, and shall
have all discretionary authority and powers necessary to accomplish its
purposes, including, but not by way of limitation, the following:

            i. To construe and interpret the terms and provisions of this Plan;

            ii. To compute and certify to the amount and kind of benefits
      payable to Participants and their Beneficiaries;

            iii. To maintain all records that may be necessary for the
      administration of the Plan;

            iv. To provide for the disclosure of all information and the filing
      or provision of all reports and statements to Participants, Beneficiaries
      or governmental agencies as shall be required by law;

            v. To make and publish such rules for the regulation of this Plan,
      and procedures for the administration of this Plan, as are not
      inconsistent with the terms hereof; and

            vi. To appoint a plan administrator or any other agent, and to
      delegate to them such powers and duties in connection with the
      administration of this Plan as the Committee may from time to time
      prescribe.

Section 3.4 Construction and Interpretation.

      The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to the Company and
any Participant or Beneficiary. The Committee shall administer such terms and
provisions in a uniform and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.

Section 3.5 Information.

      To enable the Committee to perform its functions, the Employers shall
supply full and timely information to the Committee on all matters relating to
the Compensation of all Participants, their death or other cause of termination,
and such other pertinent facts as the Committee may require.


                                       8
<PAGE>
                                                                   EXHIBIT 10.20

Section 3.6 Compensation, Expenses and Indemnity.

      a. The members of the Committee shall serve without compensation for their
services hereunder.

      b. The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the administration of the
Plan shall be paid by the Company.

      c. To the extent permitted by applicable state law, the Company shall
indemnify and hold harmless the Committee and each member thereof, the Board of
Directors, Compensation Committee and any delegate of the Committee who is an
employee of the Company against any and all expenses, liabilities and claims,
including legal fees to defend against such liabilities and claims arising out
of their discharge in good faith of responsibilities under or incident to this
Plan, other than expenses and liabilities arising out of bad faith or willful
misconduct. This indemnity shall not preclude such further indemnities as may be
available under insurance purchased by the Company or provided by the Company
under any bylaw, agreement or otherwise, as such indemnities are permitted under
state law.

Section 3.7 Quarterly Statements.

      Under procedures established by the Committee, a Participant shall receive
a statement with respect to such Participant's Stock Unit Accounts on an annual
basis as of each March 31. A CEO who selects Salary deferral shall receive a
statement with respect to such Participant's Stock Unit Accounts on a quarterly
basis as of each March 31, June 30, September 30 and December 31.

Section 3.8 Claim Procedures.

      a. Claim. A person who believes that he or she is being denied a benefit
to which he or she is entitled under this Plan (hereinafter referred to as
"Claimant") may file a written request for such benefit with the Plan
Administrator, setting forth his or her claim.

      b. Claim Decision. Upon receipt of a claim, the Plan Administrator shall
advise the Claimant that a reply will be forthcoming within 90 days and shall,
in fact, deliver such reply within such period. The Plan Administrator may,
however, extend the reply period for an additional 90 days for special
circumstances. If the claim is denied in whole or in part, the Plan
Administrator shall inform the Claimant in writing, using language calculated to
be understood by the Claimant, setting forth: (A) the specified reason or
reasons for such denial; (B) the specific reference to pertinent provisions of
this Plan on which such denial is based; (C) a description of any additional
material or information necessary for the Claimant to perfect his or her claim
and an explanation why such material or such information is necessary; (D)
appropriate information as to the steps to be taken if the Claimant wishes to
submit the claim for review; and (E) the time limits for requesting a review
under subsection 3.9(c).


                                       9
<PAGE>
                                                                   EXHIBIT 10.20

      c. Request for Review. Within 60 days after the receipt by the Claimant of
the written opinion described above, the Claimant may request in writing that
the Committee review the determination of the Plan Administrator. The Claimant
or his or her duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Committee. If the Claimant does not request a review within such 60 day
period, he or she shall be barred and estopped from challenging the Plan
Administrator's determination.

      d. Review of Decision. Within 60 days after the Committee's receipt of a
request for review, after considering all materials presented by the Claimant,
the Committee will inform the Participant in writing, in a manner calculated to
be understood by the Claimant, of its decision, setting forth the specific
reasons for the decision and containing specific references to the pertinent
provisions of this Agreement on which the decision is based. If special
circumstances require that the 60 day time period be extended, the Committee
will so notify the Claimant and will render the decision as soon as possible,
but no later than 120 days after receipt of the request for review.

                                   ARTICLE IV
                                  MISCELLANEOUS

Section 4.1 Unsecured General Creditor.

      Participants and their Beneficiaries, heirs, successors, and assigns shall
have no legal or equitable rights, claims, or interest in any specific property
or assets of any Employer. Any and all of the assets of each Employer shall be,
and remain, the general unpledged, unrestricted assets of such Employer. Each
Employer's obligation under this Plan shall be merely that of an unfunded and
unsecured promise of such Employer to pay money in the future, and the rights of
the Participants and Beneficiaries shall be no greater than those of unsecured
general creditors. It is the intention of the Company that this Plan be unfunded
for purposes of the Code and for purposes of Title I of ERISA.

Section 4.2 Restriction Against Assignment.

      The Employers shall pay all amounts payable hereunder only to the person
or persons designated by this Plan and not to any other person or corporation.
No part of a Participant's Account shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant's Account be subject to execution by levy,
attachment, or garnishment or by any other legal or equitable proceeding, nor
shall any such person have any right to alienate, anticipate, sell, transfer,
commute, pledge, encumber, or assign any benefits or payments hereunder in any
manner whatsoever. If any Participant, Beneficiary or successor in interest is
adjudicated bankrupt or purports to anticipate, alienate, sell, transfer,
commute, assign, pledge, encumber or charge any distribution or payment from the
Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel
such distribution or payment


                                       10
<PAGE>
                                                                   EXHIBIT 10.20

(or any part thereof) to or for the benefit of such Participant, Beneficiary or
successor in interest in such manner as the Committee shall direct.

Section 4.3 Change of Control.

      For purposes of this Plan, "Change of Control" means the occurrence of any
of the following: (i) a business combination effectuated through the merger or
consolidation of the Company with or into another entity where the Company is
not the Surviving Organization; (ii) any business combination effectuated
through the merger or consolidation of the Company with or into another entity
where the Company is the Surviving Organization and such business combination
occurred with an entity whose market capitalization prior to the transaction was
greater than 50 percent of the Company's market capitalization prior to the
transaction; (iii) the sale in a transaction or series of transactions of all or
substantially all of the Company's assets; (iv) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act) other than
UniHealth, a California non-profit public benefit corporation; (v) a dissolution
or liquidation of the Company; or (vi) the Company ceases to be subject to the
reporting requirements of the Exchange Act as a result of a "going private
transaction" (within the meaning of the Exchange Act). For purposes hereof,
"Surviving Organization" shall mean any entity where the majority of the members
of such entity's board of directors are persons who were members of the
Company's board of directors prior to the merger, consolidation or other
business combination and the senior management of the surviving entity includes
all of the individuals who were the Company's executive management (the
Company's chief executive officer and those individuals who report directly to
the Company's chief executive officer) prior to the merger, consolidation or
other business combination and such individuals are in at least comparable
positions with such entity. The Committee may make such determinations and
interpretations and adopt such rules and conditions as it, in its absolute
discretion, deems appropriate in connection with a Change in Control. All such
determinations and interpretations by the Committee shall be conclusive.

      Section 4.4 Change In Company Shares.

      If the outstanding shares of Common Stock are hereafter changed into or
exchanged for a different number or kind of shares or other securities of the
Company, or of another company, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, stock dividend
or combination of shares, or if the Company distributes a cash or non-cash
dividend to holders of Common Stock or engages in another similar transaction,
the Compensation Committee shall make an appropriate and equitable adjustment in
the number and kind of units credited to the Stock Unit Account. Any such
adjustment made by the Compensation Committee shall be final and binding upon a
Participant, the Company and all other interested persons.


                                       11
<PAGE>
                                                                   EXHIBIT 10.20

Section 4.5 Beneficiary.

      For purposes of this Plan, "Beneficiary" or "Beneficiaries" mean the
person or persons, including a trustee, personal representative or other
fiduciary, last designated in writing by a Participant in accordance with
procedures established by the Committee to receive the benefits specified
hereunder in the event of the Participant's death. No beneficiary designation
shall become effective until it is filed with the Committee. If there is no such
designation or if there is no surviving designated Beneficiary, then the
Participant's surviving spouse shall be the Beneficiary. If there is no
surviving spouse to receive any benefits payable in accordance with the
preceding sentence, the participant's estate shall be the Beneficiary. In the
event any amount is payable under the Plan to a minor, payment shall not be made
to the minor, but instead be paid (a) to that person's living parent(s) to act
as custodian, (b) if that person's parents are then divorced, and one parent is
the sole custodial parent, to such custodial parent, or (c) if no parent of that
person is then living, to a custodian selected by the Committee to hold the
funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect
in the jurisdiction in which the minor resides. If no parent is living and the
Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within 60 days after the date the
amount becomes payable, payment shall be deposited with the court having
jurisdiction over the estate of the minor.

Section 4.6 Withholding.

      There shall be deducted from each payment made under the Plan or any other
compensation payable to the Participant (or Beneficiary) all taxes which are
required to be withheld by the Company in respect to such payment for this Plan.
The Company shall have the right to reduce any payment (or compensation) by the
amount of cash sufficient to provide the amount of said taxes.

Section 4.7 Amendment, Modification, Suspension or Termination.

      The Compensation Committee may amend, modify, suspend or terminate this
Plan in whole or in part, except that no amendment, modification, suspension or
termination shall have any retroactive effect to reduce any amounts allocated to
a Participant's Stock Account. In the event that this Plan is terminated, the
amounts allocated to a Participant's Stock Account shall be distributed to the
Participant or, in the event of his or her death, his or her Beneficiary in a
lump sum as soon as administratively possible following the date of termination.

Section 4.8 Governing Law.

      This Plan shall be construed, governed and administered in accordance with
the laws of the United States and, to the extent not preempted by such law, by
the laws of the State of California.


                                       12
<PAGE>
                                                                   EXHIBIT 10.20

Section 4.9 Receipt or Release.

      Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall to the extent thereof, be in
full satisfaction of all claims for benefits under this Plan against the
Committee and the Company. The Committee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a receipt and
release to such effect.

Section 4.10 Effective Date.

      This Plan shall be effective as of January 1, 2002.

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]


                                       13
<PAGE>
                                                                   EXHIBIT 10.20

      IN WITNESS WHEREOF, this Plan is adopted as of January 1, 2002.

                              PACIFICARE HEALTH SYSTEMS, INC.


                              ------------------------------------
                              By:
                              Title:


                                       14