<PAGE>

                           PACIFICARE HEALTH SYSTEMS, INC.
                             STATUTORY RESTORATION PLAN

     WHEREAS, PacifiCare Health Systems, Inc., (the "Company") desires to
establish a statutory restoration 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 January 1, 1998;

     WHEREAS, it is believed that the adoption of this plan providing for
deferral of compensation at the election of each eligible executive will be in
the best interests of the Company;

     WHEREAS, it is the intent of the Company that the Plan shall supersede any
other statutory restoration plan, policy or arrangement which the Company or any
of its subsidiaries may have sponsored or made available in the past; 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     "Accounts" shall mean the accounts maintained by the Committee
for each Participant which includes the Deferral Account, the Matching Account
and the Two Percent Account.

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

Section 1.3    "Bonus" means any cash incentive compensation or sales commission
payable to a Participant in addition to the Participant's Salary, other than the
LTPIP Bonus, moving expenses, sign-on bonuses or bonuses paid in connection with
a promotion, prior to any reduction for 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
7.3.

Section 1.5    "Code" means the Internal Revenue Code of 1986, as amended from
time to time.


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<PAGE>

Section 1.6    "Committee" means the Committee appointed by the Compensation
Committee to administer the Plan in accordance with Article VI.

Section 1.7    "Company" means PacifiCare Health Systems, Inc., a Delaware
corporation, or any successor corporation.

Section 1.8    "Compensation" means for any Participant for any Plan Year his or
her Statutory Compensation for such Plan Year, excluding all reimbursements or
other expense allowances, fringe benefits (cash and noncash), moving expense,
deferred compensation and welfare benefits (including severance benefits).

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

Section 1.10   "Deferral Account" shall mean the account maintained by the
Committee for each Participant that is credited with the amounts deferred under
Section 2.2 of this Plan together with any Earnings on such deferred amounts.

Section 1.11   "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 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 1.12   "Earnings" shall mean the amount credited to a Participant's
Account as result of the investment elections made by a Participant pursuant to
Section 3.1.

Section 1.13   "Eligible Employee" means any Employee of an Employer who the
Company has designated to be at an executive salary grade of 15 or above and who
is scheduled to work at least 32 hours per week.  Notwithstanding the previous
sentence, any Employee who participated in the Company's predecessor to this
Plan during 1997 shall be an Eligible Employee for Plan Year 1998 and shall
continue to be eligible to participate in this Plan in future Plan Years.

Section 1.14   "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 1.15   "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.


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<PAGE>

Section 1.16   "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

Section 1.17   "Fund" or "Funds" means one or more of the funds selected by the
Committee pursuant to Section 3.1(b).

Section 1.18   "Interest Rate" shall mean, for each Fund, an amount equal to the
net  gain or loss on the assets of such Fund during each month.

Section 1.19   "LTPIP" means the Company's Long-Term Performance Incentive Plan,
as it may be amended from time to time.

Section 1.20   "LTPIP Bonus" means incentive compensation payable to a
Participant under the LTPIP.

Section 1.21   "Matching Account" shall mean the account maintained by the
Committee for each Participant that is to be credited with contributions
pursuant to Section 2.4 of this Plan together with the Earnings credited to such
amounts as provided herein.

Section 1.22   "Participant" means, for purposes of this Plan, any Eligible
Employee who satisfies the requirements of Section 2.1.

Section 1.23   "Plan" means this Statutory Restoration Plan of PacifiCare Health
Systems, Inc., as may be amended from time to time.

Section 1.24   "Plan Year" means the 12 consecutive month period beginning on
January 1 and ending on December 31 of the same year.

Section 1.25   "Qualified Plan" shall mean the Amended and Restated PacifiCare
Health Systems, Inc. Savings and Profit-Sharing Plan.

Section 1.26   "Retirement" or "Retire" shall mean the retirement of a
Participant under the normal or disability provisions of the Qualified Plan.

Section 1.27  "Statutory Compensation" means for any Participant for any Plan
Year his or her total taxable remuneration received from an Employer in that
Plan Year for service rendered as an Employee (including those items not
reported on Form W-2 as determined under Treas. Reg. Section
1.415-2(d)(2)(iii)-(vi)) and including any elective deferrals as defined in Code
Section 402(g)(3) and any amounts not includable in gross income by reason of
the Code Section 125 (cafeteria plan) or Code Section 457 (deferred compensation
plan of state and local governments and tax-exempt organizations) and excluding


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<PAGE>

          (a)  Employer contributions to a deferred compensation plan (to the
     extent includable in the Participant's gross income solely by reason of
     Code Section 415) or to a simplified employee pension plan (to the extent
     deductible by the Participant) and any distribution from a deferred
     compensation plan (other than an unfunded, non-qualified plan);

          (b)  amounts realized from the exercise of a non-qualified stock
     option or taxable by reason of restricted property becoming freely tradable
     or free of a substantial risk of forfeiture as described in Code Section
     83;

          (c)  amounts realized from the sale, exchange, or other disposition of
     stock acquired under a qualified stock option; and

          (d)  other amounts which receive special tax benefits such as Employer
     contributions toward the purchase of an annuity contract described in Code
     Section 403(b) (whether or not excludable form the Participant's gross
     income).

Section 1.28   "Statutory Limits" shall mean the limitations on contributions
imposed by Sections 415, 401(a)(17) and 402(g) of the Code.

Section 1.29   "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

Section 1.30   "Two Percent Contribution Account" shall mean the account
maintained by the Committee for each Participant which is to be credited with
contributions made pursuant to Section 2.3 of this Plan together with the
Earnings credited thereon as provided herein.


                                     ARTICLE II
                               CONTRIBUTIONS TO PLAN

SECTION 2.1    ELECTION TO PARTICIPATE.

     a.   Except as provided in Section 2.5, to be eligible to participate in
this Plan, an Eligible Employee must be participating in the Qualified Plan and
be contributing to the Qualified Plan the maximum elective deferral allowed
under the Qualified Plan.

     b.   An Eligible Employee shall become a Participant in this Plan through
either (1) an election to defer a portion of his or her Salary in accordance
with


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<PAGE>

subsection 2.1 (c) or (2) a contribution by the Company to an Employee's Two
Percent Account.

     c.   The Compensation Committee shall determine the Eligible Employees who
may participate in this Plan for the next Plan Year at least 60 days prior to
the beginning of the next Plan Year and the Committee shall notify each Employee
of his prospective eligibility to participate in this Plan at least 30 days
prior to the time he must file an application for participation.  To be eligible
to defer Salary and/or Bonus paid during any Plan Year, an Eligible Employee
must file a written application with the Committee no later than December 15 of
the preceding 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.  The application for participation shall
signify the Eligible Employee's acceptance of the terms of this Plan and the
portion of Salary and/or Bonus that he elects to defer in accordance with
Section 2.2 of this Plan.  Elections by Eligible Employees to defer Salary
and/or Bonus for a Plan Year shall be irrevocable.

SECTION 2.2    AMOUNT OF DEFERRAL.

     A Participant may elect to defer all or a portion of the amount of his
Salary and/or Bonus that he could defer under the terms of the Qualified Plan,
except for the application of the Statutory Limits.  If a Participant so elects,
any such excess deferral will be credited to that Participant's Deferral Account
under this Plan.  Upon an election to defer Salary and/or Bonus, each
Participant's Salary and/or Bonus will be reduced by the amount deferred.

SECTION 2.3    AMOUNT OF TWO PERCENT CONTRIBUTION.

     Any excess two percent contribution that would have been contributed on
behalf of a Participant under the terms of the Qualified Plan, except for the
application of the Statutory Limits, will be credited to that Participant's Two
Percent Account under this Plan.

SECTION 2.4    AMOUNT OF MATCHING CONTRIBUTION.

     Any excess Company matching contribution that would have been contributed
on behalf of a Participant under the terms of the Qualified Plan, except for the
application of the Statutory Limits, will be credited to that Participant's
Matching Account under this Plan.  Such matching contributions shall be
determined assuming that such Participant's Salary and/or Bonus deferrals under
this Plan would have been made under the Qualified Plan.


                                          5

<PAGE>

SECTION 2.5    CONTRIBUTIONS PRIOR TO QUALIFIED PLAN ELIGIBILITY.

     Prior to being eligible to participate in the Qualified Plan, an Eligible
Employee who has been granted expressed authorization by the Compensation
Committee to participate in this Plan may participate in this Plan subject to
the following provisions:

     a.   Amount of Deferral.  A Participant may elect to defer all or a portion
of the amount of his or her Salary and/or Bonus that he could defer under the
terms of the Qualified Plan, except for the application of the eligibility
requirements of the Qualified Plan and the Statutory Limits.  If a Participant
who satisfies this Section 2.5 so elects, any such deferral will be credited to
the Participant's Deferral Account under this Plan.  Such Participant shall
agree to contribute the maximum elective deferral under the Qualified Plan upon
becoming eligible to participate in the Qualified Plan.

     b.   Amount of Two Percent Contribution.  Any Two Percent Contribution that
would have been contributed on behalf of a Participant under the terms of the
Qualified Plan, except for the application of the eligibility requirements of
the Qualified Plan and the Statutory Limits, will be credited to that
Participant's Two Percent Account under this Plan.

     c.   Amount of Matching Contribution.  Any Company matching contribution
that would have been contributed on behalf of a Participant under the terms of
the Qualified Plan, except for the application of the eligibility requirements
of the Qualified Plan and the Statutory Limits, will be credited to that
Participant's Matching Account under this Plan.  Such matching contributions
shall be determined assuming that such Participant's Salary and/or Bonus
deferrals under this Plan would have been made under the Qualified Plan.

SECTION 2.6    DESIGNATION OF BENEFICIARY.

     For purposes of this Plan, a Participant's Beneficiary or Beneficiaries
will be the individual(s) designated as such under the Qualified Plan.  The
Employer and the Committee may rely on the designation of the Beneficiary or
Beneficiaries last filed in accordance with the terms of the Qualified Plan.  In
the case of an Eligible Employee who is participating in this Plan through the
provisions of Section 2.5 prior to becoming eligible to participate in the
Qualified Plan, such Participant's Beneficiary or Beneficiaries shall be the
individual(s) designated as such for life insurance purposes.  Upon
participation in the Qualified Plan, the Participant's Beneficiary or
Beneficiaries will be the person designated under the Qualified Plan.

SECTION 2.7    ADMINISTRATION.

     Any amounts credited to a Participant's Account under this Plan will be
administered by the Committee.


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<PAGE>

                                    ARTICLE III
                                ACCRUAL OF BENEFITS

SECTION 3.1    INVESTMENT ELECTIONS.

     a.   At the time of making the deferral elections described in Section 2.2,
the Participant shall designate, on a form provided by the Committee, the types
of funds the Participant's Accounts will be deemed to be invested in for
purposes of determining the amount of Earnings to be credited to his or her
Account.  Examples of the types of funds that may be available for investment
are:  (i) Money Market Fund; (ii) Common Stock Fund;  (iii) International Equity
Fund; (iv) Balanced Fund; (v) Growth Fund; (vi) Aggressive Growth Fund; (vii)
Bond Fund; and (viii) Global Equity Fund.

     In making the designation pursuant to this Section 3.1, a Participant may
specify that all or any multiple of a Participant's Account (at least 10
percent) be deemed to be invested in one or more funds.  Effective as of the end
of any calendar month, a Participant may change the designation made under this
Section 3.1 with respect to amounts contained in his or her Accounts or amounts
to be credited to his Accounts by current or future deferrals by filing an
election, on a form provided by the Committee, at least 30 days prior to the end
of such month.  If a Participant fails to elect a type of fund under this
Section 3.1, he or she shall be deemed to have elected a fund similar to a Money
Market Fund.

     b.   Although the Participant may designate the type of funds in subsection
(a) above, the Committee shall select from time to time, in its sole discretion,
a commercially available fund similar to the types described in subsection (a)
above to be the Funds.  The Interest Rate of such commercially available fund or
contract shall be used to determine the amount of Earnings to be credited to
Participants' Accounts under Section 4.4.

SECTION 3.2    DEFERRAL ACCOUNT.

     The Committee shall establish and maintain an Account for each Participant
under the Plan.  Each Participant's Accounts shall be further divided into
separate subaccounts ("fund subaccounts"), each of which corresponds to a fund
elected by the Participant pursuant to Section 3.1(a).  A Participant's Accounts
shall be credited as follows:

     a.   As of the last day of each month, the Committee shall credit the fund
subaccounts of the Participant's Accounts with an amount equal to Salary
deferred by the Participant during each pay period ending in that month in
accordance with the Participant's election under Section 3.1(a); that is, the
portion of the Participant's deferred Salary that the Participant has elected to
be deemed to be invested in a certain type of fund shall be credited to the fund
subaccount corresponding to that fund.


                                          7

<PAGE>

     b.   As of the last day of the month in which the Bonus or partial Bonus
would have been paid, the Committee shall credit the fund subaccounts of the
Participant's Accounts with an amount equal to the portion of the Bonus deferred
by the Participant's election under Section 3.1(a); that is, the portion of the
Participant's deferred Bonus that the Participant has elected to be deemed to be
invested in a particular type of fund shall be credited to the fund subaccount
corresponding to that fund.

     c.   As of the last day of each month, each fund subaccount of a
Participant's Accounts shall be credited with earnings or losses in an amount
equal to that determined by multiplying the balance credited to such fund
subaccount as of the last day of the preceding month by the Interest Rate for
the corresponding Fund selected by the Company pursuant to Section 3.1(b) with
the assumption that all dividends or interest is reinvested at the fair market
value of the Fund at the end of the day in which it would be paid.

SECTION 3.3    VESTING.

     The interest of each Participant in any benefit accrued hereunder shall be
vested in accordance with the vesting provisions of the Qualified Plan.  In the
event of death or Disability, the Participant will become 100 percent vested.

                                     ARTICLE IV
                              DISTRIBUTION OF ACCOUNTS

SECTION 4.1    PAYMENT UPON RETIREMENT

     If a Participant terminates employment with all Employers due to Retirement
(or thereafter), the amount of a Participant's Accounts distributable to the
Participant (determined pursuant to Section 3.1) as of the date of such
Retirement shall be paid to the Participant in the manner selected by
Participant not less than one year in advance of the Participant's Retirement.
At that time, the Participant may elect to have his or her Accounts paid:  (i)
in a single lump sum cash payment as soon as practicable after the last day of
the calendar quarter (the "Valuation Date") following the Participant's
Retirement Date; or (ii) in equal quarterly installments over a period not
greater than 15 years.

SECTION 4.2    PAYMENT UPON TERMINATION OF EMPLOYMENT.

     If a Participant terminates employment with all Employers by reason of
death, or any other reason other than Retirement, the amount of a Participant's
Accounts distributable to the Participant (determined pursuant to Section 3.1)
as of the date of termination shall be distributed to the Participant in a
single lump sum cash payment as soon as practicable after the Valuation Date
following such termination.


                                          8

<PAGE>

SECTION 4.3    PAYMENT UPON A CHANGE OF CONTROL

     a.   If a Change of Control occurs, the amount of a Participant's Accounts
distributable to the Participant (determined pursuant to Section 3.1) as of the
date of such Change of Control shall be paid by the Trustee of the Trust (as
defined herein) to the Participant in a single lump sum cash payment, as soon as
practicable after the Valuation Date following the effective date of such Change
of Control.

     b.   In the event of a Change in Control, no changes in the Plan and no
adjustments, determinations or other exercises of discretion by the Plan
Administrator, the Committee, the Compensation Committee or the Board of
Directors that were made at the effective time of, or 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 shall be effective.

SECTION 4.4    AMOUNT DISTRIBUTABLE.

     The amount of a Participant's Accounts distributable to a Participant or
any designated Beneficiary or Beneficiaries as of any date specified in this
Plan shall be an amount equal to the vested balance credited to the
Participant's Accounts as of the Valuation Date immediately following said date.

                                     ARTICLE V
                                       TRUST

SECTION 5.1    TRUST.

     a.   The Company shall cause the payment of benefits under this Plan to be
made in whole or in part by the Trustee of the PacifiCare Health Systems, Inc.
Rabbi Trust (the "Trust") in accordance with the provisions of this Section 5.1.
As soon as practicable after the end of each Plan Year (but no later than the
tax return due date of the Company for such year), each Employer shall
contribute to the Trust for each Participant an amount equal to the amount
deferred by the Participant for the Plan Year and an amount equal to the Two
Percent and Company Matching Contributions for such Participant for such Plan
Year.  Notwithstanding anything contained herein, contributions to the Trust by
each Employer may be made throughout the Plan Year.

     b.   The Committee shall direct the Trustee to pay the Participant or his
beneficiary at the time and in the amount described in Article IV.  In the event
the amounts held under the Trust are not sufficient to provide the full amount
payable to the Participant, the Employers shall pay for the remainder of such
amount at the time set forth in Article IV.




                                          9

<PAGE>

                                    ARTICLE VI.
                                   ADMINISTRATION

SECTION 6.1    COMMITTEE.

     A number of individuals shall be appointed by, and serve at the pleasure
of, the Compensation Committee as a committee to administer this 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 6.2    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.

SECTION 6.3    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 select the funds or contracts to be the Funds in accordance
     with Section 3.1(b);

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

          iii.   To compute and certify the amount and kind of benefits payable
     to Participants and their beneficiaries;

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


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<PAGE>

          v.     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;

          vi.    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;

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

          viii.  To take all actions set forth in the Trust agreement, including
     determining whether to hold or discontinue the policies.

SECTION 6.4   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 this Plan.

SECTION 6.5   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.

SECTION 6.6   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, the Compensation Committee and any delegate of the Committee who is
an employee of the Company against any and all expenses, liabilities and claims,
including


                                          11

<PAGE>

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 6.8   QUARTERLY STATEMENTS.

     Under procedures established by the Committee, a Participant shall receive
a statement with respect to such Participant's Accounts on a quarterly basis as
of each March 31, June 30, September 30 and December 31.

SECTION 6.9   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 a 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 of 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 6.9(c).

     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 Administration. 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


                                          12

<PAGE>

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 VII
                                   MISCELLANEOUS

SECTION 7.1   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 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 (and the
Trust described in Article V) be unfunded for purposes of the Code and for
purposes of Title I of ERISA.

SECTION 7.2   RESTRICTION AGAINST ASSIGNMENT.

     The Employers shall pay all amounts payable hereunder only to the person or
persons designated by the Plan and not to any other person or corporation. No
part of a Participant's Accounts 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 Accounts 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 (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 7.3   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


                                          13

<PAGE>

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 Securities Exchange Act of 1934,
as amended (the "Exchange Act")) other than UniHealth, a California non-profit
public benefit corporation ("UniHealth"), acquires beneficial ownership within
the meaning of Rule 13d-3 of the Exchange Act, directly or indirectly, of 20
percent or more of the voting common stock of the Company and the beneficial
ownership of the voting common stock of the Company owned by UniHealth at that
date is less than or equal to the beneficial ownership interest of voting
securities attributable to such other person or group; (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 7.4   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 or 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 7.5   AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION.

     The Compensation Committee may amend, modify, suspend or terminate the 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 Accounts.  In the event that this Plan is terminated, the
amounts allocated to a Participant's Accounts (regardless of whether such
amounts had become vested)


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<PAGE>

shall be distributed to the Participant or, in the event of his or her death,
his or her beneficiary in a lump sum within 30 days following the date of
termination.

SECTION 7.6   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.

SECTION 7.7   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 7.8   EFFECTIVE DATE.

     This Plan shall be effective as of January 1, 1998.

     IN WITNESS WHEREOF, this Plan is adopted as of January 1, 1998.

                                   PACIFICARE HEALTH SYSTEMS, INC.


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                                   By:
                                   Title:



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