AMENDED AND RESTATED MID ATLANTIC MEDICAL SERVICES, INC.
                       STOCK COMPENSATION TRUST AGREEMENT

         THIS AMENDED AND RESTATED STOCK  COMPENSATION  TRUST AGREEMENT made and
entered  into as of the 11th day of January,  1999,  by and between MID ATLANTIC
MEDICAL SERVICES,  INC., a corporation  organized under the laws of the State of
Delaware  (hereinafter referred to as the "Company") and THE BANK OF NEW YORK, a
New York banking corporation (hereinafter referred to as the "Trustee").

         WHEREAS,  the Company (as defined  below)  desires to establish a trust
(the "Trust") in  accordance  with the laws of the State of New York and for the
purposes stated in this Agreement;

         WHEREAS,  the  Trustee  desires to act as trustee of the Trust,  and to
hold  legal  title to the  assets  of the  Trusts,  in trust,  for the  purposes
hereinafter stated and in accordance with the terms hereof;

     WHEREAS,  the Company or its subsidiaries have previously adopted the Plans
(as defined below);

         WHEREAS,  the Company desires to provide  assurance of the availability
of  the  shares  of  its  common  stock  necessary  to  satisfy  certain  of its
obligations or those of its subsidiaries under the Plans (as defined below);

     WHEREAS, the Trustee has accepted such appointment as of August 26, 1996;

         WHEREAS,  the Company intends,  that the assets of the Trust Fund shall
be and  remain  subject  to the  claims  of the  Company's  creditors  as herein
provided and that the Plans not be deemed  funded by virtue of the  existence of
this Trust; and

         WHEREAS,  the Trust is intended to be a "grantor trust" with the result
that the corpus and income of the Trust are  treated as assets and income of the
Company pursuant to Sections 671 through 679 of the Code; and

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained,  the Stock  Compensation  Trust  Agreement  dated  December 20, 1996,
effective as of August 26,  1996,  between the Company and the Trustee is hereby
amended and restated in its entirety as follows:

1.       DEFINITIONS; ESTABLISHMENT OF TRUST

         1.1.     Definitions.
                  Whenever  used  in  this  Trust  Agreement,  unless  otherwise
provided or the context otherwise requires:

               Authorized  Officer.  "Authorized  Officer"  means the  Chairman,
President,  any Vice President, the Secretary or the Treasurer of the Company or
any other person or persons as may be designated by the Company
 .
               Board of  Directors.  "Board  of  Directors"  means  the board of
directors of the Company.

          Change of  Control.  "Change of  Control"  means any of the  following
events:  (a) an  acquisition  by any  individual,  entity or group  (within  the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities  Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial  ownership (within the meaning of
Rule 13d-3  promulgated  under the Exchange  Act) of 50% or more of the combined
voting power of the then outstanding voting securities of the Company; provided,
however,  that the  following  acquisitions  shall  not  constitute  a Change of
Control: (i) an acquisition by or directly from the Company, (ii) an acquisition
by any employee  benefit plan or trust  sponsored or  maintained by the Company;
and (iii) any  acquisition  described in subclauses (A) or (B) of subsection (b)
below; or
                  (b)  approval  by the  stockholders  of the  Company  of (i) a
complete  dissolution  or  liquidation  of the  Company,  (ii) a sale  or  other
disposition  of all or  substantially  all of the  Company's  assets  or (iii) a
reorganization,  merger, or consolidation ("Business Combination") unless either
(A) all or  substantially  all of the  stockholders  of the Company  immediately
prior to the Business  Combination own more than 50% of the voting securities of
the entity surviving the Business  Combination,  or the entity which directly or
indirectly  controls such surviving entity, in substantially the same proportion
as they owned the voting securities of the Company immediately prior thereto, or
(B) the  consideration  (other  than cash paid in lieu of  fractional  shares or
payment upon  perfection  of appraisal  rights)  issued to  stockholders  of the
Company in the  Business  Combination  is solely  common stock which is publicly
traded on an established securities exchange in the United States.

               Code. "Code" means the Internal Revenue Code of 1986, as amended.

                  Committee.  "Committee" means a committee of officers selected
by the  Board  of  Directors,  except  as  provided  in  Section  9.2,  or by an
individual  or  individuals  authorized  by the Board of  Directors to make such
selection which is charged with administration of the Trust.

               Company.  "Company" means Mid Atlantic Medical Services,  Inc., a
Delaware corporation,  or any successor thereto. References to the Company shall
include its subsidiaries where appropriate.  Company Stock "Company Stock" means
shares of common stock, par value $0.01 per share,  issued by the Company or any
successor securities.

                  Extraordinary  Dividend.  "Extraordinary  Dividend"  means any
dividend or other  distribution  of cash or other  property  (other than Company
Stock) made with respect to Company Stock, which the Board of Directors declares
generally to be other than an ordinary dividend.

                  Fair Market  Value.  "Fair Market  Value" means as of any date
the  closing  price  quotation,  or, if none,  the  average of the bid and asked
prices,  as  reported  with  respect to the Company  Stock on the most  recently
available  date,  on any  national  exchange on which the Company  Stock is then
listed,  or  if  not  so  listed,  on  the  NASDAQ  National  Market,  or  other
consolidated  reporting  system  reporting  trades of the Company  Stock.  If he
Company  Stock is not so listed,  "Fair Market  Value" shall mean the average of
the bid and asked prices as quoted by all market makers in the Company Stock. In
the event that a market for the Company Stock does not exist,  the Committee may
determine, in any case or cases, that "Fair Market Value" shall be determined on
the basis of the opinion of one or more  independent  and  reputable  appraisers
qualified to value companies in the Company's line of business.

                  Insolvency.  "Insolvency"  means  (i)  the  inability  of  the
Company to pay its debts as they become due, or (ii) the Company  being  subject
to a pending  proceeding  as a debtor  under the  provisions  of Title 11 of the
United States Code (Bankruptcy Code).

                  Loan.  "Loan"  means the loan and  extension  of credit to the
Trust evidenced by a promissory note (the "Original  Promissory  Note") dated as
of the Closing (as defined in the Amended and  Restated  Common  Stock  Purchase
Agreement dated December 20, 1996,  effective as of August 26, 1996, between the
Trust and the  Company  (the  "1996  Common  Stock  Purchase  Agreement"))  and,
following  cancellation of such promissory  note, by the replacement  promissory
note dated as of the  Rescission  Closing (as  defined in the 1996 Common  Stock
Purchase Agreement),  with which the Trustee purchased Company Stock, as amended
by an Allonge  to the  Original  Promissory  Note  dated as of the  Closing  (as
defined in the  Common  Stock  Purchase  Agreement  dated of even date  herewith
between the Trust and the Company), with which the Trustee will purchase Company
Stock.

                  Option Grant.  "Option Grant" means an option granted under
one of the Plans to a Plan Participant to acquire shares of Company Stock.

                  Plan Committee Certification.  "Plan Committee Certifications"
means a  certification  to be provided to the Trustee by the Committee from time
to time which (i) sets forth the number of shares of Company  Stock  transferred
to a Plan Participant,  and (ii) certifies that the determination of such number
is in accordance with the terms of each Plan.

                  Plans.  "Plans"  means the  employee  plans  listed on 
Schedule A hereto and any other employee benefit plan of the Company  designated
as such by the Board of Directors.

                  Plan Participant.  "Plan Participant" means an individual who
has an Option Grant under any of the Plans.

                  Reliable  Source.  "Reliable  Source" means (i) a report filed
with the Securities and Exchange  Commission,  (ii) a public statement issued by
the Company, or a periodical of general circulation,  including, but not limited
to, The New York Times or The Wall Street Journal, or (iii) a certificate of the
Company signed by the Chief Executive Officer or by the Chairman of the Board of
Directors.

                  Suspense  Account.  "Suspense  Account" means the account in 
which  shares of Company  Stock  acquired  with the Loan are held until they are
released pursuant to Section 3.1.

                  Trust.  "Trust" means the trust established pursuant to this 
Trust Agreement.

                  Trustee.  "Trustee" means The Bank of New York or any 
successor trustee.

                  Trust Year.  "Trust Year" means the period  beginning on the 
date of the  Closing  (the  "Closing  Date")  and  ending on the next  following
December 31st and on each December 31st thereafter.

         1.2.     Establishment of Trust.

                  Trust.  This Agreement and the Trust shall be known as the Mid
Atlantic Medical  Services,  Inc. Stock  Compensation  Trust. The parties intend
that the Trust will be an  independent  legal  entity with title to and power to
convey all of its assets.  The parties  hereto further intend that the Trust not
be subject to the Employee  Retirement  Income Security Act of 1974, as amended.
The Trust is not a part of any of the Plans and does not provide  retirement  or
other  benefits to any Plan  Participant.  The assets of the Trust will be held,
invested  and disposed of by the Trustee,  in  accordance  with the terms of the
Trust.  The  Company  covenants  and  agrees  to at  all  times  make  available
sufficient  shares of Company Stock for purposes of the Plans to the extent that
there are not  sufficient  shares in the Trust to meet the  requirements  of the
Plans;  provided,  however,  that  the  Trustee  shall  not be  responsible  for
enforcing such obligation of the Company.

                  Trustee.  The  trustee  named  above,  and  its  successor  or
successors,  is hereby designated as the trustee  hereunder,  to receive,  hold,
invest,  administer  and  distribute  the  Trust  Fund in  accordance  with this
Agreement,   the  provisions  of  which  shall  govern  the  power,  duties  and
responsibilities of the Trustee.

                  Trust Fund.  The assets held at any time and from time to time
under the Trust  collectively  are herein  referred  to as the "Trust  Fund" and
shall consist of contributions  received by the Trustee,  proceeds of any loans,
investments and  reinvestment  thereof,  the earnings and income  thereon,  less
disbursements  therefrom.  Except as  herein  otherwise  provided,  title to the
assets  of the Trust  Fund  shall at all  times be  vested  in the  Trustee  and
securities that are part of the Trust Fund shall be held in such manner that the
Trustee's  name and the fiduciary  capacity in which the securities are held are
fully  disclosed,  subject  to the right of the  Trustee to hold title in bearer
form or in the name of a nominee,  and the interests of others in the Trust Fund
shall  be  only  the  right  to  have  such  assets  received,  held,  invested,
administered and distributed in accordance with the provisions of the Trust.

                  Irrevocability. The Trust Fund shall be used for the exclusive
purpose of aiding the Company in delivering  the benefits  provided by the Plans
and defraying the expenses of the Trust in accordance with this Trust Agreement.
The Trustee,  however,  is under no obligation to enforce the  requirements  set
forth in the  foregoing  sentence.  No part of the income or corpus of the Trust
Fund shall be recoverable by the Company except as provided in Sections 2.1, 2.2
and 7.2 and  except as  provided  in Article  II of the  Common  Stock  Purchase
Agreement, with respect to the Rescission (as defined in such Agreement).

                  Trust Fund Subject to Claims. Notwithstanding any provision of
this Agreement to the contrary, the Trust Fund shall at all times remain subject
to the claims of the Company's  general creditors under federal and state law as
set forth herein.

2.       CONTRIBUTIONS AND DIVIDENDS

                  2.1.  Contributions.  For each  Trust Year the  Company  shall
contribute to the Trust in cash such amount,  which together with dividends,  as
provided in Section 2.2, and any other earnings of the Trust Fund,  shall enable
the Trustee to make all  scheduled  payments of principal and interest due under
the Loan on a timely basis.  Unless otherwise  expressly  provided  herein,  the
Trustee  shall  apply all such  contributions,  dividends  and  earnings  to the
payment of principal and interest due under the Loan.  The Company may from time
to time, in its sole discretion,  make additional contributions to the Trust for
the purpose of enabling the Trust to make  prepayments of principal with respect
to the Loan (a "Prepayment Contribution"). The Trustee shall immediately use any
Prepayment  Contribution  to make a prepayment of principal  with respect to the
Loan. All contributions  made under the Trust shall be delivered to the Trustee.
The Trustee shall be accountable for all contributions received by it, but shall
have no duty to require any contributions to be made to it.

                  2.2. Dividends. Except as otherwise provided herein, dividends
paid in cash on Company Stock held by the Trust, including Company Stock held in
the  Suspense  Account,  shall be applied to pay  interest  and repay  scheduled
principal due under the Loan. In the event that cash  dividends  paid on Company
Stock held in the Trust, other than Extraordinary  Dividends,  exceed the amount
of scheduled  principal and interest due in any Trust Year, such excess shall be
used to purchase  additional shares of Company Stock and/or shall be distributed
to a broad  cross-section of individuals  employed by the Company, as determined
in good faith by the  Committee.  Dividends  which are not in cash or in Company
Stock (including  Extraordinary Dividends, or portions thereof) shall be reduced
to cash by the Trustee and  reinvested in Company Stock as soon as  practicable.
For purposes of this Agreement,  Company Stock purchased with the proceeds of an
Extraordinary  Dividend,  any excess dividend or with the proceeds of a non-cash
dividend and any dividend paid in the form of Company Stock shall,  for purposes
of this Agreement  (including without limitation Section 3.1 hereof),  be deemed
to  have  been  acquired  with  the  proceeds  of the  Loan.  In  the  Trustee's
discretion,  investments  in  Company  Stock  may be  made  through  open-market
purchases,  private  transactions or (with the Company's consent) purchases from
the  Company.  In  carrying  out the  duties as set forth in this  Section,  the
Trustee shall act solely pursuant to the directions of the Committee.

3.       RELEASE AND ALLOCATION OF COMPANY STOCK

                  3.1.  Release  of  Shares.   Upon  any  payment  (including  a
prepayment)  or  forgiveness  in any Trust Year of any  principal on the Loan (a
"Principal  Payment"),  the following number of shares of Company Stock acquired
with the  proceeds of the Loan shall be  available  for  allocation  ("Available
Shares")  as provided  in this  Article 3: the number of shares so acquired  and
held in the Suspense  Account  immediately  before such payment or  forgiveness,
multiplied  by a fraction the  numerator of which is the amount of the Principal
Payment and the  denominator of which is the sum of such  Principal  Payment and
the remaining principal of the Loan outstanding after such Principal Payment.

                  3.2.   Payment  of   Benefits.   Available   Shares  shall  be
distributed,  as directed by the  Committee,  to the Plan  Participants  at such
times as may be required to provide  shares in  accordance  with the Plans.  Any
payments required by the Plan Participants  shall be made in accordance with the
Plans.

4.       TAX WITHHOLDING

                  4.1.  Withholding of Taxes.  The Trustee shall, as directed by
the  Committee,   withhold,  require  withholding,   or  otherwise  satisfy  any
withholding  obligation,  on any distribution which it is directed to make, such
amount as the Committee shall reasonably estimate to be necessary to comply with
applicable federal, state and local withholding requirements. Upon settlement of
such tax  liability,  the Trustee shall  distribute  the balance of such amount.
Prior to making any distribution hereunder, the Trustee may require such release
of documents from any taxing  authority,  or may require such indemnity,  as the
Trustee shall reasonably deem necessary for its protection.

5.       ADMINISTRATION OF TRUST FUND

                  5.1.  Management  and  Control of Trust  Fund.  Subject to the
terms  of this  Agreement,  the  Trustee  shall  have  exclusive  authority  and
responsibility  to manage and control  the assets of the Trust  Fund;  provided,
however,  that the Trustee shall have no authority or  responsibility  to manage
and control shares of Company Stock  returned to the Company in connection  with
the Rescission from and after the date of the Rescission  Closing (as such terms
are defined in the Amended and Restated Common Stock Purchase  Agreement,  dated
as of December 20, 1996, by and between the Company and the Trust).

                  5.2.  Investment  of Funds.  Except as  otherwise  provided in
Section 2.2 and in this Section  5.2, the Trustee  shall invest and reinvest the
Trust Fund  exclusively  in Company  Stock,  including  any  accretions  thereto
resulting  from the  proceeds  of a tender  offer,  recapitalization  or similar
transaction  which, if not in Company Stock, shall be reduced to cash as soon as
practicable.  The Trustee  may invest any portion of the Trust Fund  temporarily
pending investment in Company Stock,  distribution or payment of expenses in (i)
investments in United States Government obligations with maturities of less than
one  year,  (ii)   interest-bearing   accounts  including  but  not  limited  to
certificates  of  deposit,  time  deposits,  saving  accounts  and money  market
accounts  with  maturities  of less  than one year in any  bank,  including  the
Trustee's,  with  aggregate  capital in excess of  $1,000,000,000  and a Moody's
Investor  Services  rating  of at  least  P1,  or an  equivalent  rating  from a
nationally  recognized ratings agency, which accounts are insured by the Federal
Deposit Insurance Corporation or other similar federal agency, (iii) obligations
issued or  guaranteed by any agency or  instrumentality  of the United States of
America  with  maturities  of less  than  one year or (iv)  short-term  discount
obligations of the Federal National Mortgage Association.

                  5.3.  Trustee's  Administrative  Powers.  Except as  otherwise
provided  herein,  and subject to the Trustee's  duties  hereunder,  the Trustee
shall have the  following  powers and  rights,  in  addition  to those  provided
elsewhere in this Agreement or by law:

                  (a)      to retain any asset of the Trust Fund;

                  (b) subject to Section  5.4 and Article 3, to sell,  transfer,
         mortgage,  pledge, lease or otherwise dispose of, or grant options with
         respect to, any Trust Fund assets at public or private sale;

                  (c) upon  direction  from the Committee and with the Trustee's
         consent,  to borrow from any lender  (including the Company pursuant to
         the Loan), to acquire Company Stock as authorized by this Agreement, to
         enter into lending  agreements  upon such terms  (including  reasonable
         interest and security for the loan and rights to renegotiate and prepay
         such loan) as may be determined by the  Committee;  provided,  however,
         that any collateral  given by the Trustee for the Loan shall be limited
         to cash and  property  contributed  by the  Company  to the  Trust  and
         dividends paid on Company Stock held in the Trust and shall not include
         Company Stock acquired with the proceeds of the Loan;

                  (d) with the consent of the  Committee,  to settle,  submit to
         arbitration,  compromise,  contest,  prosecute  or  abandon  claims and
         demands in favor of or  against  the Trust  Fund  initiated  by a party
         other than the Trustee;

                  (e) to  vote  or to  give  any  consent  with  respect  to any
         securities,  including any Company  Stock,  held by the Trust either in
         person or by proxy for any  purpose,  provided  that the Trustee  shall
         vote,  tender or  exchange  all shares of Company  Stock as provided in
         Section 5.4;

                  (f) to exercise any of the powers and rights of an  individual
         owner with  respect  to any asset of the Trust Fund and to perform  any
         and all other acts that in its  judgment are  necessary or  appropriate
         for the proper  administration  of the Trust  Fund,  even  though  such
         powers,  rights  and  acts  are  not  specifically  enumerated  in this
         Agreement;

                  (g) to employ such accountants, actuaries, investment bankers,
         appraisers, other advisors and agents as may be reasonably necessary in
         collecting, managing,  administering,  investing, valuing, distributing
         and  protecting  the Trust Fund or the assets thereof or any borrowings
         of the Trustee made in accordance with Section 5.3(c); and to pay their
         reasonable fees and out-of-pocket expenses, which shall be deemed to be
         expenses of the Trust and for which the Trustee  shall be reimbursed in
         accordance with Section 4.1;

                  (h) to cause any asset of the Trust Fund to be issued, held or
         registered in the Trustee's  name or in the name of its nominee,  or in
         such form that title will pass by delivery,  provided  that the records
         of the Trustee shall indicate the true ownership of such asset;

                  (i) to utilize  another  entity as custodian to hold,  but not
         invest or otherwise manage or control, some or all of the assets of the
         Trust Fund; and

                  (j) to consult with legal counsel (who may also be counsel for
         the Trustee generally) with respect to any of its duties or obligations
         hereunder; and to pay the reasonable fees and out-of-pocket expenses of
         such counsel, which shall be deemed to be expenses of the Trust and for
         which the Trustee shall be reimbursed in accordance with Section 4.1.

         Notwithstanding the foregoing,  neither the Trust nor the Trustee shall
         have any power to, and shall not, engage in any trade or business.  Any
         loan obtained by the Trustee pursuant to Section 5.3(c) shall be in its
         capacity as Trustee and not in its individual corporate capacity.

                  5.4.     Voting and Tendering of Company Stock.

                  (a) Voting of Company  Stock.  The  Trustee  shall  follow the
directions of each Plan Participant, as to the manner in which shares of Company
Stock held by the Trust are to be voted on each matter  brought before an annual
or  special  stockholders'  meeting  of the  Company  or the manner in which any
consent is to be  executed,  in each case as  provided  below.  Before each such
meeting of  stockholders,  the Trustee  shall cause to be furnished to each Plan
Participant,  a copy of the proxy solicitation material received by the Trustee,
together with a form requesting confidential  instructions as to how to vote the
shares of Company Stock held by the Trustee.  Upon timely  receipt of directions
from the Plan  Participants,  the  Trustee  shall on each such  matter  vote the
number of shares  (including  fractional  shares) of  Company  Stock held by the
Trust as follows:

                  The Company Stock shall be voted by the Trustee with each Plan
Participant  directing  a number of shares of Company  Stock  (the  "Participant
Directed  Amount")  equal to the  quotient of (x) the total  number of shares of
Company Stock held by the Trust and (y) the number of Plan  Participants  on the
relevant date. Any  Participant  Shares for which the Trustee does not receive a
signed voting-direction  instrument shall be voted for, against or to abstain in
the same  proportions as those shares of Company Stock for which the Trustee did
receive instructions.

                  Similar  provisions  shall  apply in the case of any action by
shareholder consent without a meeting.

                  (b) Tender or Exchange of Company Stock. The Trustee shall use
its best efforts  timely to distribute or cause to be  distributed  to each Plan
Participant  any written  materials  distributed to  stockholders of the Company
generally in connection with any tender offer or exchange offer, together with a
form  requesting  confidential  instructions  as to  whether or not to tender or
exchange  shares of  Company  Stock held in the Trust.  Upon  timely  receipt of
instructions   from  a  Plan   Participant,   the  Trustee   shall  tender  such
Participant's  Participant Directed Amount if such Plan Participant has directed
the Trustee to tender.

                  (c) The  Company  shall  maintain  appropriate  procedures  to
ensure  that all  instructions  by  Participants  in the  Plans  are  collected,
tabulated,  and transmitted to the Trustee without being divulged or released to
any person  affiliated with the Company or its affiliates.  All actions taken by
Plan  Participants  shall be held  confidential  by the Trustee and shall not be
divulged or released to any person, other than (i) agents of the Trustee who are
not  affiliated  with the  Company  or its  affiliates  or (ii) by virtue of the
execution by the Trustee of any proxy,  consent or letter of transmittal for the
shares of Company Stock held in the Trust.

6.       CONCERNING THE TRUSTEE

         6.1. Notices to the Trustee.  The Trustee may rely on the authenticity,
truth and accuracy of, and will be fully protected in acting upon:

                  (a) any notice,  direction,  certification,  approval or other
writing of the Company,  if evidenced by an instrument signed in the name of the
Company by an Authorized Officer; and

                  (b) any copy of a resolution  of the Board of Directors of the
Company,  if certified by the Secretary or an Assistant Secretary of the Company
under its corporate seal; or

                  (c) any notice,  direction,  certification,  approval or other
writing,  oral or other transmitted form of instruction  received by the Trustee
and  believed  by it to be  genuine  and  to be  sent  by or on  behalf  of  the
Committee.

         6.2.  Expenses of the Trust Fund.  The Trustee is authorized to pay out
of the Trust Fund:  (a) all  brokerage  fees and transfer tax expenses and other
expenses  incurred in connection with the sale or purchase of  investments;  (b)
all real and personal  property taxes,  income taxes and other taxes of any kind
at any time  levied or assessed  under any  present or future law upon,  or with
respect to, the Trust Fund or any property  included in the Trust Fund;  (c) the
Trustee's  compensation and expenses as provided in Section 6.3 hereof;  and (d)
all other expenses of administering the Trust,  including,  without  limitation,
the expenses incurred by the Trustee pursuant to Section 6.11 of this Agreement,
if any, unless promptly paid to the Trustee by the Company.

         6.3.  Compensation of the Trustee.  The Company will pay to the Trustee
such  compensation  for its  services  as set forth on Exhibit A as from time to
time amended by the Company and the Trustee and will  reimburse  the Trustee for
all expenses (including  reasonable  attorney's fees) incurred by the Trustee in
the  administration  of the Trust. If not promptly paid on request,  the Trustee
may charge such fees and  expenses to and pay the same from the Trust Fund.  The
compensation  and expenses of the Trustee  shall  constitute a lien on the Trust
Fund.

         6.4.  Protection  of the  Trustee.  The  Company  shall  pay and  shall
protect, indemnify and save harmless the Trustee and its officers, employees and
agents from and against any and all losses,  liabilities  (including liabilities
for penalties),  actions, suits, judgments, demands, damages, costs and expenses
(including,  without  limitation,  attorneys'  fees and  expenses) of any nature
arising from or relating to any action or any failure to act by the Trustee, its
officers,  employees and agents or the  transactions  contemplated by this Trust
Agreement,  including,  but not  limited  to,  any  claim  with  respect  to the
Rescission (as such term is defined in the Common Stock Purchase Agreement), any
claim by a shareholder of the Company of any kind or nature, any claim made by a
Plan  Participant or his or her beneficiary  with respect to payments made or to
be made by the  Trustee  and any claim  made by the  Company  or its  successor,
whether  pursuant to a sale of assets,  merger,  consolidation,  liquidation  or
otherwise,  that this Trust  Agreement is invalid or ultra vires,  except to the
extent that any such loss, liability,  action, suit, judgment,  demand,  damage,
cost or expense has been  determined by a final judgment of a court of competent
jurisdiction  to be  solely  the  result  of the  gross  negligence  or  willful
misconduct of the Trustee, its officers, employees or agents. To the extent that
the Company has not fulfilled its obligations under the foregoing  provisions of
this Section,  the Trustee  shall be  reimbursed  out of the assets of the Trust
Fund or may set up reasonable reserves for the payment of such obligations.  The
Trustee  assumes no  obligation  or  responsibility  with  respect to any action
required by this Trust  Agreement  on the part of the Company or the  Committee.
With respect to all action or inaction  taken or not taken by the Trustee  prior
to the  Rescission  Closing,  the rights of the Trustee  shall be  determined in
accordance  with the terms and  provisions  of the 1996  Common  Stock  Purchase
Agreement.

         6.5.  Duties  of the  Trustee.  The  Trustee  will be under  no  duties
whatsoever,  except  such duties as are  specifically  set forth as such in this
Trust  Agreement,  and no implied  covenant or obligation will be read into this
Trust  Agreement  against the  Trustee.  The Trustee  will not be liable for any
action or  failure to act  except if such  action or failure to act  constitutes
gross  negligence  or willful  misconduct.  The Trustee will not be compelled to
take any action toward the execution or enforcement of the Trust or to prosecute
or defend any suit in respect  thereof,  unless  indemnified to its satisfaction
against  loss,  cost,  liability  and expense;  and the Trustee will be under no
liability or obligation to anyone with respect to any failure on the part of the
Company,  the Committee or a Plan  Participant.  Nothing in this Trust Agreement
shall be construed as requiring the Trustee to make any payment in excess of the
amounts  held in the Trust Fund at the time of such payment or otherwise to risk
its own funds.  The  Trustee  has no duty to maintain  records  with  respect to
Option Grants or with respect to the shares in the Suspense Account.

         6.6.  Settlement of Accounts of the Trustee.  The Trustee shall keep or
cause to be kept accurate and detailed  accounts of all  investments,  receipts,
disbursements and other transactions  hereunder.  Such accounts shall be open to
inspection and audit at all reasonable times during normal business hours by any
person  designated by the Company or the Committee.  At least annually after the
end of each Plan Year, the Trustee shall file with the Company and the Committee
a written account,  listing the investments of the Trust Fund and any uninvested
cash balance thereof, and setting forth all receipts,  disbursements,  payments,
and other  transactions  respecting  the  Trust  Fund not  included  in any such
previous account.  Any account,  when approved by the Company and the Committee,
will be binding  and  conclusive  on the  Company,  the  Committee  and all Plan
Participants,  and the Trustee will thereby be released and discharged  from any
liability  or  accountability  to  the  Company,  the  Committee  and  all  Plan
Participants  with  respect to all  matters set forth  therein.  Omission by the
Company or the Committee to object in writing to any specific  items in any such
account  within sixty (60) days after its delivery will  constitute  approval of
the account by the Company and the Committee. No other accounts or reports shall
be required to be given to the  Company,  the  Committee  or a Plan  Participant
except as stated  herein or except  as  otherwise  agreed to in  writing  by the
Trustee.  The Trustee shall not be required to file, and no Plan  Participant or
beneficiary shall have right to compel, an accounting, judicial or otherwise, by
the Trustee.

         6.7.  Right to Judicial  Settlement.  Nothing  contained  in this Trust
Agreement  shall be construed  as  depriving  the Trustee of the right to have a
judicial  settlement of its  accounts,  and upon any  proceeding  for a judicial
settlement  of the Trustee's  accounts or for  instructions  the only  necessary
parties  thereto  in  addition  to the  Trustee  shall  be the  Company  and the
Committee.

         6.8. Resignation or Removal of the Trustee. The Trustee may at any time
resign and may at any time be  removed by the  Company  upon  thirty  (30) days'
notice in writing.

         6.9.  Appointment of Successor Trustee. In the event of the resignation
or removal of the Trustee,  or in any other event in which the Trustee ceases to
act, a  successor  trustee may be  appointed  by the  Company by  instrument  in
writing  delivered  to and  accepted by the  successor  trustee.  Notice of such
appointment  and approval,  if  applicable,  will be given by the Company to the
retiring trustee, and the successor trustee will deliver to the retiring trustee
an  instrument  in  writing  accepting  such  appointment.  Notwithstanding  the
foregoing, if no appointment and approval, if applicable, of a successor trustee
is made by the  Company  within a  reasonable  time  after  such a  resignation,
removal  or other  event,  any court of  competent  jurisdiction  may  appoint a
successor  trustee  after such  notice,  if any,  solely to the  Company and the
retiring trustee, as such court may deem suitable and proper.

         In the event of such resignation,  removal or other event, the retiring
trustee  or its  successors  and  assigns  shall  file with the  Company a final
account  to which the  provisions  of  Section  6.6  hereof  relating  to annual
accounts shall apply.

         In the event of the appointment of a successor trustee,  such successor
trustee  will  succeed to all the  right,  title and estate of, and will be, the
Trustee; and the retiring trustee will after the settlement of its final account
and the receipt of any  compensation  or expenses due it, deliver the Trust Fund
to the  successor  trustee  together  with all  such  instruments  of  transfer,
conveyance,  assignment  and  further  assurance  as the  successor  trustee may
reasonably require.  The retiring trustee will retain a lien upon the Trust Fund
to secure all amounts due the retiring  trustee  pursuant to the  provisions  of
this Trust Agreement.

         6.10.   Merger  or  Consolidation  of  the  Trustee.   Any  corporation
continuing as the result of any merger or resulting  from any  consolidation  to
which merger or  consolidation  the Trustee is a party,  or any  corporation  to
which  substantially  all  the  business  and  assets  of  the  Trustee  may  be
transferred, will be deemed automatically to be continuing as the Trustee.

         6.11.  Declaratory Judgment.  Effective on and after December 20, 1996,
the Trustee  may,  prior to taking any action  pursuant to this  Agreement  with
respect to which the  Trustee  determines  in good faith  that the  legality  or
permissibility of such action under this Agreement or otherwise is questionable,
seek a declaratory  judgment from a court of competent  jurisdiction  as to such
legality or permissibility.

7.       ENFORCEMENT; INSOLVENCY OF THE COMPANY

         7.1. Enforcement of Trust Agreement and Legal Proceedings.  The Company
shall have the right to enforce any  provision of this Trust  Agreement.  In any
action or proceeding  affecting the Trust,  the only necessary  parties shall be
the Company,  the Trustee and the Committee and, except as otherwise required by
applicable  law, no other  person  shall be entitled to any notice or service of
process.  Any judgment  entered in such an action or  proceeding  shall,  to the
maximum  extent  permitted by applicable  law, be binding and  conclusive on all
persons having or claiming to have any interest in the Trust.

         7.2.     Insolvency of the Company.

                  (a) If at any time (i) the Company or a person  claiming to be
a creditor of the Company alleges in writing to the Trustee that the Company has
become  Insolvent,  (ii) the Trustee is served with any order,  process or paper
from which it appears  that an  allegation  to the  effect  that the  Company is
Insolvent has been made in a judicial proceeding or (iii) the Trustee has actual
knowledge of a current report or statement from a nationally  recognized  credit
reporting  agency or from a Reliable  Source to the effect  that the  Company is
Insolvent,  the Trustee shall discontinue allocations under Section 3 under this
Trust  Agreement,  shall  hold the Trust Fund for the  benefit of the  Company's
creditors,  and  shall  resume  allocations  under  Section 3 under  this  Trust
Agreement,  only upon receipt of an order of a court of  competent  jurisdiction
requiring  such  payment or if the  Trustee  has actual  knowledge  of a current
report or statement  from a nationally  recognized  credit  reporting  agency or
other Reliable Source (other than a Reliable Source described in clause (iii) of
the  definition  thereof)  to the  effect  that the  Company  is not  Insolvent;
provided,  however,  that in the event  that  allocations  under  Section 3 were
discontinued by reason of a court order or injunction,  the Trustee shall resume
allocations  only upon receipt of an order of a court of competent  jurisdiction
requiring such allocation.  The Company and its Chief Executive Officer shall be
obligated  to give the  Trustee  prompt  written  notice in the  event  that the
Company  becomes  Insolvent.  The  Trustee  shall not be liable to anyone in the
event  benefit  payments  are  discontinued  pursuant to this  Section  7.2. For
purposes of this Section 7.2, the term Company  shall include any and all of the
Company's subsidiaries.  The Company hereby specifically represents and warrants
to the  Trustee  that,  as of the  date  hereof,  neither  the  Company  nor any
subsidiary of the Company with one or more employees  benefiting under the Plans
is Insolvent.

8.  AMENDMENT, REVOCATION AND TERMINATION

                  8.1.  Amendments.  Except as otherwise  provided  herein,  the
Company  may amend  the  Trust at any time and from  time to time in any  manner
which it deems  desirable,  provided  that no  amendment  which would  adversely
affect the rights, duties,  interests,  fees or obligations of the Trustee shall
be made  without the  Trustee's  written  consent,  which  consent  shall not be
unreasonably withheld.  Notwithstanding the foregoing,  the Company shall retain
the power  under all  circumstances  to amend the Trust to correct any errors or
clarify any ambiguities or similar issues of interpretation in this Agreement.

                  8.2.  Termination.  Subject to the terms of this  Section 8.2,
the Trust shall terminate on the later of (i) the date all Available  Shares are
distributed  and  (ii)  the  date on  which  the  Loan  is  paid  in  full  (the
"Termination  Date").  The Company may  terminate the Trust at any time prior to
the  Termination  Date.  The Trust shall also terminate  automatically  upon the
Company  giving the Trustee  written  notice of a Change of Control (The Trustee
shall  have no duty to  authenticate  the  occurrence  of a Change of  Control).
Immediately upon a termination of the Trust, the Company shall be deemed to have
forgiven all amounts then  outstanding  under the Loan.  As soon as  practicable
after receiving notice from the Company of a Change of Control or upon any other
termination  of the Trust,  the Trustee  shall sell all of the Company Stock and
other  non-cash  assets (if any) then held in the Trust Fund as  directed by the
Committee  in  good  faith  taking  into  account  the   interests  of  a  broad
cross-section of individuals  employed by the Company. The proceeds of such sale
shall first be returned  to the Company up to an amount  equal to the  principal
amount,  plus any  accrued  interest,  of the Loan that was  forgiven  upon such
termination.  Any funds remaining in the Trust after such payment to the Company
(the  "Excess  Funds")  shall  be  allocated  and  distributed  with  reasonable
promptness to Plan  Participants  among a broad  cross-section  of the Company's
employees as determined by the Committee.

                  8.3.  Form of  Amendment  or  Termination.  Any  amendment  or
termination  of the Trust shall be evidenced by an instrument in writing  signed
by an  Authorized  Officer of the  Company,  certifying  that said  amendment or
termination  has been  authorized  and  directed  by the Company or the Board of
Directors, as applicable,  and, in the case of any amendment, shall be consented
to by signature of an authorized officer of the Trustee,  if required by Section
8.1.

9.       MISCELLANEOUS PROVISIONS

         9.1.     Successors.  This Trust  Agreement  shall be binding upon and
inure to the  benefit  of the  Company  and the  Trustee  and  their  respective
successors and assigns.
         9.2.  Committee Action. Any action required or permitted to be taken by
the  Committee  may be taken on behalf of the  Committee  by any  individual  so
authorized.  The Company  (or the  Committee  after a Change of  Control)  shall
furnish to the Trustee  the name and  specimen  signature  of each member of the
Committee  upon  whose  statement  of a decision  or  direction  the  Trustee is
authorized to rely. Until notified of a change in the identity of such person or
persons,  the  Trustee  shall  act upon the  assumption  that  there has been no
change.  After the Company has given the Trustee notice that a Change of Control
has  occurred,  the Board of  Directors  shall no longer have the  authority  to
remove or appoint  members of the  Committee and the members of the Committee in
place  immediately  preceding  such a Change of Control  shall  continue as such
members  and shall  appoint  new  members to replace  any  members who resign or
otherwise cease to be members after the Change of Control.

         9.3.  Nonalienation.  Except  insofar as  applicable  law may otherwise
require,  (a) no amount payable to or in respect of any Plan  Participant at any
time  under  the  Trust  shall  be  subject  in  any  manner  to  alienation  by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge
or  encumbrance  of any kind,  and any attempt to so alienate,  sell,  transfer,
assign,  pledge,  attach, charge or otherwise encumber any such amount,  whether
presently or thereafter payable,  shall be void; and (b) the Trust Fund shall in
no manner be  liable  for or  subject  to the debts or  liabilities  of any Plan
Participant.

         9.4.     Communications.

                  (a)  Communications  to the Company  shall be addressed to the
Company at 4 Taft Court,  Rockville,  MD 20850 Attn:  Sharon  Pavlos,  provided,
however,  that upon the Company's written request,  such communications shall be
sent to such other address as the Company may specify.

                  (b)  Communications to the Trustee shall be addressed to it at
One Wall  Street,  New  York,  New  York  10286,  Attn:  Division  Head,  Master
Trust/Custody  Division;  provided,  however,  that upon the  Trustee's  written
request,  such communications shall be sent to such other address as the Trustee
may specify.

                  (c) No communication  shall be binding on the Trustee until it
is received by officer the Trustee having primary responsibility for this Trust,
and no communication shall be binding on the Company until it is received by the
Company.

         9.5.     Headings.  Titles to the Sections of this Trust  Agreement  
are  included  for  convenience  only and  shall  not  control  the  meaning  or
interpretation of any provision of this Trust Agreement.

         9.6. Third Parties. A third party dealing with the Trustee shall not be
required to make  inquiry as to the  authority of the Trustee to take any action
nor be under any  obligation to follow the proper  application by the Trustee of
the proceeds of sale of any property  sold by the Trustee or to inquire into the
validity or propriety of any act of the Trustee.

         9.7.  Governing  Law. This Trust  Agreement  and the Trust  established
hereunder  shall be governed by and construed,  enforced,  and  administered  in
accordance  with the internal  laws of the State of New York  without  regard to
principles  of conflicts of laws and the Trustee shall be liable to account only
in the courts of that state.

         9.8.     Counterparts.  This Trust Agreement may be executed in any
number  of  counterparts,  each of which  shall  be  deemed  to be the  original
although the others shall not be produced.

         IN WITNESS WHEREOF,  this Trust Agreement has been duly executed by the
parties hereto as of the day and year first above written.

Attest                                       MID ATLANTIC MEDICAL SERVICES, INC.

  /s/ Alisa Chestler                             By:  /s/ Sharon C. Pavlos 
                                                Title:  Senior Vice President, 
                                                        General Counsel       

Attest                                        THE BANK OF NEW YORK, as TRUSTEE
/s/ Paulette S. Bazil                              By:  /s/ Richard J. Barry 
                                                     Title:  Vice President