MID ATLANTIC MEDICAL SERVICES, INC.
                      2003 NON-QUALIFIED STOCK OPTION PLAN

Article I.  Purpose, Adoption and Term of the Plan

     1.01 Purpose.  The purpose of the Mid Atlantic Medical Services,  Inc. 2003
Non-Qualified  Stock Option Plan  (hereinafter  referred to as the "Plan") is to
advance  the  interests  of  the  Company  (as  hereinafter   defined)  and  its
Subsidiaries  (as  hereinafter  defined) by  encouraging  and  providing for the
acquisition  of an equity  interest  in the Company by  non-employee  directors,
officers and key employees through the grant of options to purchase Common Stock
(as  hereinafter  defined).  The Plan will  enable  the  Company  to retain  the
services  of  non-employee  directors,  officers  and key  employees  upon whose
judgment,  interest, and special effort the successful conduct of its operations
is largely  dependent and to compete  effectively with other enterprises for the
services of non-employee directors,  officers and key employees as may be needed
for the continued improvement of its business.

     1.02  Adoption and Term.  The Plan shall  become  effective on May 1, 2003,
subject to the prior  approval  of a simple  majority  of the  holders of Common
Stock  represented,  by person or by proxy, and entitled to vote at an annual or
special meeting of the holders of Common Stock.  The Plan shall terminate on May
1,  2013,  or  such  earlier  date as  shall  be  determined  by the  Board  (as
hereinafter  defined);  provided,  however,  that,  in the event the Plan is not
approved by a simple  majority of the holders of Common  Stock  represented,  by
person or by proxy,  and entitled to vote at an annual or special  meeting at or
before the Company's  2003 annual  meeting of holders of Common Stock,  the Plan
shall terminate on such date and any Options (as hereinafter defined) made under
the Plan prior to such date shall be void and of no force and effect.

Article II.  Definitions

     For  purposes  of the Plan,  capitalized  terms  shall  have the  following
meanings:

     2.01  "Beneficiary"  means an  individual,  trust or estate who or that, by
will or the  laws of  descent  and  distribution,  succeeds  to the  rights  and
obligations of the Participant  under the Plan and an Option  Agreement upon the
Participant's death.

     2.02 "Board" means the Board of Directors of the Company.

     2.03 "Code" means the Internal  Revenue Code of 1986,  as amended from time
to time,  or any  successor  thereto.  References to a section of the Code shall
include  that  section  and any  comparable  section or  sections  of any future
legislation that amends, supplements, or supersedes said section.

     2.04 "Committee"  means a committee of the Board as may be appointed,  from
time to time, by the Board.
<PAGE>

                  (a)  The  Board  may  appoint  more  than  one   Committee  to
administer the Plan. If it appoints more than one Committee,  one Committee (the
"Compensation  and Stock Option  Committee")  shall have the  authority to grant
Options to a Participant  who is either,  at the Date of Grant of the Option,  a
"covered  employee" as defined in Section 162(m) or who is subject to Section 16
of the Exchange Act;  however,  such Committee  shall also have the authority to
grant Options to other Participants. The Compensation and Stock Option Committee
shall be composed of at least two  directors of the  Company,  each of whom is a
"non-employee  director"  as  defined in Rule  16b-3 and an  "outside  director"
within the meaning of Section 162(m). If, however, at least two of the Company's
directors are not both  "non-employee  directors" and "outside  directors,"  the
Board may grant Options to a Participant  who is either a "covered  employee" or
subject  to  Section 16 of the  Exchange  Act,  in which case the Board may also
administer  the Plan and the term  "Committee" as used herein shall also include
the Board. The other Committee (the "Select  Committee") shall be composed of at
least one director,  who may be an officer of the Company.  The Select Committee
shall have  authority to grant Options to a Participant  who is not, at the Date
of Grant of the Option, either a "covered employee" as defined in Section 162(m)
or subject to Section 16 of the Exchange Act.

                  (b) The Board may, from time to time,  appoint members of each
Committee in substitution  for those members who were  previously  appointed and
may fill vacancies, however caused, in the Committee.

                  (c) The Compensation and Stock Option Committee and the Select
Committee  shall each have the power and  authority  to  administer  the Plan in
accordance  with Article III with respect to particular  classes of Participants
(as specified in Section  2.04(a)) and, when used herein,  the term  "Committee"
shall mean either the  Compensation  and Stock  Option  Committee  or the Select
Committee if the Board  appoints more than one Committee to administer the Plan.
If,  however,  there  is a  conflict  between  the  determinations  made  by the
Compensation  and  Stock  Option  Committee  and  the  Select   Committee,   the
determinations  made  by the  Compensation  and  Stock  Option  Committee  shall
control.

     2.05 "Common  Stock" means the Common Stock,  par value $.01 per share,  of
the Company.

     2.06 "Company"  means Mid Atlantic  Medical  Services,  Inc., a corporation
organized under the laws of the State of Delaware, and its successors.

     2.07 "Date of Grant" means the date designated by the Committee as the date
as of which it grants an Option,  which  shall not be  earlier  than the date on
which the Committee approves the granting of such Option.

     2.08  "Disability"  has the meaning  specified  in Section  22(e)(3) of the
Code.

     2.09 "Disability  Date" means the date as of which an Employee  Participant
is determined by the Committee to have a Disability.
<PAGE>

     2.10 "Employee  Participant"  means a Participant who is not a Non-Employee
Director.

     2.11 "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended.

     2.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     2.13 "Fair Market Value" of a share of Common Stock means,  as of any given
date,  the closing  sales  price of a share of Common  Stock on such date on the
principal national  securities exchange on which the Common Stock is then traded
or, if the Common  Stock is not then traded on a national  securities  exchange,
the closing sales price or, if none,  the average of the bid and asked prices of
the  Common  Stock on such  date as  reported  on the  National  Association  of
Securities  Dealers Automated  Quotation System ("Nasdaq");  provided,  however,
that, if there were no sales  reported as of such date,  Fair Market Value shall
be  computed  as of the  last  date  preceding  such  date on  which a sale  was
reported;  provided,  further, that, if any such exchange or quotation system is
closed on any day on which Fair Market  Value is to be  determined,  Fair Market
Value shall be determined as of the first date  immediately  preceding such date
on which such exchange or quotation  system was open for trading.  If the Common
Stock is not admitted to trade on a securities exchange or quoted on Nasdaq, the
Fair  Market  Value of a share of Common  Stock as of any given date shall be as
determined in good faith by the Committee,  in its sole and absolute discretion,
which  determination may be based on, among other things,  the opinion of one or
more  independent and reputable  appraisers  qualified to value companies in the
Company's line of business. Notwithstanding the foregoing, the Fair Market Value
of a share of Common Stock shall never be less than par value per share.

     2.14 "Non-Employee Director" means each member of the Board or of the Board
of Directors of a Subsidiary, in each case who is not an employee of the Company
or of any of its Subsidiaries.

     2.15 "Option Agreement" means a written agreement between the Company and a
Participant  specifically  setting  forth the terms and  conditions of an Option
granted to a Participant under the Plan.

     2.16 "Option"  means any option to purchase  Common Stock granted under the
Plan to an  Employee  Participant  or to a  Non-Employee  Director.  All Options
granted  under the Plan shall be Options that do not qualify as incentive  stock
options under Section 422 of the Code.

     2.17  "Participant"  means any  employee  or  Non-Employee  Director of the
Company  or any of its  Subsidiaries  selected  by the  Committee  to receive an
Option under the Plan in accordance with Articles V and/or VI.

     2.18  "Plan"  means  the  Mid  Atlantic   Medical   Services,   Inc.   2003
Non-Qualified  Stock  Option  Plan as set forth  herein,  and as the same may be
amended from time to time.
<PAGE>

     2.19 "Rule 16b-3" means Rule 16b-3  promulgated by the SEC under Section 16
of the Exchange Act and any successor rule.

     2.20 "SEC" means the Securities and Exchange Commission.

     2.21 "Section  162(m)" means Section 162(m) of the Code and the regulations
thereunder.

     2.22 "Subsidiary"  means a company more than 50% of the equity interests of
which are beneficially owned, directly or indirectly, by the Company.

     2.23  "Termination  of  Employment"  means,  with  respect  to an  Employee
Participant,  the  voluntary  or  involuntary  termination  of  a  Participant's
employment  with  the  Company  or any  of  its  Subsidiaries  for  any  reason,
including, without limitation, death, Disability, retirement or as the result of
the sale or other  divestiture  of the  Participant's  employer  or any  similar
transaction in which the Participant's  employer ceases to be the Company or one
of its Subsidiaries. Whether entering military or other government service shall
constitute Termination of Employment, and whether a Termination of Employment is
a result of Disability, shall be determined in each case by the Committee in its
sole and absolute discretion.

Article III.  Administration

     3.01  Committee.  The Plan shall be  administered  by the Committee,  which
shall have exclusive and final authority in each determination,  interpretation,
or other action  affecting the Plan and its  Participants.  The Committee  shall
have the sole and absolute  discretion  to interpret  the Plan, to establish and
modify administrative rules for the Plan, to select the Non-Employee  Directors,
officers and other key  employees  to whom Options may be granted,  to determine
the terms and provisions of the respective  Option Agreements (which need not be
identical),  to determine all claims for benefits under the Plan, to impose such
conditions  and  restrictions  on  Options  as  it  determines  appropriate,  to
determine  whether the shares  delivered on exercise of Options will be treasury
shares or will be authorized but previously  unissued  shares,  and to take such
steps in connection with the Plan and Options  granted  hereunder as it may deem
necessary  or  advisable.  No action of the  Committee  will be  effective if it
contravenes or amends the Plan in any respect.

     3.02 Actions of the Committee.  Except when the  "Committee" is the "Board"
in the  circumstance  described in the fourth sentence of Section  2.04(a),  all
determinations of the Committee shall be made by a majority vote of its members.
A majority of a Committee's  members shall constitute a quorum.  Any decision or
determination reduced to writing and signed by all of the members shall be fully
as effective as if it had been made by a majority  vote at a meeting duly called
and held. The Committee shall also have express  authorization to hold Committee
meetings by conference telephone, or similar communication equipment by means of
which all persons participating in the meeting can hear each other.
<PAGE>

Article IV.  Shares of Common Stock

     4.01 Number of Shares of Common Stock  Issuable.  Subject to adjustments as
provided in Section 7.05,  the lesser of 2,000,000  shares of Common Stock or an
amount not to exceed 5% of the total amount of the class  outstanding  of Common
Stock as of the record date for the 2003  Annual  Meeting,  rounded  down to the
lowest multiple of hundred thousand shares, shall be available for Options under
the Plan. Any and all of such shares may be issued  pursuant to Options  granted
to Employee  Participants or to Non-Employee  Directors.  The Common Stock to be
offered under the Plan shall be authorized and unissued  Common Stock, or issued
Common  Stock that shall have been  reacquired  by the  Company  and held in its
treasury.

     4.02 Number of Shares of Common Stock  Awarded to any  Participant.  In the
event the  purchase  price of an Option is paid,  or related tax or  withholding
payments  are  satisfied,  in whole or in part through the delivery of shares of
Common  Stock  issuable  in  connection  with  the  exercise  of the  Option,  a
Participant  will be deemed to have  received  an Option  with  respect to those
shares of Common Stock.

     4.03 Shares of Common Stock Subject to Terminated Options. The Common Stock
covered by any unexercised  portions of terminated  Options may again be subject
to new Options under the Plan.

Article V.  Participation

     5.01 Eligible  Participants.  Employee  Participants shall be such officers
and other key  employees  of the  Company  or its  Subsidiaries,  whether or not
directors of the Company, as the Committee, in its sole and absolute discretion,
may designate from time to time.  Non-Employee  Director  Participants  shall be
such  Non-Employee  Directors  as  the  Committee,  in  its  sole  and  absolute
discretion,  may designate  from time to time. In making such  designation,  the
Committee  may take into  account  the nature of the  services  rendered  by the
officers, key employees and Non-Employee Directors,  their present and potential
contributions to the success of the Company and its Subsidiaries, and such other
factors  as the  Committee,  in its  sole  and  absolute  discretion,  may  deem
relevant.  The  Committee's  designation  of a Participant in any year shall not
require the Committee to designate  such person to receive  Options in any other
year.  The  Committee  shall  consider  such  factors as it deems  pertinent  in
selecting  Participants  and  in  determining  the  type  and  amount  of  their
respective  Options.  A Participant  may hold more than one Option granted under
the Plan.  During the term of the Plan,  no  Employee  Participant  may  receive
Options to purchase more than 1,000,000 shares of Common Stock under the Plan.

Article VI.  Stock Options

     6.01 Grant of Option.  Any  Option  granted  under the Plan shall have such
terms as the  Committee  may,  from  time to time,  approve,  and the  terms and
conditions of Options need not be the same with respect to each Participant.
<PAGE>

     6.02 Terms of Options.  Options  granted under the Plan shall be subject to
the following  terms and  conditions  and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:

                  (a) Option  Price.  The option price per share of Common Stock
purchasable  under an Option shall be determined by the Committee at the time of
grant  but shall  not be less  than the Fair  Market  Value of a share of Common
Stock on the Date of Grant; provided,  however, that, except as required by Rule
16b-3 with  respect to Options  granted to persons  subject to Section 16 of the
Exchange Act, no amendment of an Option shall be deemed to be the grant of a new
Option for purposes of this Section 6.02(a).  Notwithstanding the foregoing, the
option price per share of Common Stock of an Option shall never be less than par
value per share.

                  (b) Option Term. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the Date
of Grant.

                  (c)  Exercisability.  An  Option  Agreement  with  respect  to
Options may contain such performance  targets,  waiting periods,  exercise dates
and restrictions on exercise (including,  but not limited to, a requirement that
an Option is exercisable in periodic installments), and restrictions on transfer
of the  underlying  shares of Common Stock,  if any, as may be determined by the
Committee at the time of grant. To the extent not exercised,  installments shall
cumulate and be  exercisable,  in whole or in part,  at any time after  becoming
exercisable,  subject to the limitations set forth in Sections 6.02(b), (f), (g)
and (h).

                  (d)  Method  of  Exercise.  Subject  to  whatever  installment
exercise and waiting  period  provisions  that apply under  Section  6.02(c) and
subject to Sections 6.02(b), (f), (g) and (h), Options may be exercised in whole
or in part at any time during the term of the Option,  by giving  written notice
of exercise to the Company specifying the number of shares of Common Stock to be
purchased.  Such notice shall be  accompanied by payment in full of the purchase
price in such form as the Committee may accept (including  payment in accordance
with a cashless  exercise  program  approved  by the  Committee).  If and to the
extent the Committee  determines in its sole and absolute discretion at or after
grant,  payment  in full or in part may also be made in the  form of  shares  of
Common Stock already owned by the Participant (and for which the Participant has
good  title,  free and  clear of any  liens or  encumbrances)  based on the Fair
Market Value of the shares of Common Stock on the date the Option is  exercised;
provided,  however,  that any already  owned  Common Stock used for payment must
have been held by the Participant for at least six months. No Common Stock shall
be issued on exercise of an Option until payment,  as provided herein,  therefor
has been made.  A  Participant  shall  generally  have the right to dividends or
other rights of a stockholder with respect to Common Stock subject to the Option
only when certificates for shares of Common Stock are issued to the Participant.

                  (e)   Non-Transferability  of  Options.  No  Option  shall  be
transferable by the  Participant  otherwise than by will, by the laws of descent
and distribution, or pursuant to a domestic relations order.
<PAGE>

                  (f) Acceleration or Extension of Exercise Time. The Committee,
in its sole and absolute discretion,  shall have the right (but shall not in any
case be  obligated)  to permit  purchase of Common  Stock  subject to any Option
granted to a Participant  prior to the time such Option would  otherwise  become
exercisable under the terms of the Option Agreement. In addition, the Committee,
in its sole and absolute discretion,  shall have the right (but shall not in any
case be obligated) to permit any Option granted to a Participant to be exercised
after the day the  Option  would  otherwise  expire,  subject,  however,  to the
limitation set forth in Section 6.02(b).

                  (g) Exercise of Options Upon  Termination of  Employment.  The
following provisions apply to Options granted to Employee Participants:

                    (i)  Exercise  of  Vested   Options  Upon   Termination   of
                         Employment.

                                    (A)  Termination.  Unless the Committee,  in
                                         its  sole  and   absolute   discretion,
                                         provides for a shorter or longer period
                                         of time  in an  Option  Agreement  or a
                                         longer  period  of time  in  accordance
                                         with Section 6.02(f),  upon an Employee
                                         Participant's Termination of Employment
                                         other   than  by  reason  of  death  or
                                         Disability,  the  Employee  Participant
                                         may,  within  90 days  from the date of
                                         such    Termination    of   Employment,
                                         exercise  all or any part of his or her
                                         Options as were exercisable at the date
                                         of  Termination  of  Employment.  In no
                                         event,   however,  may  any  Option  be
                                         exercised    later    than   the   date
                                         determined pursuant to Section 6.02(b).

                                    (B)  Disability.  Unless the  Committee,  in
                                         its  sole  and   absolute   discretion,
                                         provides for a shorter or longer period
                                         of time  in an  Option  Agreement  or a
                                         longer  period  of time  in  accordance
                                         with Section 6.02(f),  upon an Employee
                                         Participant's   Disability   Date,  the
                                         Employee  Participant  may,  within one
                                         year   after   the   Disability   Date,
                                         exercise  all or a  part  of his or her
                                         Options, whether or not such Option was
                                         exercisable on the Disability Date, but
                                         only  to  the  extent  not   previously
                                         exercised.  In no event,  however,  may
                                         any Option be exercised  later than the
                                         date  determined  pursuant  to  Section
                                         6.02(b).

                                        (C) Death. Unless the Committee,  in its
                                        sole and absolute  discretion,  provides
                                        for  a  shorter  period  of  time  in an
                                        Option  Agreement,  in the  event of the
                                        death of an Employee  Participant  while
                                        employed by the Company or a Subsidiary,
                                        the Employee  Participant's  Beneficiary
                                        shall  be  entitled   to  exercise   any
                                        Options  that were vested at the date of
                                        the Employee  Participant's  death until
                                        the  initial  expiration  date  of  such
                                        Option  determined  pursuant  to Section

<PAGE>

                                        6.02(b).  Notwithstanding  the above, if
                                        the Employee  Participant at the time of
                                        death  had  been  an   employee  of  the
                                        Company or a Subsidiary  for a period of
                                        ten   years,   50%   of   the   Employee
                                        Participant's   unvested   Option  would
                                        become vested and subject to exercise as
                                        stated   above   and  if  the   Employee
                                        Participant  at the  time of  death  had
                                        been an  employee  of the  Company  or a
                                        Subsidiary   for  a  period  of  fifteen
                                        years, all of the Employee Participant's
                                        unvested Options would become vested and
                                        subject to exercise as stated  above and
                                        shall  expire on the date of  expiration
                                        of the  Option  determined  pursuant  to
                                        Section 6.02(b).

                    (ii) Expiration  of Unvested  Options  Upon  Termination  of
                         Employment.    Subject   to   Sections    6.02(f)   and
                         6.02(g)(i)(B) and (C), to the extent all or any part of
                         an Option  granted to an Employee  Participant  was not
                         exercisable   as  of  the   date  of   Termination   of
                         Employment, such right shall expire at the date of such
                         Termination   of   Employment.    Notwithstanding   the
                         foregoing,  the  Committee,  in its sole  and  absolute
                         discretion   and   under   such   terms   as  it  deems
                         appropriate,  may  permit an  Employee  Participant  to
                         continue to accrue service with respect to the right to
                         exercise his or her Options.

                  (h) Exercise of Options Upon  Termination  of Service.  Unless
the Committee,  in its sole and absolute  discretion,  provides for a shorter or
longer  period  of time in an  Option  Agreement  or a longer  period of time in
accordance with Section 6.02(f),  if a Non-Employee  Director's service with the
Company or a Subsidiary terminates for any reason or if such person ceases to be
a  Non-Employee  Director,  such  Option may be  exercised  to the extent it was
exercisable  on the date of such  termination of service until the expiration of
the stated  term of the  Option,  but only to the  extent it was not  previously
exercised.

Article VII.  Terms Applicable to All Options Granted Under the Plan

     7.01 Plan  Provisions  Control  Option  Terms.  The terms of the Plan shall
govern all Options  granted under the Plan,  and in no event shall the Committee
have the  power to grant to a  Participant  any  Option  under  the Plan that is
contrary to any  provisions of the Plan. If any provision of any Option  granted
under the Plan conflicts with any of the terms in the Plan as constituted on the
Date of Grant of such Option,  the terms in the Plan as  constituted on the Date
of Grant of such Option shall control.

     7.02 Option  Agreement.  No person  shall have any rights  under any Option
granted under the Plan unless and until the Company and the  Participant to whom
such Option shall have been granted  shall have executed and delivered an Option
Agreement  authorized  by the  Committee  expressly  granting the Option to such
person and containing provisions setting forth the terms of the Option. If there
is any conflict  between the provisions of an Option  Agreement and the terms of
the Plan, the terms of the Plan shall control.
<PAGE>

     7.03  Modification  of  Option  After  Grant.  Except  as  provided  by the
Committee,  in its sole and absolute  discretion,  in the Option Agreement or as
provided in Section 7.05, no Option granted under the Plan to a Participant  may
be modified (unless such modification does not materially  decrease the value of
the Option) after the Date of Grant except by express written  agreement between
the Company and the Participant,  provided that any such change (a) shall not be
inconsistent  with the  terms of the  Plan,  and (b)  shall be  approved  by the
Committee.  In addition,  the  repricing of any Option  granted  under this Plan
shall require shareholder approval.

     7.04 Taxes.  The  Company  shall be  entitled,  if the  Committee  deems it
necessary or desirable,  to withhold (or secure payment from the  Participant in
lieu of withholding)  the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any Common Stock  issuable
under such  Participant's  Option,  and the Company may defer issuance of Common
Stock  upon  the  grant or  exercise  of an  Option  unless  indemnified  to its
satisfaction  against  any  liability  for any  such  tax.  The  amount  of such
withholding  or tax payment shall be determined by the Committee or its delegate
and  shall  be  payable  by the  Participant  at  such  time  as  the  Committee
determines.  A  Participant  shall be  permitted  to  satisfy  his or her tax or
withholding obligation by (a) having cash withheld from the Participant's salary
or other compensation payable by the Company or a Subsidiary, (b) the payment of
cash by the  Participant  to the  Company,  (c) the  payment in shares of Common
Stock already owned by the Participant  valued at Fair Market Value,  and/or (d)
the withholding from the Option,  at the appropriate time, of a number of shares
of Common  Stock  sufficient,  based upon the Fair  Market  Value of such Common
Stock, to satisfy such tax or withholding  requirements.  The Committee shall be
authorized,  in its  sole  and  absolute  discretion,  to  establish  rules  and
procedures  relating  to any such  withholding  methods  it deems  necessary  or
appropriate  (including,  without  limitation,  rules and procedures relating to
elections by Participants who are subject to the provisions of Section 16 of the
Exchange Act to have shares of Common Stock withheld from an Award to meet those
withholding obligations).

     7.05 Adjustments to Reflect Capital Changes; Change in Control.

                  (a) Recapitalization. The number and kind of shares subject to
outstanding  Options,  the purchase price or exercise price of such Options, the
limit set forth in the last sentence of Section 5.01 of the Plan, and the number
and kind of shares  available  for Options  subsequently  granted under the Plan
shall be  appropriately  adjusted to reflect any stock  dividend,  stock  split,
combination  or exchange of shares,  merger,  consolidation  or other  change in
capitalization  with a similar  substantive  effect upon the Plan or the Options
granted under the Plan. The Committee shall have the power and sole and absolute
discretion  to determine  the nature and amount of the  adjustment to be made in
each case.

                  (b) Sale or Reorganization. After any reorganization,  merger,
or consolidation in which the Company is the surviving entity,  each Participant
shall,  at no  additional  cost,  be  entitled  upon the  exercise  of an Option
outstanding  prior to such event to receive  (subject to any required  action by

<PAGE>

stockholders),  in lieu of the number of shares of Common  Stock  receivable  on
exercise  pursuant  to such  Option,  the number and class of shares of stock or
other securities to which such Participant  would have been entitled pursuant to
the terms of the  reorganization,  merger,  or consolidation  if, at the time of
such  reorganization,  merger, or  consolidation,  such Participant had been the
holder of record of a number of shares of Common  Stock  equal to the  number of
shares  of  Common  Stock  receivable  on  exercise  pursuant  to  such  Option.
Comparable  rights shall accrue to each  Participant  in the event of successive
reorganizations, mergers, or consolidations of the character described above.

                  (c) Options to Purchase Stock of Acquired Companies. After any
reorganization,  merger,  or  consolidation  in  which  the  Company  shall be a
surviving  entity,  the  Committee  may  grant  substituted  Options  under  the
provisions of the Plan,  replacing  old options  granted under a plan of another
party to the reorganization, merger, or consolidation whose stock subject to the
old options may no longer be issued following such  reorganization,  merger,  or
consolidation.  The  foregoing  adjustments  and  manner of  application  of the
foregoing  provisions  shall  be  determined  by the  Committee  in its sole and
absolute discretion. Any such adjustments may provide for the elimination of any
fractional  shares of Common Stock that might  otherwise  become  subject to any
Options.

                  (d)  Changes  in  Control.   (i)  Upon  the   dissolution   or
liquidation of the Company, (ii) upon a reorganization, merger, or consolidation
in which the Company is not the  surviving  corporation,  (iii) upon the sale of
substantially  all  of  the  property  or  assets  of  the  Company  to  another
corporation,  or (iv) if at least 50% or more of the voting stock of the Company
is sold either  through a tender offer or otherwise to a party or an  affiliated
group  of  parties,  then  the  Plan and the  Options  issued  thereunder  shall
terminate,  unless  provisions are made in connection with such  transaction for
the assumption of Options theretofore  granted, or for the substitution for such
Options of new options of the  successor  corporation  or a parent or subsidiary
thereof,  with  appropriate  adjustment as to the number and kinds of shares and
the per share  exercise  prices.  In the event such Options shall be terminated,
all outstanding  Options shall be exercisable in full for at least 30 days prior
to such  termination  date,  whether  or not  exercisable  during  such  period,
subject,  however, to the limitation set forth in Section 6.02(b).  For purposes
of this Section 7.05(d),  the Company refers to Mid Atlantic  Medical  Services,
Inc.,  MD-Individual  Practice  Association,  Inc., Optimum Choice, Inc., and/or
Physicians Health Plan of Maryland,  Inc., jointly or separately.  The Committee
shall  determine  the date on which Options may become  exercisable  pursuant to
this Section 7.05(d).

     7.06 Surrender of Options.  Any Option  granted to a Participant  under the
Plan may be  surrendered  to the Company for  cancellation  on such terms as the
Committee and holder approve.

     7.07 No Right to Option; No Right to Employment.  No director,  employee or
other person shall have any claim or right to be granted an Option.  Neither the
Plan nor any action  taken  hereunder  shall be construed as giving any employee
any  right  to be  retained  in  the  employ  of  the  Company  or  any  of  its
Subsidiaries.
<PAGE>

     7.08 Options Not Includable for Benefit  Purposes.  Income  recognized by a
Participant  pursuant to the provisions of the Plan shall not be included in the
determination  of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of ERISA) or group  insurance or other  benefit plans
applicable to the  Participant  that are maintained by the Company or any of its
Subsidiaries,  except  as may be  provided  under  the  terms  of such  plans or
determined by resolution of the Board.

     7.09 Governing Law. The Plan and all determinations  made and actions taken
pursuant  to the Plan  shall be  governed  by the laws of the State of  Delaware
other than the conflict of laws  provisions of such laws, and shall be construed
in accordance therewith.

     7.10 No  Strict  Construction.  No rule of  strict  construction  shall  be
implied  against  the  Company,  the  Committee,  or  any  other  person  in the
interpretation  of any of the terms of the Plan,  any Option  granted  under the
Plan or any rule or procedure established by the Committee.

     7.11 Compliance with Rule 16b-3 and Section 162(m). It is intended that the
Plan be applied and  administered in compliance with Rule 16b-3 and with Section
162(m).  If any provision of the Plan would be in violation of Section 162(m) if
applied as written, such provision shall not have effect as written and shall be
given effect so as to comply with Section  162(m) as determined by the Committee
in its sole and absolute  discretion.  The Board is authorized to amend the Plan
and the  Committee  is  authorized  to make any  such  modifications  to  Option
Agreements to comply with Rule 16b-3 and Section 162(m),  as they may be amended
from time to time, and to make any other such amendments or modifications deemed
necessary or appropriate to better  accomplish the purposes of the Plan in light
of any amendments  made to Rule 16b-3 and Section  162(m).  Notwithstanding  the
foregoing,  the  Board  may  amend  the  Plan  so  that  it (or  certain  of its
provisions) no longer comply with either or both of Rule 16b-3 or Section 162(m)
if the Board  specifically  determines that such compliance is no longer desired
and the  Committee  may grant  Options that do not comply with Rule 16b-3 and/or
Section 162(m) if the Committee determines, in its sole and absolute discretion,
that it is in the interest of the Company to do so.

     7.12 Captions.  The captions (i.e., all Article and Section  headings) used
in the Plan are for convenience  only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize,  or affect in any way any provisions
of the Plan, and all provisions of the Plan shall be construed as if no captions
have been used in the Plan.

     7.13 Severability.  Whenever possible, each provision in the Plan and every
Option at any time granted under the Plan shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of the Plan
or any Option at any time granted  under the Plan shall be held to be prohibited
by or invalid  under  applicable  law, then (a) such  provision  shall be deemed
amended to accomplish the  objectives of the provision as originally  written to
the fullest  extent  permitted by law, and (b) all other  provisions of the Plan
and every other Option at any time  granted  under the Plan shall remain in full
force and effect.
<PAGE>

     7.14 Legends.  All  certificates  for Common Stock delivered under the Plan
shall be subject to such  transfer  restrictions  set forth in the Plan and such
other  restrictions  as the  Committee  may  deem  advisable  under  the  rules,
regulations,  and other  requirements  of the SEC, any stock exchange upon which
the Common Stock is then listed,  and any applicable federal or state securities
law.  The  Committee  may  cause  a  legend  or  legends  to be put on any  such
certificates to make appropriate references to such restrictions.

     7.15 Investment Representation. The Committee may, in its sole and absolute
discretion,  demand  that any  Participant  awarded  an  Option  deliver  to the
Committee   at  the  time  of  grant  or  exercise  of  such  Option  a  written
representation  that the shares of Common Stock to be acquired upon exercise are
to be  acquired  for  investment  and  not  for  resale  or  with a view  to the
distribution thereof. Upon such demand,  delivery of such written representation
by the Participant  prior to the delivery of any shares of Common Stock pursuant
to the  exercise  of his or her Option  shall be a  condition  precedent  to the
Participant's right to purchase or otherwise acquire such shares of Common Stock
by such grant or  exercise.  The Company is not  legally  obliged  hereunder  if
fulfillment  of its  obligations  under the Plan would violate  federal or state
securities laws.

     7.16 Amendment and Termination.

                  (a)  Amendment.  The  Board  shall  have  complete  power  and
authority to amend the Plan at any time it is deemed  necessary or  appropriate;
provided, however, that the Board shall not, without the affirmative approval of
a simple majority of the holders of Common Stock,  represented,  by person or by
proxy,  and  entitled to vote at an annual or special  meeting of the holders of
Common  Stock,  make any  amendment  that requires  stockholder  approval  under
applicable law or rule,  unless the Board  determines  that compliance with such
law or rule is no  longer  desired  with  respect  to the Plan as a whole or the
provision to be amended.  No termination  or amendment of the Plan may,  without
the consent of the  Participant to whom any Option shall  theretofore  have been
granted under the Plan, adversely affect the right of such individual under such
Option;  provided,  however,  that the  Committee  may, in its sole and absolute
discretion,  make provision in an Option  Agreement for such amendments that, in
its sole and absolute discretion, it deems appropriate.

                  (b) Termination.  The Board shall have the right and the power
to terminate  the Plan at any time.  No Option  shall be granted  under the Plan
after the  termination  of the Plan,  but the  termination of the Plan shall not
have any other effect, and any Option outstanding at the time of the termination
of the Plan may be amended and exercised and may vest after  termination  of the
Plan at any time prior to the expiration  date of such Option to the same extent
such Option  could have been  amended and would have been  exercisable  or would
have vested had the Plan not terminated.

     7.17 Costs and Expenses.  All costs and expenses  incurred in administering
the Plan shall be borne by the Company.

     7.18  Unfunded  Plan.  The Company  shall not be required to establish  any
special or separate fund or make any other  segregation  of assets to assure the
payment of any award under the Plan.