MID ATLANTIC MEDICAL SERVICES, INC.
                      1999 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.
1999 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 3, 1999,
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
2,  2004,  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  1999 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 "Cause" means, with respect to a Participant who is a Non-Employee
Director,  removal as a director by the holders of Common  Stock or by the Board
for cause; provided, however, that, if a Non-Employee Director is not a director
of the  Company,  removal as a director  by the  holders of common  stock of any
Subsidiary  on whose  Board of  Directors  he or she  serves or by such Board of
Directors for cause.

         2.04 "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.

          2.05  "Committee"  means a committee of the Board as may be appointed,
     from time to time, by the Board.

                  (a)  The  Board  may  appoint  more  than  one   Committee  to
administer the Plan. If it appoints more than one Committee,  one Committee (the
"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 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 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 2.05(a)) and, when used herein,  the term "Committee"  shall mean either
the 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 Stock Option  Committee  and the Select
Committee, the determinations made by the Stock Option Committee shall control.

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

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

         2.08 "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.

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

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

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

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

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

         2.14 "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.  In the event
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.

         2.15  "Non-Employee  Director" means each member of the Board or of the
Board of Directors of Physicians Health Plan of Maryland, Inc., in each case who
is not an  employee  of the  Company  or of any of its  Subsidiaries;  provided,
however, that Francis C.
Bruno shall be considered to be a Non-Employee Director.

         2.16  "Non-Employee   Director  Option"  means  an  Option  granted  in
accordance with Article VII.

         2.17 "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.

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

         2.19  "Participant"  means any  employee  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 VI and, solely to the extent provided in Article
VII, any Non-Employee Director.

          2.20  "Plan"  means  the Mid  Atlantic  Medical  Services,  Inc.  1999
     Non-Qualified Stock Option Plan as set forth herein, and
as the same may be amended from time to time.

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

         2.22     "SEC" means the Securities and Exchange Commission.

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

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

         2.25  "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 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 2.05(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.

Article IV.  Shares of Common Stock

         4.01 Number of Shares of Common Stock Issuable.  Subject to adjustments
as provided in Section 8.05, 1,500,000 shares of Common Stock 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 in the Plan 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.  In  making  such
designation,  the  Committee  may take into  account the nature of the  services
rendered  by the  officers  and  key  employees,  their  present  and  potential
contributions  to the  success of the  Company,  and such  other  factors as the
Committee,  in  its  sole  and  absolute  discretion,  may  deem  relevant.  The
Committee's designation of an Employee 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
Employee 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 one million shares of Common Stock under the Plan.

         Non-Employee  Directors shall receive Non-Employee  Director Options in
accordance  with  Article  VII,  the  provisions  of  which  are  automatic  and
non-discretionary in operation.  Non-Employee Directors shall not be eligible to
receive any other Options under the Plan unless they are no longer  Non-Employee
Directors on the Date of Grant of such Options.

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.

         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 100% of 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 five 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) and
(g).

                  (d)  Method  of  Exercise.  Subject  to  whatever  installment
exercise and waiting period  provisions  that apply under Section 6.02(c) above,
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 at a qualified domestic relations order as defined
by the Code, Title I of ERISA or the rules thereunder.

                  (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 an Employee 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 an  Employee
Participant to be exercised after its expiration date,  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 the
          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  three  months  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 the
          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  or longer  period of time in the
          Option Agreement or a longer period of time in accordance with Section
          6.02(f),  in the event of the death of an Employee  Participant  while
          employed by the  Company or a  Subsidiary,  the right of the  Employee
          Participant's  Beneficiary  to exercise the Option in full (whether or
          not all or any part of the  Option was  exercisable  as of the date of
          death  of  the  Employee  Participant,  but  only  to the  extent  not
          previously  exercised)  shall expire upon the  expiration  of one year
          from the date of the  Employee  Participant's  death or on the date of
          expiration  of the Option  determined  pursuant  to  Section  6.02(b),
          whichever is earlier.

                           (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.

Article VII.  Non-Employee Director Options

         7.01 Grant of Non-Employee  Director Options;  Exercise Price; Term. On
May 3, 1999,  each person who is a  Non-Employee  Director on such date shall be
granted a  Non-Employee  Director  Option to  purchase  the  number of shares of
Common Stock determined in accordance with Section 7.02. A Non-Employee Director
shall only receive one  Non-Employee  Director Option on May 3, 1999, even if he
or she serves as a Non-Employee Director of the Company and/or of one or more of
its Subsidiaries.

         The exercise price per share for Non-Employee Director Options shall be
the Fair  Market  Value of a share of  Common  Stock on the Date of  Grant.  All
Non-Employee Director Options shall have a five-year term.

         7.02 Number of Shares. Each Non-Employee  Director Option shall entitle
the holder to purchase 5,000 shares of Common Stock; provided, however, that, if
a  Non-Employee  Director is not a  Non-Employee  Director of the Company on the
Date of Grant of the Option, his or her Non-Employee  Director Option shall only
entitle him or her to purchase 3,000 shares of Common Stock.

         7.03  Exercisability.   Each  Non-Employee  Director  Option  shall  be
exercisable in full on the Date of Grant.

         7.04 Termination. If a Non-Employee Director's service with the Company
terminates  for  any  reason  or if  such  person  ceases  to be a  Non-Employee
Director,  such Option may be exercised  until the expiration of the stated term
of the Option.  Accordingly,  if a Non-Employee Director ceases to serve for any
reason,  he or she may  continue to exercise  his or her  Non-Employee  Director
Option until the  expiration of the stated term of such Option,  but only to the
extent it was not previously exercised.

         7.05 Other  Plan  Provisions.  All  applicable  provisions  of the Plan
(other than  Sections  6.02(f) and (g)) not  inconsistent  with this Article VII
shall apply to Options granted to Non-Employee Directors.

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

         8.01 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. In the event any provision of any Option
granted  under  the Plan  shall  conflict  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.

         8.02 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.

         8.03  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 8.05, 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.

         8.04 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).

         8.05     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
amount of Non-Employee  Director Options to be granted on any date under Section
7.02, the limit set forth in the last sentence of the first paragraph 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
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 Sections 6.02(b) and 7.01. For
purposes of this Section  8.05(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 8.05(d).

         8.06 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.

         8.07 No Right to Option; No Right to Employment.  Except as provided in
Article VII, 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.

         8.08 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.

         8.09  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.

         8.10 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.

         8.11 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.

         8.12 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.

         8.13 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.

         8.14 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.

         8.15  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.

         8.16     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 or would have been  exercisable  or vest had
the Plan not terminated.

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

         8.18 Unfunded Plan.  The Plan shall be unfunded.  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.