Document:

MID ATLANTIC MEDICAL SERVICES, INC.

                      Plan for Deferral of Directors' Fees

1. Purpose.

This Plan for the Deferral of Directors'  Fees,  adopted by Mid Atlantic Medical
Services,  Inc.,  Rockville,  Maryland  (the  "Company")  is for the  purpose of
permitting  members of its Board of  Directors  to defer the receipt of fees for
services as a Director,  and as a member of any and all  committees of the Board
of Directors.

2. Eligibility.

Any Director who is serving on the Board at the  effective  date of this Plan or
who is hereafter elected or appointed to membership on the Board of Directors of
the  Company,  may elect to defer  receipt of either all or  one-half of his/her
future  Directors'  fees,  and to receive  such  deferred  fees,  together  with
earnings thereon, at the time and in the manner hereafter  provided,  subject to
all the terms and conditions of this Plan.

3. Election to Defer.

Election to defer  Directors'  fees shall be made by written  election on a form
provided by the Company,  which shall be filed with the Secretary of the Company
on or before  December 31 of any year.  Such  election  shall be effective  with
respect to Directors'  fees earned for services  performed  during the following
calendar  year,  except for the year 2000  wherein if an election  form is filed
with the Secretary of the Company  within sixty (60) days of the effective  date
of the plan,  such  election  shall be effective  with respect to fees earned by
him/her for services  performed in the year 2000 but  subsequent  to the date of
filing of his/her election.  However,  if a newly-elected or appointed  Director
files an election  within  sixty (60) days after  becoming a  Director,  his/her
election  may be made  effective  with  respect to fees  earned by  him/her  for
services  performed  in the same  calendar  year but  subsequent  to the date of
filing of his/her election.

4. Amount of Deferral.

At the time he makes his/her election, the Director shall:

    a. Indicate whether the deferral shall apply to all or to one-half of
his/her Directors' fees;

    b. Specify the payment date selected in accordance with paragraph 7 hereof;
 and

    c. Specify the method of payment  selected in  accordance  with  paragraph 8
    hereof.  Such election and all the terms thereof shall be  irrevocable  with
    respect to Directors' fees earned while that election is in effect.

5. Duration and Termination.

Any Election to Defer Directors' Fees shall continue in effect indefinitely from
year to year so long as the Director  continues as a Director of the Company.  A
Director may terminate his/her election at any time by written notice filed with
the Secretary of the Company, which shall only be effective with respect to fees
earned for  services  performed  subsequent  to such  notice of  termination.  A
Director  may elect to change  the  portion  of fees to be  deferred,  or change
his/her  selection  of the payment date or method of payment by filing a Revised
Election with the Secretary of the Company on or before December 31 of any year.
Such Revised  Election  shall apply with respect to  Directors'  Fees earned for
services performed during the following calendar year and thereafter.  No change
of date of payment or method of payment  shall  apply to fees  deferred  under a
prior election.

6. Earnings.

Each amount of deferred  compensation  shall  accrue  earnings  from the date of
deferral.  Earnings shall accrue at the prime rate as periodically  adjusted and
published in the Wall Street  Journal.  All such earnings  shall be deemed to be
deferred  compensation to be distributed in accordance with the terms and in the
manner set forth in this Agreement.

7. Time of Payment.

The balance of a Directors' deferred fees shall become payable either:

    a. On the first of January next following the date he ceases to be a
Director; or

    b. On the first day of January next following the Director's 65th birthday;
and

    c. On the  first  day of  January  next  following  the date of  either  the
    Director's 65th birthday and the date he ceases to be a Director,  whichever
    is  later,  as the  Director  shall  specify  at the time he  makes  his/her
    Election to Defer.

8. Installment Payments.

When the balance of a Director's  deferred  fees becomes  payable,  such balance
shall be paid in a series of approximately equal installments,  payable annually
or quarterly over a five-year or ten-year  period or the life  expectancy of the
Director  in  accordance  with the  mortality  table  in  effect  for  actuarial
equivalence under the Company Pension Plan, as the Director shall specify at the
time he makes  his/her  Election to Defer.  During the time that such balance of
deferred  fees is being paid in  installments,  earnings  shall  continue  to be
credited on the unpaid  balance as provided in  paragraph 6 hereof and until the
entire balance is fully paid.

9. Beneficiary Designation

If a Director dies before his/her fee account becomes payable,  or before he has
received the entire balance thereof,  any remaining balance thereof shall become
payable on the first day of January next following  his/her death,  and shall be
paid to his/her designated beneficiary in one lump sum. A Director may designate
a beneficiary,  and change or revoke a designation of  beneficiary,  at any time
and from time to time,  by a writing  filed with the  Secretary  of the  Company
prior to his/her  death.  If no  designation  of beneficiary is in effect at the
time of the Director's  death, or if the last designated  beneficiary shall have
predeceased the Director,  the balance of his/her deferred fees shall be paid to
the estate of the Director in one lump sum.

10. General Unsecured Obligation Only.

A Director's deferred fees and all earnings thereon shall be a general unsecured
obligation  of the  Company  and  the  Company  shall  not in any way  fund  its
liability for such deferred  Directors'  fees or earnings  thereon.  Any Company
memorandum  or record  of a  Director's  fee  account  shall be  solely  for the
Company's  internal  bookkeeping  purposes and the Director,  his/her designated
beneficiary or his/her estate shall not have any earnings whatsoever therein.

11. Compliance with Law.

This plan is intended to accomplish the authorized  deferral of the incidence of
federal  income taxes on a  Director's  deferred  fees and the earnings  thereon
until such time as the Director,  his/her beneficiary or his/her estate received
actual  payment of the same,  as  authorized  by the  Internal  Revenue Code and
applicable  law,  and this  plan  shall be  construed  in  accordance  with such
intended purpose.

12. Amendment.

This plan may be amended by the Company at any time and from time to time in the
Company's sole discretion, or terminated in its sole discretion. No amendment or
termination  of  the  plan  shall  apply  with  respect  to  a  Director's  fees
theretofore  deferred except with the Director's consent,  unless in the opinion
of legal counsel to the Company,  such  amendment or termination is necessary or
desirable to  accomplish  the purpose of this Plan or to comply with  applicable
law.

13. Effective Date.

This plan shall be effective with respect to Directors' fees earned for services
performed on and after the first day of April  following  the date of the plan's
adoption by the Company's Board of Directors.

14. Successor Company.

The Company shall not merge or consolidate  with any other company or reorganize
unless and until such  succeeding  and  continuing  company agrees to assume and
discharge  the  obligations  of the  Company  under  this Plan for  Deferral  of
Directors' Fees. Upon such  assumption,  the term "Company" as used in this Plan
shall be deemed to refer to such successor company.

15. Other Agreements Superseded.

This Plan shall  supersede any prior Plans as to  compensation  earned after the
Effective Date of this Plan. Any compensation previously deferred at the request
of a Director pursuant to any prior Plan may be designated by the Director to be
included  within the term of this Plan or, in the event no such  designation  is
made,  shall  continue to be payable in accordance  with the terms of such prior
Plan. This Plan shall not be construed to prevent the Director or any of his/her
designated   beneficiaries   from   receiving,   in  addition  to  the  deferred
compensation  provided for herein, any amounts which he may be entitled to under
any pension plan, employees' retirement plan, or any other compensation to which
he may be legally entitled as an officer or employee of the Company.MID ATLANTIC MEDICAL SERVICES, INC.
               NON-QUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES

         AGREEMENT  ("Agreement")  dated the date indicated on the attached Face
Sheet by and between Mid Atlantic Medical Services, Inc., a Delaware corporation
("Corporation"),  and the  person  indicated  on the  attached  Face  Sheet,  an
employee of the Corporation and/or one of its subsidiaries ("Optionee").

         WHEREAS,  the  Corporation  desires to have  Optionee  continue  in its
employ and to provide  Optionee  with an  incentive by sharing in the success of
the Corporation;

     WHEREAS,  in order to provide  such an  incentive  to its  officers and key
employees,  the Corporation has adopted the Mid Atlantic Medical Services,  Inc.
2000 Non-Qualified Stock Option Plan ("Plan");

         WHEREAS,  the  Corporation  desires to grant to Optionee under the Plan
options not intended to qualify as "incentive  stock options" within the meaning
of Section 422 or any successor  provision of the Internal Revenue Code of 1986,
as amended ("Code"); and

         WHEREAS,  unless otherwise  provided herein,  capitalized terms used in
this Agreement shall have the meaning given them in the Plan.

         NOW,   THEREFORE,   in   consideration  of  the  mutual  covenants  and
representations  herein contained and intending to be legally bound, the parties
hereto agree as follows:

         1. Number of Shares and Price.  The  Corporation  hereby  grants to the
Optionee an option  ("Option")  to purchase the number of shares of Common Stock
set forth on the attached Face Sheet of this  Agreement.  The exercise price per
share of Common  Stock of the  Option  shall be as is set forth on the  attached
Face Sheet of this  Agreement,  such price being the Fair Market Value per share
of Common  Stock on the Date of Grant of the Option.  The Option is not intended
to qualify as an "incentive stock option" under Section 422 of the Code.

         2. Term and  Exercise.  The Option shall expire five (5) years from the
date hereof,  subject to earlier  termination as set forth in Section 3. Subject
to the  provisions  of  Section  3,  the  Option  shall  become  exercisable  in
installments as set forth on the attached Face Sheet of this Agreement.

         3.       Exercise of Option Upon Termination of Employment.

               (a)  Termination of Vested Option Upon Termination of Employment.

                    (i)  Termination.   Upon  the   Optionee's   Termination  of
                         Employment,   other   than  by   reason   of  death  or
                         Disability,  the Optionee may,  within 90 days from the
                         date of such Termination of Employment, exercise all or
                         any part of the Option as were  exercisable at the date
                         of  Termination  of  Employment.  In no  event  may the
                         Option be  exercised  later  than the  expiration  date
                         described in Section 2.

                    (ii) Disability.  Upon the Optionee's  Disability  Date, the
                         Optionee  may,  within one year  after such  Disability
                         Date, exercise all or a part of the Option,  whether or
                         not it was  exercisable  on such  Disability  Date, but
                         only to the  extent  not  previously  exercised.  In no
                         event,  however, may the Option be exercised later than
                         the expiration date described in Section 2.

                    (iii)Death.  In the event of the death of the Optionee while
                         employed  by  the  Corporation  or  a  Subsidiary,  the
                         Optionee's  Beneficiary  shall be  entitled to exercise
                         all or any part of the  Option  that was  vested at the
                         date  of  the   Optionee's   death  until  the  initial
                         expiration date of such Option  determined  pursuant to
                         Section 2.  Notwithstanding  the above, if the Optionee
                         at the  time  of  death  had  been an  employee  of the
                         Corporation  or a Subsidiary for a period of ten years,
                         50% of  the  Optionee's  unvested  Option  will  become
                         vested and subject to exercise as stated  above and, if
                         the  Optionee at the time of death had been an employee
                         of the  Corporation  or a  Subsidiary  for a period  of
                         fifteen years,  all of the Optionee's  unvested  Option
                         will  become  vested and  subject to exercise as stated
                         above and shall expire on the date of expiration of the
                         Option determined pursuant to Section 2.

                  (b)  Termination  of  Unvested  Option  Upon   Termination  of
Employment. Except as provided in Sections 3(a)(ii) and 3(a)(iii), to the extent
all or any part of the Option was not  exercisable as of the date of Termination
of Employment,  the unexercisable portion of the Option shall expire at the date
of such Termination of Employment.

                  (c)  Change  of  Control.   Notwithstanding  anything  to  the
contrary  in  Section 2 or this  Section 3, if one of the  events  specified  in
Section  7.05(d)(i),  (ii), (iii) or (iv) of the Plan occurs,  the provisions of
such Section 7.05(d) shall determine when the Option becomes  exercisable,  when
it may be exercised and when it expires.

         4.  Exercise  Procedures.  The Option shall be  exercisable  by written
notice to the  Corporation,  which  must be  received  by the  Secretary  of the
Corporation  not later  than 5:00 P.M.  local  time at the  principal  executive
office of the  Corporation  on the expiration  date of the Option.  Such written
notice shall set forth (a) the number of shares of Common Stock being purchased,
(b) the total exercise price for the shares of Common Stock being purchased, (c)
the exact name as it should appear on the stock  certificate(s) to be issued for
the shares of Common  Stock  being  purchased,  and (d) the address to which the
stock  certificate(s)  should be sent.  The  exercise  price of shares of Common
Stock  purchased  upon exercise of the Option shall be paid in full (a) in cash,
(b) by delivery to the  Corporation  of shares of Common Stock (which  shares of
Common  Stock  must  have  been  held  for  at  least  six  months),  (c) in any
combination of cash and shares of Common Stock, or (d) by delivery of such other
consideration  as  the  Committee  deems  appropriate  and  in  compliance  with
applicable law (including payment in accordance with a cashless exercise program
approved by the  Committee).  If any shares of Common Stock shall be transferred
to the Corporation to satisfy all or any part of the exercise price, the part of
the exercise  price deemed to have been  satisfied by such transfer of shares of
Common  Stock  shall be equal to the  product  derived by  multiplying  the Fair
Market  Value as of the date of  exercise  times the  number of shares of Common
Stock  transferred  to the  Corporation.  Any shares of Common Stock tendered in
payment  shall be duly  endorsed in blank or  accompanied  by stock  powers duly
endorsed  in  blank.  The  Optionee  may  not  transfer  to the  Corporation  in
satisfaction of the exercise price any fraction of a share of Common Stock,  and
any portion of the exercise price that would represent less than a full share of
Common Stock must be paid in cash by the  Optionee.  Subject to Sections 8 and 9
hereof, certificates for the purchased shares of Common Stock will be issued and
delivered  to the  Optionee  as soon as  practicable  after the  receipt of such
payment of the exercise  price;  provided,  however,  that  delivery of any such
shares of Common Stock shall be deemed  effected  for all purposes  when a stock
transfer agent of the Corporation  shall have deposited such certificates in the
United States mail, addressed to Optionee,  at the address set forth on the Face
Sheet of this  Agreement  or to such other  address as Optionee may from time to
time designate in a written notice to the Corporation. The Optionee shall not be
deemed for any purpose to be a shareholder of the  Corporation in respect of any
shares of Common Stock as to which the Option shall not have been exercised,  as
herein provided,  until such shares of Common Stock have been issued to Optionee
by the Corporation hereunder.

         5. Plan Provisions Control Option Terms;  Modifications.  The Option is
granted  pursuant  and  subject  to the terms and  conditions  of the Plan,  the
provisions of which are  incorporated  herein by reference.  If any provision of
this Agreement conflicts with any of the terms in the Plan as constituted on the
Date of Grant,  the terms of the Plan as  constituted on the Date of Grant shall
control.  Except as provided in Sections  7.03 and 7.05 of the Plan,  the Option
shall  not be  modified  after  the  Date of Grant  except  by  express  written
agreement between the Corporation and the Optionee;  provided, however, that any
such  modification (a) shall not be inconsistent with the terms of the Plan, and
(b) shall be approved by the Committee.

     6.  Limitations on Transfer.  The Option may not be assigned or transferred
other than by will,  by the laws of descent  and  distribution  or pursuant to a
domestic relations order.

         7. Taxes.  The  Corporation  shall be  entitled to withhold  (or secure
payment from the Optionee in lieu of withholding)  the amount of any withholding
or other tax  required  by law to be withheld  or paid by the  Corporation  with
respect to any shares of Common Stock  issuable  under this  Agreement,  and the
Corporation  may defer  issuance of shares of Common  Stock upon the exercise of
the Option unless the Corporation is 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
Optionee at such time as the Committee determines.  The Optionee may satisfy his
or her  tax  withholding  obligation  by  (a)  having  cash  withheld  from  the
Optionee's  salary  or  other  compensation  payable  by  the  Corporation  or a
Subsidiary,  (b) the  payment  of cash to the  Corporation,  (c) the  payment in
shares of Common  Stock  already  owned by the  Optionee  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 shares of Common Stock, to satisfy such tax withholding  requirements.  The
Committee shall be authorized, in its sole and absolute discretion, to establish
such rules and procedures  relating to any such withholding  methods as it deems
necessary or appropriate,  including,  without limitation,  rules and procedures
relating to elections to have shares of Common Stock  withheld  upon exercise of
the Option to meet such withholding obligations.

         8.  No  Exercise  in  Violation  of  Law.  Notwithstanding  any  of the
provisions of this Agreement, the Optionee hereby agrees that he or she will not
exercise  the  Option  granted  hereby,  and  that the  Corporation  will not be
obligated to issue any shares of Common Stock to the Optionee hereunder,  if the
exercise thereof or the issuance of such shares of Common Stock shall constitute
a violation by the Optionee or the  Corporation  of any  provision of any law or
regulation of any governmental  authority.  Any determination in this connection
by the Committee shall be final, binding and conclusive.

         9. Securities Law Compliance. The Optionee agrees, for the Optionee and
his or her  Beneficiaries,  with respect to all shares of Common Stock  acquired
pursuant  to the terms and  conditions  of the Plan and the Option (or any other
shares of Common  Stock  issued  pursuant  to a stock  dividend  or stock  split
thereon or any securities  issued in lieu thereof or in substitution or exchange
therefor),  that  the  Optionee  and his or her  Beneficiaries  will not sell or
otherwise  dispose of these shares except pursuant to an effective  registration
statement under the Securities Act of 1933, as amended (the "Act"), or except in
a  transaction  that, in the opinion of counsel for the  Corporation,  is exempt
from registration under the Act. Further,  the Corporation shall not be required
to sell or  issue  any  shares  under  the  Option  if,  in the  opinion  of the
Corporation, (a) the issuance of such shares would constitute a violation by the
Optionee  or  the  Corporation  of  any  applicable  law  or  regulation  of any
government  authority or (b) the consent or approval of any governmental body is
necessary or desirable as condition of, or in connection  with,  the issuance of
such shares.

         10.  Adjustments.  The  existence of the Option shall not affect in any
way the right or power of the  Corporation or its directors or  shareholders  to
make or authorize any or all adjustments, recapitalizations, reorganizations, or
other changes in the  Corporation's  capital  structure or its business,  or any
merger  or  consolidation  of  the  Corporation,   or  any  issuance  of  bonds,
debentures,  preferred stock or prior preference stock ahead of or affecting the
Common  Stock or the  rights  thereof,  or  dissolution  or  liquidation  of the
Corporation,  or any  sale  or  transfer  of all or any  part of its  assets  or
business,  or any  other  corporate  act or  proceeding,  whether  of a  similar
character or otherwise.

         11.  Dispute  Resolution.  As a condition of granting  the Option,  the
Optionee agrees, for the Optionee and his or her Beneficiaries, that any dispute
or  disagreement  that may arise under or as a result of or pursuant to the Plan
and the Option  shall be  determined  by the  Committee in its sole and absolute
discretion, and any interpretation by the Committee of the terms of the Plan and
Option shall be final, binding and conclusive.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year first above specified.

ATTEST:                             MID ATLANTIC MEDICAL SERVICES, INC.

__________________________ By:
                                                 Thomas P. Barbera,
                                           President and Chief Executive Officer

                                        By:
                                           Member of the Stock Option Committee

WITNESS:                            OPTIONEE

--------------------------
                                   (Signature)

<PAGE>

5

                                   FACE SHEET

Notice Addresses:

         Optionee:

                  ------------------------
                  4 Taft Court
                  Rockville, Maryland  20850

         Corporation:

                  Mid Atlantic Medical Services, Inc.
                  4 Taft Court
                  Rockville, Maryland  20850
                  Attention: Secretary

Grant Date:                                                   ___________

Total Options Granted:                                        ___________

Exercise Price Per Share of Common Stock:                     $__________

Vesting Schedule:

                                                     Number of Shares

                  Date                               (Non-Cumulative)

                  06/01/2001                                  ___
                  06/01/2002                                  ___
                  06/01/2003                                  ___

Expiration Date:

         Optioned  shares must be purchased  within five (5) years from the date
of  grant,  which is  _________.  That is,  all  options  must be  exercised  by
__________.

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