MID ATLANTIC MEDICAL SERVICES INC
2002 STOCK OPTION PLAN
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex1042_123101.txt
<DESCRIPTION>2002 STOCK OPTION PLAN
<TEXT>


                       MID ATLANTIC MEDICAL SERVICES, INC.
                      2002 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. 2002
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, 2002,
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,  2012,  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  2002 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.   2002
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 2002  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 6.02(b).  Notwithstanding

<PAGE>

               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 stockholders), in lieu of the number of shares of Common
     Stock receivable on exercise pursuant to such Option,  the number and class

<PAGE>

     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.

     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,

<PAGE>

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.



</TEXT>
</DOCUMENT>
