Form of Coventry Health Care, Inc. Non-Qualified Stock Option Agreement.



Exhibit 10.18



COVENTRY HEALTH CARE,
INC.
NON-QUALIFIED STOCK
OPTION AGREEMENT 




To: 



We are pleased to notify you that you
have been granted an option (“Option”) to purchase _________ shares of the
common stock $.01 par value (“Common Stock”) of Coventry Health Care, Inc. (the
“Company”) at a price of $______ per share, the closing price of the Common
Stock as reported on The New York Stock Exchange on __________, 200___, under the
Company’s 2004 Stock Incentive Plan (the “Plan”) by the Board of Directors
(the “Board of Directors” or “Board”) of the Company or a Committee of
the Board (the “Committee”) administering the Plan, as the case may be. This
Option may thereafter be exercised only upon the terms and conditions set forth below. 




1. Purpose of Plan 



The purpose of the Plan under which
this Option has been granted is to enable the Company to attract, retain and reward key
employees of and consultants to the Company and its direct and indirect subsidiaries (each
a “Subsidiary”, and, collectively, “Subsidiaries”) and directors who
are not also employees of the Company, and to strengthen the mutuality of interests
between such key employees, consultants, and directors by awarding such key employees,
consultants, and directors (collectively “Participants”) performance-based stock
incentive and/or other equity interests or equity-based incentives in the Company, as well
as performance-based incentives payable in cash. 




2. Plan Controls 



This Option is granted pursuant to
the terms of the Plan and is subject to all of the terms and conditions of the Plan, which
is incorporated herein by reference. The Compensation and Benefits Committee has authority
to interpret this Option and its interpretation shall be binding. If any of the provisions
of this Option conflict with or are inconsistent with the provisions of the Plan, the
provisions of the Plan shall be controlling. 




3. Acceptance of Option
Agreement 



Your execution of this option
agreement will indicate your acceptance of and your willingness to be bound by its terms;
it imposes no obligation upon you to purchase any of the shares subject to the Option.
Your obligation to purchase shares can arise only upon your exercise of the Option in the
manner set forth in Section 5 hereof. 




4. When Option May Be
Exercised 



This option may be exercised in
cumulative annual installments of ____% of the total number of shares purchasable by you
hereunder, the first such installment being exercisable on _________________ and
subsequent additional installments of ____% of such shares being exercisable on each
anniversary of the _______ succeeding years thereafter. This Option expires 10 years from
the date of grant whether or not it has been duly exercised, unless sooner terminated as
provided in Sections 6, 7, and 8 hereof. 




5. How Option May Be
Exercised. 



This Option is exercisable by giving
written notice to the Company at its executive offices, signifying your election to
exercise the Option. The notice must state the number of shares of Common Stock as to
which the Option is being exercised, must contain a statement by you ( in a form
acceptable to the Company) that such shares are being acquired by you for investment and
not with a view to their distribution or resale (unless a registration statement covering
the shares purchasable been declared effective by the Securities and Exchanged Commission)
and must be accompanied by check payable to the order of the Company for the full purchase
price of the shares being purchased and such amount, if any, as may be required for income
tax withholding. Upon the Committee’s approval, such payment may also be made in
whole or in part by delivering previously owned shares of Common Stock or shares of
Restricted Stock or another award under the Plan (in each case valued at the Fair Market
Value equal to the purchased price and the Amount required for income tax withholding. Any
Common Stock delivered in satisfaction of all or any portion of the purchased price shall
be appropriately endorsed for transfer and assignment to the Company. No shares shall be
issued until full payment therefor has been made and your income tax withholding
obligations satisfied. 



If
notice of the exercise of this Option is given by a person or persons other than you, the
Company will require the submission to the Company of appropriate proof of the right of
such person or persons to exercise this Option. 



Certificates for shares of the Common
Stock so purchased will be issued as soon as practicable. The Company, however, shall not
be required to issue or deliver a certificate for any shares until it has complied with
all requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, any stock exchange on which the Common Stock may then be listed and all
applicable state laws in connection with the issuance or sale of such shares or the
listing of such shares on said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise this Option, shall have
none of the rights of a stockholder with respect to shares subject to this Option. 




6. Termination of
Employment 



If your employment with the Company
(or a Subsidiary) is terminated for any reason other than as a result of your death,
disability or early or normal retirement you may exercise that portion of this Option
which was exercisable by you at the date of termination at any time within ninety (90)
days of the date of such termination provided, however, such exercise occurs within 10
years of the date this Option was granted to you, and further provided that in the event
such termination was due to “Cause” (as defined in the Plan), this Option shall
immediately lapse and expire. Absence or leave approved by the employer corporation shall
not be considered an interruption of your employment for purpose of this Option. 




7. Retirement or
Disability 



If your employment with the Company
(or a Subsidiary) is terminated by reason of your disability or early or normal
retirement, you may exercise that portion of this Option which was exercisable by you at
the date of such termination at any time within three years of the date of such
termination provided, however, that such exercise occurs within 10 years of the date this
Option was granted to you. 




8. Death 



If you die while employed by the
Company (or a Subsidiary), or within three years following termination of your employment
due to disability or early or normal retirement, that portion of this Option which was
exercisable by you at the date of your death, disability or retirement may be exercised by
the legal representative of your estate or the legatee or legatees under your will within
12 months from the date of your death, but in no event after 10 years from the date this
Option was granted to you. 




9. Non-Transferability
of Option 



This Option shall not be assignable
or transferable without the prior written consent of the Committee except (a) to a member
of your Immediate Family or a trust for the benefit of you or a member of your Immediate
Family or (b) by will or the laws of descent and distribution. 




10. Non-Qualified Stock
Option 



This Option is not intended to be an
“incentive stock option” as defined in Section 422 of the Internal Revenue Code
of 1986, as amended. 




11. Adjustments Upon
Changes in Capitalization 



If at any time after the date of
grant of this Option, the Company shall, by stock dividend, split-up, combination,
reclassification or exchange, or through merger or consolidation, or otherwise, change its
shares of Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by this Option and the price of
each such share shall be proportionately adjusted for any such change by the Board of
Directors whose determination shall be conclusive. Any fraction of a share resulting from
any adjustment shall be eliminated and the price per share of the remaining shares subject
to this Option shall be adjusted accordingly. 




12. Effects of Change in
Control 



Immediately following a “Change
in Control” of the Company (as defined in the Plan), this Option shall become
immediately vested and fully exercisable, but in no event may this Option be exercised
after 10 years from the date this Option was granted to you. 




13. Modification 



This Option may be amended by the
Committee, or the Board, as the case may be (subject to certain limitations as set forth
in the Plan), prospectively or retroactively and in whole or in part, except that no such
action may impair your rights with respect to this Option without your consent. 




14. Meaning of
Capitalized Terms 



Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to them in the Plan. 




15. When Option Becomes
Effective 



This Option shall not become
effective unless a copy of this option agreement has been signed by you and returned to
the Company at the following Address: 




Coventry Health Care,
Inc 
6705 Rockledge Dr.,
Suite 900 
Bethesda, MD 20817 
Attn: Debra Craig 
Corporate and
Securities 




Sincerely yours, 




COVENTRY HEALTH CARE, INC. 




By:__________________________________ 



Agreed to and accepted this 




_____day of________,
______ 



_________________