Exhibit 10.1






COVENTRY HEALTH CARE


 


2006 Compensation Program


for Non-Employee Directors


 


 



ANNUAL COMPENSATION:    $225,000


 



	
            •
 	
            Includes services for five regularly scheduled Board meetings per year
 





	
            •
 	
            Does not include committee chair retainers or Board/committee meeting fees (whether in-person or telephonic)
 





	
            •
 	
            Prorated for Directors hired after January 1st 
 





	
            •
 	
            New Directors receive a one-time initial grant of 10,000 options vesting 25% over 4 years
 




 


EFFECTIVE DATE:    January 1, 2006



 


TIMING OF ELECTIONS:


 


Current Directors:  Elections must be made prior to the beginning of each calendar year


New Directors:  Elections must be made prior to the effective date of becoming a Director


 


INDIVIDUAL COMPENSATION CHOICES:


 



	
            •
 	
            Directors may elect the form and the timing of their compensation on an individual basis
 





	
            •
 	
            All elections of the “Form” of payment must be made in multiples of 25%
 




 



	
            Payment

“Form”
 	
            Maximum Allocation
 	
            Payment

“Current”
 	
            Payment

“Deferred”
 	
            Vesting
 
	
            Cash
 	
            50%1
 	
            Paid Quarterly
 	
            Credited quarterly2
 	
            None
 
	
            Restricted Stock/
 Stock Units
 	
            100%
 	
            Granted at beginning of year
 	
            Stock Units deferred as outlined below
 	
            Quarterly over the year of service
 
	
            Stock Options
 	
            100%
 	
            Granted at beginning of year
 	
            Exercisable as outlined below
 	
            Quarterly over the year of service
 



 


STOCK OPTIONS:


 



	
            •
 	
            Become exercisable when vested
 





	
            •
 	
            Maximum term of 10 years
 




_________________________



	
            1 
 	
            Percentage limit may be waived with the approval of the Chairman of the Compensation Committee
 





	
            2 
 	
            Deferred cash will be credited quarterly with interest based on the Company’s borrowing rate set at the beginning of each year (2005 rate is approximately 5%)
 



 

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FINAL 11/7/05


 









 


 



EXCHANGING CASH ALLOCATION FOR STOCK:  


 



	
             
 	
            •
 	
            Compensation allocated to stock awards (options or restricted stock/stock units) would be converted to awards of equivalent value
 





	
             
 	
            •
 	
            Value would be determined using the same method used to expense the awards for financial accounting purposes
 





	
             
 	
            •
 	
            Restricted stock and Stock options granted under the Program are subject to the terms and conditions of the 2004 Incentive Plan, as amended.
 




 


TIMING OF DEFERRAL PERIOD APPLICABLE TO CASH AND RESTRICTED STOCK UNITS:


 



	
             
 	
            •
 	
            Termination of service as director for any reason
 




	
             
 	
            •
 	
            Unforeseeable emergency as defined by Internal Revenue Code (IRC) Section 409A
 




	
             
 	
              –
 	
            Definition is more restrictive than financial hardship distribution under Company 401(k) plan – e.g., does not include purchase of a primary residence or post-secondary educational expenses and fees
 




	
             
 	
            •
 	
            In the event of a change in control as defined by IRC Section 409A
 




 


FORM OF DISTRIBUTION:


 


Cash: Will be distributed as lump-sum payment


Restricted Stock Units:  Will be distributed as cash


Restricted Stock:  Will be issued as stock shares


 


TAX SUMMARY:


 



	
            •
 	
            Deferred stock units/cash are taxable at value when paid
 





	
            •
 	
            Stock options taxable on date exercised in amount equal to difference between (i) fair market value of shares acquired on option exercise and (ii) aggregate exercise price
 




 


 


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