Health Benefits Direct Corporation Director Compensation Plan (Effective March 14, 2006)

 Exhibit 10.1 HEALTH BENEFITS DIRECT CORPORATION COMPENSATION PLAN FOR DIRECTORS EFFECTIVE MARCH 14, 2006 - -------------------------------------------------------------------------------- I. General Provisions 1.1 PURPOSE. The purpose of the Health Benefits Direct Corporation Compensation Plan for Directors (the "Plan") is to provide a comprehensive compensation program which will attract and retain qualified individuals for Health Benefits Direct Corporation (the "Company") and its subsidiaries, to serve on the Company's Board of Directors. In particular, the Plan aligns the interests of directors with those of the Company's stockholders by providing that a significant portion of director compensation is directly linked to increases in the value of the Company's stock. 1.2 DEFINITIONS. Capitalized words and phrases not otherwise defined herein, shall have the same meaning as the definitions set forth in the Company's 2005 Non-Employee Directors Stock Option Plan (the "2005 Plan"). FAIR MARKET VALUE. "Fair Market Value" means the average of the high and low prices of publicly traded shares of Stock, rounded to the nearest cent, on the principal national securities exchange on which shares of Stock are listed (if the shares of Stock are so listed), or on the Nasdaq Stock Market (if the shares of Stock are regularly quoted on the Nasdaq Stock Market), or, if not so listed or regularly quoted, the closing bid price of publicly traded shares of Stock in the over-the-counter market, or, if such bid price shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Board in a manner consistent with the provisions of the Code. Notwithstanding anything to the contrary herein, in no event shall the option exercise price be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares are then listed. 1.3 STOCK RESERVED FOR THE PLAN. A total of up to 2,500,000 shares of Stock shall be subject to the Plan, with a maximum of 1,500,000 shares of Stock available under the 2005 Plan (reduced to such lesser amount as shall represent the net amount remaining after taking into account all issuances under the 2005 Plan, plus the amount of any cancelled options under the 2005 Plan), and such additional number of shares up to a maximum of 1,000,000 additional shares to be designated from the authorized but unissued shares of the capital stock of the Company. Stock subject to the Plan may consist of unissued shares or treasury shares, and such Stock shall be, and hereby is, reserved for issuance by the Company for such purpose. Any Stock that has not been issued or that is not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purposes of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan. Should any Option expire or be canceled prior to its exercise or vesting in full or should the number of shares to be delivered upon the exercise or vesting in full of an Option be reduced for any reason, the shares theretofore subject to such Option or shall thereupon become available for future grants under the Plan.  II. Cash Fees 2.1 FEES. Each Non-Employee Director who is the Vice-Chairman of the Board of Directors (who is not also Chairman or an Executive Chairman) shall become entitled to receive a one-time payment in the amount of $250,000 payable as follows: (i) $125,000 promptly following the date of adoption of the Plan; and (ii) $125,000 in 12 equal monthly installments commencing March 31, 2006, provided such person remains a director and serving in such capacity on the due date of each such installment. 2.2 MEETINGS. Each director, regardless employment with the Company, shall receive a fee of $1,000, payable in cash, for each meeting of a committee of the Board of Directors that he or she attends (either in person or telephonically) and each special meeting of the Board of Directors attended, as reimbursement for the fees and expenses of attendance and participation in such meeting. No fee is payable with respect to attendance at a regular meeting of the Board of Directors, including the annual meeting occurring immediately after an Annual Meeting of Stockholders. 2.3 COMMITTEE CHAIRS. A director, regardless of employment with the Company, appointed to chair any committee of the Board of Directors shall be paid an additional annual retainer of $1,000 in cash payable upon appointment. III. Stock Options 3.1 ANNUAL GRANTS OF STOCK OPTIONS - NEW DIRECTORS. As of the close of business on the date of each Annual Meeting of Stockholders, each director who has been first elected at such Annual Meeting of Stockholders who is not a director as of the date of adoption of this Plan, regardless of his or her employment with the Company, who consents to such appointment as director, shall be granted an Option to purchase 100,000 shares of Common Stock. 3.2 ANNUAL GRANTS OF STOCK OPTIONS - SITTING DIRECTORS. Any director who is not eligible to receive a grant of Options pursuant to Section 3.1 hereof, who as of the close of business on the date of each Annual Meeting of Stockholders, has been re-elected at such Annual Meeting of Stockholders, regardless of his or her employment with the Company, who consents to such appointment as director shall be granted an Option to purchase 10,000 shares of Common Stock. Notwithstanding the foregoing, any director who is eligible to or receives a grant under Section 3.1 hereof shall not be eligible for grant pursuant to this Section 3.2 until the next following Annual Meeting of Stockholders. 3.3 OTHER GRANTS OF STOCK OPTIONS. Each Non-Employee Director who is or has been appointed or elected Vice Chairman of the Board of Directors (but who is not an Executive Chairman or Chairman) shall be granted a one-time additional option to purchase 425,000 shares upon his or her initial appointment or election, as the case may be, on the later of: (i) the date of such appointment or election or (ii) the date of adoption of this Plan. 3.4 EXPIRATION DATE OF OPTIONS. All Options granted pursuant to the Plan shall be non-qualified options and shall expire five (5) years from the date of grant. 2  3.5 OPTION EXERCISE PRICE. The per share price to be paid to exercise an option shall be the Fair Market Value of the Stock on the date of grant. 3.6 VESTING AND EXERCISE OF OPTIONS. Each option granted under the Plan pursuant to Section 3.3 hereof will become exercisable as to 1/2 of such options on the six (6) month anniversary of the date of grant and as to 1/2 of such options on the twelve (12) months anniversary of the date of grant. Each option granted under any other Section of the Plan will become exercisable as to 1/3 of such Option on each of the first, second, and third anniversary of the date of grant. All options issued under the Plan shall immediately vest upon the removal, without Cause, of a director but in all other respects shall be governed in accordance with the terms and provisions of the 2005 Plan which shall control in the event of an inconsistency between the Plan and the 2005 Plan. 3.7 METHOD OF EXERCISE AND PURCHASE. An Option shall be exercised by giving written notice to the Secretary, or an Assistant Secretary, of the Company specifying the number of shares to be purchased and the particular grant being exercised. Such notice shall be accompanied by a check as payment of the exercise price of the shares with respect to which such option, or portion thereof, is exercised. Alternatively, such notice may include an election to have such shares delivered to a broker-dealer with whom arrangements have been made to immediately sell the shares and withhold from the net sale proceeds the full purchase price amount to be delivered to the Company, or by other "cashless exercise" means. The Company may also require payment of all withholding taxes to exercise an option, whether or not a broker-dealer arrangement has been used. IV. Additional Provisions 4.1 The Plan shall be administered by the Board of Directors (or a Committee thereof authorized by the Board of Directors) which shall have the power to interpret the Plan and amend it from time to time as it deems proper. To the fullest extent practicable, however, the terms and conditions of the 2005 Plan shall be applicable to this Plan. 4.2 The Plan shall be submitted for stockholder approval prior to the first anniversary of adoption. 4.3 The number of shares of Stock covered by any Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a split or subdivision of shares, a combination of shares, or the payment of a stock dividend. 4.4 All Options shall become fully exercisable upon the occurrence of a Change of Control as defined in the 2005 Plan. 4.5 The Plan shall be governed by and subject to the laws of the State of Delaware and applicable Federal laws. 4.6 The Plan may be terminated, amended or modified by the Board of Directors, provided no such amendment or modification shall affect previously issued Options without the written consent of the Option holder. 3  4.7 The Plan will terminate when all shares have been issued under the Plan, provided the cash payments may continue indefinitely and can be terminated at any time prior to any new grants (old grants would be unaffected) by the Board. 4