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THIS AMENDMENT NO. 1 TO THE COVENTRY HEALTH CARE, INC. STOCK PURCHASE WARRANT
AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO COVENTRY
HEALTH CARE, INC., IS EXEMPT FROM SUCH REGISTRATION.
AMENDMENT NO. 1
TO
COVENTRY HEALTH CARE, INC.
STOCK PURCHASE WARRANT
This Amendment No. 1 ("Amendment No.1") to that certain Coventry Health
Care, Inc. Stock Purchase Warrant executed on March 31, 1998 (the "Warrant"), is
entered into as of the date set forth below.
WHEREAS, on March 31, 1998, Coventry Health Care, Inc. (the "Company")
executed the Warrant in favor of Principal Health Care, Inc. ("Principal")
giving Principal the right to acquire that number of shares of Coventry's Common
Stock equal to 66-2/3% of the total number of shares of Common Stock actually
issued upon the exercise or conversion of Coventry's employee stock options and
warrants issued and outstanding at March 31, 1998, on the same terms and
conditions as set forth in the respective options and warrants; and
WHEREAS, the intent of the Warrant was to prevent the dilution of
Principal's ownership due to the exercise of options and warrants that were
outstanding at March 31, 1998, the date of the business combination between the
Company and Principal; and
WHEREAS, on September 11, 1998, Coventry's Compensation and Benefits
Committee (the "Committee") voted to reprice all employee stock options due to a
unforeseen decline in the market price of the Company's Common Stock below
exercise prices of the stock options and the Committee's concern that decreased
incentives would lead to attrition of key employees; and
WHEREAS, in order to effect the repricing, employee option holders must
agree to the cancellation of their existing options in exchange for the new
options, and, to the extent such employees so elect the exchange, the effect of
the repricing of the stock options on the Warrant would be to cancel most of the
options underlying the Warrant; and
WHEREAS, Section 3.4 of the Warrant allows the Board of Directors of the
Company to adjust the terms of the Warrant if, in the Board's opinion, an event
occurs that does not fairly protect the rights of the holder of the Warrant in
accordance with the essential intent and principles of the provisions of Section
3 of the Warrant; and
WHEREAS, the Company has determined that this Amendment No.1 is necessary
or desirable and consistent with the objectives of the Board of Directors in
issuing the Warrant.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereby agree as follows:
1. Section 3.1 of the Warrant is hereby amended in its entirety to read as
follows:
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3.1 Cancellation or Expiration of Option Convertible Securities.
If any Option Security shall expire or shall be canceled
without being exercised, in whole or in part, and any
obligation of the Company to issue shares of Common Stock
thereunder shall terminate, then the right of the Holder to
acquire any share of Common Stock relating to such canceled
Option Security shall immediately terminate and no longer be
in effect. Notwithstanding the foregoing, the Option
Securities that are canceled as a result of the repricing of
such Option Securities pursuant to action taken by the
Company's Compensation and Benefits Committee on September 11,
1998, shall not be considered canceled or repriced as to
Principal only, but shall remain in full force and effect and
Principal shall retain the right to purchase 66-2/3% of the
total shares covered by the original Option Securities upon
exercise of the repriced Option Securities by the underlying
holders set forth on Exhibit 1 attached to the Warrant.
2. Sections 8(i) and (ii) are hereby deleted and the following shall be
substituted in their place and stead:
(i) if to the Company:
▇▇▇▇ ▇. ▇▇▇▇
Coventry Health Care, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Principal:
▇▇▇▇ ▇. ▇▇▇▇▇
Principal Life Insurance Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Principal Life Insurance Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
3. Capitalized terms not herein defined shall have the meanings ascribed to
them in the Warrant.
4. The remaining terms and conditions of the Warrant shall remain in full
force and effect, and upon execution hereof, this Amendment No. 1 and the
Warrant shall be considered together as one document.
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IN WITNESS WHEREOF, COVENTRY HEALTH CARE, INC. has caused its duly
authorized officer to execute this Amendment No. 1 to the Principal Warrant in
its name and on its behalf as of the
29th day of October, 1998.
ATTEST: COVENTRY HEALTH CARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇
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Title: Senior Vice President Title: Executive Vice President & CFO
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