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Registration Number 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
COVENTRY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TENNESSEE 62-1297579
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
501 CORPORATE DRIVE, SUITE 400, FRANKLIN, TENNESSEE 37067
(615) 771-4141
(Address, Including Zip Code, and Telephone Number,
Including Area Code of Registrant's Principal Executive Offices)
-------------------------
SHIRLEY R. SMITH
VICE PRESIDENT, CORPORATE GENERAL COUNSEL AND SECRETARY
COVENTRY CORPORATION
501 CORPORATE DRIVE, SUITE 400
FRANKLIN, TENNESSEE 37067
(615) 771-4177
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES OF COMMUNICATIONS TO:
BOB F. THOMPSON
BASS, BERRY & SIMS PLC
2700 FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
(615) 742-6262
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plan, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box, and list the
Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum Amount Of
Title Of Shares Amount To Aggregate Price Aggregate Offering Registration
To Be Registered Be Registered Per Unit (1) Price (1) Fee
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<S> <C> <C> <C> <C>
Common Stock,
par value $.01 per share 439,560 shares $16.1875 $7,115,378 $2,100
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
sales prices of the Company's Common Stock on February 27, 1997, as
reported by the Nasdaq Stock Market National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED MARCH 3, 1998
439,560 Shares
COVENTRY CORPORATION
COMMON STOCK
-----------------------------
This Prospectus relates to the offering and sale of up to 439,560
shares of common stock, par value $.01 per share ("Common Stock"), of Coventry
Corporation, a Tennessee corporation ("Coventry" or the Company") by Coventry
Health and Life Insurance Company ("CHLIC") a wholly-owned subsidiary of the
Company. The shares of Common Stock offered hereby (the "Offered Securities")
were sold to CHLIC by Coventry on March 31, 1997.
The Common Stock may be sold from time to time by CHLIC. Such sales may
be made in the over-the-counter market, or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares may be sold by one or more of the following:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. At the time of a particular offer or sale of any
of the Offered Securities is made by CHLIC, to the extent required pursuant to
the Securities Act, a supplement to this Prospectus will be distributed which
describes the method of sale in greater detail. In addition, any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers or dealers engaged by CHLIC may arrange for
other brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from CHLIC in amounts to be negotiated immediately
prior to the sale. CHLIC and agents who execute orders on its behalf may be
deemed to be underwriters as that term is defined in Section 2(11) of the Act
and any profit on the sales of Offered Securities and discounts, commissions or
other compensation may be deemed to be underwriting compensation for purposes of
the Act.
--------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 4.
--------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the Common Stock to which it relates.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities offered in any jurisdiction in which it is not
lawful or to any person to whom it is not lawful to make any such offer or
solicitation.
THE DATE OF THIS PROSPECTUS IS MARCH __, 1998.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act with respect to the Shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. Certain items are omitted in accordance with
the rules and regulations of the Commission. Statements contained in this
Prospectus concerning the provisions or contents of any contract or other
document referred to herein are not necessarily complete. With respect to each
such contract or agreement or document, reference is made to such document for a
more complete description, and each such statement is deemed to be qualified in
all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files proxy statements, reports, and other information
with the Securities and Exchange Commission (the "Commission"). Proxy
statements, reports and other information concerning the Company can be
inspected and copied at the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's regional offices in New York (7
World Trade Center, New York, New York 10048) and Chicago (Northwestern Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661), and copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
Commission The Company's Common Stock is quoted on the Nasdaq National Market.
Proxy Statements, reports and other information concerning the Company also may
be inspected at the offices of the National Association of Securities Dealers,
Inc., Corporate Financing Department, 9513 Key West Avenue, 3rd Floor,
Rockville, Maryland 20850.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
hereby incorporated herein by reference:
(i) Annual Report on Form 10-K for year ended December 31,
1996, as amended by Forms 10-K/A filed on April 1, 1997, April 30,
1997, June 11, 1997, July 3, 1997 and July 25, 1997;
(ii) Coventry's Proxy Statement dated July 29, 1997 for its
Annual Meeting of Shareholders held on August 20, 1997, as supplemented
on August 5, 1997;
(iii) Quarterly Reports on Form 10-Q for quarter ended March
31, 1997, as amended by Forms 10-Q/A filed June 11, 1997 and July 3,
1997, for quarter ended June 30, 1997, and for quarter ended September
30, 1997; and
(iv) Current Reports on Form 8-K filed on February 26, 1997,
April 14, 1997, May 14, 1997, July 9, 1997, November 7, 1997, January
9, 1998 and February 6, 1998.
(v) Description of Common Stock of the Company contained in
the Company's Registration Statement on Form 8-A filed with the
Commission on April 11, 1991, and any amendment or report filed for the
purpose of updating such description.
(vi) The description of the Company's Stock Purchase Rights
(the "Rights") contained in the Registration statement on Form 8-A
filed with the Commission on February 5, 1996, and any amendment or
report filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c),
and 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by
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reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(other than exhibits specifically incorporated by reference therein). Written
requests should be directed to:
Coventry Corporation
501 Corporate Drive
Franklin, Tennessee 37067
Attn: Shirley R. Smith
Vice President, Corporate General Counsel and Secretary
Telephone requests may be directed to (615) 771-4177.
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THE COMPANY
The following discussion is not intended to be complete and is
qualified in its entirety by reference to, and should be read in conjunction
with, the detailed information appearing elsewhere or incorporated by reference
in this Prospectus. Except as otherwise specified herein, all references herein
to "Coventry" and "the Company" shall include the Company and its wholly-owned
subsidiaries.
Coventry is a managed health care company that at December 31, 1997
provided comprehensive health benefits and services to 897,758 members in
Pennsylvania, Ohio, West Virginia, Missouri, Illinois and Virginia. Health care
services are provided to employer groups and government funded groups through a
variety of full-risk health care plans, including health maintenance
organizations ("HMOs") and preferred provider organization ("PPO") products.
Coventry's HMO products provide comprehensive health care benefits to
enrollees, including ambulatory and inpatient physician services,
hospitalization, pharmacy, dental, optical, mental health, ancillary diagnostic
and therapeutic services. Coventry, through its regional health plans, also
offers fully-insured flexible provider products, including PPO products and
point of service ("POS") products which permit enrollees to participate in
managed care but allow them to choose, at the time services are required, to use
providers not participating in the managed care network. In addition, Coventry
markets a Medicare risk product under the name "Advantra(R)" in the St. Louis,
western and central Pennsylvania, West Virginia, Ohio, and Southern Illinois
markets and offers health care coverage to Medicaid recipients in the St. Louis
and central Missouri markets. Coventry's health plans offer an administrative
services only product to employers who self-insure their employee's health
benefits.
Coventry's health plans maintain provider networks which furnish health
care services through contractual arrangements with physicians, hospitals and
other health care providers, rather than providing reimbursement to the enrollee
for the charges of such products. Because the health plans receive the same
amount of revenue from their enrollees irrespective of the cost of health care
services provided, they must manage both the utilization of services and unit
costs of the services. In the aggregate, Coventry contracts with approximately
18,000 physicians and 270 hospitals for its HMO, PPO and POS programs.
RECENT DEVELOPMENTS
The Board of Directors of Coventry has unanimously approved and
recommended to shareholders a Capital Contribution and Merger Agreement dated as
of November 3, 1997 ("Combination Agreement") by and among, inter alia,
Coventry, Coventry Health Care, Inc. ("Newco"), Principal Health Care, Inc.
("PHC") and Principal Mutual Life Insurance Company ("Mutual") and a related
Agreement and Plan of Merger ("Merger Plan") by and among Coventry, Newco and
Coventry Merger Corporation ("Merger Sub").
The Combination Agreement and related Merger Plan provide that at the
effective time (the "Effective Time"), Merger Sub will merge with and into
Coventry, with Coventry being the surviving corporation, and each outstanding
share of Common Stock shall be converted into one share of Newco's common stock
("Newco Common Stock") and one right (each a "Newco Right") to be issued under
that certain rights agreement between Newco and ChaseMellon Shareholder
Services, LLC. In addition, each outstanding convertible exchangeable
subordinated promissory note (collectively the "Coventry Convertible Notes")
issued by Coventry shall be converted into a convertible exchangeable
subordinated promissory note (collectively the "Newco Convertible Notes")
containing substantially the same terms and conditions as the Coventry
Convertible Notes. No fractional shares will be issued by Newco in the Merger.
Simultaneously at the Effective Time, PHC, an indirect wholly-owned
subsidiary of Mutual, will effect a capital contribution to Newco of certain
assets, including the issued and outstanding capital stock of certain of PHC's
wholly-owned subsidiaries (including its HMO subsidiaries in sixteen states);
Newco will assume the liabilities of PHC, including all liabilities of PHC
relating to the PHC Assets, except certain liabilities, and Newco will issue to
PHC that number of shares of Newco Common Stock and Newco Rights as shall equal
66 2/3% of the shares of Newco Common Stock issued to Coventry's shareholders in
the Merger plus 66 2/3% of the shares of Newco Common Stock issuable upon
conversion of the Newco Convertible Notes (or in the event the Coventry
Convertible Notes are converted into shares of Coventry Preferred Stock prior to
the Effective Time, the shares of Newco
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Common Stock issuable upon conversion of the Newco Preferred Stock). Based on
the 33,304,462 shares of Common Stock outstanding on February 2, 1998 and the
4,166,000 shares issuable upon conversion of $41,660,000 principal amount of
Coventry Convertible Notes outstanding on that date, Newco will issue
approximately 33,304,462 shares of Newco Common Stock to Coventry's shareholders
and 24,980,308 shares of Newco Common Stock to PHC.
The shares of Newco Common Stock issued to PC will constitute 40% of
the sum of (i) the issued and outstanding shares of Newco Common Stock
immediately after the Effective Time and (ii) the shares of Newco Common Stock
issuable upon conversion of the Newco Convertible Notes or the Newco Preferred
Stock, and a similar percentage of the Newco Rights.
At the Effective Time, Newco, Mutual and PHC will enter into the
Shareholders' Agreement which includes (i) a standstill agreement, pursuant to
which Mutual and its affiliates will agree for the five-year period following
the Effective Time (A) not to acquire more than 40% of the total of issued and
outstanding shares of Newco Common Stock other than pursuant to the Combination
Agreement and the instruments and agreements thereunder and (B) not to take
certain other actions; (ii) certain restrictions on direct or indirect transfers
of Newco Common Stock by Mutual and/or its affiliates; (iii) registration rights
pursuant to which Mutual and/or its affiliates may demand that Newco register
certain shares of Newco Common Stock under a registration statement filed with
the Commission and may participate as a selling party in the registered
offerings of the Newco Common Stock; and (iv) Mutual, together with its
affiliates, will have the right to designate six of the fifteen members of the
Newco Board of Directors.
At or prior to the Effective Time, Newco will enter into an agreement
with Mutual (the "Management Services Agreement") to manage, for 3.3% of the
premium revenue attributable therefrom, that portion of those indemnity health
insurance policies issued by Mutual which provide coverage in the Newco markets
("Administered Health Insurance Policies"), which markets will include those
geographic areas in which Coventry, PHC and their respective subsidiaries
conduct business operations. The earned premium for the Administered Health
Insurance Policies was approximately $432 million for the nine months ended
September 30, 1997. The Management Services Agreement will terminate on December
31, 1999 at which time Newco's indirectly wholly-owned subsidiary, Coventry
Health and Life Insurance Company ("CHLIC"), will have the obligation, pursuant
to a renewal rights agreement (the "Renewal Rights Agreement"), to offer to
renew the insurance policies constituting the Administered Health Insurance
Policies and, to the extent that customers choose to renew such policies with
Mutual rather than CHLIC, will reinsure such policies pursuant to a coinsurance
agreement (the "Coinsurance Agreement") with Mutual.
Newco will issue to Mutual at the Effective Time a warrant (the "Newco
Warrant") that gives Mutual the right to purchase from Newco that number of
shares of Newco Common Stock as shall equal 66 2/3% of the total number of
shares of Newco Common Stock as shall actually be issued by Newco upon the
exercise or conversion of the Coventry Options, Coventry Warrants and PHC
Options assumed by Newco upon the same terms and conditions as set forth in the
Coventry Options, Coventry Warrants and PHC Options. As of December 5, 1997,
Coventry had outstanding 3,302,587 Coventry Options with an average exercise
price of $13.47 and 2,477,766 Coventry Warrants with an average exercise price
of $10.79. As of December 31, 1997, PHC had outstanding 750,000 PHC Options with
an exercise price per option equal to $14.50. Mutual's right to purchase shares
of Newco Common Stock under the Newco Warrant will vest, from time to time, with
respect to the number of shares of Newco Common Stock as shall be issued upon
exercise of the Coventry Options, Coventry Warrants or PHC Options, upon receipt
of notice from Newco of the exercise and issuance of such shares and shall
terminate upon the expiration of the Newco Warrant on the later of (x) the 90th
day following receipt of notice of exercise of the underlying Coventry Option,
Coventry Warrant or PHC Option or (y) the expiration of the exercise period of
such underlying option or warrant. Based on the exercise periods of the
underlying Coventry Options, Coventry Warrants or PHC Options, the Newco Warrant
will terminate with respect to 6% through 2003, and 44%, 3%, 20%, 26%, and 1% of
the shares covered thereby in the years 2004 through 2008, respectively.
Coventry estimates that the fair market value of the Newco Warrant as of
November 4, 1997 was approximately $25.0 million.
Relative Voting Power Before and After the Effective Time
The following table sets forth the relative voting power in Coventry
and in Newco, before and after exercise of the Newco Warrant and all stock
options and warrants held by each as of January 31, 1998, of, respectively, (i)
Mutual, (ii) Warburg, (iii) all directors and executive officers of Coventry, as
a group, and (iv) all other shareholders of Coventry.
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<TABLE>
<CAPTION>
After the Effective Time
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Prior to exercise of After exercise of
Newco Warrant Newco Warrant
and options and and options and
Prior to the warrants held at warrants held at
Effective Time January 31, 1998 January 31, 1998
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<S> <C> <C> <C>
Mutual....................................................... 0 40.0%(1) 40.0%(1)
Warburg(1)................................................... 10.1% 6.1% 8.8%
All Coventry directors and executive officers as a group..... 5.5% 3.3% 4.0%
All other Coventry shareholders.............................. 84.4% 50.6% 47.2%
</TABLE>
(1) Assumes the conversion of $37,490,000 principal amount of Convertible
Notes into 3,749,000 shares of Coventry (and after the Effective Time
Newco) Preferred Stock, which has one vote per share.
Newco's headquarters will be located at 6705 Rockledge Drive, Suite
100, Bethesda, Maryland 20817. The Board of Directors of Newco on the Effective
Time will consist of the Board of Directors of Coventry immediately prior to the
Merger and six directors designated by Mutual. Allen F. Wise, the President and
Chief Executive Officer of Coventry, will serve as President and Chief Executive
Officer of Newco after the Effective Time. Kenneth J. Linde, President and Chief
Executive Officer of PHC, will serve as Executive Vice President and Chief
Operating Officer of Newco after the Effective Time. Dale B. Wolf, Senior Vice
President, Chief Financial Officer and Treasurer of Coventry, will serve as
Chief Financial Officer and Treasurer of Newco after the Effective Time.
The obligations of Coventry, Mutual and PHC to consummate the
transactions contemplated by the Combination Agreement (the "Business
Combination") are subject to certain conditions, including, but not limited to:
(i) the Combination Agreement shall have been approved and adopted by the
affirmative vote of the holders of a majority of the shares of the Coventry
Common Stock entitled to be cast at the Special Meeting; (ii) all material
authorizations, consents and approvals of third parties shall have been
obtained; (iii) this Proxy Statement/Prospectus shall have been declared
effective under the Securities Act and shall not be subject to any stop order;
(iv) no action or proceeding shall have been instituted before a court or other
governmental body by any governmental agency or public authority to restrain or
prohibit the transactions contemplated by the Combination Agreement or to obtain
an amount of damages or other material relief in connection therewith and no
governmental agency shall have given notice to the effect that the consummation
of the transactions contemplated by the Combination Agreement will constitute a
violation of any law or that it intends to commence proceedings to restrain the
consummation thereof; (v) Coventry and PHC shall have each received an opinion
of counsel as to certain tax matters; and (vi) certain other conditions
customary in transactions of this nature, including the receipt of other
necessary regulatory approvals and the performance by the parties of their
respective obligations under the Combination Agreement shall have been waived or
satisfied.
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RISK FACTORS
In addition to the other information included or incorporated by
reference in this Prospectus, the following factors should be considered
carefully in evaluating an investment in the Common Stock offered hereby. This
discussion also identifies important cautionary factors that could cause the
Company's actual results to differ materially from those projected in forward
looking statements of the Company made by, or on behalf of, the Company.
RISKS OF GOVERNMENTAL PROGRAMS AND REGULATIONS
Coventry's and PHC's industry is heavily regulated and the laws and
rules governing the industry and interpretations of those laws and rules are
subject to frequent change. Existing or future laws and rules could force Newco
to change how it does business and may restrict Newco's revenue and/or
enrollment growth and/or increase its health care and administrative costs.
Regulatory approvals must be obtained and maintained to market many of the
products and services of Coventry and PHC. Delays in obtaining or failure to
obtain or maintain such approvals could adversely affect Newco's revenue or the
number of covered lives, or could increase costs.
Each of Coventry and PHC is, and Newco will be, subject to risks
associated with offering Medicaid and Medicare risk products, including pricing
and other regulatory restrictions, potentially higher medical loss ratios and
risks associated with entering new markets. Newco currently intends to continue
to expand these products, and its exposure to such risks will increase.
Coventry's and PHC's HMO subsidiaries which provide managed health care services
under the Federal Employees Health Benefits Program are subject to audit, in the
normal course of business, by the United States Office of Personnel Management
("OPM"), and such audits could result in material adjustments. Coventry's and
PHC's financial results are also susceptible to future state and federal
regulatory measures, including health care reform. Recently, the Clinton
Administration and various leaders of the U.S. Congress have proposed
legislation which could result in increased costs to managed care providers.
LIMITATIONS ON ABILITY TO INCREASE REVENUES
Increases in Newco's revenues will be generally dependent upon its
ability to increase premiums and number of members, as well as the mix of the
products sold. Coventry's health care plan membership recently has shown only
moderate increases; while membership in PHC's plans increased at a more
vigorous rate prior to 1997, much of the increased membership was not
profitable, and recent PHC premium rate increases may result in fewer members in
the future. Although premium rates for managed care plans generally have
increased recently, competitive pressures, regulatory restrictions and consumer
preference for lower-priced health care options may cause decreases or severely
limit increases in the future. The premiums from governmental programs such as
Medicare or Medicaid are generally not based on an individual company's
anticipated costs and cannot be adjusted by the company. Certain of the
customers of Coventry and of PHC represent a significant percentage of the
membership of one or more of their respective health plans, and the loss of one
or more of such customers could cause a material adverse effect on the revenues
of Newco in the future.
LIMITS ON ABILITY TO PROJECT ACTUAL HEALTH CARE COSTS
A substantial portion of the revenue received by Coventry and PHC, and
expected to be received by Newco, is expected to pay the costs of health care
services or supplies delivered to persons covered by its health plan and
insurance products. The total health care costs incurred by Coventry and PHC,
and to be incurred by Newco, are affected by the number of individual services
rendered and the cost of each service. Much of the premium revenue is set in
advance of the actual delivery of services and the related incurring of the
cost, usually on a prospective annual basis. While Coventry and PHC attempt to
base the premiums they charge at least in part on their estimate of expected
health care costs over the fixed premium period, competition, regulations and
other circumstances may limit their and Newco's ability to fully base premiums
on estimated costs. In addition, many factors may and often do cause actual
health care costs to exceed those estimated, including increased cost of
individual services, catastrophes, epidemics, seasonality, general inflation,
new mandated benefits or other regulatory changes and insured population
characteristics. Accordingly, there may be discrepancies between reserves for
incurred-but-not-reported liabilities and the actual amount of such liabilities.
Historically, increases in health care prices and utilization have caused health
care costs to rise faster than general inflation. While these increases have
moderated recently, there can be no assurance that health care prices or
utilization will not again increase at a more rapid pace.
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RISKS OF AGREEMENTS WITH PROVIDERS
Prior to 1997, Coventry's St. Louis and Pennsylvania health plans
offered members access to Company owned and staffed medical centers, as well as
to networks of contracting providers. During 1997, the Company's medical centers
were sold to provider systems which have contracted to provide care to the
Company's members continuing to use such centers. Newco expects that
substantially all its membership will be served by providers contracting with
Newco to provide the requisite medical care. The ability of Newco to contract
successfully with a sufficiently large number of providers in a given geographic
market will impact the relative attractiveness of its managed care products in
those markets. The terms of such provider contracts also have a material impact
on Newco's medical costs and its ability to control such costs. In certain
markets, currently served by Coventry and PHC, certain provider systems have
significant market positions, and may compete with Coventry or PHC and, in the
future, Newco. If such provider systems refuse to contract with Newco, place
Newco at a competitive disadvantage or use their market position to negotiate
contracts unfavorable to Newco, Newco's product offerings or profitability in
such market areas could be adversely affected.
Among the medical cost control techniques Coventry has utilized, and
Newco will continue to utilize, are capitation agreements with providers
pursuant to which providers are paid a fixed dollar amount per member under the
agreement, with the provider obligated to provide all of a particular type of
medical service required by the members, and global capitation agreements,
pursuant to which a single integrated hospital-physician provider system
provides substantially all hospital and medical services to large number of
members for a fixed percentage of the premium charged by Coventry. While these
systems may shift to the contracting provider system the risk that medical costs
will exceed the amounts anticipated, Coventry and Newco will be exposed to the
risk that the provider systems will be financially unable or unwilling to
fulfill their payment or medical care obligations under the capitation
agreements, and to the risk that members may prefer other providers in the
market.
RECENT OPERATING LOSSES
Coventry experienced significant operating losses in 1996 and in the
first quarter of 1997 and has only recently returned to profitability. PHC
incurred operating losses in 1995, 1996 and the first nine months of 1997. While
management of Coventry believes that the operating results of the PHC Business
will improve in 1998 and 1999 and that efficiencies in combined operations after
the Effective Time will improve the profitability of the combined companies, no
assurance can be given that such efficiencies or profitability will be achieved.
INFORMATION SYSTEMS AND ADMINISTRATIVE EXPENSE RISKS
The level of administrative expense is a significant factor in the
operating results of Coventry, PHC and, in the future, Newco. While Coventry and
PHC attempt to effectively manage such expenses, increases in staff-related and
other administrative expenses may occur from time to time due to business or
product startups or expansions, growth or changes in business, acquisitions,
regulatory requirements or other reasons. Such expense increases are not clearly
predictable, and increases in administrative expenses may adversely affect
results. As a result of the Business Combination, the parties will seek to
reduce the level of their combined administrative expense through integration
efficiencies, including some personnel reductions. However, the substantially
greater scope of Newco's operations over those of Coventry and PHC,
respectively, may lead to increases in administrative expenses, particularly in
the short term.
Coventry's and PHC's businesses are significantly dependent on
effective information systems. Coventry and PHC have different information
systems for their various businesses. Newco will attempt to reduce the number of
systems and also upgrade and expand its information systems capabilities.
Failure to maintain an effective and efficient information system could result
in loss of existing customers and difficulty in attracting new customers,
customer and provider disputes, regulatory problems, increases in administrative
expenses or other adverse consequences. In addition, Newco, may, from time to
time, obtain significant portions of its systems-related or other services or
facilities from independent third parties which may make Newco's operations
vulnerable to such third party's failure to perform adequately. Although both
Coventry and PHC have undertaken programs designed to prevent material
information system disruption at January 1, 2000, such programs have not been
completed and are subject to the failure of third party vendors to comply with
planned software revisions.
RISK OF INTEGRATION OF THE BUSINESSES
The Business Combination involves the integration of two companies that
have previously been operated independently. Among the factors considered by the
Coventry Board of Directors in connection with its approval of the Combination
Agreement were the opportunities of integration efficiencies that should result
from such integration. No assurance can be given that difficulties
7
<PAGE> 10
will not be encountered in such integration, including, without limitation,
difficulties relating to the integration of the companies' management
information, accounting, accrual and control systems, executive management and
culture, or that the benefits expected from such operation and integration will
be realized. Because of the demands placed on the management information systems
of the combined companies, the integrated operations of Coventry and PHC are
especially susceptible to risks associated with a malfunction in these systems,
including an impairment of the systems' operations caused by the year 2000
problem. Any delays or unexpected costs incurred in connection with such
operation and integration could have a material adverse effect on Newco's
business, results of operations or financial condition.
FINANCING RISK
Coventry's and PHC's recent financial losses may make it more difficult
to obtain financing on as favorable terms in the future. In addition, operating
losses by a subsidiary may require Coventry, PHC or Newco to make investments
in, or to refinance loans to, such subsidiary in order to maintain required
capital levels. Many of the state regulatory authorities in states in which
Coventry and PHC conduct business are expected to increase capital requirements
for managed care companies in the next two years. Coventry currently has a
credit facility with a group of banks, under which Coventry has $42.8 million of
outstanding indebtedness. The credit facility currently requires repayment in
full on April 1, 1999. Consummation of the transactions contemplated by the
Combination Agreement will require approval from Coventry's lending banks, which
Coventry anticipates will be received.
ADMINISTERED HEALTH INSURANCE POLICIES RISK
The Management Services Agreement and Renewal Rights Agreement
contemplate that Newco will manage the Administered Health Insurance Policies in
the Newco Markets and offer to renew such policies as are in force on December
31, 1999. Although Coventry believes that more than 50% of the Administered
Health Insurance Policies utilize preferred provider networks or other elements
of managed care similar to Newco's business, a significant amount of the
policies will be indemnity policies under which the insurer is liable for all
claims (subject to certain deductible amounts or copayment percentages)
regardless of whether the provider has an agreement with the insurer. Neither
Coventry nor PHC has any recent experience in the management or operation of a
substantial indemnity health insurance business, and there can be no assurance
that existing customers will renew their existing indemnity health insurance
policies with Mutual while the Management Services Agreement is effective, or
that such customers will agree to renew such policies with expiration of the
Management Services Agreement, and there can be no assurance that the benefits
expected from the Management Service Agreement, Renewal Rights Agreement and
Coinsurance Agreement will be realized. In addition, to the extent policy
holders elect to renew the Administered Health Insurance Policies with Mutual
after December 31, 1999, CHLIC will be required to reinsure such policies which
will require that CHLIC increase its capital by an amount estimated to be
between $50 million to $100 million. There can be no assurance that Newco will
be able to restructure its operations to free up existing capital, generate
sufficient funds from operations to increase CHLIC's capital to required levels
prior to December 31, 1999 or will be able to raise such capital from external
sources.
RISK OF COMPETITION
Coventry and PHC operate, and Newco will operate, in a highly
competitive industry. In many of its geographic or product markets, Newco will
compete with a number of other entities, some of which may have certain
characteristics or capabilities that give them an advantage in competing with
Newco. In many of Newco's markets, Newco will initially have a small share of
the total market for the managed health insurance business and will be exposed
to additional risks relating to competition with larger or more established
competitors. Coventry believes that there are few barriers to entry in these
markets, so that the addition of new competitors can occur relatively easily.
Certain of Coventry's and PHC's existing customers may decide to perform for
themselves functions or services formerly provided by Coventry or PHC, resulting
in a decrease of Newco's projected revenue. In addition, significant merger and
acquisition activity has occurred in the managed care industry as well as in
other segments of the health care industry, both nationally and in various local
markets. This activity may create stronger competitors and/or result in higher
health care costs. To the extent that there is strong competition or that
competition intensifies in any market, Newco's ability to retain or increase
customers, its revenue growth, its pricing flexibility, its control over medical
costs trends and its marketing expenses may all be adversely affected.
RISK OF SUBSTANTIAL BENEFICIAL OWNERSHIP OF NEWCO BY MUTUAL AND PHC
As a result of the Merger and the Capital Contribution, PHC will own
approximately 40% of the Newco Common Stock and, although it has agreed to a
limitation on acquiring additional shares of the Newco Common Stock and from
taking certain other actions, Mutual and its affiliates will be permitted under
certain circumstances to acquire additional shares of Newco Common Stock in
order to maintain a collective ownership of up to 40% of the Newco Common Stock,
and to elect six of the fifteen members of
8
<PAGE> 11
Newco's Board of Directors, until the earlier of the fifth anniversary of the
Effective Time or certain other actions are taken by Newco. After the fifth
anniversary of the Effective Time or after a third party acquires more voting
securities than those held by Mutual, there will be no restrictions on the
acquisition of Newco Common Stock by Mutual and its affiliates. During the
period from the Effective Time until eighteen months thereafter, so long as
Mutual maintains ownership of 40% of the Newco Common Stock, it is highly
unlikely that any matter involving a shareholder vote, including the issuance of
more than 20% of the Newco Common Stock, or an acquisition of Newco by merger,
consolidation, share exchange or other transaction could be effectuated if
Mutual were opposed thereto. During the period beginning eighteen months after
the Effective Time and ending on the fifth anniversary of the Effective Time,
Mutual has agreed to vote its shares in favor of an acquisition required to be
approved by shareholders that the Board has recommended and has been approved by
a majority of Newco's shareholders (other than Mutual and its affiliates).
During the period after the termination of the "standstill restrictions"
contained in the Shareholders' Agreement, and in any event after the fifth
anniversary of the Effective Time, there will be no restrictions on the
acquisition of additional shares of Newco Common Stock by Mutual and its
affiliates, and as a result, Mutual, in addition to having an effective veto
over transactions involving a shareholder vote (assuming it were to continue to
beneficially own 40% of Newco's voting securities), could acquire over 50% of
the outstanding Newco Common Stock and exercise actual control of Newco without
a vote of the remaining Newco shareholders.
MARKETING RISK
Coventry and PHC market their products and services through both
employed sales people and independent sales agents. Although each of Coventry
and PHC has a number of such sales employees and agents, if certain key sales
employees or agents or a large subset of such individuals were to leave, Newco's
ability to retain existing customers and members could be impaired. In addition,
certain of the customers or potential customers of Coventry and PHC consider
rating, accreditation or certification of Coventry and PHC by various private or
governmental bodies or rating agencies necessary or important. Certain of
Newco's health plans or other business units may not have obtained or may not
desire or be able to obtain or maintain such accreditation or certification
which could adversely affect Newco's ability to obtain or retain business with
such customers. The managed care industry has recently received significant
amounts of negative publicity. Such general publicity, or negative publicity
regarding Coventry and PHC in particular, could adversely affect Newco's ability
to sell its product or services or could create regulatory problems for Newco.
LITIGATION AND INSURANCE RISK
The health care industry in general is susceptible to litigation and
insurance risks, including medical malpractice liability, disputes relating to
the denial of coverage and the adequacy of "stop-loss" reinsurance for costs
resulting from catastrophic injuries or illnesses to Coventry's or PHC's
members. Coventry and PHC have contingent litigation risk with certain
discontinued operations. Such litigation may result in losses to Coventry, PHC
and Newco which could have a material adverse effect on the operations,
financial performance or prospects of Newco.
STOCK MARKET RISK
Recently, the market prices of the securities of certain of the
publicly-held companies in the industry in which Coventry and PHC operate have
shown volatility and sensitivity in response to many factors, including public
communications regarding managed care, legislative or regulatory actions, health
care cost trends, pricing trends, competition, earnings or membership reports of
particular industry participants, and acquisition activity. There can be no
assurance regarding the level or stability of Newco's share price at any time or
of the impact of these or any other factors on the share price.
9
<PAGE> 12
USE OF PROCEEDS
The Company will not directly receive any of the proceeds from the sale
of any shares of Common Stock held by CHLIC. However, since CHLIC is a
wholly-named subsidiary, the net proceeds (estimated at approximately $7,105,000
after expenses, based on the closing sale price on February 27, 1998) will be
indirectly received by the Company. All of the proceeds will be retained by
CHLIC for its general corporate purposes.
SELLING SHAREHOLDER
CHLIC has been a wholly-owned subsidiary of the Company since its
acquisition in 1987. Its ownership of Common Stock prior to this offering was
439,560 shares, which it acquired from the Company on March 31, 1997 and after
the completion of the offering it will cease to own shares of the Company's
Common Stock.
PLAN OF DISTRIBUTION
The Common Stock may be sold from time to time by CHLIC. Such sales may
be made in the over-the-counter market, or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares may be sold by one or more of the following:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. At the time of a particular offer or sale of any
of the Offered Securities is made by CHLIC, to the extent required pursuant to
the Securities Act, a supplement to this Prospectus will be distributed which
describes the method of sale in greater detail. In addition, any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers or dealers engaged by CHLIC may arrange for
other brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from CHLIC in amounts to be negotiated immediately
prior to the sale. CHLIC and agents who execute orders on its behalf may be
deemed to be underwriters as that term is defined in Section 2(11) of the Act
and any profit on the sales of Offered Securities and discounts, commissions or
other compensation may be deemed to be underwriting compensation for purposes of
the Act.
CHLIC may indemnify any broker-dealer that participates in transactions
involving the sale of shares of Common Stock against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Bass, Berry & Sims PLC, Nashville, Tennessee.
EXPERTS
The consolidated financial statements and schedules of the Company as
of December 31, 1996, incorporated by reference herein, from the Company's 1996
Annual Report on Form 10-K, as amended by Forms 10-K/A filed April 1, 1997,
April 30, 1997, June 11, 1997, July 3, 1997 and July 25, 1997, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
10
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee............................................................... 2,116
Legal Fees and Expenses............................................................ 5,000
Accounting Fees and Expenses....................................................... 2,000
Miscellaneous........................................................................ 884
Total.............................................................................$10,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Tennessee Business Corporation Act ("TBCA") provides that a
corporation may indemnify any of its directors and officers against liability
incurred in connection with a proceeding if (i) the director or officer acted in
good faith, (ii) in the case of conduct in an official capacity with the
corporation, the director or officer reasonably believed such conduct was in the
corporation's best interests, (iii) in all other cases, the director or officer
reasonably believed such conduct was in the corporation's best interests, (iii)
in all other cases, the director or officer reasonably believed that his or her
conduct was not opposed to the best interests of the corporation, and (iv) in
connection with any criminal proceeding, the director or officer had no
reasonable cause to believe that his or her conduct was unlawful. In actions
brought by or in the right of the corporation, however, the TBCA provides that
no indemnification may be made if the director or officer was adjudged to be
liable to the corporation. In cases where indemnification may be made if the
director or officer was adjudged to be liable to the corporation. In cases where
the director or officer is wholly successful, on the merits or otherwise, in
defense of any proceeding instigated because of his or her status as an officer
or director of a corporation, the TBCA mandates that the Corporation indemnify
the director or officer against reasonable expenses incurred in the proceeding.
The TBCA also provides that in connection with any proceeding charging improper
personal benefit to an officer or director, no indemnification may be made if
such officer or director is adjudged liable on the basis that such personal
benefit was improperly received. Notwithstanding the foregoing, the TBCA
provides that a court of competent jurisdiction, upon application, may order
that an officer or director be indemnified for reasonable expenses if, in
consideration of all relevant circumstances, the court determines that such
individual is fairly and reasonably entitled to indemnification, whether or not
the standard of conduct set forth above was met.
The Amended and Restated Charter (the "Charter") of the Company and its
Amended and Restated Bylaws (the "Bylaws") provide that the Company shall
indemnify against liability, and advance expenses to, any present or former
director or officer of the Company to the fullest extent allowed by the TBCA as
amended from time to time, or any subsequent law, rule or regulation adopted in
lieu thereof. Additionally, the Charter provides that no director of the Company
shall be personally liable to the Company or any of its shareholders for
monetary damages for breach of any fiduciary duty except for liability arising
from (i) any breach of a director's duty of loyalty to the Company or its
shareholders, (ii) acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law, (iii) any unlawful
distributions, or (iv) receiving any improper personal benefit. The Company has
entered into indemnification agreements with each of the Company's directors and
executive officers.
II-1
<PAGE> 14
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Capital Contribution and Merger Agreement effective as of November 3, 1997 by and
among Coventry Corporation, Coventry Health Care, Inc., Principal Mutual Life
Insurance Company, Principal Holding Company and Principal Health Care, Inc.*
5 Opinion of Bass, Berry & Sims.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Bass, Berry & Sims (included in exhibit 5).
24 Power of Attorney (included on page II-4)
- ----------
* Incorporated by reference to Amendment No. 1 to Form S-4 (Registration No. 333-
45821) of Coventry Health Care, Inc.
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities offered hereby, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that the undertakings in paragraphs (i) and (ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered hereby which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 15
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 16
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Franklin, State of Tennessee, on the 3rd day
of March, 1998.
COVENTRY CORPORATION
By: /s/ Alan F. Wise
-------------------------------------
Alan F. Wise
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Shirley R. Smith his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including, without limitation,
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alan F. Wise
- --------------------------------- President, Chief Executive Officer March 3, 1998
Alan F. Wise and Director (Principal Executive
Officer)
/s/ Dale B. Wolf
- --------------------------------- Senior Vice President, Chief March 3, 1998
Dale B. Wolf Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
- --------------------------------- Director _____________, 1998
John H. Austin, M.D.
- --------------------------------- Director _____________, 1998
Philip N. Bredesen
/s/ Lawrence De France
- --------------------------------- Director March 3, 1998
Lawrence De France
/s/ Emerson D. Farley, Jr.
- --------------------------------- Director March 3, 1998
Emerson D. Farley, Jr., M.D.
- --------------------------------- Director _____________, 1998
Lawrence N. Kugelman
/s/ Richard H. Jones
- --------------------------------- Director, Senior Vice President, March 3, 1998
Richard H. Jones Finance and Development
</TABLE>
II-4
<PAGE> 17
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Patrick T. Hackett
- --------------------------------- Director March 2, 1998
Patrick T. Hackett
- --------------------------------- Director _____________, 1998
Rodman W. Moorhead
</TABLE>
II-5
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
----- -----------
<S> <C>
2.1 Capital Contribution and Merger Agreement effective as of November 3, 1997
by and among Coventry Corporation, Coventry Health Care, Inc., Principal
Mutual Life Insurance Company, Principal Holding Company and Principal
Health Care, Inc.*
5 Opinion of Bass, Berry & Sims.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Bass, Berry & Sims (included in exhibit 5).
24 Power of Attorney (included on page II-4)
</TABLE>
- ----------
* Incorporated by reference to Amendment No. 1 to Form S-4 (Registration
No. 333-45821) of Coventry Health Care, Inc.
II-6
<PAGE> 1
Exhibit 5.1
B A S S, B E R R Y & S I M S P L C
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
2700 FIRST AMERICAN CENTER 1700 RIVERVIEW TOWER
NASHVILLE, TENNESSEE 37238-2700 POST OFFICE BOX 1509
TELEPHONE (615) 742-6200 KNOXVILLE, TENNESSEE 37901-1509
TELECOPIER (615) 742-6293 TELEPHONE (423) 521-6200
TELECOPIER (423) 521-6234
March 2, 1998
Coventry Corporation
501 Corporate Drive, Suite 400
Franklin, TN 37204
Re: REGISTRATION STATEMENT ON FORM S-3
Dear Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") to be filed by
you with the Securities and Exchange Commission, covering 439,560 shares of
common stock, no par value (the "Common Stock"), of Coventry Corporation, a
Tennessee corporation (the "Company"), to be offered by Coventry Health and Life
Insurance Company ("CHLIC").
In connection with this opinion, we have examined and relied upon such
records, documents and other instruments as in our judgment are necessary or
appropriate in order to express the opinions hereinafter set forth and have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.
Based upon the foregoing and such other matters as we have deemed
relevant, we are of the opinion that the shares of Common Stock to be offered by
the CHLIC, when as described in the Registration Statement (after the
Registration Statement is declared effective), will be validly issued, fully
paid and nonassessable.
We hereby consent to the reference to our law firm in the Registration
Statement under the caption "Legal Matters" and to the use of this opinion as an
exhibit to the Registration Statement.
Sincerely,
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated February 21, 1997 (except for Notes G and S, as
to which the date is March 31, 1997), included in Amendment No. 5 to Form 10-K/A
for the year ended December 31, 1996 in this Form S-3 of Coventry Corporation.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 27, 1998
