SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. _____________)/1/
Coventry Health Care, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
222862104
(CUSIP Number)
Karen Shaff, Esq.
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392
(515)247-6139
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
with a copy to:
Donald B. Henderson, Jr.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019-5389
(212) 424-8000
April 1, 1998
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 3d-1(c), 13d-1(f) or 13d-1(g), check the following
box [_].
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 51 Pages)
- ----------
/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
SCHEDULE 13D
CUSIP No. 222862104 Page 2 of 51 Pages
- ------------------- ------------------
1 NAME OF REPORTING PERSON
Principal Mutual Life Insurance Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
I.R.S. Identification No. 42-0127290
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [_]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [_]
6 CITIZENSHIP OR PLACE OF OR ANIZATION
Iowa
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH 25,081,604 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
10 SHARED DISPOSITIVE POWER
25,081,604 (See Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,081,604 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [_]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.9%
14 TYPE OF REPORTING PERSON
HC
SCHEDULE 13D
CUSIP No. 222862104 Page 3 of 51 Pages
- ------------------- ------------------
1 NAME OF REPORTING PERSON
Principal Holding Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
I.R.S. Identification No. 42-0942600
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [_]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) [_]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Iowa
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH 25,081,604 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
10 SHARED DISPOSITIVE POWER
25,081,604 (See Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,081,604 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [_]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.9%
14 TYPE OF REPORTING PERSON
HC
SCHEDULE 13D
CUSIP No. 222862104 Page 4 of 51 Pages
- ------------------- ------------------
1 NAME OF REPORTING PERSON
Principal Health Care, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
I.R.S. Identification No. 52-1503069
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [_]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) [_]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Iowa
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH 25,043,704 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
10 SHARED DISPOSITIVE POWER
25,043,704 (See Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,081,604 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [_]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.9%
14 TYPE OF REPORTING PERSON
CO
Item 1. Security and Issuer.
The title of the securities to which this statement relates is common
stock, par value $.01 per share ("CHC Common Stock") of Coventry Health Care,
Inc., a Delaware corporation ("CHC"). The principal executive offices of CHC are
located at 6705 Rockledge Drive, Suite 100, Bethesda, MD 20817.
Item 2. Identity and Background.
This statement is being filed by: (i) Principal Mutual Life Insurance
Company ("PM"), (ii) Principal Holding Company ("PH"), and (iii) Principal
Health Care, Inc. ("PHC").
PM is a mutual insurance company organized under the laws of the State of
Iowa. The present principal business activity of PM is the provision of products
and services for businesses, groups and individuals including individual
insurance, pension plans and group/employee benefits. The address of its
principal business and principal office is 711 High Street, Des Moines, Iowa
50392.
PH is a corporation incorporated under the laws of the State of Iowa. It is
a wholly owned subsidiary of PM. PH is a holding company for the non-life
insurance subsidiaries of PM. The address of its principal business and
principal office is 711 High Street, Des Moines, Iowa 50392.
PHC is a corporation incorporated under the laws of the State of Iowa. It
is a direct wholly owned subsidiary of PH and an indirect wholly owned
subsidiary of PM. PHC's principal business is the development and administration
of managed care arrangements such as preferred provider organizations and health
maintenance organizations. The address of PHC's principal business and principal
office is 6705 Rockledge Drive, Suite 100, Bethesda, MD 20817.
Each of PM, PH and PHC is hereinafter referred to individually as a
"Reporting Person" and collectively as "Reporting Persons." As discussed below,
the Reporting Persons collectively may be deemed to be a group, within the
meaning of Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as
amended (the "Act"), beneficially owning, in the aggregate, 25,081,604 shares of
CHC Common Stock or approximately 42.9% of CHC Common Stock within the meaning
of Rule 13d-3(a) of the Act.
Victor H. Loewenstein, a director of PM, is a citizen of the United
Kingdom. Elizabeth E. Tallett, a director of PM, is a citizen of the United
Kingdom. All other Directors and Executive Officers of the Reporting Persons are
United States citizens.
Attached as Schedule B hereto and incorporated by reference herein is a
list of all Directors and Executive Officers of each Reporting Person. Such
Schedule B also sets forth the principal business address and principal
occupation or employment of each person listed thereon.
During the last five years, except as set forth below, none of the
Reporting Persons, or the Directors or Executive Officers of the Reporting
Persons, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
During the last five years, except as set forth below, none of the
Reporting Persons, or the Directors or Executive Officers of the Reporting
Persons, has been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, or finding any violation with
respect to, federal or state securities law.
Item 3. Source and Amount of Funds or Other Consideration.
On April 1, 1998, pursuant to a Capital Contribution and Merger Agreement
dated as of December 19, 1997 (effective as of November 1, 1997, and amending
and restating the Capital Contribution and Share Exchange Agreement dated as of
November 3, 1997) (the "Combination Agreement"), by and among CHC, Coventry
Corporation, a Tennessee corporation ("Coventry"), Coventry Health Care, Inc., a
Maryland corporation ("CHC II"), PM, PH and PHC, PHC transferred to CHC certain
of PHC's assets, including the issued and outstanding stock of certain of PHC's
wholly-owned subsidiaries, all real or personal property owned or leased by PHC,
all accounts receivable, cash, securities, contract rights, prepaid liabilities,
and all other assets except for specified excluded assets (the "PHC Assets").
The book value of the PHC Assets including property and excluding $43.1 million
of recorded goodwill at September 30, 1997 was approximately $288.6 million. CHC
assumed all of the liabilities of PHC, including all liabilities of PHC relating
to the PHC Assets but excluding liabilities under certain PHC employee benefit
plans, tax liabilities with respect to the pre-closing operations of PHC and its
subsidiaries, liabilities relating to certain assets of PHC not transferred to
CHC and certain other specified excluded liabilities (the "PHC Liabilities"). In
consideration of this transfer, CHC issued to PHC consideration consisting of
25,043,704 shares of CHC Common Stock.
By virtue of their ownership and control of PHC, PM and PH have the
ultimate voting and dispositive power with respect to the shares of CHC Common
Stock held by PHC and may be deemed indirect beneficial owners of all of the
shares of CHC Common Stock owned by PHC within the meaning of Rule 13d- 3(a)
under the Act.
Item 4. Purpose of Transaction.
The acquisition of the shares of CHC Common Stock by the Reporting Persons
reported in this statement on Schedule 13D was made for long term investment
purposes.
Concurrently with the consummation of the Merger, PM and PHC entered into
the Shareholders' Agreement with CHC, dated as of April 1, 1998 (the
"Shareholders' Agreement"). The Shareholders' Agreement includes (i) a
standstill agreement, pursuant to which PM and its affiliates agree for the
five-year period following April 1, 1998 (A) not to acquire more than 40% of the
total of issued and outstanding shares of CHC 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 CHC Common Stock by PM and/or its affiliates; (iii)
registration rights pursuant to which PM and/or its affiliates may demand that
CHC register certain shares of CHC Common Stock under a registration statement
filed with the SEC and may participate as a selling party in other registered
offerings of CHC Common Stock; and (iv) the right of PM, together with its
affiliates, to designate six of the fifteen members of the CHC Board of
Directors.
As a result of the Shareholders' Agreement, the parties thereto may be
deemed to constitute a "group" within the meaning of Rule 13d-5 under the Act,
and as such, each member of the group would be deemed to beneficially own all
shares of CHC Common Stock held, in the aggregate, by all group members.
Pursuant to the Combination Agreement, CHC also issued to PM the Warrant,
dated as of March 31, 1998 (the "Warrant"). Under the terms of the Warrant, PM
has the right to purchase from CHC that number of shares of CHC Common Stock as
shall equal 66 2/3% of the total number of shares of CHC Common Stock as shall
actually be issued by CHC upon the exercise or conversion of all of the
outstanding options and warrants issued by CHC or options assumed by CHC from
PHC upon the same terms and conditions as set forth in the CHC Options, CHC
Warrants and assumed PHC Options. As of March 9, 1998, CHC had outstanding
3,355,045 CHC Options with an average exercise price of $13.50 and 2,477,766 CHC
Warrants with an average exercise price of $10.79. As of March 9, 1998, there
were 750,000 PHC Options outstanding with an exercise price per option equal to
$14.50. PM's right to purchase shares of CHC Common Stock under the Warrant will
vest, from time to time, with respect to the number of shares of CHC Common
Stock as shall be issued upon exercise of the CHC Options, CHC Warrants or
assumed PHC Options, upon receipt of notice from CHC of the exercise and
issuance of such shares and shall terminate upon the expiration of the Warrant
on the later of (x) the 90th day following receipt of notice of exercise of the
underlying CHC Option, CHC Warrant or assumed PHC Option or (y) the expiration
of the exercise period of such underlying option or warrant. Based on the
exercise periods of the underlying CHC Options, CHC Warrants or assumed PHC
Options, the Warrant will terminate with respect to 6% in 2003, and 44%, 3%,
20%, 26%, and 1% of the shares covered thereby in the years 2004 through 2008,
respectively. It is estimated that the fair market value of the Warrant as of
November 4, 1997 was approximately $25.0 million.
Other than as set forth above, the Reporting Persons do not have any plans
or proposals, which relate to or would result in any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D under the
Act. The Reporting Persons reserve the right to acquire additional securities of
CHC, to dispose of securities of CHC at any time or to formulate other purposes,
plans or proposals regarding CHC or any of its securities to the extent deemed
advisable in light of their respective general investment and trading policies,
market conditions or other factors.
Item 5. Interest in Securities of the Issuer.
(a) - (b) As of the date hereof, PHC holds 25,043,704 shares of CHC Common
Stock.
In addition, Invista Capital Management, Inc. ("Invista"), a direct wholly
owned subsidiary of PH, and an indirect wholly owned subsidiary of PM, is a
record holder of an additional 37,900 shares of CHC Common Stock. Invista is a
corporation incorporated under the laws of the state of Iowa. The present
principal business activity of Invista is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940. The address of Invista's
principal business and principal office is 699 Walnut, 1800 Hub Tower, Des
Moines, Iowa 50309. Invista, using funds provided by holders of certain
investment accounts for which Invista acts as investment adviser, acquired and
is a record holder of 37,900 shares of CHC Common Stock. Invista originally
acquired, and continues to hold, its shares of CHC Common Stock for investment
purposes only.
PM and PH, by virtue of their ownership and control of PHC and Invista, are
deemed to share the power to vote or dispose, or direct the voting or
disposition of, 25,081,604 shares of CHC Common Stock, and therefore may be
deemed beneficial owners of the shares of CHC Common Stock held by PHC and
Invista within the meaning of Rule 13d-3(a) under the Act. PHC is deemed to
share the power to vote or dispose, or direct the voting or disposition of,
25,043,704 shares of CHC Common Stock.
The Reporting Persons acted together for the purposes of acquiring,
holding, voting or disposing of CHC Common Stock. Furthermore, PM and PHC are
parties to the Shareholders' Agreement. The Shareholders' Agreement obligates PM
and PHC to act in concert with respect to certain matters concerning CHC. As a
result, the Reporting Persons may be deemed to constitute a group within the
meaning of the Act. Pursuant to Rule 13d-5(b)(1) members of the group may be
deemed to have acquired beneficial ownership of all shares of CHC Common Stock
beneficially held by each member of the group. As a result, each of the
Reporting Persons is deemed to beneficially own 25,081,604 shares of CHC Common
Stock or 42.9% of CHC Common Stock.
(c) None of the Reporting Persons, nor, to the best knowledge of the
Reporting Persons, any person named on Exhibit B hereto, has effected any
transactions in CHC Common Stock during the past 60 days except as described
herein.
(d) As an investment adviser, Invista invested funds of investment accounts
for which Invista acts as investment adviser in CHC Common Stock. Consequently,
holders of such investment accounts are the beneficiaries of the right to
receive dividends from, or the proceeds from the sale of, CHC Common Stock held
of record by Invista.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The responses to Items 3, 4, and 5 are incorporated herein by reference.
Pursuant to the Combination Agreement, PM was issued the Warrant, a copy of
which is attached hereto as Exhibit D. PM and PHC are also parties to the
Shareholders' Agreement attached hereto as Exhibit C.
Other than the above mentioned agreements, there are no other contracts,
arrangements, understanding or relationships with respect to CHC Common Stock to
which any Reporting Person is a party or by which any Reporting Person is bound.
Item 7. Exhibits.
Exhibit A: Joint Filing Agreement dated April 10, 1998, among the Reporting
Persons.
Exhibit B: Directors and Executive Officers of the Reporting Persons.
Exhibit C: Shareholders' Agreement dated April 1, 1998, among PM, PHC and CHC.
Exhibit D: Warrant dated as of March 31, 1998, issued by CHC to PM.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 10, 1998
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
PRINCIPAL HOLDING COMPANY
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
PRINCIPAL HEALTH CARE, INC.
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
EXHIBIT A
Joint Filing Agreement
In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934,
as amended, each of the parties hereto agrees with the other parties that the
statement of Schedule 13D pertaining to certain securities of Coventry Health
Care, Inc. to which this agreement is an exhibit is filed by and on behalf of
each such party and that any amendment thereto will be filed on behalf of each
such party.
Dated: April 10, 1998
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
PRINCIPAL HOLDING COMPANY
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
PRINCIPAL HEALTH CARE, INC.
By: /s/ Mary L. Bricker
Mary L. Bricker
Assistant Corporate Secretary
EXHIBIT B
Directors and Executive Officers of the Reporting Persons
Principal Mutual Life Insurance Company
Directors
Mary Vermeer Andringa Lee Liu
President and Chief Operating Officer Chairman of the Board and
Vermeer Manufacturing Company Chief Executive Officer
Box 200 IES Industries Inc.
Pella, Iowa 50219-0200 Post Office Box 351
Cedar Rapids, Iowa 52406
Dr. Ruth M. Davis Victor H. Loewenstein
President and Chief Executive Officer Managing Partner
The Pymatuning Group, Inc. Egon Zehnder International
Suite 570 350 Park Avenue - 8th Floor
4900 Seminary Road New York, New York 10022
Alexandria, Virginia 22311
David J. Drury Ronald D. Pearson
Chairman and Chief Executive Officer Chairman, President and
Principal Mutual Life Insurance Company Chief Executive Officer
711 High Street Hy-Vee, Inc.
Des Moines, Iowa 50392-0100 5820 Westown Parkway
West Des Moines, Iowa 50266
Daniel Gelatt John R. Price
President Managing Director
NMT Corporation The Chase Manhattan Corporation
Post Office Box 2287 270 Park Avenue - 44th Floor
La Cross, Wisconsin 54602-2287 New York, New York 10017
J. Barry Griswell Dr. Donald M. Stewart
President President
Principal Mutual Life Insurance Company The College Board
711 High Street 45 Columbus Avenue
Des Moines, Iowa 50392-0100 New York, New York 10023-6992
G. David Hurd Elizabeth E. Tallett
Principal Mutual Life Insurance Company President and Chief Executive Officer
711 High Street Dioscor Inc.
Des Moines, Iowa 50392-0100 48 Federal Twist Road
Stockton, New Jersey 08559
Charles S. Johnson Dean D. Thornton
Chairman, President and 1602 - 34 Court West
Chief Executive Officer Seattle, Washington 98199
Pioneer Hi-Bred International, Inc.
400 Locust Fred W. Weitz
Suite 700 Capital Square President and Chief Executive Officer
Des Moines, Iowa 50309 Essex Meadows, Inc.
800 Second Avenue, Suite 150
William T. Kerr Des Moines, Iowa 50309
Chairman and Chief Executive Officer
Meredith Corporation 1716 Locust Street
The principal business address for all Executive Officers of Principal
Mutual Life Insurance Company is 711 High Street, Des Moines, Iowa 50392.
Executive Officers
- ------------------
David J. Drury
Chairman and CEO
J. Barry Griswell
President
Ronald E. Keller
Executive Vice President
John E. Aschenbrenner
Senior Vice President
Dennis P. Francis
Senior Vice President
Thomas J. Gaard
Senior Vice President
Michael H. Gersie
Senior Vice President
Thomas J. Graf
Senior Vice President
Mary A. O'Keefe
Senior Vice President
Richard L. Prey
Senior Vice President
Carl C. Williams
Senior Vice President and
Chief Information Officer
Gregg R. Narber
Senior Vice President and
General Counsel
Douglas C. Cunningham
Vice President and Controller
Joyce N. Hoffman
Vice President and Corporate
Secretary
Craig L. Bassett
Treasurer
Mary L. Bricker
Assistant Corporate Secretary
Principal Holding Company
The principal business address for all Directors and Executive Officers of
Principal Holding Company is 711 High Street, Des Moines, Iowa 50392.
Directors
- ---------
David J. Drury
Chairman
John E. Aschenbrenner
Michael H. Gersie
Thomas J. Graf
J. Barry Griswell
Ronald E. Keller
Ellen Z. Lamale
Gregg R. Narber
Richard L. Prey
Executive Officers
- ------------------
David J. Drury
Chairman and CEO
J. Barry Griswell
President
Ronald E. Keller
Executive Vice President
John E. Aschenbrenner
Senior Vice President
Dennis P. Francis
Senior Vice President
Thomas J. Gaard
Senior Vice President
Michael H. Gersie
Senior Vice President
Thomas J. Graf
Senior Vice President
Mary A. O'Keefe
Senior Vice President
Richard L. Prey
Senior Vice President
Carl C. Williams
Senior Vice President and
Chief Information Officer
Gregg R. Narber
Senior Vice President and
General Counsel
Douglas C. Cunningham
Vice President and Controller
Joyce N. Hoffman
Vice President and Corporate
Secretary
Craig L. Bassett
Treasurer
Mary L. Bricker
Assistant Corporate Secretary
Principal Health Care, Inc.
The principal business address for all of the Directors and Executive
Officers of Principal Health Care, Inc. is 711 High Street, Des Moines, Iowa
50392.
Directors Executive Officers
- --------- ------------------
Thomas J. Graf Thomas J. Graf
Chairman Officer
Joyce N. Hoffman
David J. Drury Officer
Craig L. Bassett
Officer
Mary L. Bricker
Officer
EXHIBIT C
Shareholders' Agreement
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of April l, 1998,
is by and among Coventry Health Care, Inc., a Delaware corporation (the
"Company"), Principal Mutual Life Insurance Company, an Iowa mutual insurance
company ("Mutual"), and Principal Health Care, Inc., an Iowa corporation
("Principal"). Reference is made herein to that certain Capital Contribution and
Merger Agreement (effective as of November 3, 1997, and amending and restating
the Capital Contribution and Share Exchange Agreement dated as of November 3,
1997) executed on December 19, 1997 (the "Merger Agreement") by and among the
Company, Coventry Corporation, a Tennessee corporation, Coventry Health Care,
Inc., a Maryland corporation, Mutual, Principal Holding Company, an Iowa
corporation, and Principal. Capitalized terms not herein defined shall have the
meanings ascribed thereto in the Merger Agreement.
WHEREAS, Section 6.18(e) of the Merger Agreement provides that the Company,
Principal and Mutual execute and deliver this Agreement as a condition precedent
to the effectiveness of the Merger Agreement;
WHEREAS, the parties hereto desire to effect the transactions contemplated
by the Merger Agreement and to enter into this Agreement in order to set forth
certain agreements and understandings with respect to the obligations, rights
and privileges of Principal as a shareholder of the Company;
NOW THEREFORE, in consideration of promises and mutual covenants and
agreements set forth herein and in the Merger Agreement, intending to be legally
bound hereby, the parties hereto agree as follows:
SECTION 1. RESTRICTION ON RESALE; LEGEND.
(a) Resale of Securities. Principal and Mutual each hereby covenant that:
(i) it will not, directly or indirectly, sell or otherwise transfer
the shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), acquired thereby under the Merger Agreement or otherwise except
pursuant to an effective registration under the Securities Act of 1933, (the
"Securities Act") or in a transaction which, in the opinion of counsel
reasonably satisfactory to the Company, qualifies as an exempt transaction under
the Securities Act and the rules and regulations promulgated thereunder; and
(ii) on or before the fifth anniversary hereof, it will not, directly
or indirectly, sell or otherwise transfer, or permit any of its subsidiaries,
directly or indirectly, to sell or to transfer, the shares of Common Stock
acquired thereby under the Merger Agreement or otherwise, to any person other
than an entity that is an Affiliate (as defined under Rule 13d-3 of the
Securities and Exchange Act of 1934, as amended) of Mutual and/or Principal
(such Affiliate, now or in the future, a "Mutual Affiliate") which agrees to be
bound by the terms of this Agreement, unless such sale or transfer (A) is made
in accordance with the provisions of Section 9 hereof, (B) is made pursuant to
and in compliance with Rule 144 under the Securities Act, or (C) shall have been
approved by the written consent of the Company's Board of Directors.
(b) Stock Legend. The stock certificates evidencing ownership of the shares
of Common Stock acquired by Principal under the Merger Agreement will bear
substantially the following legends:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
THE COMPANY, IS EXEMPT FROM SUCH REGISTRATION.
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN SHAREHOLDERS' AGREEMENT, DATED
______________, BETWEEN PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
PRINCIPAL HEALTH CARE, INC. AND THE COMPANY, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY. ANY
ATTEMPTED TRANSFER OF THE SECURITIES IN VIOLATION OF THE PROVISIONS OF
THE SHAREHOLDERS' AGREEMENT SHALL BE VOID AB INITIO AND SHALL NOT BE
RECOGNIZED BY THE COMPANY.
The legend in the first paragraph above shall be removed by the Company
from and after the expiration of the holding period for restricted securities
under the Act, if the Company shall receive an opinion of counsel, from counsel
reasonably acceptable to the Company, that such legend is not required under the
Securities Act or any state securities laws. In addition, whenever any shares
cease to be subject to this Agreement and are not otherwise restricted
securities, the shareholder thereof shall be entitled to receive from the
Company, without expense, upon surrender to the Company of the certificate
representing such shares, a new certificate representing such shares, of like
tenor but without a legend of the character set forth above.
SECTION 2. SUBSCRIPTION RIGHT. If at any time after the date hereof, the
Company proposes to issue equity securities of any kind (the term "equity
securities" shall include for these purposes any warrants, options or other
rights to acquire equity securities and debt securities convertible into equity
securities but shall not include the issuance of securities (i) upon conversion
of the Preferred Stock ("Preferred Stock") or Convertible Promissory Notes
("Convertible Notes") issued under the Warburg Agreement, as amended by the
Warburg Consent, (ii) pursuant to which the Company or any of its subsidiaries
acquires another corporation or other entity by merger, consolidation, exchange
offer, share exchange, purchase of substantially all of the assets or stock, or
other form of reorganization, (iii) pursuant to any employee or director stock
option or incentive plans, stock bonus plan, employee stock purchase plan,
employee savings plan, supplemental executive retirement plan, management equity
program, or similar employee or director stock plan, (iv) to providers and/or
customers of the Company in an amount not to exceed 2% of the shares of Common
Stock outstanding from and after the date hereof, (vi) pursuant to that certain
Rights Agreement dated as of the Closing Date between the Company and
ChaseMellon Shareholder Services, LLC ("Rights Agreement"), or (viii) under the
Warrant Agreement between the Company and Principal dated of even date herewith)
then, as to Principal, the Company shall:
(a) give written notice setting forth in reasonable detail (i) the
designation and all of the terms and provisions of the securities proposed to be
issued (the "Proposed Securities"), including, where applicable, the voting
powers, preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and interest
rate and maturity; (ii) the price and other terms of the proposed sale of such
securities; (iii) the amount of such securities proposed to be issued; and (iv)
such other information as the holders of the Securities may reasonably request
in order to evaluate the proposed issuance;
(b) offer to issue to Principal (and/or to any other Mutual Mi1iate which
shall own shares of Common Stock) upon the terms described in subparagraph (a)
above an amount of Equity Securities identical to the Proposed Securities (the
"Subscription Securities") equal to (i) the number of Proposed Securities to be
issued times (ii) such percentage as will allow Principal and the Mutual
Affiliates to own, following the issuance of the Proposed Securities, a
percentage of such Equity Securities equal to a percentage determined by
dividing (x) the number of shares of Common Stock owned by Principal and/or any
Mutual Affiliate immediately preceding the issuance of the Proposed Securities,
by (y) the total number of shares of Common Stock outstanding immediately
preceding the issuance of the Proposed Securities (provided that in no event
shall such percentage determined by dividing (x) by (y) exceed 40%).
(c) Principal and/or Mutual Affiliate must notify the Company of its intent
to exercise its purchase rights hereunder within ten (10) days after receipt of
such notice from the Company and purchase the Subscription Securities upon the
closing of the issuance of the Proposed Securities.
(d) Upon the expiration of the offering period described above, the Company
will be free to sell such Subscription Securities that Principal and/or any
Mutual Affiliate has not elected to purchase during the ninety (90) days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to Principal and/or any Mutual Affiliate.
Any Subscription Securities offered or sold by the Company after such ninety
(90) day period must be reoffered to Principal and/or any Mutual Affiliate
pursuant to this Section 2.
(e) The election by Principal and/or any Mutual Affiliate not to exercise
its subscription rights under this Section 2 in any one instance shall not
affect its right (other than in respect of a reduction in its percentage
holdings) as to any subsequent proposed issuance. Any sale of such securities by
the Company without first giving Principal and/or any Mutual Affiliate the
rights described in this Section 2 shall be void and of no force and effect.
SECTION 3. EFFECT OF RIGHTS AGREEMENT. At or prior to the Closing, the
Company shall have adopted the Rights Agreement, substantially in the form
attached as Exhibit 8 to the Merger Agreement, pursuant to which Principal,
Mutual and/or any Mutual Affiliate shall be exempt from the definition of an
"Acquiring Person" (as defined under the Rights Agreement) for so long as none
of Principal, Mutual and/or any Mutual Affiliate has breached in any material
respect, any provision of Sections 1(a) or 4 of this Agreement while such
sections remain effective, and after such sections shall no longer be effective,
until such time as Mutual and the Mutual Affiliates shall collectively
Beneficially Own less than fifteen percent (15 %) of the Common Stock.
SECTION 4. STANDSTILL. Mutual hereby covenants and agrees that, on or
before the fifth anniversary of the date hereof, it will not, and will cause
Mutual Affiliates to not, without the prior written consent of a majority of the
members of the Company's Board of Directors, do any of the following except
pursuant to Section 2 hereof:
(a) acquire, offer or agree to acquire any shares of Common Stock (or
options or warrants to acquire, or securities convertible into or exchangeable
for, shares of Common Stock) if, as a result of such acquisition, Mutual
(together with any Mutual Affiliates) would Beneficially Own more than a number
of shares of Common Stock in excess of a number equal to forty percent (40%) of
the outstanding shares of Common Stock plus forty percent (40%) of the shares of
Common Stock issuable upon conversion of the Convertible Notes plus forty
percent (40%) of the number of shares of Common Stock issuable upon conversation
of the Preferred Stock; provided, however, that, for purposes of computing such
amount, the 37,900 shares of Common Stock Beneficially Owned by Invista Capital
Management, Inc. ("Invista") on December __, 1997 shall be excluded from such
calculation for as long as such shares are regarded as Beneficially Owned by
Invista (and no longer) and provided that no executive officer or director of
Mutual or Principal or any employee of Mutual, Principal, or any of their
affiliates other than officers, directors or employees of Invista charged with
the responsibility thereof shall participate in the voting of such shares and
provided further that for so long as the Convertible Notes are outstanding,
Mutual and the Mutual Affiliates, in the aggregate, will not vote or act on
written consent in any matter coming before shareholders at any shareholder
meeting or shareholder action in excess of forty percent (40%) of the shares of
Common Stock outstanding plus forty percent (40%) of the shares of Preferred
Stock outstanding;
(b) directly or indirectly commence or participate in a solicitation of
proxies either to oppose the election of any Person to the Board of Directors or
to seek the removal of any Person from the Board of Directors, which Person has
been nominated by the Nominating Committee of the Board of Directors;
(c) vote its shares of Common Stock for the election of any Person to the
Board of Directors other than the Persons nominated by the Nominating Committee
of the Board of Directors; or
(d) directly or indirectly make or solicit or assist any third party to
make a tender or exchange offer to purchase any shares of Common Stock or make
any public announcement concerning, or submit any written proposal to the Board
of Directors of the Company for a merger, share exchange, acquisition of
substantially all of the assets or similar transaction involving the Company.
SECTION 5. SUSPENSION OF COVENANTS. The provisions of Section 1(a)(ii) and
4 hereof shall thereafter cease to apply in the event of any of the following:
(a) the Company issues voting securities in an acquisition by the Company
of another corporation or entity by merger, consolidation, exchange offer,
purchase of substantially all of the assets or stock, or other form of business
combination ("Company Acquisition") to any Person as a result of which such
Person, together with its affiliates, shall own a number of shares of voting
securities that shall equal or exceed the number of such shares owned by Mutual
and the Mutual Affiliates in the aggregate;
(b) the number of shares of Common Stock then owned by Mutual and the
Mutual Affiliates, in the aggregate, shall be less than 10% of the then issued
and outstanding shares of Common Stock; or
(c) the number of shares of Common Stock then owed by any Person (other
than Warburg, or a Person who acquired a number of shares of Common Stock in a
Company Acquisition which did not equal or exceed the number of shares owned by
Mutual and the Mutual Affiliates in the aggregate, so long as the Company does
not permit such person to acquire additional shares of Common Stock) and the
Affiliates of such Person, in the aggregate, shall be greater than 15% of the
insured and outstanding shares of Common Stock.
SECTION 6. RIGHT TO MATCH OFFER. During such period as Section 4 shall be
effective, in the event a third party makes a bona fide tender or exchange offer
(a "Bona Fide Offer") to purchase a majority of the issued and outstanding
shares of Common Stock or to effect a merger or share exchange in which the
acquisition of substantially all of the assets or similar transaction involving
the Company, then not withstanding the provisions of Section 4, Mutual shall be
permitted to make a competing offer (the "Mutual Offer") to the Board of
Directors of the Company. Upon the receipt of any Bona Fide Offer, the Board of
Directors shall establish a special committee (the "Special Committee"),
consisting of members of the Board of Directors that are neither members of the
Company's management nor members of the Board of Directors designated by Mutual
pursuant to the terms of Section 7 hereof. The Special Committee shall determine
whether it is advisable and in the best interest of the Company to solicit
additional offers from any other party or parties, shall retain any legal or
financial advisory services deemed necessary or advisable to assist it in its
analysis of the Bona Fide Offer, the Mutual Offer and any other offers solicited
from third parties by the Company, and shall establish any procedures deemed
necessary or advisable to regulate the process pursuant to which the Company
entertains and analyzes the competing offers. The Special Committee shall
analyze each such offer and shall make a recommendation to the entire Board of
Directors with respect to whether any such offer is one that the Company should
recommend to its shareholders. If the Special Committee shall determine that the
value of the Bona Fide Offer or any other offer solicited from a third party is
greater than the value of the Mutual Offer, then Mutual shall have the
opportunity to amend the Mutual Offer to match or exceed the value of the higher
offer and each of the other parties that has submitted an offer to the Company
shall have the right to submit a revised offer to the Company. If the Special
Committee shall determine that, after the Company shall have received the final
offer from each such party, the value of the Mutual Offer is equal to or greater
than any other offer received by the Company and that the Mutual Offer is
advisable and in the best interest of the Company's shareholders, then,
notwithstanding the provisions of Section 4(a) hereof to the contrary, Mutual
shall be permitted to take any action deemed necessary or convenient to acquire
that number of shares of Common Stock as specified in the Mutual Offer for the
terms (including price) set forth in the Mutual Offer.
SECTION 7. VOTING BY MUTUAL. During such period as Section 4 shall be
effective, in the event that (i) a third party makes a Bona Fide Offer to
purchase all of the issued and outstanding shares of Common Stock or to effect a
merger, share exchange or similar transaction as contemplated in Section 6
hereof and the Special Committee shall determine in accordance with the
procedures set forth in Section 6 that the acceptance of the Bona Fide Offer is
in the best interests of the Company's shareholders or (ii) a Special Committee
organized pursuant to the procedures set forth in Section 6 determines that it
is in the best interests of the Company's shareholders for the Company to issue
shares of Common Stock in connection with a Company acquisition and, in
connection with such acquisition the Company a vote of the holder's of the
Company's Common Stock is required by law or by applicable requirements of the
National Association of Securities Dealers, Inc.'s National Market System or any
other securities exchange on which shares of the Common Stock are traded, then,
in either event, Mutual agrees to refrain from voting and to cause each Mutual
Affiliate to refrain from voting all of their shares of Common Stock at any
meeting of the Company's shareholders held for the purpose of considering such
proposal (or, if an approval of shareholders is required by reference to all
shares outstanding, to vote its shares of Common Stock and to cause each Mutual
Affiliate to vote its shares of Common Stock in favor of such proposal) provided
that each of the following conditions set forth below are satisfied at such
time:
(a) the date of the shareholders meeting shall be on or after the date that
is eighteen (18) months following the Effective Date and during the period as
Section 4 shall be effective;
(b) the Board shall have received the written opinion of a nationally
recognized investment banking firm selected by the Company and reasonably
acceptable to Mutual that the proposed transaction is fair to the Company and
its shareholders from a financial standpoint; and
(c) the Company's shareholders (other than Mutual and the Mutual
Affiliates) shall have voted in favor of the proposed transaction by majority
vote;
SECTION 8. MUTUAL NOMINEES TO BOARD. For so long as Mutual Beneficially
Owns at least 10% (the "Minimum Percentage") of the then issued and outstanding
shares of Common Stock and shall not have breached in any material respect,
without cure, any provision of this Agreement, the Company will (i) nominate and
use its best efforts to cause its shareholders to elect and to retain as
directors on the Board of Directors at least one nominee designated by Mutual
for each 6% of the issued and outstanding Common Stock then held by Mutual (such
nominees are collectively hereinafter referred to as the "Mutual Directors") and
(ii) use its best efforts to cause its Board of Directors to limit the number of
members of the Compensation Committee, Audit Committee and Finance Committee of
the Board of Directors to three directors and to cause one Mutual Director to be
appointed as a member of each such committee. Any vacancy created by the death,
disability, retirement or removal of any Mutual Director on the Board of
Directors or on any such committee of the Board of Directors shall be filled by
the Board of Directors in accordance with written instructions of Mutual. In the
event the number of members of the Board of Directors is increased to more than
15 directors, for so long as Mutual owns the Minimum Percentage, Mutual shall be
entitled to the whole number of Mutual Directors obtained by multiplying (a) the
number of directors on the Board of Directors (including Mutual Directors) by
(b) a fraction, (x) the numerator of which is equal to the number of shares of
Common Stock then beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by Mutual and (y) the denominator of which is equal to the total
number of shares of Common Stock then issued and outstanding. In the event any
calculation of the number of Directors that Mutual is entitled to designate
under this Section 7 shall not produce a whole number of Mutual Directors, then
the number of Mutual Directors shall be rounded to the nearest whole number
(with percentages greater than or equal to 50% being rounded up to the next
whole number and percentages less than 50% being rounded down to the next whole
number.) In the event that any of Mutual's nominees shall fail to be elected to
the Board of Directors, the provisions of Sections 1 (a)(ii) and 4 hereof shall
terminate and be of no further force or effect. In the event that after the
expiration of Section 4, Mutual or any of the affiliates shall take any of the
actions specified in Section 4(b) or 4(c), then the Company's obligations
hereunder will cease.
SECTION 9. REGISTRATION RIGHTS.
9.1 Definitions. As used in this Section 9:
(a) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(b) the term "Registrable Securities" means (i) shares of Common Stock
acquired by Principal under the Merger Agreement or pursuant to the exercise of
the Warrant issued under the Merger Agreement, (ii) any capital stock of the
Company issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the shares of Common Stock, if any, referred
to in clause (i) hereof and any additional shares of Common Stock acquired by
Principal or a Mutual Affiliate from the Company pursuant to the provisions of
Section 2 hereof;
(c) the term "Holder" shall mean any holder of Registrable Securities;
(d) the term "Initiating Holder" shall mean any Holder or Holders who in
the aggregate are Holders of more than fifty percent (50.0%) of the then
outstanding Registrable Securities;
(e) "Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Sections 9.2 and 9.3 hereof, including, without limitation,
all registration, filing fees and NASD fees, printing expenses, fees and
disbursements of counsel for the Company and of its independent public
accountants, fees and disbursements of one counsel for all the Holders, blue sky
fees and expenses and the expense of any special audits or "cold comfort"
letters incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company) and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding Selling Expenses; and
(f) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders.
9.2 Requested Registration.
(a) Request for Registration. If the Company shall receive from an
Initiating Holder a written request that the Company effect any registration
with respect to all or a part of the Registrable Securities and specifying the
intended method of disposition thereon, the Company will:
(i) give written notice of the proposed registration, qualification or
compliance to all other Holders of Registrable Securities promptly, and in
any event within 10 business days; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration as may be so requested (in accordance with the intended
method thereof as aforesaid) and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request received by the Company within ten (10)
business days after written notice from the Company is given under Section
9.2(a)(i) above; provided that the Company shall not be obligated to
effect, or take any action to effect, any such registration pursuant to
this Section 9.2:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or
regulations thereunder;
(B) After the Company has effected four (4) such registrations
pursuant to this Section 9.2 and such registrations have been declared
or ordered effective and the sales of such Registrable Securities
shall have closed; provided that any Holder may participate in any
such registration to the extent provided in Section 9.2 if the
registration as the result of a request of another Initiating Holder;
(C) If the Registrable Securities requested by all Holders to be
registered pursuant to such request have an anticipated aggregate
public offering price (before any underwriting discounts and
commissions) of less than $20,000,000; or
(D) If in the good faith judgment of the Board based upon the
written opinion of a nationally recognized investment banking firm
selected by the Company and reasonably acceptable to the Holders, such
registration would have a material adverse effect on the market price
of the shares of Common Stock, the Company shall have the right to
limit the number of Registrable Securities requested by all Holders to
be registered pursuant to such request; provided, however, that the
Company shall use reasonable commercial efforts to register not less
than fifty percent (50%) of the number of Registrable Securities
requested to be registered or to facilitate a private sale of such
number of Registrable Securities to institutional investors in a
manner that would ameliorate the anticipated material adverse effect
of any such sale on the market price of the shares of Common Stock;
provided, further, that in the event the total number of shares that
the Selling Holders (as hereinafter defined) shall request to be
registered by the Company equals a number that is equal to or less
than twenty percent (20%) of the then outstanding shares of Common
Stock, then the provisions of this Subsection (i)(E) shall not apply;
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 9.2(b) below, include other
securities of the Company which are held by Persons who, by virtue of agreements
with the Company, are entitled to include their securities in any such
registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 9.2. If holders of securities of the Company other than Registrable
Securities who are entitled, by contract with the Company or otherwise, to have
securities included in such a registration (the "Other Stockholders") request
such inclusion, the Holders shall offer to include the securities of such Other
Stockholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 9. The Holders
whose shares are to be included in such registration and the Company shall
(together with all Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Initiating Holders and reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 9.2, if the
representative advises the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the securities of the
Company held by Other Stockholders shall be excluded from such registration to
the extent so required by such limitation. If, after the exclusion of such
shares, further reductions are still required, the number of shares included in
the registration by each Holder shall be reduced on a pro rata basis (based on
the number of shares held by such Holder), by such minimum number of shares as
is necessary to comply with such request. No Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any of the
Holders or any Other Stockholder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. The securities so withdrawn shall
also be withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities and securities of the Company held by Other
Shareholders to be underwritten, the Company may include its securities for its
own account in such registration if the representative so agrees and if the
number of Registrable Securities and securities of the Company held by Other
Shareholders which would otherwise have been included in such registration and
underwriting will not thereby be limited.
9.3 Company Registration.
(a) Inclusion in Registration. If the Company shall determine to register
any of its equity securities either for its own account or for the account of a
security holder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a SEC Rule 145 transaction, or a registration
on any registration form which does not permit secondary sales or does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) promptly, and in event within 10 business days, give to each of
the Holders a written notice thereof, its intended method of disposition,
such Holder's rights under this Section 9.3 and a list of the jurisdictions
in which the Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws; and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 9.3(b) below. Such written request may specify all or
a part of the Holders' Registrable Securities. No registration effected
under this Section 9.3 shall relieve the Company of its obligations to
effect any registration upon request under Section 9.2.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 9.3(a)(i). In such event, the right of each of the Holders to
registration pursuant to this Section 9.3 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein;
provided, however, that Mutual shall not be required to participate in such
underwriting if Mutual notifies the Company that it is seeking registration of
its shares solely to enable it to distribute such shares to its shareholders or
holders of mutual interests issued thereby. The Holders whose shares are to be
included in such registration (other than Mutual if it elects not to participate
in such underwriting) shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 9.3, if the representative
determines that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the allocation priority
set forth below) limit the number of Registrable Securities to be included in
the registration and underwriting to not less than fifteen percent (15.0%) of
the securities included therein (based on aggregate market values). The Company
shall so advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner: The
securities of the Company held by Other Stockholders of the Company (other than
Registrable Securities and other than securities held by holders who by
contractual right demanded such registration ("Demanding Holders")) shall be
excluded from such registration and underwriting to the extent required by such
limitation, and, if a limitation on the number of shares is still required, the
number of shares that may be included in the registration and underwriting by
each of the Holders and Demanding Holders shall be reduced, on a pro rata basis
(based on the number of shares held by such Holder), by such minimum number of
shares as is necessary to comply with such limitation. If any of the Holders or
any Other Stockholder disapproves of the terms of any such underwriting, such
person may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
9.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 9 shall be borne by the Company, and all Selling Expenses shall be borne
by the persons selling shares so registered pro rata on the basis of the number
of their shares so registered. Notwithstanding the foregoing, if the Holders
request registration pursuant to Section 9.2 and, at the time of such request,
all shares then requested to be sold could be sold pursuant to Rule 144(k) under
the Act, then the Company shall not be obligated to pay Registration Expenses of
more than $75,000 in connection with such registration.
9.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 9, the Company will keep the Holders, as
applicable, advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense, the Company will:
(a) prepare and file with the SEC such appropriate form of registration
statement as shall be selected by the Company, and, in the case of a
registration pursuant to Section as shall be reasonably acceptable to Holders
owning a majority (by number of Registrable Securities) of the Registrable
Securities so to be registered, to effect such registration and thereafter use
its best efforts to cause such registration statement to become effective;
provided, however, that in the case of a registration requested pursuant to
Section 9.2, if the Company shall furnish to the Initiating Holders a
certificate signed by the Chairman of the Board stating that, in the good faith
judgment of the Board, the timing of the disclosure of any information that
would be required to be disclosed in such registration statement would be a
serious detriment to the Company and its shareholders if such disclosure were
made on or before the date the filing of such registration statement would be
required, then the Company shall have one additional period of not more than 60
days within which to file such registration statement;
(b)(i) prepare and file with the SEC such amendments to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period of either (1) not less
than 270 days or, if such registration statement relates to an underwritten
offering, such longer period as in the opinion of counsel for the underwriters a
prospectus is required by law to be delivered in connection with sales of
Registrable Securities by an underwriter or dealer or (2) such shorter period
which will terminate when all of the Registrable Securities covered by such
registration statement have been disposed of in accordance with the intended
method of disposition by the Holders selling Registrable securities covered by
such registration statement (a "Selling Holder") (or other sellers of securities
thereunder)(but in any event not before the expiration of any longer period
required under the Securities Act), and (ii) comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until such time as all of such securities
have been disposed of in accordance with the intended method of disposition by
the Selling Holders (or other sellers of securities thereunder);
(c) furnish to each Selling Holder such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under the Securities
Act, and such other documents in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder as such Selling Holder may
reasonably request;
(d) use its best efforts to register or qualify such Registrable Securities
and other securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each Selling Shareholder
and each other seller of securities thereunder shall reasonably request, to keep
such registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Selling Holder;
(e) use its best efforts to cause all Registrable Securities and other
securities covered by such registration statement to be registered with or
approved by, and make any other necessary registrations or filings with, all
other governmental authorities as may be necessary by virtue of the business and
operations of the Company to enable the Selling Holder and any other sellers of
securities thereunder to consummate the disposition of such Shares;
(f) furnish to each Selling Holder a signed counterpart, addressed to such
Selling Holder (and the underwriters, if any) of an opinion of the Company's
counsel and a "cold comfort" letter from the Company's independent public
accountants, each in such form and covering such matters as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in under-written public offerings of securities and, in the
case of the accountants' letter, such other financial matters, and, in the case
of the legal opinion, such other legal matters, as such Selling Holder may
reasonably request;
(g) notify each Selling Holder selling Registrable Securities under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such Selling
Holder promptly prepare and furnish to such Selling Holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made;
(h) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC;
(i) provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement; and
(j) use its best efforts to list all Registrable Securities covered by such
registration statement on each securities exchange on which similar securities
issued by the Company are then listed or on the National Association of
Securities Dealers Automated Quotation System or an internationally recognized
stock exchange.
9.6 Indemnification
(a) The Company will indemnify each of the Holders, as applicable, each of
its officers, directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Section 9, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each of the
Holders, each of its officers, directors and partners, and each person
controlling each of the Holders, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Holders or underwriter and stated to
be specifically for use therein.
(b) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter, each Other Stockholder and each of their officers, directors, and
partners, and each person controlling such Other Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements by such Holder therein not misleading, and will reimburse the
Company and such Other Stockholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder for use therein; provided, however, that
the obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section 9.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided, further, that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 9 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 9.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue (or alleged
untrue) statement of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(f) The foregoing indemnity agreement of the Company and the Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
9.7 Information by the Holders. Each of the Holders holding securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section 9.
9.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Merger Act at any time after it has become subject to such reporting
requirements; and
(c) so long as the Holder owns any Registrable Securities, furnish to the
Holder upon request, a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety
(90) days following the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and the Merger Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as the
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.
9.9 "Market Stand-off" Agreement.
(a) Each of the Holders agrees, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Holder during the 90-day period following the effective
date of a registration statement of the Company filed under the Securities Act,
provided that all executive officers and directors of the Company enter into
similar agreements. If requested by the underwriters, the Holders shall execute
a separate agreement to the foregoing effect. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said 90-day period. The provisions of
this Section 9.8 shall be binding upon any transferee who acquires Registrable
Securities, whether or not such transferee is entitled to the registration
rights provided hereunder.
(b) The Company agrees, if requested by the Holders and the underwriter
selected thereby pursuant to Section 9.2(b), not to sell or otherwise transfer
or dispose of any Common Stock (or other securities) of the Company pursuant to
a public offering (other than an offering under Form S-8) during the 90-day
period following the effective date of a registration statement of the Company
filed under the Securities Act in accordance with the provisions of Section 9.2
hereof, provided that all Holders enter a "stand off" agreement under Section
9.9(a) hereof.
9.10 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders owning Shares to
be registered under such registration statement, their underwriters, if any, and
their respective counsel and accountants (the "Inspectors"), the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. Records which the Company determines in good faith to be
confidential and which it notifies the Inspectors in writing are confidential
shall be treated as confidential by each Inspector in accordance with such
procedures as such Inspector applies generally to information of this kind
unless (a) disclosure of such records is necessary to avoid or correct a
misstatement or omission in the registration statement or any prospectus used in
connection therewith, (b) the information contained in such records has become
generally available to the public, (c) disclosure is required in any report,
statement or testimony required to be submitted to any governments authority
having or claiming to have jurisdiction over such Inspector, or (d) disclosure
is required in response to any summons or subpoena or in connection with any
litigation.
9.11 Adjustment Affecting Shares. The Company will not effect or permit to
occur any combination or subdivision of the Registrable Securities which would
adversely affect the ability of the Holders to include the Registrable
Securities in any registration of its securities contemplated by this Article 9
or the marketability of the Registrable Securities under any such registration.
9.12 Termination. The registration rights set forth in this Section 9 shall
not be available to any Holder if, in the opinion of counsel to the Company, all
of the Registrable Securities then owned by such Holder could be sold in any
90-day period pursuant to Rule 144 under the Securities Act (without giving
effect to the provisions of Rule 144(k) in the case of a Holder owing more than
three percent (3.0%) of the Common Stock then outstanding).
9.13 Assignment. The registration rights set forth in this Section 9 shall
be assignable, in whole or in part, to any transferee of Common Stock in a
private placement or other unregistered sale (who shall be bound by all
obligations of this Section 9).
SECTION 10. MISCELLANEOUS.
10.1 Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile and by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed: (x) if to the Company, at
the Company's principal business address at [] or (y) if to Mutual, at the
address of Mutual listed in the stock records of the Company, or (z) to such
other address as any party shall specify by written notice so given, and such
notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or if mailed, the date of receipt.
10.2 Assignment, Binding Effect; Benefit. Unless expressly provided in this
Agreement, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
10.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
10.4 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
10.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its rules
of conflict of laws.
10.6 Headings. Headings of the sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.7 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.8 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.10 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: COVENTRY HEALTH CARE, INC.
By: /s/ By: /s/
Name: Shirley R. Smith Name: Allen F. Wise
Title: Secretary Title: President and
Chief Executive
Officer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/
Name: Thomas J. Graf
Title: Senior Vice
President
PRINCIPAL HEALTH CARE, INC.
By: /s/
Name: Thomas J. Graf
Title: Executive Vice
President
EXHIBIT D
THIS 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.
COVENTRY HEALTH CARE, INC.
COMMON STOCK PURCHASE WARRANT
Attached hereto as Exhibit 1 is a list (the "Option List") of issued and
outstanding options (each, an "Option"), and warrants (each, a "Warrant," and
together with the Options the "Option Securities") that give the respective
holders thereof the right to acquire shares of Common Stock, par value $0.01 per
share (the "Common Stock"), of COVENTRY HEALTH CARE, INC., a Delaware
corporation (the "Company"). The Option List sets forth the name of each holder
of an Option Security, the date on which such Option Security may be exercised,
the date on which such Option Security expires, and the exercise price per share
of Common Stock issuable upon the exercise of such Option Security. Reference is
made herein to that certain Capital Contribution and Merger Agreement (effective
as of November 3, 1997, and amending and restating the Capital Contribution and
Share Exchange Agreement dated November 3, 1997), executed on December 19, 1997
(the "Merger Agreement"), by and among the Company, Coventry Health Care, Inc.
(a Maryland corporation), Coventry Corporation, a Tennessee corporation,
Principal Mutual Life Insurance Company, an Iowa mutual insurance company
("Principal Mutual"), Principal Holding Company, an Iowa corporation, and
Principal Health Care, Inc., an Iowa corporation ("Principal"). Capitalized
terms not herein defined shall have the meanings ascribed thereto in the Merger
Agreement.
The Company hereby certifies that, for value received, Principal or its
successor or assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time and from time to time during
the period beginning on the date hereof and ending on the latest date of
expiration set forth on the Option List (the "Exercise Period") for each Option
Security set forth on the Option List (and only during the period from the date
each such Option Security is exercised and ending on the later of the
termination date of the Option Security without regard to the actual date of
exercise by the holder of the Option Security, or the thirtieth day after Holder
receives notice from the Company of the exercise of the Option Security) a
corresponding number of shares of Common Stock equal to 66 2/3% of the number of
shares of Common Stock purchasable under such Option Security, at the exercise
price set forth on the Option List for such Option Security, provided that in
the event any Option Security shall not have been exercised and shall be
cancelled, then the right to purchase hereunder shall be correspondingly reduced
by 66 2/3% of the number of shares of Common Stock covered by such cancelled
option. This Warrant is herein called the "Principal Warrant."
1. EXERCISE OF WARRANT.
1.1 Delivery of Exercise Notice. During the Exercise Period, on or before
the fifth business day immediately following the last calendar day of March,
June, September and December during each year of the Exercise Period, and at
least twenty (20) days before any meeting of the Company's shareholders or any
other action involving a vote of the Company's Common Stock, the chief financial
officer of the Company shall deliver to the Holder a written notice (each, a
"Warrant Notice") that sets forth (i) the number of shares of Common Stock that
the Holder shall thereafter be entitled to purchase, which number shall be equal
to the product of (x) 66 2/3% and (y) the number of shares of Common Stock that
were issued by the Company upon the exercise of any Option Securities since the
last Warrant Notice through the record date for the shareholder meeting or
voting event requiring the immediate Warrant Notice or, in all other cases,
through the period ending thirty (30) days before such Warrant Notice; (ii) the
price per share (the "Notice Price") received by the Company upon such exercise
of each of such Option Securities; and (iii) a description of any Option
Securities that have expired or have been canceled during the same period.
1.2 Exercise. The purchase rights evidenced by this Warrant shall be
exercised by the Holder delivering to the Company a written notice substantially
in the form attached as Exhibit 2 hereto (the "Exercise Notice"), duly executed
by such Holder, accompanied by payment (the "Exercise Payment") of an amount
equal to the Notice Price multiplied by the number of shares being purchased
pursuant to such exercise, payable as follows: (a) by payment to the Company in
cash, by check, or by wire transfer of the Exercise Payment, or (b) by surrender
to the Company for cancellation of securities of the Company having a Market
Price (as hereinafter defined) on the date of exercise equal to the Exercise
Payment.
For purposes hereof, the term "Market Price" shall mean (a) if the Common
Stock is traded on a national securities exchange, the last reported sale price
of a share of Common Stock, regular way on such date or, in case no such sale
takes place on such date, the average of the closing bid and asked prices
thereof regular way on such date, in either case as officially reported on the
principal national securities exchange on which the Common Stock is then listed
or admitted for trading, or, (b) if the Common Stock is not then listed or
admitted for trading on any national securities exchange but is designated as a
national market system security by the National Association of Securities
Dealers, Inc. ("NASD"), the last reported trading price of the Common Stock on
such date, or (c) if not listed or admitted to trading on any national
securities exchange or designated as a national market system security, the
average of the reported bid and asked price of the Common Stock on such date in
the over-the-counter market as furnished by the National Quotation Bureau, Inc.,
or, if such firm is not then engaged in the business of reporting such prices,
as furnished by any member of the NASD selected by the Company or, (d) if the
shares of Common Stock are not so publicly traded, the fair market value
thereof, as determined in good faith by the Board of Directors of the Company.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable after
any exercise of this Principal Warrant and receipt of the Exercise Payment, and
in any event within ten business days thereafter, the Company, at its expense,
will cause to be issued in the name of and delivered to the Holder a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock or property to which such holder shall be entitled upon such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash in an amount determined in accordance with Section 3.5 hereof.
The Company agrees that the shares so purchased shall be deemed to be issued to
the holder hereof as the record owner of such shares as of the close of business
on the date the Exercise Notice shall have been delivered and payment made for
such shares as aforesaid.
3. OTHER ADJUSTMENTS. The number of shares of Common Stock issuable upon
exercise of this Principal Warrant shall be subject to adjustment from time to
time in accordance with this Section 3.
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
shares of Common Stock relating to such canceled Option Security shall
immediately terminate and no longer be in effect.
3.2 Principal Warrant Adjustment. In the event the Exercise Price and/or
the number of shares underlying any Option Security shall be adjusted as a
result of the anti-dilution rights pertaining to such Option Security, then this
Principal Warrant shall likewise be adjusted with respect to such Option
Security.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale of
Assets. If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder of this Principal Warrant shall have the right
to acquire and receive upon exercise of this Principal Warrant such shares of
stock, securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of the Company's Common
Stock (the "Reorganization Consideration") as shall equal the product of (x)
forty percent (40%) and (y) any Reorganization Consideration payable to the
holders of the Option Securities in connection with their ownership of such
Option Securities.
3.4 Adjustment by Board of Directors. If any event occurs as to which, in
the opinion of the Board of Directors of the Company, the provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holder of this Principal Warrant in accordance with
the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid.
3.5 Fractional Shares. The Company shall not issue fractions of shares of
Common Stock upon exercise of this Principal Warrant or scrip in lieu thereof.
If any fraction of a share of Common Stock would, except for the provisions of
this Section 3.5, be issuable upon exercise of this Principal Warrant, the
Company shall in lieu thereof pay to the person entitled thereto an amount in
cash equal to the Market Price, calculated to the nearest one-hundredth (1/100)
of a share.
3.6 Officer's Statement as to Adjustments. Whenever the number of shares
issuable upon exercise of this Principal Warrant shall be adjusted as provided
in this Section 3, the Company shall deliver to the Holder, a statement, signed
by the Chief Financial Officer of the Company, showing in reasonable detail an
amended and restated Exhibit l to this Principal Warrant that will be effective
after such adjustment.
4. RESERVATION OF STOCK. The Company shall at all times reserve and keep
available out of its authorized but unissued stock, solely for the issuance and
delivery upon the exercise of this Principal Warrant, such number of its duly
authorized shares of Common Stock as from time to time shall be issuable upon
the exercise of this Principal Warrant.
5. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Principal
Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new warrant of
like tenor.
6. REMEDIES. The Company stipulates that the remedies at law of the Holder
in the event of any default by the Company in the performance of or compliance
with any of the terms of this Principal Warrant are not and will not be
adequate, and that the same may be specifically enforced.
7. NEGOTIABILITY, ETC. This Principal Warrant and any shares of Common
Stock issuable under this Principal Warrant may not be sold, pledged,
hypothecated or otherwise transferred except in accordance with the provisions
of that certain Shareholders' Agreement, of even date herewith, by and among the
Company, Principal and Principal Mutual.
8. NOTICES. All notices, consents, waivers, and other communications under
this Principal Warrant must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt) provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight courier service
(receipt requested), in each case to the appropriate address and telecopier
number set forth below (or such other address and telecopier number as the
Company or the Principal may designate by notice to the other party):
(i) if to the Company:
Dale Wolf
Coventry Health Care, Inc.
53 Century Boulevard
Nashville, Tennessee 37214
Telecopy Number:
with a copy to:
Bob F. Thompson, Esq.
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Telecopy Number: (615) 742-6298
(ii) if to the Principal:
Kenneth J. Linde
Principal Health Care, Inc.
6705 Rockledge Drive
Suite 100
Bethesda, Maryland 20817
Telecopy Number:
with a copy to:
Thomas M. Farah, Esq.
Epstein, Becker & Green, P.C.
1227 25th Street, N.W., Suite 700
Washington, D.C. 20037
Telecopy Number: (202) 296-2882
and
Robert J. Mrizek, Esq.
Principal Health Care, Inc.
6705 Rock1edge Drive
Suite 100
Bethesda, MD 20817
Telecopy Number: (301) 493-0743
and
Mark Movic
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392
Telecopy Number: (515) 247-0130
and
Karen E. Shaff Esq.
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392
Telecopy Number: (515) 248-3011
9. HEADINGS, ETC. The headings in this Principal Warrant are for purposes
of reference only, and shall not limit or otherwise affect the meaning hereof.
10. CHANGE, WAIVER, ETC. Neither this Principal Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
11. GOVERNING LAW. THIS PRINCIPAL WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES IN EFFECT THEREIN.
IN WITNESS WHEREOF, COVENTRY HEALTH CARE, INC. has caused its duly
authorized officer to execute this Principal Warrant in its name and on its
behalf on the 31st day of March 31, 1998.
ATTEST: COVENTRY HEALTH CARE, INC.
By: /s/ Shirley R. Smith By: /s/ Dale B. Wolf
Name: Shirley R. Smith Name: Dale B. Wolf
Title: Secretary Title: President
Dated: March 31, 1998
<TABLE>
<CAPTION>
Coventry Corporation PERSONNEL SUMMARY PAGE 1
AS OF 3/31/98 File: Persnl
Date: 3/31/98
Shares Outstanding is greater than 0 Time: 2:09:06 PM
Option Option Plan/ Exer- Can- Un- Out- Exer-
Name ID Number Date Type Shares Price cised Vested celled vested standing cisable
- -------------------- ----------- ------- -------- -------- --------- -------- ------ --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adkins, Jennifer ###-##-#### 000580 7/15/97 1993/NQ 15,000 $15.9375 0 0 0 15,000 15,000 0
Ajoku, Rosemary ###-##-#### 000711 7/15/97 1997/NQ 750 $15.9375 0 0 0 750 750 0
Allan, Kimberly A. ###-##-#### 000162 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000581 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
R00218 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Allen, Carmella ###-##-#### 000575 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
C00057 9/12/96 1993/NQ 2,000 $12.5000 0 0 0 2,000 2,000 0
Arnold Edward D. ###-##-#### 000551 11/13/96 1993/NQ 40,000 $11.0000 10,000 10,000 0 30,000 30,000 0
000596 7/15/97 1993/NQ 6,000 $15.9375 0 0 0 6,000 6,000 0
Austin, M.D. John H. ###-##-#### 000004 12/14/89 1989/NQ 1,668 $5.0000 0 1,668 0 0 1,668 1,668
000005 12/14/89 1989/NQ 1,666 $8.3750 0 1,666 0 0 1,666 1,666
000134 1/1/93 93D/NQ 2,000 $11.3150 0 2,000 0 0 2,000 2,000
000135 1/1/94 93D/NQ 2,000 $21.2500 0 2,000 0 0 2,000 2,000
000136 1/1/95 93D/NQ 2,000 $24.5000 0 2,000 0 0 2,000 2,000
000498 1/1/96 93D/NQ 6,000 $20.6250 0 6,000 0 0 6,000 6,000
000556 1/1/97 93D/NQ 6,000 $9.2656 0 6,000 0 0 6,000 6,000
000720 1/1/98 93D/NQ 6,000 $15.2500 0 0 0 6,000 6,000 0
Baechle, Kim ###-##-#### 000662 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Baer, David ###-##-#### 000597 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Bailey, Don ###-##-#### 000663 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Becker, Arthur ###-##-#### 000598 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
Bednar, Connie ###-##-#### 000447 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000631 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
R00012 9/8/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
Benhardt, Suzanne ###-##-#### 000685 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
Bennett, George E. ###-##-#### 000008 7/1/94 1989/NQ 60,000 $18.1250 0 45,000 0 15,000 60,000 45,000
Benson, Donald T. ###-##-#### 000565 4/17/97 1993/NQ 100,000 $11.7500 0 0 0 100,000 100,000 0
Beswick, Robert ###-##-#### 000599 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Boody, Patricia ###-##-#### 000600 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Bowser, Pamra A. ###-##-#### 000176 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000446 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000632 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
R00018 9/6/98 1993/NQ 500 $12.7500 0 250 0 250 500 250
R00019 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,675 625
Brady, Michael P. ###-##-#### 000706 9/2/97 1997/NQ 50,000 $17.4375 0 0 0 50,000 50,000 0
Brahmam, Manu ###-##-#### 000177 7/1/94 1993/NQ 250 $18.1250 0 126 124 0 126 126
000601 7/15/97 1993/NQ 1,800 $15.9375 0 0 0 1,800 1,800 0
R00020 9/6/96 1993/NQ 124 $12.7500 0 62 0 62 124 62
R00021 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Brandt, Gary ###-##-#### 000633 7/15/97 1993/NQ 250 $15.9375 0 0 0 250 250 0
Brennen, Susan J. ###-##-#### 000179 7/1/94 1993/NQ 1,000 $18.1250 250 500 500 0 250 250
R00023 9/6/98 1993/NQ 500 $12.7500 0 250 0 250 500 250
Buonarosa, Mary ###-##-#### 000602 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Butler, Martha G. ###-##-#### 000183 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
000664 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
R00026 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
Buller, Tony C. ###-##-#### 000563 3/27/97 1993/NQ 12,500 $11.6250 0 3,125 0 9,375 12,500 3,125
Cable, Margaret E. ###-##-#### 000185 7/1/94 1993/NQ 2,500 $18.1250 0 1,250 1,250 0 1,250 1,250
000634 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
R00028 9/6/96 1993/NQ 1,250 $12.7500 0 625 0 625 1,250 625
Calderon, Mark HCUSANEW 000728 2/24/98 1997/NQ 5,000 $16.3125 0 0 0 5,000 5,000 0
Carroll, Joseph N. ###-##-#### 000548 10/14/96 1993/NQ 100,000 $10.5625 0 25,000 0 75,000 100,000 25,000
Champion, Lori B. ###-##-#### 000487 7/28/95 1993/NQ 500 $15.8750 0 125 375 0 125 125
000665 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
R00030 9/6/96 1993/NQ 375 $12.7500 0 125 0 250 375 125
Clark, Alanna M. ###-##-#### 000189 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
R00031 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Clay Bernadine ###-##-#### 000582 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Cole, Barbara L. ###-##-#### 000190 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000603 7/15/97 1993/NQ 1,800 $15.9375 0 0 0 1,800 1,800 0
R00033 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
Condo, Frank ###-##-#### 000635 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Cook, Gregg ###-##-#### C00059 9/12/96 1993/NQ 2,000 $12.5000 0 0 0 2,000 2,000 0
Coronado, M.D., Raul ###-##-#### 000530 7/15/96 1993/NQ 10,000 $12.1250 0 2,500 7,500 0 2,500 2,500
000561 3/27/97 1993/NQ 25,000 $11.6250 0 6,250 18,750 0 6,250 6,250
D'Antonio, Frank GHP32398 00000731 3/23/98 1997/NQ 10,000 $17.1250 0 0 0 10,000 10,000 0
Davis, Glenn ###-##-#### 000576 7/15/97 1993/NQ 7,500 $15.9375 0 0 0 7,500 7,500 0
RR0002 7/15/97 1993/NQ 625 $15.9375 0 0 0 625 625 0
Davis, Michele ###-##-#### 000636 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
DeFrance, Laurence ###-##-#### 000020 8/16/90 1989/NQ 1,668 $5.0000 0 1,668 0 0 1,668 1,668
000021 8/16/90 1989/NQ 1,666 $7.5000 0 1,666 0 0 1,666 1,666
000137 1/1/93 93D/NQ 2,000 $11.3150 0 2,000 0 0 2,000 2,000
000138 1/1/94 93D/NQ 2,000 $21.2500 0 2,000 0 0 2,000 2,000
000139 1/1/95 93D/NQ 2,000 $24.5000 0 2,000 0 0 2,000 2,000
000499 1/1/96 93D/NQ 2,000 $20.6250 0 2,000 0 0 2,000 2,000
000555 1/1/97 93D/NQ 2,000 $9.2656 0 2,000 0 0 2,000 2,000
000721 1/1/98 93D/NQ 2,000 $15.2500 0 0 0 2,000 2,000 0
DeMovick, Harvey ###-##-#### 000569 7/1/97 1989/NQ 125,000 $14.8125 0 0 0 125,000 125,000 0
Dengler, Steve HBRG33098 00000729 3/30/98 1997/NQ 10,000 $16.9375 0 0 0 10,000 10,000 0
Donofrio, Lisa K. ###-##-#### 000209 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000604 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
R00049 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
R00050 9/6/98 1993/NQ 100 $12.7500 0 25 0 75 100 25
Dougherty, Jeff ###-##-#### 000605 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Dougherty, Lisa ###-##-#### 000606 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Doyle, Janine ###-##-#### 000666 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Drake, Janet L. ###-##-#### 000574 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
CR0009 9/6/96 1993/NQ 5,000 $12.7500 0 0 0 5,000 5,000 0
Farley, Jr. MD,
Emerson D ###-##-#### R00052 9/6/96 1993/NQ 7,500 $12.7500 0 5,000 0 2,500 7,500 5,000
R00234 11/6/96 1993/NQ 2,000 $12.7500 0 2,000 0 0 2,000 2,000
R00235 11/6/96 1993/NQ 2,500 $12.7500 0 2,500 0 0 2,500 2,500
Felice, M.D., Civie D###-##-#### R00238 9/6/96 1993/NQ 250 $12.7500 125 125 750 125 125 0
Fosselman, Larry R. ###-##-#### 000221 8/15/94 1993/NQ 1,000 $18.7500 0 250 0 0 250 250
Fosselman, Larry R. ###-##-#### 000712 7/15/97 1997/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
R00060 9/6/98 1993/NQ 750 $12.7500 0 500 0 250 750 500
Franzl, Cynthia ###-##-#### 000607 7/15/97 1993/NQ 3,000 $15.9375 0 0 0 3,000 3,000 0
Gall, Dan ###-##-#### 000713 7/15/97 1997/NQ 500 $15.9375 0 0 0 500 500 0
Galupi, Louis ###-##-#### 000608 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Gans, Joanne ###-##-#### 000667 7/15/97 1993/NQ 6,000 $15.9375 0 0 0 6,000 6,000 0
R00062 9/6/96 1993/NQ 5,000 $12.7500 2,500 2,500 0 2,500 2,500 0
R00063 9/6/96 1993/NQ 5,000 $12.7500 1,250 1,250 0 3,750 3,750 0
RR0018 7/15/97 1993/NQ 625 $15.9375 0 0 0 625 625 0
Gardner J. Kevin ###-##-#### 000029 12/31/93 1989/NQ 1,000 $21.2500 0 1,000 0 0 1,000 1,000
Geesaman, Patricia ###-##-#### 000226 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000714 7/15/97 1997/NQ 750 $15.9375 0 0 0 750 750 0
R00064 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Giardina, James ###-##-#### 000637 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Gore, James L. ###-##-#### 000541 9/6/96 1993/NQ 10,000 $12.7500 0 2,500 0 7,500 10,000 2,500
000696 7/15/97 1989/NQ 20,000 $15.9375 0 0 0 20,000 20,000 0
R00066 9/6/96 1993/NQ 30,000 $12.7500 0 20,000 0 10,000 30,000 20,000
R00232 9/6/96 1993/NQ 15,000 $12.7500 0 3,750 0 11,250 15,000 3,750
R00512 2/20/96 1993/NQ 40,000 $18.1250 0 10,000 30,000 0 10,000 10,000
Gravely, Maria M. ###-##-#### 000584 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Green, Christine ###-##-#### 000638 7/15/97 1993/NQ 500 $15.9375 0 0 0 500 500 0
Gribble, Debbie K. ###-##-#### 000463 7/28/95 1993/NQ 12,000 $15.8750 0 2,000 10,000 0 2,000 2,000
000668 7/15/97 1993/NQ 10,000 $15.9375 0 0 0 10,000 10,000 0
CR0020 9/5/96 1993/NQ 10,000 $12.7500 0 2,000 4,000 4,000 6,000 2,000
RR0016 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
RR0017 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Groff, Jeffrey ###-##-#### 000639 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Gronefeld, Diana ###-##-#### 000669 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Guarneschelli,
N.Timothy ###-##-#### 000442 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000640 7/15/97 1993/NQ 6,000 $15.9375 0 0 0 6,000 6,000 0
CR0022 9/6/96 1993/NQ 2,000 $12.7500 0 0 0 2,000 2,000 0
R00069 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
Guertin, Shawn M. ###-##-#### 000725 1/22/98 1997/NQ 50,000 $13.6250 0 0 0 50,000 50,000 0
Hailey, James R. ###-##-#### 000234 7/1/94 1993/NQ 10,000 $18.1250 0 5,000 5,000 0 5,000 5,000
000429 7/28/95 1993/NQ 10,000 $15.8750 0 2,500 7,500 0 2,500 2,500
000699 7/15/97 1997/NQ 8,000 $15.9375 0 0 0 8,000 8,000 0
CR0023 9/6/96 1993/NQ 6,000 $12.7500 0 0 0 6,000 6,000 0
R00070 9/6/96 1993/NQ 5,000 $12.7500 0 2,500 0 2,500 5,000 2,500
R00071 9/6/96 1993/NQ 7,500 $12.7500 0 2,500 0 5,000 7,500 2,500
R00072 9/6/96 1993/NQ 10,000 $12.7500 0 10,000 0 0 10,000 10,000
R00517 2/20/96 1993/NQ 20,000 $18.1250 0 10,000 10,000 0 10,000 10,000
Halleran, Laura ###-##-#### 000610 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Harger, Patricia S. ###-##-#### 000670 7/15/97 1993/NQ 7,500 $15.9375 0 0 0 7,500 7,500 0
R00075 9/6/96 1993/NQ 5,000 $12.7500 0 2,500 0 2,500 5,000 2,500
RR0003 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
Hawkins, Alicia ###-##-#### 000611 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Hayes, Darin D. ###-##-#### 000243 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000612 7/15/97 1993/NQ 4,500 $15.9375 0 0 0 4,500 4,500 0
R00078 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
Hengelsberg,
Richard C. ###-##-#### 000244 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000613 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
R00079 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
R00080 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Henry, Susan ###-##-#### 000641 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Hodges, Jan H. ###-##-#### 000044 2/7/91 1989/NQ 834 $5.0000 0 834 0 0 834 834
000045 2/7/91 1989/NQ 834 $7.5000 0 834 0 0 834 834
000247 1/1/93 1993.NQ 1,000 $11.3150 0 1,000 0 0 1,000 1,000
000248 7/1/94 1993/NQ 5,000 $18.1250 0 2,500 2,500 0 2,500 2,500
000428 7/28/95 1993/NQ 10,000 $15.8750 0 2,500 7,500 0 2,500 2,500
000528 7/15/96 1993/NQ 25,000 $12.1250 0 6,250 0 18,750 25,000 6,250
000700 7/15/97 1997/NQ 30,000 $15.9375 0 0 0 30,000 30,000 0
CR0025 9/6/96 1993/NQ 6,000 $12.7500 0 0 0 6,000 6,000 0
R00083 9/6/96 1993/NQ 2,500 $12.7500 0 1,250 0 1,250 2,500 1,250
R00084 9/6/96 1993/NQ 7,500 $12.7500 0 2,500 0 5,000 7,500 2,500
R00085 9/6/96 1989/NQ 2,500 $12.7500 0 2,500 0 0 2,500 2,500
R00518 2/20/98 1989/NQ 5,000 $18.1250 0 2,500 2,500 0 2,500 2,500
Hoffman, Kay ###-##-#### 000642 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Hollingsworth,
Jenifer J. ###-##-#### 000532 9/12/96 1993/NQ 500 $12.5000 125 125 0 375 375 0
000687 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Holub, Sharon P. ###-##-#### 000250 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
R00087 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
Homberger, Krista ###-##-#### 000614 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
Huether, Jamie ###-##-#### 000671 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Hutt, MD, Edward D. ###-##-#### 000705 10/1/97 1997/NQ 30,000 $16.8750 0 0 0 30,000 30,000 0
Jacobs, Kenneth A. ###-##-#### 000048 6/19/90 1989/NQ 334 $5.0000 0 334 0 0 334 334
000049 6/19/90 1989/NQ 334 $7.5000 0 334 0 0 334 334
000254 7/1/94 1993/NQ 2,000 $18.1250 0 1,000 1,000 0 1,000 1,000
000456 7/28/95 1993/NQ 5,000 $15.8750 0 1,250 3,750 0 1,250 1,250
R00090 9/6/96 1993/NQ 1,000 $12.7500 0 500 0 500 1,000 500
R00091 9/6/96 1993/NQ 3,750 $12.7500 0 1,250 0 2,500 3,750 1,250
R00092 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Jones, Richard H. ###-##-#### 000050 6/18/90 1989/NQ 8,334 $5.0000 6,668 8,334 0 0 1,666 1,666
000051 1/16/90 1989/NQ 8,334 $5.0000 6,668 8,334 0 0 1,666 1,666
000052 1/16/90 1989/NQ 8,334 $7.5000 6,668 8,334 0 0 1,666 1,666
000053 1/16/91 1989/NQ 20,000 $6.3750 12,000 20,000 0 0 8,000 8,000
000054 1/1/93 1989/NQ 80,000 $11.3150 6,128 80,000 0 0 73,872 73,872
000398 6/18/90 1989/NQ 8,334 $7.5000 6,668 8,334 0 0 1,666 1,666
000496 7/28/95 1993/NQ 25,000 $15.8750 0 6,250 18,750 0 6,250 6,250
000538 9/6/96 1993/NQ 75,000 $12.7500 0 18,750 0 56,250 75,000 18,750
000697 7/15/97 1993/NQ 50,000 $15.9375 0 0 0 50,000 50,000 0
R00093 9/6/96 1993/NQ 18,750 $12.7500 0 6,250 0 12,500 18,750 6,250
R00094 9/6/96 1989/NQ 17,500 $12.7500 0 17,500 0 0 17,500 17,500
R00228 9/6/96 1993/NQ 25,000 $12.7500 0 6,250 0 18,750 25,000 6,250
Jones, Richard H. ###-##-#### R00508 2/20/96 1989/NQ 35,000 $18.1250 0 17,500 17,500 0 17,500 17,500
Juargens, Patricia ###-##-#### 000571 4/14/97 1993/NQ 10,000 $11.1250 0 0 0 10,000 10,000 0
000643 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
Kelm, M.D., Peter J. ###-##-#### 000259 1/30/94 1993/NQ 5,000 $25.0000 0 1,250 3,750 0 1,250 1,250
R00098 9/6/96 1993/NQ 3,750 $12.7500 0 2,500 0 1,250 3,750 2,500
Kelley, M.D., Suzanne###-##-#### 000644 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Kelliher, Steve SHMC2298 00000730 2/2/98 1997/NQ 2,500 $14.5000 0 0 0 2,500 2,500 0
Killeen, Sean ###-##-#### 000586 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
King, Ray ###-##-#### 000715 7/15/97 1997/NQ 750 $15.9375 0 0 0 750 750 0
Kleja, Stanley G. ###-##-#### 000263 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000815 7/15/97 1993/NQ 5,000 $15.9375 0 0 0 5,000 5,000 0
R00103 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
R00104 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Knight, Margarette E.###-##-#### 000265 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000646 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
R00106 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Krebs, Paul ###-##-#### 000572 3/10/97 1993/NQ 7,500 $11.2500 0 1,875 0 5,625 7,500 1,875
Kugelman, Lawrence N.###-##-#### 000144 1/1/94 93D/NQ 2,000 $21.2500 0 2,000 0 0 2,000 2,000
000145 1/1/95 93D/NQ 2,000 $24.5000 0 2,000 0 0 2,000 2,000
000554 1/1/97 93D/NQ 2,000 $9.2565 0 2,000 0 0 2,000 2,000
000719 1/1/98 93D/NQ 2,000 $15.2500 0 0 0 2,000 2,000 0
R000236 11/6/96 1993/NQ 25,000 $12.7500 0 25,000 0 0 25,000 25,000
Landis, Constance ###-##-#### 000647 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Lane, Davina ###-##-#### 000529 7/15/96 1993/NQ 50,000 $12.1250 0 12,500 0 37,500 50,000 12,500
000698 7/15/97 1993/NQ 25,000 $15.9375 0 0 0 25,000 25,000 0
C00054 7/15/96 1993/NQ 50,000 $12.1250 0 0 0 50,000 50,000 0
Lavelle, Amy ###-##-#### 000616 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Lavelle, Stewart ###-##-#### 000726 1/27/98 1997/NQ 100,000 $13.3750 0 0 0 100,000 100,000 0
Lester, Gail ###-##-#### 000587 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Lodder, Ron M. 1 000062 1/30/90 1989/NQ 18,668 $7.5000 0 16,668 0 0 16,668 16,668
Lytwyniuk, Sue ###-##-#### 000723 1/5/98 1997/NQ 20,000 $15.2500 0 0 0 20,000 20,000 0
Maddux, Susan V. ###-##-#### 000280 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
000672 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
R00219 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
Marcocci, Kendall L. ###-##-#### 000283 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000648 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
R00118 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Martinez, Ainette ###-##-#### 000577 7/15/97 1993/NQ 5,000 $15.9375 0 0 0 5,000 5,000 0
C00056 9/12/96 1993/NQ 5,000 $12.5000 0 0 0 5,000 5,000 0
Mayer, Robert A. ###-##-#### 000560 2/10/97 1989/NQ 100,000 $7.3125 0 33,333 0 66,667 100,000 33,333
000564 3/27/97 1993/NQ 50,000 $11.6250 0 12,500 0 37,500 50,000 12,500
000703 4/14/97 1997/NQ 50,000 $11.1250 0 0 0 50,000 50,000 0
McNulty, M.D.,
Barbara M. ###-##-#### R00237 9/6/96 1993/NQ 250 $12.7500 125 125 0 125 125 0
Medley, Rick ###-##-#### 000595 6/16/97 1993/NQ 35,000 $15.3750 0 0 0 35,000 35,000 0
Merkel, Frederick G. ###-##-#### R00509 2/20/96 1993/NQ 15,000 $18.1250 0 7,500 7,500 0 7,500 7,500
R00510 2/20/96 1993/NQ 60,000 $18.1250 0 30,000 30,000 0 30,000 30,000
Mientus, Robert J. ###-##-#### 000300 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000457 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000618 7/15/97 1993/NQ 3,000 $15.9375 0 0 0 3,000 3,000 0
R00131 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
R00132 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
Miller, Rex A. ###-##-#### 000535 9/6/96 1993/NQ 7,500 $12.7500 1,875 1,875 0 5,625 5,625 0
000688 7/15/97 1993/NQ 5,000 $15.9375 0 0 0 5,000 5,000 0
Moser, Philip C. ###-##-#### 000304 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
000673 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
R00135 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
Mullenix,
Elizabeth O. ###-##-#### 000464 7/28/95 1993/NQ 7,000 $15.8750 0 750 6,250 0 750 750
000674 7/15/97 1993/NQ 500 $15.9375 0 0 0 500 500 0
CR0032 9/6/96 1993/NQ 6,250 $12.7500 0 750 4,000 1,500 2,250 750
RR0004 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Mulner, Terry W. ###-##-#### 000306 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000619 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
R00136 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
Mulvaney, James ###-##-#### 000469 7/28/95 1993/NQ 4,000 $15.8750 0 250 3,750 0 250 250
CR0033 9/6/96 1993/NQ 3,750 $12.7500 0 250 3,000 500 750 250
RR0005 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Murchison, Marvin M. ###-##-#### 000588 7/15/97 1993/NQ 10,000 $15.9375 0 0 0 10,000 10,000 0
RR0006 7/15/97 1993/NQ 625 $15.9375 0 0 0 625 625 0
Murray, Thomas J. ###-##-#### CR0035 9/6/96 1993/NQ 20,000 $12.7500 0 0 0 20,000 20,000 0
R00137 9/6/96 1993/NQ 18,750 $12.7500 6,250 6,250 0 12,500 12,500 0
R00513 2/20/96 1989/NQ 12,000 $18.1250 0 6,000 6,000 0 6,000 6,000
Muscarella, Sharon M.###-##-#### 000308 7/1/94 1993/NQ 10,000 $18.1250 0 5,000 5,000 0 5,000 5,000
000443 7/28/95 1993/NQ 5,000 $15.8750 0 1,250 3,750 0 1,250 1,250
000649 7/15/97 1993/NQ 26,000 $15.9375 0 0 0 26,000 26,000 0
R00139 9/6/96 1993/NQ 5,000 $12.7500 0 2,500 0 2,500 5,000 2,500
R00140 9/6/96 1993/NQ 3,750 $12.7500 0 1,250 0 2,500 3,750 1,250
RR0007 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
RR0014 7/15/97 1993/NQ 1,750 $15.9375 0 0 0 1,750 1,750 0
Nelf, Kathleen
Kunselma ###-##-#### 000269 7/1/94 1993/NQ 1,500 $18.1250 0 750 750 0 750 750
000722 7/15/97 1993/NQ 4,500 $15.9375 0 0 0 4,500 4,500 0
R00108 9/5/96 1993/NQ 750 $12.7500 0 375 0 375 750 375
Ockerman,
Jefferson H. ###-##-#### 000488 7/28/95 1993/NQ 5,000 $15.8750 0 1,250 3,750 0 1,250 1,250
000527 7/10/96 1993/NQ 2,500 $12.5000 0 625 0 1,875 2,500 625
000689 7/15/97 1993/NQ 25,000 $15.9375 0 0 0 25,000 25,000 0
R00144 9/6/96 1993/NQ 3,750 $12.7500 0 1,250 0 2,500 3,750 1,250
Ogle, M.D., Kim A. ###-##-#### R00240 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
Passwater, Keith ###-##-#### 000684 5/27/97 1993/NQ 7,500 $13.6250 0 0 0 7,500 7,500 0
000727 2/24/98 1997/NQ 2,500 $16.3125 0 0 0 2,500 2,500 0
Patterson, William ###-##-#### 000620 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Payne, Tim ###-##-#### 000675 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Peterson, Susan ###-##-#### 000536 9/6/96 1993/NQ 500 $12.7500 0 125 0 375 500 125
000691 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Petru, Suzanne ###-##-#### 000550 10/21/96 1993/NQ 22,500 $9.8750 0 5,625 0 16,875 22,500 5,625
Pluckhorn, Fred B. ###-##-#### 000710 10/6/97 1997/NQ 7,500 $16.9375 0 0 0 7,500 7,500 0
Rembisz, David W. ###-##-#### 000621 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
R00160 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Richards, Judith B. ###-##-#### 000335 7/1/94 1993/NQ 8,000 $18.1250 0 4,000 4,000 0 4,000 4,000
000451 7/28/95 1993/NQ 5,000 $15.8750 0 1,250 3,750 0 1,250 1,250
R00162 9/6/96 1993/NQ 4,000 $12.7500 0 2,000 0 2,000 4,000 2,000
R00163 9/6/96 1993/NQ 3,750 $12.7500 0 1,250 0 2,500 3,750 1,250
Rominger, M.D.,
Michael P ###-##-#### 000724 1/5/98 1997/NQ 5,000 $15.2500 0 0 0 5,000 5,000 0
Rosenbayer, Lyn ###-##-#### 000717 7/15/97 1997/NQ 500 $15.9375 0 0 0 500 500 0
Saeger, Jeffrey ###-##-#### 000652 7/15/97 1993/NQ 250 $15.9375 0 0 0 250 250 0
Sanner, Dianne ###-##-#### 000622 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
Saur, Robert J. ###-##-#### 000709 10/6/97 1997/NQ 7,500 $16.9375 0 0 0 7,500 7,500 0
Schlueter, Ann L. ###-##-#### 000553 12/18/96 1993/NQ 5,000 $10.0000 0 1,250 0 3,750 5,000 1,250
000676 7/15/97 1993/NQ 7,500 $15.9375 0 0 0 7,500 7,500 0
Schultz, Christine ###-##-#### 000348 7/1/94 1993/NQ 500 $18.1250 0 250 250 0 250 250
000454 7/28/95 1993/NQ 500 $15.8750 0 125 375 0 125 125
000718 7/15/97 1997/NQ 500 $15.9375 0 0 0 500 500 0
R00171 9/6/96 1993/NQ 250 $12.7500 0 125 0 125 250 125
R00172 9/8/96 1993/NQ 375 $12.7500 0 125 0 250 375 125
Schuster, Deb ###-##-#### 000677 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Scott, April CVTYNEWGN 000693 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Sasterhenn, MD,
Steven E ###-##-#### 000708 8/11/97 1997/NQ 25,000 $17.5000 0 0 0 25,000 25,000 0
Shank, Cathlene
Porco ###-##-#### 000623 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
Slayton, M.D., Val ###-##-#### 000624 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
000707 7/11/97 1997/NQ 10,000 $16.5000 0 0 0 10,000 10,000 0
Smith, Shirley R. ###-##-#### 000108 4/3/89 1989/NQ 668 $5.0000 0 668 0 0 668 668
000109 4/3/89 1989/NQ 666 $6.3750 0 666 0 0 666 666
000110 1/4/93 1989/NQ 3,000 $11.0000 0 3,000 0 0 3,000 3,000
000353 1/1/93 1993/NQ 1,000 $11.3150 0 1,000 0 0 1,000 1,000
000354 7/1/94 1993/NQ 5,000 $18.1250 0 2,500 2,500 0 2,500 2,500
000426 7/28/95 1993/NQ 10,000 $15.8750 0 2,500 7,500 0 2,500 2,500
000545 9/6/98 1993/NQ 6,000 $12.7500 0 1,500 0 4,500 6,000 1,500
000701 7/15/97 1997/NQ 25,000 $15.9375 0 0 0 25,000 25,000 0
R00176 9/6/96 1993/NQ 2,500 $12.7500 0 1,250 0 1,250 2,500 1,250
R00177 9/6/96 1993/NQ 7,500 $12.7500 0 2,500 0 5,000 7,500 2,500
R00178 9/6/96 1989/NQ 5,000 $12.7500 0 5,000 0 0 5,000 5,000
R00519 2/20/96 1989/NQ 10,000 $18.1250 0 5,000 5,000 0 5,000 5,000
RR0008 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
Smith, Timothy ###-##-#### 000653 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Stelben, John J. ###-##-#### 000356 8/8/94 1993/NQ 1,600 $16.8750 0 800 800 0 800 800
000432 8/7/95 1993/NQ 2,500 $15.6250 0 625 1,875 0 625 625
000694 7/15/97 1993/NQ 14,000 $15.9375 0 0 0 14,000 14,000 0
R00180 9/6/96 1993/NQ 800 $12.7500 0 400 0 400 800 400
R00181 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
RR0009 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
Slone, Christopher ###-##-#### 000695 7/15/97 1993/NQ 500 $15.9375 0 0 0 500 500 0
Stoner, Audrey ###-##-#### 000654 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
Sucheski, Steve ###-##-#### 000655 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Sullivan, Robert ###-##-#### 000589 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Swamer, Yvonne ###-##-#### 000656 7/15/97 1993/NQ 250 $15.9375 0 0 0 250 250 0
Tabor, Bonnie ###-##-#### 000364 8/11/94 1993/NQ 2,500 $22.7500 0 625 1,875 0 625 625
000444 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
R00188 9/6/96 1993/NQ 1,875 $12.7500 0 1,250 0 625 1,875 1,250
R00189 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
Tamilla, Christine L.###-##-#### R00190 9/8/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Taylor, Priscilla ###-##-#### 000678 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Tony, Brian D. ###-##-#### C00060 9/12/96 1993/NQ 2,000 $12.5000 0 0 0 2,000 2,000 0
R00193 9/6/96 1993/NQ 100 $12.7500 0 25 0 75 100 25
Torek, Dina ###-##-#### 000626 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
Trauttein, M.D.,
Joseph J. ###-##-#### 000371 7/1/94 1993/NQ 5,500 $18.1250 0 2,750 2,750 0 2,750 2,750
000657 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
R00194 9/6/96 1993/NQ 2,750 $12.7500 0 1,375 0 1,375 2,750 1,375
Tully, Michael ###-##-#### 000679 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Turner, John ###-##-#### 000590 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Ultmann, M.D.,
Michelle C ###-##-#### R00239 9/6/96 1993/NQ 250 $12.7500 125 125 0 125 125 0
Valora, Michael ###-##-#### 000680 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Veno, Gane G. ###-##-#### 000448 7/28/95 1993/NQ 5,000 $15.8750 0 1,250 3,750 0 1,250 1,250
R00197 9/6/96 1993/NQ 3,750 $12.7500 0 1,250 2,500 0 1,250 1,250
R00198 9/6/96 1993/NQ 1,875 $12.7500 0 1,250 625 0 1,250 1,250
R00515 2/20/96 1993/NQ 2,500 $18.1250 0 625 1,875 0 825 825
Wallendjack, MD,
John C. ###-##-#### 000379 7/1/94 1993/NQ 10,000 $18.1250 0 5,000 5,000 0 5,000 5,000
000441 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000659 7/15/97 1993/NQ 3,750 $15.9375 0 0 0 3,750 3,750 0
R00200 9/6/96 1993/NQ 5,000 $12.7500 0 2,500 0 2,500 5,000 2,500
R00201 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
RR0012 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Walter, Eileen P. ###-##-#### 000437 7/28/95 1993/NQ 2,500 $15.8750 0 625 1,875 0 625 625
000591 7/15/97 1993/NQ 10,000 $15.9375 0 0 0 10,000 10,000 0
CR0050 9/6/96 1993/NQ 2,500 $12.7500 0 0 0 2,500 2,500 0
R00202 9/6/96 1993/NQ 1,875 $12.7500 0 625 0 1,250 1,875 625
Walter, Janis A. ###-##-#### 000380 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
R00203 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
Wargo, Thomas ###-##-#### 000627 7/15/97 1993/NQ 500 $15.9375 0 0 0 500 500 0
Washington, Terri ###-##-#### 000660 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Wayland, Charles ###-##-#### 000592 7/15/97 1993/NQ 7,500 $15.9375 0 0 0 7,500 7,500 0
Wayne, Janet ###-##-#### C00062 9/12/96 1993/NQ 2,000 $12.5000 0 0 0 2,000 2,000 0
Wetzel, Teresa R. ###-##-#### 000384 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
R00207 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
Whaley, Linda ###-##-#### 000579 7/15/97 1993/NQ 2,000 $15.9375 0 0 0 2,000 2,000 0
C00058 9/12/96 1993/NQ 2,000 $12.5000 0 0 0 2,000 2,000 0
Wheeler, Jr.,
George B. ###-##-#### 000160 9/21/93 SHMC/ISO 6,872 $3.7800 3,500 6,872 0 0 3,372 3,372
000594 7/15/97 1993/NQ 10,000 $15.9375 0 0 0 10,000 10,000 0
RR0013 7/15/97 1993/NQ 625 $15.9375 0 0 0 625 625 0
Wheeler, Lisa ###-##-#### 000593 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Whitaker, Gregory
Scott ###-##-#### 000483 7/28/95 1993/NQ 1,000 $15.8750 0 250 750 0 250 250
R00208 9/6/96 1993/NQ 750 $12.7500 0 250 500 0 250 250
White, Marilyn ###-##-#### 000626 7/15/97 1993/NQ 1,250 $15.9375 0 0 0 1,250 1,250 0
Williams, Lisa W. ###-##-#### 000387 7/1/94 1993/NQ 800 $18.1250 0 400 400 0 400 400
000466 7/28/95 1993/NQ 14,000 $15.8750 0 2,500 11,500 0 2,500 2,500
000682 7/15/97 1993/NQ 5,000 $15.9375 0 0 0 5,000 5,000 0
CR0052 9/6/96 1993/NQ 11,500 $12.7500 0 2,500 4,000 5,000 7,500 2,500
R00211 9/6/96 1993/NQ 400 $12.7500 0 200 0 200 400 200
RR0020 7/15/97 1993/NQ 1,500 $15.9375 0 0 0 1,500 1,500 0
RR0021 7/15/97 1993/NQ 1,000 $15.9375 0 0 0 1,000 1,000 0
Williams, Steve ###-##-#### 000683 7/15/97 1993/NQ 3,500 $15.9375 0 0 0 3,500 3,500 0
Williamson, Sheri
Cope ###-##-#### CR0006 9/6/96 1993/NQ 1,000 $12.7500 0 0 0 1,000 1,000 0
Winfield, Lesley ###-##-#### 000661 7/15/97 1993/NQ 2,500 $15.9375 0 0 0 2,500 2,500 0
Winter, Gail A. ###-##-#### 000390 7/1/94 1993/NQ 1,000 $18.1250 0 500 500 0 500 500
000629 7/15/97 1993/NQ 4,000 $15.9375 0 0 0 4,000 4,000 0
R00214 9/6/96 1993/NQ 500 $12.7500 0 250 0 250 500 250
Wise, Allen F. ###-##-#### 000533 10/7/96 1993/NQ 400,000 $11.0000 0 133,333 0 266,667 400,000 133,333
000704 7/17/97 1997/NQ 150,000 $17.0000 0 0 0 150,000 150,000 0
S00001 7/17/97 1997/RSP 50,000 $17.0000 0 0 0 50,000 50,000 0
Wolf, Dale ###-##-#### 000552 11/18/96 1993/NQ 100,000 $10.3750 0 25,000 0 75,000 100,000 25,000
000562 3/27/97 1993/NQ 50,000 $11.6250 0 12,500 0 37,500 50,000 12,500
000702 7/15/97 1997/NQ 50,000 $15.9375 0 0 0 50,000 50,000 0
Zuroski, Deborah ###-##-#### 000630 7/15/97 1993/NQ 750 $15.9375 0 0 0 750 750 0
ZZ-Butsch, MD,
Richard H ###-##-#### W00001 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-Craig, MD,
Johnetta WARRANT7 W00015 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Cross, MD,
Betty S. ###-##-#### W00002 5/1/97 WARR/ISO 800 $12.6250 0 0 0 800 800 0
ZZ-Dichsen, MD,
Donald V ###-##-#### W00003 5/1/97 WARR/ISO 1,925 $12.6250 0 0 0 1,925 1,925 0
W00016 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Glaser, MD, Jeff WARRANT4 W00017 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-Ireland, MD,
Kim C. ###-##-#### W00004 5/1/97 WARR/ISO 800 $12.6250 0 0 0 800 800 0
W00018 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Jacobson, MD,
Steve WARRANT1 W00019 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Jones, MD,
Gilbert WARRANT6 W00020 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Lee, MD, Chong B. ###-##-#### W00005 5/1/97 WARR/ISO 1,925 $12.6250 0 0 0 1,925 1,925 0
W00021 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Maret, MD,
Christophe ###-##-#### W00006 5/1/97 WARR/ISO 1,925 $12.6250 0 0 0 1,925 1,925 0
W00022 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-McDonald, MD,
Sharon ###-##-#### W00007 5/1/97 WARR/ISO 1,925 $12.6250 0 0 0 1,925 1,925 0
ZZ-Meghijee, MD,
Zinnat WARRANT5 W00023 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Moeser, MD,
Pierre J. ###-##-#### W00008 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
W00024 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Ngo, MD, Khai ###-##-#### W00009 5/1/97 WARR/ISO 800 $12.6250 0 0 0 800 800 0
W00025 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Perlstein,MD,
Laurence ###-##-#### W00010 5/1/97 WARR/ISO 1,925 $12.6250 0 0 0 1,925 1,925 0
W00026 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Piontek, Ronald F.###-##-#### W00011 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
W00027 5/1/97 WARR/ISO 300 $12.6250 0 0 0 300 300 0
ZZ-Ream, MD, Sheryl WARRANT3 W00028 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-Rugen, MD,
Rebecca ###-##-#### W00012 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-Schacht, MD,
Larry WARRANT2 W00029 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
ZZ-Valentine,
Claudia ###-##-#### W00013 5/1/97 WARR/ISO 400 $12.6250 0 0 0 400 400 0
ZZ-Warrant, Franklin
Capital WARRANTS5 000567 5/9/97 WARR/ISO 235,294 $10.6250 0 235,294 0 0 235,294 235,294
ZZ-Warrant,
Warburg Pin WARRANTS4 000566 5/9/97 WARR/ISO 1,343,822 $10.6250 0 1,343,822 0 0 1,343,822 1,343,822
000568 6/30/97 WARR/ISO 773,825 $10.6250 0 773,825 0 0 773,825 773,825
ZZ-Warrant, West
Penn H. WARRANTS3 000482 7/1/95 WARR/ISO 100,000 $14.1250 0 66,666 0 33,334 100,000 66,666
ZZ-Zimmerman, MD,
Debo ###-##-#### W00014 5/1/97 WARR/ISO 800 $12.6250 0 0 0 800 800 0
W00030 5/1/97 WARR/ISO 1,000 $12.6250 0 0 0 1,000 1,000 0
--------- ------ --------- ------- --------- --------- ---------
TOTALS 6,180,854 70,925 3,319,550 309,449 2,551,855 5,800,480 3,248,625
</TABLE>
EXHIBIT 2
FORM OF EXERCISE NOTE
[To be signed only upon exercise of Warrant]
TO CONVENTRY HEALTH CARE, INC.:
The undersigned, the holder of that certain Principal Warrant, dated [ ],
1998 (the "Warrant"), issued by you, hereby acknowledges receipt of a Warrant
Notice on __________ from you; hereby irrevocably elects to exercise the
purchase right represented by such Principal Warrant for, and to purchase
thereunder, __________ shares of Common Stock, par value $0.01 per share, of
Coventry Health Care, Inc., herewith makes payment of $______ therefor; and
requests that the stock certificate for such shares be issued in the name of,
and be delivered, to the person listed below at the address listed under such
person's name:
Name:
Address:
Dated:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
