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EXECUTION COPY
COVENTRY HEALTH CARE, INC.
AMENDMENT NO. 1
TO
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
Dated as of August 1, 1998
This Amendment No. 1 (this "Agreement"), dated as of August 1,
1998, by and between Coventry Health Care, Inc., a Delaware corporation and the
successor by merger to Coventry Corporation, a Tennessee corporation (the
"Company"), and Warburg, Xxxxxx Ventures, L.P., a Delaware limited partnership
("Warburg").
R E C I T A L S :
WHEREAS, the Company, Warburg and Franklin Capital Associates
III are parties to an Amended and Restated Securities Purchase Agreement, dated
as of April 2, 1997 (the "Purchase Agreement"); and
WHEREAS, the Company and Warburg wish to amend certain
provisions of the Purchase Agreement relating to Warburg.
NOW, THEREFORE, in consideration of the foregoing premises and
for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions. Capitalized terms used but not defined
herein shall have the meaning assigned to them in the Purchase Agreement.
Section 2. Amendments.
(a) Notwithstanding the provisions of the Purchase Agreement
or the Notes, from and after May 28, 1999, the Notes held by Warburg shall no
longer bear interest. Warburg agrees to exchange any Notes presently held by it
for new Notes reflecting this amendment.
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(b) Section 9(a) of the Purchase Agreement is hereby amended
by adding the following to the end thereof:
"Notwithstanding anything contained in this Agreement to the contrary,
the Notes shall not be convertible by Warburg, if, after giving effect
to the shares of Common Stock of the Company issuable to Warburg upon
such conversion (or partial conversion), Warburg would beneficially own
ten percent (10%) or more of the outstanding Voting Securities of the
Company (the "Control Threshold"), unless Warburg shall have obtained
all Required Approvals. For purposes of this Agreement, (i) beneficial
ownership shall be determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, (ii) Voting Securities of
the Company shall mean all shares of Common Stock and all securities
convertible into or exchangeable for shares of Common Stock other than
any Notes owned by Warburg and any Warrants to acquire shares of Common
Stock owned by Warburg ("Warburg Warrants"), and (iii) "Required
Approval" shall mean any approval required by any state insurance
regulatory or similar authority to which the Company or any of its
assets is subject, in connection with an acquisition of control of the
Company or any of its subsidiaries. The foregoing provisions are
specifically intended to prevent the acquisition of control (as defined
or presumed to exist under any such state insurance or similar
regulatory authority) of the Company or any of its subsidiaries by
Warburg unless and until Warburg obtains the Required Approval."
(c) Section 9(e) of the Purchase Agreement is hereby amended
by deleting the fourth sentence thereof and inserting the following in its
place:
"The date of receipt by the Company of the Notes and notice shall be
the conversion date. Warburg shall have the right to deliver a notice
of conversion conditioned upon the receipt of all Required Approvals as
provided in Section 9(a) hereof and, upon the receipt of such Required
Approvals, the Company shall deliver certificates representing the
shares of Common Stock to Warburg. Upon the receipt by the Company of a
notice of conversion, the Company shall no longer have the right to
prepay any of the Notes subject to such notice without the prior
written consent of the holder thereof."
Section 3. Exchange of Notes
(a) In the event that, on or before December 31, 1999,
directors or stockholders of the Company authorize a series of preferred stock
having substantially identical rights to the shares of Series A Preferred Stock
("New Convertible Preferred"), except that such shares will have no voting
rights except as provided by law and will have a limitation on the extent to
which
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they can be converted substantially similar to the restriction set forth in
Section 2(b) hereof, the Company may upon written notice to the holders of the
Notes (the "Notice"), exchange the Notes for shares of New Convertible Preferred
(the "Exchange").
(b) In the event the Company elects to effect the Exchange,
the holders of the Notes shall be entitled to receive a number of shares of New
Convertible Preferred equal to the number of shares of Series A Preferred Stock
into which such Notes are exchangeable pursuant to the terms of the Purchase
Agreement.
(c) As soon as practicable after the date on which the Company
delivers to the holders of the Notes the Notice, and in any event within ten
(10) days thereafter, the Company, at its expense, will cause to be issued in
the name of and delivered to the holders of the Notes a certificate or
certificates for the number of fully paid and non-assessable shares of New
Convertible Preferred to which such holder shall be entitled plus, in lieu of
any fractional share to which such holder would otherwise be entitled, cash in
an amount determined in accordance with Section 9(c) of the Purchase Agreement.
Such shares shall otherwise be issuable upon the same terms as the shares of
Series A Preferred Stock pursuant to Section 9 of the Purchase Agreement.
Section 4. Mandatory Exercise of Warburg Warrants. In the
event the Company exercises its rights pursuant to Section 1.2(b) of the Warburg
Warrants and, after giving effect to the shares of Common Stock issuable upon
such exercise (or partial exercise), Warburg would exceed the Control Threshold
(as defined in the Warburg Warrants), then the following provisions shall apply:
(a) Warburg shall use its reasonable best efforts to obtain
all Required Approvals (as defined in the Warburg Warrants) as soon as
practicable following receipt of the Optional Exercise Notice (as defined in the
Warburg Warrants), unless Warburg notifies the Company that it intends to sell
or otherwise transfer shares of Common Stock so that, after giving effect to the
Mandatory Exercise (as defined in the Warburg Warrants), it will not exceed the
Control Threshold. Without limiting the generality of the foregoing, at the
request of Warburg, the Company shall register the shares to be issued to
Warburg pursuant to the Mandatory Exercise in the names of the partners of
Warburg unless, in the opinion of counsel to the Company, such shares are not at
the time of such registration freely transferable by such partners pursuant to
Rule 144(k) or another similar exemption from the registration requirements of
the Securities Act of 1933, as amended.
(b) In no event shall any shares of Common Stock be issued to
Warburg pursuant to the Mandatory Exercise unless and until Warburg notifies the
Company in writing that all Required Approvals have been obtained or that it has
transferred or sold such number of shares of Common Stock such that, after
giving
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effect to the issuance of the shares of Common Stock pursuant to the Mandatory
Exercise, the Control Threshold would not be exceeded.
(c) In the event Warburg is unable or unwilling to obtain the
Required Approvals in order to permit the Company to exercise the Mandatory
Exercise, Warburg shall use all reasonable efforts to sell or otherwise
transfer, during a period of 120 days from the date on which the Company
delivers the Optional Exercise Notice, such number of shares of Common Stock as
shall be required in order to permit the Mandatory Exercise to be effected
without exceeding the Control Threshold.
Section 5. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
Section 6. Section Headings. The headings of the sections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
Section 7. Notices.
(a) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(1) if to Warburg, at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (facsimile: (000) 000-0000), marked for attention of
Xxxxxxx X. Xxxxxxx, or at such other address as Warburg may
have furnished the Company in writing (with a copy to Xxxxxxx
Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attention: Xxxxxx X. Xxxxxxx, Esq. (facsimile: (212)
728-8111), or at such other address it may have furnished the
Company in writing), or
(2) if to the Company, at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000-0000 (facsimile: (000) 000-0000) marked for
attention of Chief Financial Officer, or at such other address
as the Company may have furnished the Investors in writing
(with a copy to Bass, Xxxxx & Xxxx PLC, Attention: Xxx X.
Xxxxxxxx, Esq. (facsimile: (000) 000-0000) or at such other
address as it may have furnished in writing to Warburg).
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered
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or certified mail, on the third business day after the date of such mailing.
Section 8. Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties.
Section 9. Entire Agreement; Amendment and Waiver. This
Agreement constitutes the entire understandings of the parties hereto and
supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and Warburg.
Section 10. Severability. In the event that any part or parts
of this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
effect the remaining provisions of this Agreement which shall remain in full
force and effect.
Section 11. Ratification. Except as expressly set forth
herein, the terms of the Purchase Agreement and the Notes are unaffected hereby
and shall remain in full force and effect.
Section 12. 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.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
COVENTRY HEALTH CARE, INC.
By:_____________________________
Name:
Title:
WARBURG, XXXXXX VENTURES, L.P.
By: WARBURG, XXXXXX & CO.,
General Partner
By:_________________________
Name:
Title:
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