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EXHIBIT 10.2
THIS WARRANT AND THE SHARES UNDERLYING THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS.
THIS WARRANT AND THE SHARES UNDERLYING THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF. IN ADDITION, THIS WARRANT MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
UPON THE CONDITIONS SPECIFIED IN THIS WARRANT, AND NO SALE, ASSIGNMENT,
TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED
WITH.
▇▇. ▇▇▇▇▇▇ Right to Purchase 50,000
Shares of Common Stock
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, subject to the terms and conditions set forth
herein, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Holder") is entitled to purchase from COVENTRY HEALTH
CARE, INC., a Delaware corporation (the "Company"), at any time and from time to
time, in whole or in part, during the period specified herein, up to Fifty
Thousand (50,000) fully paid and nonassessable shares of the Company's Common
Stock, par value $.01 per share (the "Warrant Shares"), at an exercise price of
$7.625 per share (the "Exercise Price"), which is the market price of the
Company's Common Stock on December 21, 1998, the date the Company executed an
agreement for the provision of legal services with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
("EBG") and agreed to the issuance of this Warrant. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Section 7 hereof.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Warrant
Shares. Subject to the provisions hereof, including Section 2 hereof, this
Warrant may be exercised by the Holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed Exercise Agreement in the
form attached hereto, to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the Holder hereof),
and upon payment to the Company in cash or by certified or official bank check
of the Exercise Price for the Warrant Shares specified in said Exercise
Agreement. In addition, to the extent and when from time to time the Company
generally makes available to its senior management the ability to do a cashless
exercise of options issued under the Company's Amended and Restated 1998 Stock
Incentive Plan, the Holder shall be entitled to do a cashless exercise of this
Warrant on substantially similar terms. The Warrant Shares so purchased shall be
deemed to be issued to the Holder or said Holder's designee as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered for exercise, the completed Exercise Agreement
delivered, and payment made for the Warrant Shares being purchased as aforesaid.
Certificates for the Warrant Shares so purchased,
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representing the aggregate number of shares specified in said Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time,
not exceeding seven (7) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder hereof and shall be registered in the name of said
Holder or such other name as shall be designated by said Holder. If this
Warrant shall have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of delivery of said
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.
2. Period of Exercise. This Warrant is exercisable as follows: 16,667
Warrant Shares become exercisable on December 31, 1999; 16,667 Warrant Shares
become exercisable on December 31, 2000; and 16,666 Warrant Shares become
exercisable on December 31, 2001. This Warrant terminates at the close of
business on January 4, 2009, subject to earlier termination as provided herein,
at which time this Warrant shall expire and be of no further force and effect.
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Warrant Shares to be Fully Paid. All Warrant Shares will, upon
issuance, be validly issued, fully paid, nonassessable and free
from all taxes, liens, and charges.
(b) Reservation of Shares. During the period within which this
Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.
(d) Registration of Warrant Shares. The Company will use its best
efforts to register the Warrant Shares with the Securities and
Exchange Commission on or before December 31, 1999.
4. Non-Employee Compensation. The value realized by the Holder on the
exercise of the Warrant is considered to be non-employee compensation and the
Company will issue a Form 1099 to the Holder reporting any such compensation
attributed to or received by the Holder.
5. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
6. Transfer, Exchange, and Replacement of Warrants and Warrant
Shares.
(a) Restriction on Transfer. Anything in this Warrant to the
contrary notwithstanding, this Warrant (and any Warrant for
which this Warrant may
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be exchanged or replaced) may not be transferred or assigned,
except (i) by the Holder to a member of his Immediate Family
(defined below) or a trust for the benefit of the Holder or a
member of his Immediate Family, or (ii) by will or pursuant to
the laws of descent and distribution; provided, however, that
any transfer or assignment shall be subject to the conditions
set forth in Section 6(f) hereof. Until due presentment for
registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be
affected by any notice to the contrary. For purposes of this
paragraph, "Immediate Family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive
relationships.
(b) Warrant Exchangeable for Different Denominations. Subject to
Section 6(a) hereof, this Warrant is exchangeable, upon the
surrender hereof by the holder hereof at the office or agency of
the Company referred to in Section 6(e) hereof, for new Warrants
of like tenor representing in the aggregate the right to purchase
the number of Warrant Shares which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such
number of Warrant Shares as shall be designated by said holder
hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in
the case of any such mutilation, upon surrender and cancellation
of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation. Upon the surrender of this Warrant in connection
with any transfer, exchange, or replacement as provided in this
Section 6, this Warrant shall be promptly canceled by the
Company.
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this
Warrant, in which the Company shall record the name and address
of the person in whose name this Warrant has been issued, as well
as the name and address of each transferee and each prior owner
of this Warrant.
(f) Investment Representation. By acceptance of this Warrant, the
holder hereof hereby represents that: (i) such holder
understands that neither this Warrant nor the Warrant Shares
issuable upon exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act") or any
state securities laws and, in addition to the other restrictions
on transfer set forth in this Warrant, neither this Warrant nor
the Warrant Shares issuable upon exercise hereof may be
transferred in the absence of an effective registration
statement under the Securities Act and any applicable state
securities laws or an exemption from the registration
requirements thereof, and (ii) such holder is acquiring this
Warrant for investment purposes only, and not with a view to the
resale or distribution of this Warrant or the Warrant Shares.
Following the exercise of this Warrant, the holder shall not
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transfer the Warrant Shares except pursuant to an effective
registration statement under the Securities Act and any
applicable state securities laws or blue sky laws unless (x) the
holder of this Warrant furnishes to the Company a written
opinion of counsel, which opinion and counsel are acceptable to
the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under the Securities
Act and under applicable state securities or blue sky laws and
(y) the holder or transferee executes and delivers to the
Company an investment letter in form and substance acceptable to
the Company.
7. Adjustments Upon Changes in Common Stock. In the event the Company
shall effect a split of the Common Stock or dividend payable in Common Stock, or
in the event the outstanding Common Stock shall be combined into a smaller
number of shares, the maximum number of Warrant Shares for which this Warrant
may be exercised shall be decreased or increased proportionately and the
Exercise Price shall be decreased or increased proportionately so that the
aggregate Exercise Price for all of the Warrant Shares shall remain the same as
immediately prior to such split, dividend or combination.
In the event of a reclassification of the Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization (including a
merger, consolidation, spin-off or sale of assets) of the Company or a parent or
subsidiary of the Company, the Board of Directors of the Company (the "Board")
shall make such adjustments, if any, as it may deem appropriate in its sole
discretion in the number, Exercise Price and kind of shares covered by the
unexercised portions of this Warrant. The provisions of this Section shall only
be applicable if, and only to the extent that, the application thereof does not
conflict with a valid governmental statute, regulation or rule.
8. Effects of Change In Control
(a) Impact of Event. In the event of: (1) a "Change in Control" as
defined in Section8(b); or (2) a "Potential Change in Control" as
defined in Section 8(c), but only if and to the extent so
determined by the Board of Directors of the Company (the "Board")
after grant (subject to any right of approval expressly reserved
by the Board at the time of such determination),
(i) This Warrant to the extent not previously exercisable and
vested shall become fully exercisable and vested.
(ii) The value of this Warrant to the extent vested and
exercisable, shall, unless otherwise determined by the Board
in its sole discretion prior to any Change in Control, be
cashed out on the basis of the "Change in Control Price" as
defined in Section 8(d) as of the date such Change in
Control or such Potential Change in Control is determined to
have occurred or such other date as the Board may determine
prior to the Change in Control.
(b) Definition of Change in Control. For purposes of Section 8(a), a
"Change in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act, other than
the Company or a wholly-owned subsidiary thereof or any
employee benefit plan of the Company or any of its
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Subsidiaries, becomes the beneficial owner of the Company's
securities having 35% or more of the combined voting power
of the then outstanding securities of the Company that may
be cast for the election of directors of the Company (other
than as a result of an issuance of securities initiated by
the Company in the ordinary course of business or other
than transactions which are approved by a majority of the
Board); or
(ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale
of assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined
voting power of the then outstanding securities of the
Company or any successor corporation or entity entitled to
vote generally in the election of the directors of the
Company or such other corporation or entity after such
transactions are held in the aggregate by the holders of the
Company's securities entitled to vote generally in the
election of directors of the Company immediately prior to
such transaction; or
(iii)during any period of two consecutive years, individuals who
at the beginning of any such period constituted the Board
cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's shareholders, of each director of the
Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company
then still in office who were directors of the Company at
the beginning of any such period.
(c) Definition of Potential Change in Control. For purposes of
Section 8(a), a "Potential Change in Control" means the happening
of any one of the following:
(i) The approval by shareholders of an agreement by the Company,
the consummation of which would result in a Change in
Control of the Company as defined in Section 8(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Company or a subsidiary or any Company employee benefit plan
(including any trustee of such plan acting as such trustee))
of securities of the Company representing 5% or more of the
combined voting power of the Company's outstanding
securities and the adoption by the Committee of a resolution
to the effect that a Potential Change in Control of the
Company has occurred for purposes of the Company's Amended
and Restated 1998 Stock Incentive Plan.
(d) Change in Control Price. For purposes of this Section 8, "Change
in Control Price" means the highest price per share paid in any
transaction
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reported on the Nasdaq National Market or such other
exchange or market as is the principal trading market for the
Common Stock, or paid or offered in any bona fide transaction
related to a Potential or actual Change in Control of the
Company at any time during the 60-day period immediately
preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control
event), in each case as determined by the Board or, where
applicable, the date on which a cash out occurs under Section
8(a)(ii).
9. Termination of Warrant. In the event that (i) the contractual
relationship between EBG and the Company or any successor of the Company is
terminated other than in connection with a Change In Control or Potential Change
in Control under Section 8, or (ii) the Holder ceases to work for EBG or (iii)
the Holder no longer renders services to the Company as EBG's partner in charge
of the Company's legal affairs, the Holder may exercise this Warrant, to the
extent he was entitled to do so at the effective date of the occurrence of any
of the foregoing events, at any time within ninety (90) days after the
occurrence of any such event but in no event after the expiration of this
Warrant (i.e., the expiration of ten years from the date of grant or such
earlier expiration date as may be provided in this Warrant); provided, however,
if the occurrence of any of the foregoing events was due to "Cause" attributable
to the actions of Holder, this Warrant shall immediately lapse and expire. For
purposes of this Warrant, "Cause" means (i) a felony conviction or the failure
to contest prosecution for a felony, or (ii) willful misconduct or dishonesty,
which is directly and materially harmful to the business or reputation of the
Company or any subsidiary or affiliate.
10. Disability or Retirement. If Holder's services rendered to the
Company on behalf of EBG are terminated by reason of Holder's disability or
early or normal retirement from EBG, in accordance with EBG's policies and
procedures, Holder may exercise that portion of this Warrant which was
exercisable by him at the date of such termination at any time within three (3)
years of the date of such termination; provided, however, that such exercise
occurs within ten (10) years of the date this Warrant was granted to Holder or
such earlier expiration date as may be provided in this Warrant.
11. Death. If Holder dies during the term of the contractual
relationship between EBG and the Company, and Holder is rendering services to
the Company as EBG's partner in charge of the Company's legal affairs, that
portion of this Warrant which was exercisable by Holder at the date of his death
may be exercised by the legal representative of Holder's estate or the legatee
or legatees under Holder's will for a period of twelve (12) months from the date
of Holder's death, but in no event after ten (10) years from the date this
Warrant was granted to Holder or such earlier expiration date as may be provided
in this Warrant.
12. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, to the office of the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: President (or Secretary), or at such other
address as shall have been furnished to the holder of this Warrant by notice
from the Company. Any such notice, request, or other communication may be sent
by telegram, telex, or telecopy, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail as provided above. All
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notices, requests, and other communications shall be deemed to have been given
either at the time of the delivery thereof to (or the receipt by, in the case
of a telegram, telex or telecopy) the person entitled to receive such notice at
the address of such person for purposes of this Section 12, or, if mailed, at
the completion of the third (3rd) full day following the time of such mailing
thereof to such address, as the case may be.
13. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.
14. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged, or terminated, except by an
instrument in writing signed by the party (or any predecessor
interest thereof) against which enforcement of the same is
sought.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of
the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, as of the 4th day of January, 1999.
COVENTRY HEALTH CARE, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
[CORPORATE SEAL]
Attest:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
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EXERCISE AGREEMENT
Dated: _____________, _______
To: _____________________
The undersigned, pursuant to the provisions set forth in the within
Warrant No. W00052, hereby agrees to purchase _________ shares of Common Stock
of Coventry Health Care, Inc. covered by such Warrant, and makes payment
herewith in full therefor at the price per share provided by such Warrant in
cash or by certified or official bank check in the amount of $_______________.
Please issue a certificate or certificates for such shares of Common Stock in
the name of (and pay cash for any fractional share(s)) to the following:
Name:
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SS No./ Tax ID No.:
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Address:
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Signature*:
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* The above signature should correspond exactly with the name on the
face of the within Warrant.
If the number of Warrant Shares exercised herein shall not be all of the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the above signatory covering the balance of the Warrant Shares purchasable
under the within Warrant, less any fraction of a share paid to the holder in
cash.
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