<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For use of the Commission Only (as permitted by Rule
14a-6(e) (2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OXFORD HEALTH PLANS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
<PAGE> 2
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 3
March 29, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders (the "Meeting") of Oxford Health Plans, Inc. (the "Company") to be
held on April 22, 1997, 10:00 a.m. at the Company's office at Westchester One,
44 South Broadway, White Plains, New York 10601.
This year, three directors are nominated for election to the Board. At
the Meeting you will be asked to elect three directors to serve until the 2000
Annual Meeting. You will also be asked to consider a proposal to amend (i) the
Company's Second Amended and Restated Certificate of Incorporation, as amended,
to increase the number of authorized shares of the Company's Common Stock from
200,000,000 to 400,000,000 shares and (ii) the Oxford Health Plans, Inc. 1991
Stock Option Plan, as amended, to increase the number of shares that can be
issued under the Plan from 17,080,000 shares to 21,580,000 shares.
The accompanying Proxy Statement provides a detailed description of
these proposals. You are urged to read the accompanying materials so that you
may be informed about the business to come before the Meeting.
It is important that your shares be represented at the Meeting.
Accordingly, we urge you, whether or not you plan to attend the Meeting, to
complete, sign and date your proxy and return it to us promptly in the enclosed
envelope. If you attend the Meeting, you may vote in person, even if you have
previously mailed in your proxy.
We look forward to seeing you at the Meeting.
Sincerely,
STEPHEN F. WIGGINS
Chairman and
Chief Executive Officer
<PAGE> 4
OXFORD HEALTH PLANS, INC.
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1997
-----------------------------------------
To the Stockholders of Oxford Health Plans, Inc.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Oxford Health Plans, Inc. (the "Company") will be held on April
22, 1997 at 10:00 a.m., local time, at the Company's office at Westchester One,
44 South Broadway, White Plains, New York 10601 for the following purposes:
1. To elect three directors to serve as Class III
Directors of the Company for a term ending at the
2000 Annual Meeting.
2. To amend the Company's Second Amended and Restated
Certificate of Incorporation, as amended, to increase
the number of authorized shares of the Company's
Common Stock from 200,000,000 to 400,000,000.
3. To amend the Oxford Health Plans, Inc. 1991 Stock
Option Plan, as amended, to increase the number of
shares of Common Stock, par value $.01 per share (the
"Common Stock"), issuable thereunder from 17,080,000
shares to 21,580,000 shares.
4. To transact such other business as may properly come
before the Meeting or any adjournment or postponement
thereof.
Only holders of record of outstanding shares of Common Stock of the
Company at the close of business on March 13, 1997 will be entitled to notice
of, and to vote at, the Meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
JEFFERY H. BOYD
Executive Vice President, General Counsel
and Secretary
Norwalk, Connecticut
March 29, 1997
---------------------------
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 5
OXFORD HEALTH PLANS, INC.
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
----------------------------------
PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD APRIL 22, 1997
-----------------------------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Oxford
Health Plans, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use at
the Annual Meeting of Stockholders to be held on April 22, 1997, at 10:00 a.m.,
local time, at the Company's office, Westchester One, 44 South Broadway, White
Plains, New York 10601 and any adjournment or postponement thereof (the
"Meeting").
At the Meeting, stockholders will be asked to consider and vote upon
three proposals: (1) the election of three directors to serve as Class III
Directors of the Company until the 2000 Annual Meeting ("Proposal Number One"),
(2) the amendment of the Company's Second Amended and Restated Certificate of
Incorporation, as amended, to increase the number of authorized shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock") from
200,000,000 to 400,000,000, ("Proposal Number Two") and (3) the amendment of the
Oxford Health Plans, Inc. 1991 Stock Option Plan, as amended (the "1991 Stock
Option Plan"), to increase the number of shares of Common Stock, $.01 par value
per share (the "Common Stock"), issuable thereunder from 17,080,000 shares to
21,580,000 shares as described in the Proxy Statement ("Proposal Number
Three").
This Proxy Statement is dated March 29, 1997 and is first being
mailed to stockholders along with the related form of proxy on or about March
29, 1997.
If a proxy in the accompanying form is properly executed and returned
to the Company in time for the Meeting and is not revoked prior to the time it
is exercised, the shares represented by the proxy will be voted in accordance
with the directions specified therein for the matters listed on the proxy card.
Unless the proxy specifies that it is to be voted against or is an abstention on
a listed matter, proxies will be voted FOR Proposal Number One, Proposal Number
Two and Proposal Number Three, and otherwise in the discretion of the proxy
holders as to any other matter that may come before the Meeting.
Votes are counted by tellers of the Company's transfer agent. These
tellers will canvas the stockholders present at the meeting, count their votes
and count the votes represented by proxies presented. Abstentions and broker
nonvotes are counted for purposes of determining the number of shares
represented at the Meeting, but are deemed not to have voted on the proposal.
Broker nonvotes occur when a broker nominee, holding shares in street name for
the beneficial owner thereof, has not received voting instructions from the
beneficial owner and does not have discretionary authority to vote.
REVOCABILITY OF PROXY
Any stockholder of the Company who has given a proxy has the power to
revoke such proxy at any time before it is voted either (i) by filing a written
revocation or a duly executed proxy bearing a later date with Jeffery H. Boyd,
Executive Vice President, General Counsel and Secretary of the Company, at
Oxford Health Plans, Inc., 800 Connecticut Avenue, Norwalk, Connecticut 06854,
or (ii) by appearing at the Meeting and voting in person. Attendance at the
Meeting will not in and of itself constitute the revocation of a proxy. Voting
by those present during the conduct of the Meeting will be by ballot.
1
<PAGE> 6
RECORD DATE, OUTSTANDING SECURITIES AND VOTES REQUIRED
The Board of Directors of the Company has fixed the close of business
on March 13, 1997 as the record date (the "Record Date") for determining holders
of outstanding shares of Common Stock who are entitled to notice of and to vote
at the Meeting. As of the Record Date, there were 568 stockholders of record and
77,922,440 shares of Common Stock issued and outstanding, each of which shares
is entitled to one vote.
The approval of Proposal Number One requires the affirmative vote of a
plurality of the shares of Common Stock which are present in person or by proxy
at the Meeting and the approval of each of Proposal Number Two and Proposal
Number Three requires the affirmative vote of a majority of the outstanding
shares of Common Stock.
The Company expects that the officers and directors of the Company will
vote the shares of Common Stock held by them (representing approximately 3.8% of
the shares of Common Stock issued and outstanding) in favor of Proposal Number
One, Proposal Number Two and Proposal Number Three.
2
<PAGE> 7
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Company's Second Amended and Restated Certificate of Incorporation,
as amended, provides for a Board of Directors divided into three classes, as
nearly equal in number as the then total number of directors constituting the
entire Board permits, with the term of office of one class expiring each year at
the Annual Meeting. Each class of Directors is elected for a term of three years
except in the case of elections to fill vacancies or newly created
directorships.
The Board of Directors presently consists of seven persons: Stephen F.
Wiggins, James B. Adamson, Robert B. Milligan, Jr., Fred F. Nazem, Marcia J.
Radosevich, Ph.D., Benjamin H. Safirstein, M.D., and Thomas A. Scully.
Three individuals are to be elected to serve as Class III Directors for
a term of three years and until the election and qualification of their
successor. Unless a stockholder WITHHOLDS AUTHORITY, the holders of proxies
representing shares of Common Stock will vote FOR the election of Stephen F.
Wiggins, Robert B. Milligan, Jr. and Marcia J. Radosevich, Ph.D. as Class III
Directors. The Board of Directors has no reason to believe that any nominee will
decline or be unable to serve as a Director of the Company. However, if a
nominee shall be unavailable for any reason, then the proxies may be voted for
the election of such person as may be recommended by the Board of Directors.
Messrs. Nazem and Scully serve as Class II Directors. Mr. Adamson and Dr.
Safirstein serve as Class I Directors. Messrs. Adamson, Nazem, Scully and Dr.
Safirstein are not standing for re-election because their terms as Directors
extend past the Meeting.
The following table sets forth the age and title of each nominee
director, each director continuing in office and each executive officer of the
Company who is not a director, followed by descriptions of such person's
additional business experience during the past five years.
NOMINEES FOR ELECTION AS CLASS III DIRECTOR
Name Age Position
- ---- --- --------
Stephen F. Wiggins 40 Chairman of the Board of Directors
and Chief Executive Officer
Robert B. Milligan, Jr. 47 Director
Marcia J. Radosevich, Ph.D. 44 Director
DIRECTORS WHOSE TERMS HAVE NOT EXPIRED
Name Age Position
- ---- --- --------
James B. Adamson 49 Director
Benjamin H. Safirstein, M.D. 58 Director
Fred F. Nazem 56 Director
Thomas A. Scully 39 Director
3
<PAGE> 8
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
William M. Sullivan 33 President and Chief Operating Officer
Jeffery H. Boyd 40 Executive Vice President and
General Counsel
Andrew B. Cassidy 52 Executive Vice President and Chief Financial Officer
Robert M. Smoler 40 Executive Vice President and Chief Executive
Officer - New York Region
David B. Snow, Jr. 42 Executive Vice President, Medical Delivery Systems
and Government Programs
John P. Driscoll 37 Vice President, Government Programs
David A. Finkel 33 Vice President, Operations
Kevin R. Hill 34 Vice President and Chief Executive Officer -
New Jersey Region
Frank N. Medici, M.D. 61 Vice President, Medical Affairs
Paul E. Ricker 50 Vice President and Chief Information Officer
Brendan R. Shanahan 34 Vice President and Controller
Jay L. Silverstein 38 Vice President, Chief Marketing Officer
Alan E. Sokolow, M.D. 46 Vice President, Medical Management and
Medical Analytics
Thomas A. Travers, D.D.S., M.P.H. 48 Vice President, Medical Delivery Systems
Jeanne D. Wisniewski 38 Vice President, Human Resources
</TABLE>
Stephen F. Wiggins, the founder of the Company, has served as Chairman
of the Board of Directors and Chief Executive Officer of the Company since its
formation in 1984. Mr. Wiggins was the founder of Accessible Space, Inc.
("A.S.I."), a nonprofit organization based in Minneapolis which develops and
operates long-term care facilities for the handicapped. Mr. Wiggins served as
Executive Director of A.S.I. from 1977 to 1982. Also, from 1980 to 1984, Mr.
Wiggins developed four retirement communities for senior citizens and the
handicapped and made health care investments for two New York venture capital
firms. Mr. Wiggins received a B.A. from Macalester College and an M.B.A. from
Harvard University Graduate School of Business Administration.
James B. Adamson was elected a Director of the Company in January 1996.
Since May 1995, he has been Chairman, President and Chief Executive Officer of
Flagstar Companies, Inc., one of the nation's largest restaurant companies,
which is headquartered in Spartanburg, South Carolina. From January 1992 until
February 1995, Mr. Adamson served in several senior executive capacities with
The Burger King Corporation, most recently as Chief Executive Officer. From 1988
to 1991, he was Executive Vice President, Marketing of Revco, Inc., a national
drugstore chain. Mr. Adamson is also a director of Kmart Corporation.
Marcia J. Radosevich, Ph.D. was elected a Director in July 1994. Dr.
Radosevich is the Chairman, President and Chief Executive Officer of HPR Inc., a
software company headquartered in Cambridge, Massachusetts, which develops and
markets cost management, provider profiling and information systems for the
health care industry. Dr. Radosevich has served in such capacity since April
1992. From July 1988 to April 1992, Dr. Radosevich served as the President and
Chief Executive Officer of HPR Inc. Dr. Radosevich co-founded HPR Inc.
(formerly, Health Payment Review, Inc.) in 1988.
Robert B. Milligan, Jr., has been a Director of the Company since
July 1992. Mr. Milligan is Chairman of Wyndam Capital, L.P., a registered
broker-dealer, Director, President and Chief Executive of Verigen Inc., a
biopharmaceutical company and Manager of OrthoNet, L.L.C., a network of
orthopedic surgeons in New York, New Jersey, and Connecticut. Mr. Milligan has
been an officer and has served on the board of directors of several private and
public companies.
Fred F. Nazem has been a Director of the Company since June 1990. Since
1981, he has been President of Nazem, Inc. and Managing General Partner of the
general partner of several Nazem & Company limited partnerships which are
affiliated venture capital funds. Mr. Nazem is a director of three public
companies, Tegal Corporation, Genesis Health Ventures, Inc., and Consep, Inc.,
as well as a number of privately held firms.
4
<PAGE> 9
Benjamin H. Safirstein, M.D. was elected a Director in 1985. Dr.
Safirstein has been Oxford's New York Regional Vice President and Medical
Director since January 1996 after serving as the Senior Medical Director of the
Company from 1985 to September 1992. Dr. Safirstein is a Clinical Associate
Professor of Medicine and is the Director of Pulmonary Medicine at Saint
Michael's Medical Center, Newark, New Jersey. He is board certified in internal
medicine and pulmonary medicine. Dr. Safirstein also is in private practice with
the Montclair Medical Group, Montclair, New Jersey. Dr. Safirstein is a graduate
of the Chicago Medical School and the Mount Sinai Hospital residency program,
where he was Chief Resident of Medicine.
Thomas A. Scully was elected a Director in September 1993. Since
January 1995, he has been President of the Federation of American Health Systems
in Washington, D.C. From 1992 until the end of 1994, he was a partner in the
Washington D. C. law firm of Patton, Boggs & Blow. Prior to that, Mr. Scully
served for four years on the White House staff. During 1992, he was Deputy
Assistant for Domestic Policy to President Bush. From 1989 to 1992, he served as
counselor to the Director of OMB and as the Associate Director of OMB for Human
Resources, Veterans and Labor. He also participated in the formulation of
President Bush's comprehensive Health Care Reform Plan. Prior to his White House
appointment, Mr. Scully was an attorney with the law firm Akin, Gump, Strauss,
Hauer & Feld.
William M. Sullivan was elected President and Chief Operating Officer
effective July 1, 1996. Mr. Sullivan joined the Company as Director of Sales in
August 1988 and was appointed Vice President, Sales in January 1990. He was
elected Executive Vice President, Sales in December 1994.
Jeffery H. Boyd joined the Company as Executive Vice President and
General Counsel in June 1995. Prior to joining the Company, Mr. Boyd was
Assistant General Counsel of Lord, Abbett & Co., a private investment management
firm, from July 1994 to May 1995. From March 1988 to June 1994, Mr. Boyd was a
partner with the law firm of Robinson & Cole.
Robert M. Smoler joined the Company in February 1987 as Vice President
of Sales. In January 1990, Mr. Smoler was appointed Executive Vice President,
Operations. Effective July 1, 1996, Mr. Smoler was appointed to the additional
position of Chief Executive Officer - New York Region. From November 1979 to
January 1987, Mr. Smoler was the Northeast regional manager for Lincoln National
Life Insurance Company, where he specialized in group health insurance
underwriting, alternative funding methods and cost containment programs.
David B. Snow, Jr., joined the Company in April 1993 as Executive Vice
President, Medical Delivery Systems and Government Programs. Prior to joining
the Company, Mr. Snow was President and Chief Executive Officer of Managed
Health Care Systems, Inc., a Medicaid managed care program developer and
operator from January 1990 to April 1993. From March 1988 to January 1990, Mr.
Snow served as Senior Vice President of American International Healthcare, Inc.,
where he directed national and international managed care consulting practices.
Prior to March 1988, Mr. Snow held various positions at U.S. Healthcare, Inc., a
health maintenance organization, including Corporate Vice President of Medical
Delivery and President of its HMO subsidiary, HMO New Jersey. Mr. Snow is a
director of Impath, Inc. Mr. Snow received a B.S. in economics from Bates
College and a masters degree in health care administration from Duke University
Fuqua School of Business.
Andrew B. Cassidy was elected Executive Vice President and Chief
Financial Officer effective February 14, 1997. Mr. Cassidy joined the Company in
July 1991 and assumed the position of Chief Financial Officer upon completion of
the Company's August 1991 initial public offering. From November 1989 until
joining the Company, Mr. Cassidy was the Chief Financial Officer and Treasurer
of Aetna Healthcare Programs of California, Inc.
John P. Driscoll joined the Company as Director, Government Programs in
February 1992, became Director, Medicaid in December 1992 and was elected Vice
President, Medicaid Programs in October 1995. In January 1997, he became Vice
President, Government Programs. From 1989 to 1992, Mr. Driscoll was associated
with the LEK Partnership, an international consulting firm, most recently as
senior consultant.
Kevin R. Hill was elected Vice President effective March 1997. He
joined the Company in July 1989 as a Group Sales Representative and was named
Director of Sales in June 1992. In October 1995, he was appointed to the
additional position of Chief Executive Officer - New Jersey Region.
5
<PAGE> 10
David A. Finkel joined the Company as Director, Operations in January
1993 and was elected Vice President, Operations in October 1995. From July 1989
until January 1993, Mr. Finkel was a manager in the health care consulting
practice of Deloitte & Touche in New York City.
Frank N. Medici, M.D. joined the Company in September 1992 as Medical
Director and was appointed Vice President, Medical Affairs in May 1993. From
1984 to September 1992, Dr. Medici held various executive positions at Nyack
Hospital, most recently as President and Chief Executive Officer. Dr. Medici is
board certified in pediatrics.
Paul E. Ricker joined the Company as Vice President and Chief
Information Officer in July 1996. From September 1995 through July 1996, he
served as President and Chief Operating Officer of Protech Consulting, a
software consulting firm. Prior to that, Mr. Ricker was Chief Information
Officer at Neodata Systems, a subscriber fulfillment company, from February 1994
through September 1995 and was Vice President, Information Systems at G.
Heileman Brewing Company from September 1989 through February 1994.
Brendan R. Shanahan joined the Company as Controller in July 1991 and
was elected Vice President and Controller in October 1995. From July 1984 to
July 1991, Mr. Shanahan was an auditor with KPMG Peat Marwick in the firm's New
York health care practice audit department, most recently as a Senior Audit
Manager.
Jay L. Silverstein joined the Company in March 1986 as Vice President,
Marketing and Communications and was named Vice President, Chief Marketing
Officer effective March 1997. Prior to March 1986, Mr. Silverstein worked at
Ogilvy & Mather, where he supervised the American Express and Seagram Worldwide
accounts, and at Millenium Direct, where he was Executive Vice President.
Alan E. Sokolow, M.D. was elected Vice President, Medical Management
and Medical Analytics in September 1996. Dr. Sokolow joined the Company in
January 1995 as Medical Director of the medical analysis group and became
Corporate Director of Medical Management, Medical Analysis and Disease
Management in March 1996. From 1992 until January 1995, Dr. Sokolow was Chairman
of the Norwalk Hospital Department of Emergency medicine. From 1986 until 1992,
he was Medical Director of the Company.
Thomas A. Travers, D.D.S., M.P.H., joined the Company in 1987 as Vice
President, Medical Delivery Systems. Prior to joining the Company, Dr. Travers
was Director of Provider Relations for Sanus Health Plan of Greater New York.
Dr. Travers is a doctor of dental surgery and has a master's degree in public
health.
Jeanne D. Wisniewski was appointed Vice President, Human Resources in
December 1993. Ms. Wisniewski joined the Company in April 1992 as Director,
Human Resources. Prior to joining the Company, Ms. Wisniewski was employed by
JFK Health Systems in Edison, New Jersey from November 1987 to April 1992, most
recently as Vice President-Hospital Personnel.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee, the current
members of which are Messrs. Nazem and Scully, a Compensation Committee
currently comprised of Messrs. Adamson, Milligan, and Scully, and a Nominating
Committee currently comprised of Messrs. Adamson, Milligan and Nazem.
The functions of the Audit Committee are to recommend annually to the
Board of Directors the appointment of the independent certified public
accountants for the Company, discuss and review the scope and the fees of the
prospective annual audit and review the results thereof with the independent
certified public accountants, review and approve nonaudit services of the
independent certified public accountants, review compliance with existing major
accounting and financial policies of the Company, review the adequacy of the
financial organization of the Company, and review management's procedures and
policies relative to the adequacy of the Company's internal accounting controls
and compliance with federal and state laws relating to accounting practices.
The Compensation Committee consists entirely of independent directors
and administers the Company's 1991 Stock Option Plan and Incentive Compensation
Plan and oversees administration of the Company's 401k Plan. The Committee also
reviews and recommends from time to time amendments to compensation plans, such
as the amendment to the 1991 Stock Option
6
<PAGE> 11
Plan which is the subject of a proposal in this proxy statement, and new
compensation plans. The Compensation Committee also considers and makes
recommendations with respect to the compensation of the Company's Chief
Executive Officer and other members of senior management and makes
recommendations to the Board of Directors generally on organization, succession,
salary and incentive compensation, and other grants and awards under the
Company's compensation and benefit plans.
The Nominating Committee consists entirely of independent directors and
was established in 1995 to consider and make recommendations on nominations for
membership in the Company's Board of Directors. The Committee will consider
nominees recommended by stockholders upon submission in writing to the Secretary
of the Company of the names of such nominees, together with their qualifications
for service as a director of the Company.
During 1996, the Board of Directors held six meetings, the Audit
Committee and Nominating Committee each held one, and the Compensation Committee
held five meetings. During 1996, each Director of the Company attended at least
75% of the meetings of the Board of Directors and 75% of the meetings of any
committees upon which he or she served.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers, Inc. Officers, directors and greater than ten
percent stockholders are required by the Commission to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no reports on
Form 5 were required for those persons, the Company believes that during 1996
all filing requirements applicable to its officers, directors and greater than
ten percent stockholders were complied with, except that Fred F. Nazem failed to
timely file a Form 4 Statement of Changes in Beneficial Ownership of equity
securities with respect to one purchase of the Company's securities. The
appropriate Form 5 was filed shortly after the Company discovered the omission.
7
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash
compensation and certain other components of the compensation of Stephen F.
Wiggins, the Chairman and Chief Executive Officer of the Company, and the four
most highly compensated executive officers of the Company in 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPEN- ALL OTHER
NAME AND PRINCIPAL ANNUAL COMPENSATION SATION AWARDS COMPENSA-
POSITION YEAR SALARY BONUS(1) OTHER OPTIONS(2) TION(3)
- ------------------- ---- ------ -------- ----- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STEPHEN F. WIGGINS 1996 $600,000 $1,080,000 $57,641 100,000 $53,958
CHAIRMAN AND CHIEF 1995 600,000 161,540 47,323 200,000 4,465
EXECUTIVE OFFICER 1994 450,000 360,000 47,323 240,000 4,620
WILLIAM M. SULLIVAN 1996 259,616 250,000 32,085 35,000 2,375
PRESIDENT AND CHIEF 1995 247,981 67,810 25,973 60,000 2,316
OPERATING OFFICER 1994 144,891 220,000 25,973 120,000 1,890
JEFFERY H. BOYD 1996 259,616 130,000 32,835 35,000 4,113
EXECUTIVE VICE PRESIDENT 1995 171,126 42,550 29,780 180,000 --
AND GENERAL COUNSEL 1994 -- -- -- -- --
ROBERT M. SMOLER 1996 259,616 130,000 34,963 35,000 3,393
EXECUTIVE VICE PRESIDENT, 1995 250,000 67,310 25,973 60,000 3,300
AND CHIEF EXECUTIVE 1994 188,363 107,049 30,452 120,000 2,717
OFFICER - NEW YORK REGION
DAVID B. SNOW, JR 1996 259,616 130,000 32,085 35,000 4,750
EXECUTIVE VICE PRESIDENT, 1995 250,000 67,310 25,973 60,000 4,620
MEDICAL DELIVERY SYSTEMS 1994 238,767 145,000 25,973 120,000 1,848
AND GOVERNMENT PROGRAMS
</TABLE>
(1) Amounts shown include payments by the Company to the named officers
pursuant to the Company's Incentive Compensation Plan. Includes amounts
of compensation deferred by the named officers pursuant to the
Company's qualified defined contribution plan (the "Savings Plan").
(2) All option grants have been adjusted for the Company's two-for-one
stock splits effected in March 1995 and March 1996.
(3) Matching contributions made by the Company pursuant to the Savings
Plan.
8
<PAGE> 13
OPTIONS GRANTED IN 1996
The following table sets forth certain information regarding stock
options granted in 1996 to the five individuals named in the Summary
Compensation Table. In addition, in accordance with the Commission's rules, the
table also shows a hypothetical potential realizable value of such options based
on assumed rates of annual compounded stock price appreciation of 5% and 10%
from the date the options were granted over the full option term. The assumed
rates of growth were selected by the Commission for illustrative purposes only,
and are not intended to predict future stock prices, which will depend upon
market conditions and the Company's future performance and prospects. Based upon
the closing stock price and the number of common shares outstanding at the end
of 1996, an assumed annual stock price appreciation of 10% would produce a
corresponding aggregate pretax gain over the full option term of approximately
$2,766,434,000 for the Company's common shareholders.
<TABLE>
<CAPTION>
Number of Potential Realized Value at Assumed
Securities % of Total Options Per Annual Rates of Stock Price
Underlying Granted to Share Appreciation For Option Term
Options Employees Exercise Expiration -----------------------------------
Name Granted (1) In Fiscal Year Price (2) Date 5% 10%
- ------------------- ----------- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STEPHEN F. WIGGINS 100,000 6.6% $ 46.50 5/24/2001 $1,285,000 $2,839,000
WILLIAM M. SULLIVAN 35,000 2.3% $ 46.50 5/24/2001 $ 450,000 $ 994,000
JEFFERY H. BOYD 35,000 2.3% $ 46.50 5/24/2001 $ 450,000 $ 994,000
ROBERT M. SMOLER 35,000 2.3% $ 46.50 5/24/2001 $ 450,000 $ 994,000
DAVID B. SNOW, JR 35,000 2.3% $ 46.50 5/24/2001 $ 450,000 $ 994,000
</TABLE>
(1) All options granted and reported in this table were made pursuant to the
1991 Stock Option Plan and have the following material terms: options may be
either (i) "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986 or (ii) nonqualified stock options; all options expire not more
than seven years from the date of grant, or not more than five years from the
date of grant in the case of incentive stock options granted to an employee
holding 10% or more of the voting stock of the Company; the aggregate fair
market value (determined at the time of grant) of shares issuable pursuant to
incentive stock options which become exercisable in any calendar year by an
employee may not exceed $100,000. For all of the above-named executive officers,
25% of options granted under the 1991 Stock Option Plan vest on each of the
first four anniversaries following the date of grant. The Committee may provide
for accelerated exercisability of options upon the optionee's death, retirement,
disability (or other events), upon a Change in Control (as defined in the 1991
Stock Option Plan) or the reasonable possibility of a Change in Control during
the succeeding six-month period.
(2) Exercise price is the fair market value of the common stock at the date of
grant.
9
<PAGE> 14
AGGREGATE OPTION EXERCISES IN 1996
AND OPTION VALUES AT DECEMBER 31, 1996
The following table sets forth certain information concerning stock
option exercises by the five individuals named in the Summary Compensation Table
during 1996, including the aggregate value of gains on the date of exercise. In
addition, this table includes the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1996. Also reported are the
values for "in-the-money" options which represent the excess of the closing
market price of the Common Stock at December 31, 1996 over the exercise price of
any such existing stock options. All exercises have been adjusted for the
Company's two-for-one stock splits effected 1993, 1995 and 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
At December 31, 1996(#) At December 31, 1996($)
Shares Acquired Value ------------------------------ -------------------------
Name On Exercise Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
STEPHEN F. WIGGINS 541,392 $27,270,000 1,208,608/510,000 $62,966,000/$18,548,000
WILLIAM M. SULLIVAN 226,928 $7,279,000 251,200/190,000 $12,916,000/$7,042,000
JEFFERY H. BOYD 25,676 $655,000 19,324/170,000 $674,000/$5,199,000
ROBERT M. SMOLER 259,392 $9,658,000 143,608/190,000 $6,523,000/$7,042,000
DAVID B. SNOW, JR. 255,060 $9,977,000 110,468/406,000 $4,846,000/$18,592,000
</TABLE>
DIRECTORS' COMPENSATION
Each non-employee director of the Company is entitled to receive $3,000
for each meeting of the Board of Directors attended plus expenses, and an
additional $3,000 for each meeting of the Compensation Committee, Nominating
Committee or Audit Committee. Directors who are not employees of the Company may
participate in the Non-Employee Directors Stock Option Plan, as amended (the
"Plan") and be awarded nonqualified stock options. The Plan currently provides
that each year, on the first Friday following the Company's Annual Meeting of
Stockholders, each individual elected, reelected or continuing as a Non-Employee
Director will automatically receive a nonqualified stock option for 5,000 shares
of the Company's Common Stock. The exercise price for such options is either the
average of the high and low prices at which the common stock traded on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System on the date of grant or the last sale price of Common
Stock on the NASDAQ on the date of grant, whichever is higher. The Plan provides
that one-fourth of the options granted under the Plan vest on each of the date
of grant and the Friday prior to the first, second, and third Annual Meeting of
Stockholders following the date of grant. Pursuant to the Plan, on May 31, 1996,
Dr. Radosevich and Messrs. Nazem, Milligan, Adamson and Scully were each
granted options to purchase 5,000 shares at an exercise price of $47.25 per
share.
EMPLOYMENT AGREEMENTS
In 1996, each of the named executive officers entered into employment
agreements with the Company which are for initial two-year terms and
automatically renew for an additional two years upon each second anniversary of
their effective dates, unless prior notice to not renew is given. Upon a Change
in Control of the Company (as defined in the agreements), the agreements
automatically extend to a two-year term. Each executive's base salary is subject
to annual review by the Company's Compensation Committee, and may be increased
at the discretion of the Compensation Committee. If prior to (or more than two
years following) a Change in Control, an executive is terminated without "Cause"
or terminates employment for "Good Reason" (as such terms are defined in the
agreements), or if an executive's agreement is not renewed, the executive (other
than Mr. Wiggins) would receive a payment equal to the sum of his annual bonus
during the fiscal year prior to the date of termination and his base salary
during the prior twelve months, payable over twelve months. Mr. Wiggins would
receive two times his annual bonus and salary, payable over twenty-four months.
10
<PAGE> 15
If during the two-year period following a Change in Control, an
executive is terminated without Cause or terminates employment for Good Reason,
the executive (other than Mr. Wiggins) would receive a lump sum payment equal to
two times the sum of the executive's highest annual rate of base salary during
the thirty-six-month period immediately prior to the date of termination and his
highest annual bonus earned during the three fiscal years immediately preceding
the date of termination, and continued welfare benefits for two years. Mr.
Wiggins would receive severance equal to three times the sum of his base salary
and bonus and three years' welfare benefits. If any payments made to an
executive pursuant to the agreements or otherwise would be subject to any excise
tax under Section 4999 of the Internal Revenue Code, the Company will provide
the executive with an additional payment such that the executive retains a net
amount equal to the payments the executive would have retained if such excise
tax had not applied. Each executive is subject to a one-year non-compete
provision if he voluntarily terminates employment prior to the end of the
employment term, unless such termination is approved by the Board of Directors
or is within the two-year period following a Change in Control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the third quarter of 1993, the Company agreed to invest up to
$10,000,000 of a total of $50,000,000 committed for investment in Health
Partners, Inc. ("Health Partners"), an independent company established to
provide management and administrative services to physicians, medical groups and
other providers of healthcare. Health Partners was formed by principals of a
healthcare investment partnership, including Stephen F. Wiggins, Chairman and
Chief Executive Officer of the Company. Mr. Wiggins serves on Health Partners'
Board of Directors and acts as a consultant to Health Partners. Mr. Wiggins'
involvement with Health Partners is in compliance with the terms of his
employment agreement with the Company. On May 18, 1994, the Company entered into
a securities purchase agreement, among the Company, a corporate investor, Health
Partners and certain management investors named therein. Pursuant to such
securities purchase agreement, the Company increased its commitment to invest in
Health Partners from $10,000,000 to $25,000,000, with an ownership interest not
to exceed 49%, in exchange for preferred stock which is convertible into 47% of
Health Partners' common stock, and the corporate investor agreed to invest
$25,000,000 in exchange for preferred stock which is convertible into 33% of
Health Partners' common stock. In accordance with the securities purchase
agreement, the Company had invested $24,947,000 in Health Partners as of
December 31, 1996. Mr. Wiggins owns 6.25% of the common stock of Health
Partners. The Company's Board of Directors appointed a committee of independent
directors to evaluate the investment and the terms of the investment as a
consequence of Mr. Wiggins' interest in Health Partners. The Company contracts
with provider groups managed by Health Partners in the Company's service area.
Any significant agreements between the Company and Health Partners are subject
to review by the independent committee or its designee.
In 1992, the Company entered into a two-year license agreement with HPR
Inc. ("HPR") for HPR's CodeReview claims analysis software. Marcia J.
Radosevich, Ph.D., a Director of the Company, is the Chief Executive Officer and
Vice Chairman of HPR. In February 1993, the Company entered into a license
agreement with HPR for HPR's Patterns of Treatment physician profiling software
for a period of one year for which the Company paid HPR $50,000 in March 1993
and $50,000 in April 1993. The license agreement was not renewed in 1994. In
April 1994, the Company and HPR extended the license agreement with respect to
the CodeReview claims analysis software for an additional two years for a fee of
$250,000. In April 1996, the Company extended the license agreement with respect
to the CodeReview claims analysis software for an additional two years for a fee
of $250,000. In addition, in December 1996, the Company entered into a license
agreement with HPR for HPR's medicare CodeReview and ProMatch software for a
period of two years for a fee of $67,200.
11
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with regard to the
beneficial ownership of the Common Stock of the Company as of March 3, 1997,
unless otherwise indicated, by (i) each stockholder who is known by the Company
to beneficially own in excess of 5% of the outstanding shares of Common Stock,
(ii) each director and the nominees for director, (iii) each of the executive
officers named in the Summary Compensation Table and (iv) the directors and all
executive officers as a group.
<TABLE>
<CAPTION>
OWNERSHIP(1)
-----------------------
NAME SHARES PERCENT
<S> <C> <C>
Provident Investment Counsel, Inc. (2) 8,272,681 10.6%
300 North Lake Avenue
Pasadena, California 91101-4022
Denver Investment Advisors L.L.C. (3) 6,727,795 8.7%
1,225 17th Street, 26th Floor
Denver, Colorado 80202
FMR Corp. (4) 6,013,080 7.7%
82 Devonshire Street
Boston, Massachusetts 02109
Stephen F. Wiggins (5) 2,955,840 3.7%
James B. Adamson (6) 1,250 *
Robert B. Milligan, Jr. (7) 7,890 *
Fred F. Nazem (8) 103,250 *
Marcia J. Radosevich, Ph.D. (9) 21,250 *
Benjamin H. Safirstein, M.D. (10) 115,694 *
Thomas A. Scully (11) 40,250 *
William M. Sullivan (12) 505,192 *
Jeffery H. Boyd (13) 23,600 *
Robert M. Smoler (14) 305,000 *
David B. Snow, Jr. (15) 263,528 *
All Executive Officers and Directors as a Group 5,373,359 6.7%
(22 persons) (16)
</TABLE>
- -----------
*Less than one percent.
12
<PAGE> 17
(1) Includes shares which such persons have the right to acquire beneficial
ownership of within 60 days from the date hereof.
(2) All information is as of December 31, 1996 and is furnished in reliance
on the Schedule 13G filed by Provident Investment Counsel, Inc. with
the Securities and Exchange Commission on February 10, 1997.
(3) All information is as of December 31, 1996 and is furnished in reliance
on the Schedule 13G filed by Denver Investment Advisors L.L.C. with the
Securities and Exchange Commission on February 10, 1997.
(4) All information is as of December 31, 1996 and is furnished in reliance
on the Schedule 13G filed by FMR Corp. with the Securities and Exchange
Commission on February 14, 1997.
(5) Includes 1,208,608 shares of common stock issuable upon exercise of
options. Mr. Wiggins currently holds unvested options to purchase
510,000 additional shares of common stock.
(6) Includes 1,250 shares issuable upon exercise of stock options. Mr.
Adamson currently holds unvested options to purchase 3,750 additional
shares of common stock.
(7) Includes 7,890 shares of common stock issuable upon exercise of
options. Mr. Milligan currently holds unvested options to purchase
13,750 additional shares of common stock.
(8) Includes 101,250 shares of common stock issuable upon exercise of
options. Mr. Nazem currently holds unvested options to purchase 13,750
additional shares of common stock.
(9) Includes 21,250 shares of common stock issuable upon exercise of
options. Dr. Radosevich currently holds unvested options to purchase
13,750 additional shares of common stock.
(10) Includes 83,750 shares of common stock issuable upon exercise of
options and 23,944 shares of common stock held by Dr. Safirstein's
spouse and children. Dr. Safirstein disclaims beneficial ownership of
the shares of common stock held by his spouse and children. Dr.
Safirstein currently holds unvested options to purchase 31,250
additional shares of common stock.
(11) Includes 40,250 shares of common stock issuable upon exercise of
options. Mr. Scully currently holds unvested options to purchase 13,750
additional shares of common stock.
(12) Includes 251,200 shares of common stock issuable upon exercise of
options. Mr. Sullivan currently holds unvested options to purchase
190,000 additional shares of common stock.
(13) Includes 19,324 shares of common stock issuable upon exercise of
options. Mr. Boyd currently holds unvested options to purchase 170,000
additional shares of common stock.
(14) Includes 63,608 shares of common stock issuable upon exercise of
options. Mr. Smoler currently holds unvested options to purchase
190,000 additional shares of common stock.
(15) Includes 198,468 shares of common stock issuable upon exercise of
options. Mr. Snow currently holds unvested options to purchase 318,000
additional shares of common stock.
(16) Includes 2,421,062 shares of common stock issuable upon exercise of
options.
13
<PAGE> 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board is responsible for reviewing the
Company's executive compensation program and policies each year and determining
the compensation of the Company's executive officers. The Company's compensation
programs and policies are designed to provide incentives that account for value
delivered to the Company's stockholders and that attract and retain individuals
of outstanding ability in key positions. The Company recognizes individual
performance and the performance of the Company relative to the performance of
other companies of comparable size, complexity and quality, and performance that
supports both the short-term and long-term goals of the Company. The executive
compensation program includes elements which, taken together, constitute a
flexible and balanced method of establishing total compensation for senior
management.
Compensation paid to the Company's executive officers for 1996 consisted
primarily of base salary, amounts deferred and matching contributions by the
Company under a long-term deferred compensation plan, payments under the
Company's Incentive Compensation Plan, and 1996 Management Incentive Company
Plan (the "1996 Plan") in the case of Mr. Wiggins, and awards of stock options
pursuant to the Company's 1991 Stock Option Plan. Compensation under the
Company's 1991 Stock Option Plan constitutes a principal component of
compensation for senior executives, reflecting the Committee's desire to align
the interests of management with those of the Company's stockholders. Payments
under the Incentive Compensation Plan and awards under the 1991 Stock Option
Plan were based upon individual executive performance and contributions to
increasing the Company's membership growth and growth in earnings and earnings
per share and enhancing value to the Company's stockholders. In determining
payments to senior executives for 1996 under the Incentive Compensation Plan,
the Committee considered the fact that the Company achieved aggressive
membership and revenue growth targets established at the beginning of the year
as well as the fact that the Company maintained its profit margins in a year
when many competitors suffered deteriorating margins. The Committee also
considered the value of stock options awarded to senior executives during 1996
in determining incentive compensation payments. Such annual incentive payments
and awards are a significant component of total compensation and are designed to
directly reflect the Company's performance and increases in stockholder value.
The Committee established the incentive compensation of Stephen F. Wiggins,
the Chairman and Chief Executive Officer of the Company, for 1996 as provided in
the 1996 Plan based on the accomplishment of performance goals relating to
membership growth, earnings, administrative expenses and stock price
performance. The Committee also awarded Mr. Wiggins a supplemental incentive
compensation payment of $180,000 outside of the 1996 Plan. Mr. Wiggins' 1996
base pay was unchanged from 1995. Mr. Wiggins' total compensation, including
awards of stock options and the supplemental compensation payment were based on
Mr. Wiggins' contribution to strong membership growth, growth in the Company's
earnings and increases in the Company's stockholder value during the year and
the other factors referred to above.
Section 162(m) of the Internal Revenue Code generally limits the
deductibility of compensation in excess of $1 million paid to the five
individuals named in the Summary Compensation Table for a given year, other than
certain performance-based compensation approved by shareholders. As described
above, the Company's compensation programs are designed to award outstanding
performance. Although the Committee intends, where possible, to maximize
deductibility by applying performance-based compensation under the 1996
Management Incentive Compensation Plan, the Committee does retain the
flexibility to take actions that it considers to be in the best interests of the
Company and its shareholders which may be based on considerations in addition to
Section 162(m). Accordingly, the Committee determined to award Mr. Wiggins the
supplemental incentive compensation payment even though it may not be deductible
under Section 162(m).
It is the opinion of the Committee that the aforementioned compensation
structures provide features which properly align the Company's executive
compensation with corporate performance and the interests of its stockholders
and which offer competitive compensation relevant to comparable opportunities in
the marketplace.
The Compensation Committee
Robert B. Milligan, Jr.
Thomas A. Scully
James B. Adamson
14
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative total
return on its Common Stock to (a) the change in the cumulative total return on
the stocks included in the NASDAQ Composite Index for U.S. Companies and (b) the
change in the cumulative total return on the stocks included in NASDAQ Health
Services Index assuming an investment of $100 made on August 7, 1991 (the date
the Company's Common Stock became listed on the NASDAQ National Market System)
and comparing relative values on December 31, 1991, 1992, 1993, 1994, 1995 and
1996. All of these cumulative total returns are computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the period. Note that the Common Stock price performance shown below should not
be viewed as being indicative of future performance.
OXFORD HEALTH PLANS, INC. STOCK PRICE PERFORMANCE
<TABLE>
<CAPTION>
8/7/91 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oxford Health Plans, Inc. $100 $121 $318 $597 $893 $1,665 $2,639
NASDAQ Stock Market $100 $112 $131 $150 $147 $ 208 $ 255
NASDAQ Health Services Stock $100 $128 $133 $153 $164 $ 208 $ 209
</TABLE>
15
<PAGE> 20
PROPOSAL NUMBER TWO
AMENDMENT TO SECOND AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
DESCRIPTION OF PROPOSED AMENDMENT
The Second Amended and Restated Certificate of Incorporation, as
amended, of the Company (the "Certificate") currently authorizes the issuance of
a total of 200,000,000 shares of Common Stock. On March 13, 1997, the record
date, 77,922,440 shares of Common Stock were issued and outstanding and
approximately 9,600,000 shares were reserved for issuance under stock options
granted or authorized to be granted under the Company's stock option plans,
leaving approximately 112,480,000 authorized shares available for future
issuance.
On March 17, 1997, the Board of Directors unanimously adopted a
resolution, subject to stockholder approval, proposing and declaring the
advisability of an amendment to Article Fourth of the Certificate which would
effect an increase in the number of authorized shares of Common Stock from
200,000,000 to 400,000,000.
The Board of Directors considers the proposed increase in the number of
authorized shares desirable because it would give the Board the necessary
flexibility to issue Common Stock in connection with stock dividends and splits,
acquisitions, financings and employee benefit plans and for other general
corporate purposes without the expense and delay incident to obtaining
stockholder approval of an amendment to the Certificate increasing the number of
authorized shares at the time of such action, except as may be required for a
particular issuance by applicable law or by the rules of any stock exchange on
which the Company's securities may then be listed.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock of the Company now authorized.
Holders of Common Stock do not have preemptive rights to subscribe to additional
securities which may be issued by the Company. The Common Stock does not have
cumulative voting rights, which means the holder or holders of more than half of
the shares voting for the election of Directors can elect all the Directors then
being elected.
The Company has no present plans, arrangements, or understandings to
issue a material number of additional shares of Common Stock, as a result of a
stock dividend or otherwise.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
The issuance of additional shares of Common Stock by the Company may
potentially have an anti-takeover effect by making it more difficult for a third
party to obtain stockholder approval of various actions, such as a merger which
has not been approved by the Company's Board of Directors or removal of
management. The issuance of additional shares would also affect the Company's
book value per share and earnings per share amounts.
This proposal, if approved, would strengthen the position of management
and might make the removal of management more difficult, even if such removal
would be generally beneficial to the Company's stockholders. The authorization
to issue the additional shares of Common Stock would provide management with a
capacity to negate the efforts of unfriendly tender offerors through the
issuance of securities to others who are friendly or desirable to management.
The proposed amendment to the Certificate is not the result of
management's knowledge of any specific effort to accumulate the Company's
securities or to obtain control of the Company by means of a merger, tender
offer, proxy solicitation in opposition to management or otherwise. The Company
is not submitting this proposal to enable it to frustrate any efforts by another
party to acquire a controlling interest or to seek Board representation.
The submission of the proposed amendment to the Certificate is not a
part of any plan by the Company's management to adopt a series of amendments to
the Company's Certificate or Amended and Restated By-laws (the "By-laws") so as
to render the takeover of the Company more difficult. Except as indicated below,
management is not aware of the existence of any other provisions in the
Certificate or By-laws having an anti-takeover effect. Except as indicated
below, those documents do not contain any provisions which would impose any
burden in excess of requirements imposed by Delaware law upon potential tender
16
<PAGE> 21
offerors or others seeking a takeover of the Company.
The Company's Certificate contains a "fair price" provision which
generally prohibits the consummation of certain Business Transactions (as
defined in the Certificate) unless specified conditions are met. The "fair
price" provision makes it more difficult to consummate a two-step acquisition
transaction in which the consideration paid for shares of Common Stock in the
second step is less than that paid for the initial accumulation of shares of
Common Stock by the acquiring person. The term "Business Transaction" includes
any major corporate restructuring such as a merger; sale or lease of a
substantial part (20%) of the Company's asset; the issuance, sale, exchange,
transfer or disposition of securities of the Company (or any subsidiary) having
an aggregate market value of in excess of $20,000,000; recapitalizations or
reclassifications of the securities of the Company; and any liquidation,
spin-off or dissolution of the Company. The "Fair Price" provision requires that
any such Business Transaction be approved by the affirmative vote of the holders
of not less than 80% of the then outstanding shares of Common Stock; provided
that such 80% requirement does not apply if (i) a majority of the Directors of
the Company who are not Related Persons of the Company approve the Business
Transaction, or (ii) certain additional conditions set forth below are
satisfied. The term "Related Person" means any entity or any affiliate or
associate of such entity which is the beneficial owner of 10% or more of the
then outstanding shares of Common Stock of the Company.
In order to avoid the 80% vote requirement and the requirement that the
Business Transaction be approved by a majority of Directors who are not Related
Persons of the Company, the following conditions must be satisfied:
(i) The Business Transaction is a merger or consolidation or sale of
substantially all of the assets of the Company and the consideration received by
the holders of shares of the Company other than the Related Person is at least
equal to the "Highest Common Stock Purchase Price" (i.e., the highest amount of
consideration paid by such Related Person for one share in the transaction which
resulted in such person becoming a Related Person or within one year prior to
the date such person became a Related Person, whichever is higher);
(ii) After the Related Person has become the holder of 20% of the then
outstanding shares of Common Stock, such person has not acquired any additional
shares of Common Stock; and
(iii) Prior to the consummation of the Business Transaction, such
Related Person has not (a) received the benefit of any loans or other financial
assistance or tax credits provided by the Company, (b) caused any material
change in the Company's business or equity capital structure or (c) except as
approved by a majority of the Company's directors who are not Related Persons of
the Company, caused the Company to reduce quarterly cash dividends.
17
<PAGE> 22
The Certificate and the Company's By-laws also contain provisions
eliminating the ability to take stockholder action by written consent; limiting
the right to call stockholder meetings to the Chairman of the Board, the Vice
Chairman, if any, the President, or the Board of Directors; providing, under
certain circumstances, for a 75 day notice period for submission of stockholder
proposals to be voted on at stockholder meetings; and requiring an 80% vote of
stockholders to amend the By-laws and certain provisions of the Certificate. The
Company's Certificate also provides for the Board of Directors to be divided
into three classes of Directors serving staggered three-year terms. As a result,
approximately one-third of the directors will be elected each year.
The purpose and intended effect of the above described provisions in
the Certificate and the Company's By-laws are to enhance the continuity and
stability of the Company's management by making it more difficult for
stockholders to remove or change the incumbent members of the Board of
Directors. Such provisions also render the Company more difficult to acquire
pursuant to any unfriendly acquisition by an outsider by making it more
difficult for such person to obtain control of the Company without the approval
of the Board of Directors.
In addition to the foregoing, the Company is subject to the provisions
of Section 203 of the Delaware General Corporation Law. That Section provides,
with certain exceptions, that a Delaware corporation may not engage in any of a
broad range of business combinations with a person or affiliate or associate of
such person who is an "interested stockholder" for a period of three years from
the time that such person becomes an interested stockholder unless: (i) the
transaction resulting in a person's becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquires 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes it an interested stockholder
(excluding shares owned by persons who are both officers and directors of the
corporation and shares held by employee stock ownership plans in which the
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (iii) on or after the time the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and by
the holders of at least 66-2/3% of the corporation's outstanding voting stock at
an annual or special meeting, excluding shares owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (i)
the owner of 15% of more of the outstanding voting stock of the corporation or
(ii) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
Additionally, applicable New York statutes and regulations require the
prior approval of the New York Commissioner of Health and the New York
Superintendent of Insurance for any change of control of the Company. A similar
law in Connecticut requires the approval of the Insurance Commissioner of
Connecticut for any change in control of the Company. For purposes of these
statutes and regulations, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity. Control is presumed to exist when a person, group of
persons or entity acquires the power to vote 10% or more of the voting
securities of another entity. Therefore, prior approval would be required for
any person to acquire the power to vote 10% or more of the Common Stock of the
Company.
VOTE REQUIRED
The resolution amending Article Fourth of the Company's Certificate to
increase the number of authorized shares of the Company's Common Stock is set
forth on Exhibit A to this Proxy Statement. As discussed above, to become
effective the amendment must be adopted by the Board of Directors and the
stockholders. The Board already has adopted the amendment. Under Delaware law
and the Company's Certificate, the amendment must be approved by the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE COMPANY'S SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 400,000,000 SHARES.
18
<PAGE> 23
PROPOSAL NUMBER THREE
AMENDMENT TO 1991 STOCK OPTION PLAN
On March 17, 1997, the Board of Directors adopted a resolution, subject
to stockholder approval, to amend the 1991 Stock Option Plan to increase the
number of shares issuable thereunder from 17,080,000 shares to 21,580,000
shares.
The Board of Directors believes that stock options are valuable tools
for the recruitment, retention and motivation of qualified employees, including
officers, and other persons who can contribute materially to the Company's
success. As of March 17, 1997, options to purchase approximately 8,400,000
shares were outstanding under the 1991 Stock Option Plan and predecessor plans
and only approximately 550,000 shares of the 17,080,000 shares originally
available for grant under the 1991 Stock Option Plan remained available for
issuance pursuant to new option grants. The Board of Directors believes that
equity ownership by management and other employees has contributed
substantially to the Company's performance and the significant returns realized
by the Company's shareholders over the past five years. The Company has also
significantly increased the number of its employees over the past year to
accommodate its membership growth. The Board believes that it is important to
have additional shares available under the 1991 Stock Option Plan to provide
adequate incentives to the Company's growing workforce and to continue aligning
the interests of management with those of Company shareholders. The material
features of the 1991 Stock Option Plan, including proposed amendments, are
outlined below. The following summary is qualified in its entirety by reference
to the full text of the 1991 Stock Option Plan, as amended, a copy of which has
been filed with the Commission. Only the text of the amendment requiring
stockholder approval is included as Exhibit B to this Proxy Statement.
PURPOSE
The purpose of the 1991 Stock Option Plan is to provide an incentive to
key employees, directors and consultants who are in a position to contribute
materially to the long term success of the Company, to increase such person's
interest in the Company's welfare and to aid in attracting and retaining
individuals with outstanding ability.
ADMINISTRATION
The 1991 Stock Option Plan is administered by the Compensation
Committee of the Board of Directors.
ELIGIBILITY
The 1991 Stock Option Plan provides for grants to key employees
(including officers) of the Company and its subsidiaries of "incentive stock
options" within the meaning of Section 422 of the Code and for grants of
nonqualified options to key employees, directors (other than members of the
Compensation Committee), and consultants of the Company and its subsidiaries.
The Compensation Committee has the authority to determine the employees to whom
options will be granted, the number of shares to be subject to each option,
whether options will be incentive or nonqualified, and the manner of exercise.
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options which first become exercisable in
any calendar year by an employee may not exceed $100,000. No individual optionee
may be granted options to purchase more than 200,000 shares in any calendar
year.
TERMS OF OPTIONS
Each option is evidenced by a written stock option agreement between
the Company and the optionee and is generally subject to the terms and
conditions listed below (pursuant to the 1991 Stock Option Plan), but specific
terms may vary:
(i) Exercise of the Option. The Compensation Committee determines when
options granted under the 1991 Stock Option Plan may be exercised. An option is
exercised by giving written notice to the Company specifying the number of
shares to be purchased and tendering payment of the purchase price. Payment for
shares issued upon exercise of an option may consist of cash, check, exchange of
shares held for more than six months or any combination thereof. An option may
not be exercised for a
19
<PAGE> 24
fraction of a share. Additionally, the Company will not permit payment of the
exercise price by a promissory note or a Company loan.
(ii) Option Price. Incentive stock options may not be granted at a
price less than the fair market value of the Common Stock on the date of grant
(or 110% of fair market value in the case of employees or officers holding 10%
or more of the voting stock of the Company). Nonqualified stock options may not
be granted at an exercise price less than the fair market value of the Common
Stock on the date of grant.
(iii) Termination of Employment. If the optionee's employment with the
Company or with a subsidiary of the Company is terminated, the term of any then
outstanding option held by such optionee shall extend for a period ending on the
earlier of the date on which such option would otherwise expire or three months
after such termination of employment. Such option will only be exercisable to
the extent it was exercisable as of the last date of such optionee's employment.
The representative of a deceased optionee's estate or beneficiaries thereof to
whom the option has been transferred shall have the right during the three month
period following the death or, if lesser, the remaining term of the option, to
exercise any then outstanding option in whole or in part.
(iv) Termination of Options. All options expire not more than seven
years from the date of grant or not more than five years from the date of grant
in the case of incentive stock options granted to an employee holding 10% or
more of the voting stock of the Company.
(v) Nontransferability of Options. An option granted under the 1991
Stock Option Plan is exercisable, during the optionee's lifetime, only by the
optionee and is not transferable except by will or by the laws of descent and
distribution.
(vi) Vesting. The Compensation Committee determines any vesting
conditions applicable to options granted under the 1991 Stock Option Plan.
Vesting may be accelerated in the event of the employee's death, disability or
retirement, in the event of a change in control with respect to the Company or
upon other events. Moreover, the Compensation Committee may determine that
outstanding options will become fully vested if it has concluded that there is a
reasonable possibility that a change in control will occur within six months
thereafter.
For purposes of the Stock Option Plan, the term "change in control" is
defined as (1) the acquisition, directly or indirectly, of at least 30% of the
outstanding voting securities of the Company by a person other than the Company
or an employee benefit plan of the Company, (2) a greater than one-third change
in the composition of the Board over a period of 24 months (if such change was
not approved by a majority of the existing directors), (3) certain mergers and
consolidations involving the Company, (4) a liquidation of the Company or (5) a
sale of all or substantially all of the Company's assets.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of change in the Company's capitalization by reason of
split-up, merger, consolidation, reorganization, reclassification,
recapitalization, or any other capital adjustment, the Compensation Committee
shall make an adjustment to options outstanding under the 1991 Stock Option Plan
in an equitable manner.
AMENDMENT AND TERMINATION
The Board of Directors may, at any time, alter, amend, suspend,
discontinue or terminate the plan; provided, however, that such action does not
adversely affect the right of the optionees to options previously granted, and
no amendment, without the approval of the stockholders, shall increase the
maximum number of shares which may be awarded under the plan, materially
increase benefits, change the class of employees eligible or materially modify
eligibility requirements. In any event, the 1991 Stock Option Plan will
terminate in 2001.
FEDERAL INCOME TAX INFORMATION
Options granted under the 1991 Stock Option Plan may be either
"incentive stock options," as defined in Section 422 of the Code, or
nonqualified options.
20
<PAGE> 25
If an option granted under the 1991 Stock Option Plan is an incentive
stock option, the optionee will recognize no income upon grant of the incentive
stock option and incur no tax liability due to the exercise unless the optionee
is subject to the alternative minimum tax. The Company will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after transfer of the shares to the optionee by
the Company, any gain will be treated as long-term capital gain. If these
holding periods are not satisfied, the optionee will recognize ordinary income
equal to the excess of the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock over the exercise
price. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized as capital gain.
All other options which do not qualify as incentive stock options are
referred to as nonqualified options. An optionee will not recognize any taxable
income at the time he is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the option price.
The income recognized by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company by payment in cash or out of the
current earnings paid to the optionee. Upon resale of such shares by the
optionee, the excess of the sale price over the optionee's basis in the shares
will be treated as capital gain or loss.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonqualified option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1991 Stock Option Plan and does not purport to be
complete and references should be made by the optionee to the applicable
provisions of the Code. In addition, this summary does not discuss the income
tax laws of any municipality, state or foreign country in which an optionee may
reside.
21
<PAGE> 26
NEW PLAN BENEFITS
The following table reflects the number of shares of Common Stock
underlying options that would have been granted for the year ended December 31,
1996 under the 1991 Stock Option Plan as proposed to be amended.
NEW PLAN BENEFITS
1991 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Number of Shares
Underlying Options
Name and Position Dollar Value (1) Granted (2)
----------------- ---------------- ------------------
<S> <C> <C>
Stephen F. Wiggins
Chairman and Chief -- 100,000
Executive Officer
William M. Sullivan
President and Chief -- 35,000
Operating Officer
Robert M. Smoler
Executive Vice President and -- 35,000
Chief Executive Officer -
New York Region
Jeffery H. Boyd
Executive Vice President -- 35,000
and General Counsel
David B. Snow, Jr
Executive Vice President, -- 35,000
Medical Delivery Systems
and Government Programs
All Executive Officers as -- 550,002
a Group (17 persons)
All Employees and Officers
who are not Executive -- 910,102
Officers as a Group (1441 persons)
</TABLE>
(1) All options are granted at fair market value on the date of grant.
(2) Represents the number of shares underlying options actually granted
under the 1991 Stock Option Plan for the year ended December 31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENTS TO THE 1991 STOCK OPTION PLAN.
22
<PAGE> 27
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick is the Company's independent public accounting firm and
has been since 1985. Representatives of KPMG Peat Marwick are expected to be
present at the Meeting. They will be given an opportunity to make a statement
and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Proxy Statement relating to
the 1998 Annual Meeting, any proposal by a record holder of Common Stock must be
received by the Company at its principal offices in Norwalk, Connecticut on or
before February 27, 1998. A proponent of such a proposal must comply with the
proxy rules under the Securities Exchange Act of 1934, as amended.
SOLICITATION
All costs and expenses associated with soliciting proxies will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
the directors, officers and employees of the Company by personal interview,
telephone or telegram. Such directors, officers and employees will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Arrangements will also
be made with custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Common Stock held of record by
such persons, and the Company will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
therewith. In addition, the Company has retained Georgeson & Company Inc., a
proxy soliciting firm, to assist in the solicitation of proxies and will pay
such firm a fee, estimated not to exceed $7,500 plus expenses. The total amount
of such expenses will be borne by the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other business or matters to be presented for consideration at the
Meeting other than as set forth in the Notice of Meeting attached to this Proxy
Statement. However, if any other business shall come before the Meeting or any
adjournment or postponement thereof and be voted upon, the enclosed proxy shall
be deemed to confer discretionary authority on the individuals named to vote the
shares represented by such proxy as to any such matters.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to each beneficial holder of its
Common Stock on the Record Date, upon the written request of any such person,
copies of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as filed with the Commission. Any such request should be made
in writing to Investor Relations Department, Oxford Health Plans, Inc., 800
Connecticut Avenue, Norwalk, Connecticut 06854.
23
<PAGE> 28
EXHIBIT A
RESOLUTION AUTHORIZING THE AMENDMENT
OF THE COMPANY'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED
RESOLVED, that the Company increase the number of authorized shares of Common
Stock, $.01 par value, from 200,000,000 to 400,000,000 by amending Article
Fourth of the Company's Second Amended and Restated Certificate of
Incorporation, as amended, as follows:
The first sentence of the first paragraph of Article Fourth is hereby
amended to read in its entirety as follows:
ARTICLE FOURTH
Capital Stock
The total authorized capital stock of the Corporation consists of
402,000,000 shares, of which 2,000,000 are shares of Preferred Stock, $.01 par
value ("Preferred Stock"), and 400,000,000 are shares of Common Stock, $.01 par
value, ("Common Stock").
24
<PAGE> 29
EXHIBIT B
RESOLVED, that, subject to the approval of the Company's stockholders,
the Company's 1991 Stock Option Plan (the "Plan") is hereby amended in the
following respects:
The first sentence of Paragraph 3 of Part I of the Plan is hereby
amended to read in its entirety as follows:
3. Shares of Stock Subject to the Plan. Subject to the provisions
of Paragraph 2 of Part IV, the number of shares of Stock which
may be issued or transferred pursuant to Stock Options granted
under the Plan shall not exceed 21,580,000 shares in the
aggregate.
25
<PAGE> 30
PROXY OXFORD HEALTH PLANS, INC. PROXY
PROXY FOR 1997 ANNUAL MEETING APRIL 22, 1997 SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen F. Wiggins, Chairman
and Chief Executive Officer, and Jeffery H. Boyd, Executive Vice President and
General Counsel, and each of them, attorneys with full power of substitution, to
vote as directed below all shares of Common Stock of Oxford Health Plans, Inc.
registered in the name of the undersigned, or which the undersigned may be
entitled to vote, at the 1997 Annual Meeting to be held at the Company's office,
Westchester One, 44 South Broadway, White Plains, New York 10601, on April 22,
1997, 10:00 a.m. and at any adjournment or postponement thereof.
<TABLE>
<C> <C> <C>
1. ELECTION OF DIRECTOR FOR Stephen F. Wiggins WITHHOLD AUTHORITY to vote
for Stephen F. Wiggins
FOR Robert B. Milligan Jr. WITHHOLD AUTHORITY to vote
for Robert B. Milligan Jr.
FOR Marcia J. Radosevich, Ph.D. WITHHOLD AUTHORITY to vote
for Marcia J. Radosevich, Ph.D.
</TABLE>
2. APPROVAL OF AMENDMENT TO THE COMPANY'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
FOR AGAINST ABSTAIN
3. APPROVAL OF AMENDMENT TO OXFORD HEALTH PLANS, INC. 1991 STOCK OPTION PLAN.
FOR AGAINST ABSTAIN
4. AS SUCH PROXIES MAY IN THEIR DISCRETION DETERMINE IN RESPECT OF ANY OTHER
BUSINESS PROPERLY TO COME BEFORE SAID MEETING (THE BOARD OF DIRECTORS KNOWING OF
NO SUCH OTHER BUSINESS).
THE DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2 AND 3.
(Continued on reverse side)
<PAGE> 31
(Continued from other side)
UNLESS THE STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS 1,
2 AND 3 AS PROPOSED.
PLEASE DATE, SIGN AND RETURN TO FLEET NATIONAL BANK, P.O. BOX 1440, HARTFORD,
CONNECTICUT 06143.
<TABLE>
<S> <C>
(Please sign in the same form as name appears hereon. Dated ______________________________, 1997
Executors and other fiduciaries should indicate
their titles. If signed on behalf of a corporation, __________________________________________
give title of officer signing).
__________________________________________
Signature of Stockholder(s)
</TABLE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS.
<PAGE> 32
APPENDIX
OXFORD HEALTH PLANS, INC.
1991 STOCK OPTION PLAN,
AS AMENDED THROUGH APRIL 22,1997
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Oxford Health Plans, Inc. 1991 Stock
Option Plan is to provide an incentive to key Employees, Directors and
Consultants of Oxford Health Plans, Inc. (the "Corporation"), who are in a
position to contribute materially to the long-term success of the
Corporation, to increase their interest in the Corporation's welfare, and to
aid in attracting and retaining Employees, Directors and Consultants of
outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean the occurrence of any of the
following events:
Any "person" (as defined below) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of securities of the Corporation
representing 30% or more of the total voting power represented by
the Corporation's then outstanding voting securities; or
A change in the composition of the Board occurs, as a result of
which fewer than two-thirds of the incumbent directors are directors
who either (i) had been directors of the Corporation on the
"look-back date" (as defined below) or (ii) were elected, or
nominated for election, to the Board with the affirmative votes of
at least a majority of the directors who had been directors of the
Corporation on the "look-back date" and who were still in office at
the time of the election or nomination; or
The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
80% of the total voting power represented by the voting securities
of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or
The stockholders of the Corporation approve (i) a plan of complete
liquidation of the Corporation or (ii) an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of this Subsection (b), the term "person" shall have
the same meaning as when used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but shall exclude (i) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Corporation or of a parent or subsidiary of the Corporation, and
(ii) a corporation owned directly or indirectly by the stockholders
of the Corporation in substantially the same proportions as their
ownership of the common stock of the Corporation.
For purposes of this Subsection (b), the term "look-back date" shall
mean the date 24 months prior to the change in the composition of
the Board.
Any other provision of this Section 2(b) notwithstanding, the term
"Change in Control" shall not include either of the following
events, if undertaken at the election of the Corporation:
(i) A transaction, the sole purpose of which is to change
the state of the Corporation's incorporation; or
(ii) A transaction, the result of which is to sell all or
substantially all of the assets of the Corporation to
another corporation (the "surviving corporation");
provided that the surviving corporation is owned
directly or indirectly by the stockholders
1
<PAGE> 33
of the Corporation immediately following such
transaction in substantially the same proportions as
their ownership of the Corporation's common stock
immediately preceding such transaction; and provided,
further, that the surviving corporation expressly
assumes this Plan and all outstanding Stock Options.
(c) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(d) "Committee" shall mean a committee whose members shall, from time to
time, be appointed by the Board; provided, however, that on such
date as the Corporation's Stock is first registered under Section 12
of the Securities Exchange Act of 1934 such committee shall consist
of at lease two Directors, all of whom are non-employees within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934.
(e) "Consultant" shall mean any person retained by the Corporation or
any of its subsidiaries to render services on a consulting basis.
(f) "Corporation" shall mean Oxford Health Plans, Inc., a Delaware
corporation, and any successor thereto.
(g) "Directors" shall mean those members of the Board of Directors of
the Corporation who are not Employees.
(h) "Disability" shall mean a medically determinable physical or mental
condition which causes an Employee, Director or Consultant to be
unable to engage in any substantial gainful activity and which can
be expected to result in death or to be of long-continued and
indefinite duration.
(i) "Employee" shall mean any common law employee, including officers,
of the Corporation or any of its subsidiaries as determined in the
Code and the Treasury Regulations thereunder.
(j) "Fair Market Value" shall mean the fair market value of the Stock as
determined by the Committee on the basis of a review of the facts
and circumstances at the time.
(k) "Grantee" shall mean an Employee, Director or Consultant granted a
Stock Option under this Plan.
(l) "Incentive Stock Option" shall mean an option granted pursuant to
the Incentive Stock Option provisions as set forth in Part II of
this Plan.
(m) "Non-Qualified Stock Option" shall mean an option granted pursuant
to the Non-Qualified Stock Option provisions as set forth in Part
III of this Plan.
(n) "Plan" shall mean the Oxford Health Plans, Inc. 1991 Stock
Option Plan as set forth herein and as amended from time to time.
(o) "Stock" shall mean authorized but unissued shares of the Common
Stock of the Corporation or reacquired shares of the Corporation's
Common Stock.
(p) "Stock Option" shall mean an option granted pursuant to the Plan to
purchase shares of Stock.
(q) "Ten Percent Stockholder" shall mean an Employee, who at the time a
Stock Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all Stock of the
Corporation or of its parent or subsidiary corporation.
3. Shares of Stock Subject to the Plan. Shares of Stock Subject to the Plan.
Subject to the provisions of Paragraph 2 of Part IV, the number of shares of
Stock which may be issued or transferred pursuant to Stock Options granted
under the Plan shall not exceed 21,580,000 shares in the aggregate. If a
Stock Option shall expire and terminate for any reason, in whole or
in part, without being exercised, the number of shares of Stock as to which
such expired or terminated Stock Option shall not have been exercised may
again become available for the grant of Stock Options.
<PAGE> 34
There shall be no terms and conditions in a Stock Option which provide that the
exercise of an Incentive Stock Option reduces the number of shares of Stock for
which an outstanding Non-Qualified Stock Option may be exercised; and there
shall be no terms and conditions in a Stock Option which provide that the
exercise of a Non- Qualified Stock Option reduces the number of shares of Stock
for which an outstanding Incentive Stock Option may be exercised.
4. Administration of the Plan. The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to it, to determine the terms and provisions of Stock
Option agreements, and to make all other determinations necessary or advisable
for the administration of the Plan. Any controversy or claim arising out of or
related to this Plan shall be determined unilaterally by and at the sole
discretion of the Committee.
5. Amendment or Termination. The Board may, at any time, alter, amend, suspend,
discontinue, or terminate this Plan; provided, however, that such action shall
not adversely affect the right of Grantees to Stock Options previously granted
and no amendment, without the approval of the stockholders of the Corporation,
shall increase the maximum number of shares which may be awarded under the
Plan in the aggregate, materially increase the benefits accruing to Grantees
under the Plan, change the class of Employees eligible to receive options
under the Plan, or materially modify the eligibility requirements for
participation in the Plan.
6. Effective Date and Duration of the Plan. The Plan shall become effective
upon its approval by the Board subject to its subsequent approval by the
stockholders of the Corporation. This Plan shall terminate ten years from the
date the Plan becomes effective, and no Stock Option may be granted under the
Plan thereafter, but such termination shall not affect any Stock Option
theretofore granted.
7. Limitation on Grants. Subject to the provisions of Paragraph 2 of Part IV,
no individual optionee may be granted Stock Options to purchase more than
200,000 shares of Stock in any calendar year.
3
<PAGE> 35
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
(a) Only key Employees of the Corporation shall be eligible to receive
Incentive Stock Options under the Plan. Directors of the Corporation
who are not also Employees shall not be eligible for Incentive Stock
Options.
(b) The purchase price of each share of Stock subject to an Incentive
Stock Option shall not be less than 100% of the Fair Market Value
of a share of the Stock on the date the Incentive Stock Option is
granted; provided, however, that the purchase price of each share
of Stock subject to an Incentive Stock Option granted to a Ten
Percent Stockholder shall not be less than 110% of the Fair
Market Value of a share of the Stock on the date the Incentive
Stock Option is granted.
(c) No Incentive Stock Option shall be exercisable more than seven years
from the date the Incentive Stock Option was granted; provided,
however, that an Incentive Stock Option granted to a Ten Percent
Stockholder shall not be exercisable more than five years from the
date the Incentive Stock Option was granted.
(d) The Committee shall determine and designate from time to time those
Employees who are to be granted Incentive Stock Options and specify
the number of shares subject to each Incentive Stock Option.
(e) Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the option is granted) of the
Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Employee during any calendar year (under
all such plans of the Grantee's employer corporation and its parent
and subsidiary corporations) shall not exceed $100,000.
(f) The Committee, in its sole discretion, shall determine whether
any particular Incentive Stock Option shall become exercisable in
one or more installments, specify the installment dates, and,
within the limitations herein provided, determine the total
period during which the Incentive Stock Option is exercisable.
The Committee may make provision for accelerated exercisability
of Incentive Stock Options in the event of the Optionee's death,
disability or retirement or other events. Further, the Committee
may make such other provisions as may appear generally acceptable
or desirable to the Committee or necessary to qualify its grants
under the provisions of Section 422 of the Code.
(g) The Committee may grant at any time new Incentive Stock Options
to an Employee who has previously received Incentive Stock
Options or other options whether such prior Incentive Stock
Options or other options are still outstanding, have previously
been exercised in whole or in part, or are cancelled in
connection with the issuance of new Incentive Stock Options. The
purchase price of the new Incentive Stock Options may be
established by the Committee without regard to the existing
Incentive Stock Options or other options.
(h) The Committee may determine, at the time of granting an Incentive
Stock Option or thereafter, that such Incentive Stock Option
shall become fully exercisable as to all Stock subject to such
Incentive Stock Option in the event that a Change of Control
occurs with respect to the Corporation. If the Committee finds
that there is a reasonable possibility that, within the
succeeding six months, a Change in Control will occur with
respect to the Corporation, then the Committee at its sole
discretion may determine that any or all outstanding Incentive
Stock Options shall become fully exercisable as to all Stock
subject to such Incentive Stock Options.
2. Exercise of Incentive Stock Options.
(a) The option price of an Incentive Stock Option shall be payable
on exercise of the option (i) in cash or by check, bank draft or
postal or express money order, (ii) by the surrender of Stock
then owned by the Grantee, provided that the stock surrendered by
the Grantee has been owned by the Grantee for at least six (6)
months, or (iii) partially in accordance with clause (i) and
partially in accordance with clause (ii) of this Paragraph. In
no event shall payment of the exercise price of an Incentive
Stock Option be made by a promissory note or a loan by the
Corporation. Shares of Stock so surrendered in accordance with
clause (ii) or (iii) shall be valued at the Fair Market Value
thereof on the date of exercise, surrender of such Stock to be
evidenced by delivery of the
4
<PAGE> 36
certificate(s) representing such shares in such manner, and
endorsed in such form, or accompanied by stock powers endorsed in
such form, as the Committee may determine.
3. Termination of Employment.
(a) If a Grantee's employment is terminated (other than by Disability or
death) the term of any then outstanding Incentive Stock Option held
by the Grantee shall extend for a period ending on the earlier of
the date on which such option would otherwise expire or three months
after such termination of employment, and such option shall be
exercisable to the extent it was exercisable as of the date of
termination of employment.
(b) If a Grantee's employment is terminated by reason of Disability, the
term of any then outstanding Incentive Stock Option held by the
Grantee shall extend for a period ending on the earlier of the date
on which such option would otherwise expire or three months after
the Grantee's last date of employment, and such option shall be
exercisable to the extent it was exercisable as of such last date of
employment.
(c) If a Grantee's employment is terminated by death, the
representative of his estate or beneficiaries thereof to whom the
option has been transferred shall have the right during the
three-month period following his death to exercise any then
outstanding Incentive Stock Options in whole or in part. If a
Grantee dies within three-months after his retirement without
having fully exercised any then outstanding Incentive Stock
Options, the representative of his estate or beneficiaries
thereof to whom the option has been transferred shall have the
right during such three-month period to exercise such options in
whole or in part. The number of shares of Stock in respect of
which an Incentive Stock Option may be exercised after a
Grantee's death shall be the number of shares in respect of which
such option could be exercised as of the date of the Grantee's
death or retirement, whichever occurs first. In no event may the
period for exercising an Incentive Stock Option extend beyond the
date on which such option would otherwise expire.
(d) The Board may grant a leave of absence to any Grantee for purposes
of continuing such Grantee's employment with the Corporation or its
subsidiaries.
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III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Stock Options.
(a) Key Employees and Consultants of the Corporation shall be eligible
to receive Non-Qualified Stock Options under the Plan. Directors of
the Corporation, excluding members of the Committee, who are not
also Employees shall also be eligible to receive Non-Qualified Stock
Options.
(b) The Committee shall determine and designate from time to time those
Employees, Directors and Consultants who are to be granted
Non-Qualified Stock Options and the amount subject to each
Non-Qualified Stock Option.
(c) The Committee may grant at any time new Non-Qualified Stock Options
to an Employee, Director or Consultant who has previously received
Non-Qualified Stock Options or other options, whether such prior
Non-Qualified Stock Options or other options are still outstanding,
have previously been exercised in whole or in part, or are cancelled
in connection with the issuance of new Non-Qualified Stock Options.
(d) When granting a Non-Qualified Stock Option, the Committee shall
determine the purchase price of the Stock subject thereto. Such
price shall not be less than 100% of the Fair Market Value of such
Stock on the date the Non-Qualified Stock Option is granted.
(e) The Committee, in its sole discretion, shall determine whether
any particular Non-Qualified Stock Option shall become
exercisable in one or more installments, specify the installment
dates, and, within the limitations herein provided, determine the
total period during which the Non-Qualified Stock Option is
exercisable. The Committee may make provision for accelerated
exercisability of Non-Qualified Stock Options in the event of the
Optionee's death, disability or retirement or other events.
Further, the Committee may make such other provisions as may
appear generally acceptable or desirable to the Committee.
(f) No Non-Qualified Stock Option shall be exercisable more than seven
years from the date such option is granted.
(g) The Committee may determine, at the time of granting a
Non-Qualified Stock Option or thereafter, that such Non-Qualified
Stock Option shall become fully exercisable as to all Stock
subject to such Non-Qualified Stock Option in the event that a
Change of Control occurs with respect to the Corporation. If the
Committee finds that there is a reasonable possibility that,
within the succeeding six months, a Change in Control will occur
with respect to the Corporation, then the Committee at its sole
discretion may determine that any or all outstanding
Non-Qualified Stock Options shall become fully exercisable as to
all Stock subject to such Non-Qualified Stock Options.
2. Exercise of Stock Options. The option price of a Non-Qualified Stock
Option shall be payable on exercise of the option (i) in cash or by check, bank
draft or postal or express money order, (ii) by the surrender of Stock then
owned by the Grantee, provided that the stock surrendered by the Grantee has
been owned by the Grantee for at least six (6) months, or (iii) partially in
accordance with clause (i) and partially in accordance with clause (ii) of this
Paragraph. In no event shall payment of the exercise price of a Non-Qualified
Stock Option be made by a promissory note or a loan by the Corporation. Shares
of Stock so surrendered in accordance with clause (ii) or (iii) shall be valued
at the Fair Market Value thereof on the date of exercise, surrender of such to
be evidenced by delivery of the certificate(s) representing such shares in such
manner, and endorsed in such form, or accompanied by stock powers endorsed in
such form, as the Committee may determine.
3. Termination of Employment.
(a) If a Grantee's employment is terminated, a Director Grantee
ceases to be a Director or a Consultant Grantee ceases to be a
Consultant (other than by Disability or death), the term of any
then outstanding Non-Qualified Stock Option held by the Grantee
shall extend for a period ending on the earlier of the date on
which such option would otherwise expire or three months after
such termination of employment or cessation of being a Director
or a Consultant, and such option shall be exercisable to the
extent it was exercisable as of the date of termination of
employment or cessation of being a Director or a Consultant.
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(b) If a Grantee's employment is terminated by reason of Disability,
a Director Grantee ceases to be a Director by reason of
Disability or a Consultant Grantee ceases to be a Consultant by
reason of Disability, the term of any then outstanding
Non-Qualified Stock Option held by the Grantee shall extend for a
period ending on the earlier of the date on which such option
would otherwise expire or three months after the Grantee's last
date of employment or being a Director or Consultant, and such
option shall be exercisable to the extent it was exercisable as
of such last date of employment or cessation of being a Director
or Consultant.
(c) If a Grantee's employment is terminated by death or a Director
Grantee ceases to be a Director or Consultant by reason of death,
the representative of his estate or beneficiaries thereof to whom
the option has been transferred shall have the right during the
three-month period following his death to exercise any then
outstanding Non-Qualified Stock Options in whole or in part. If
a Grantee dies within three-months after his retirement without
having fully exercised any then outstanding Non-Qualified Stock
Options, the representative of his estate or beneficiaries
thereof to whom the option has been transferred shall have the
right during such three month period to exercise such options in
whole or in part. The number of shares of Stock in respect of
which a Non-Qualified Stock Option may be exercised after a
Grantee's death shall be the number of shares of Stock in respect
of which such option could be exercised as of the date of the
Grantee's death or retirement, whichever first occurs. In no
event may the period for exercising a Non-Qualified Stock Option
extend beyond the date on which such option would otherwise
expire.
(d) The Board may grant a leave of absence to any Grantee for purposes
of continuing such Grantee's employment with the Corporation or its
subsidiaries.
IV. GENERAL PROVISIONS
1. Substitution of Options. In the event of a corporate merger or
consolidation, or the acquisition by the Corporation of property or stock of an
acquired corporation or any reorganization or other transaction qualifying under
Section 425 of the Code, the Committee may, in accordance with the provisions of
that Section , substitute options under this Plan for options under the plan of
the acquired corporation provided (i) the excess of the aggregate fair market
value of the shares subject to option immediately after the substitution over
the aggregate option price of such shares is not more than the similar excess
immediately before such substitution and (ii) the new option does not give the
Employee additional benefits, including any extension of the exercise period.
2. Adjustment Provisions.
(a) If the shares of Stock outstanding are changed in number or class by
reason of a split-up, merger, consolidation, reorganization,
reclassification, recapitalization, or any capital adjustment,
including a stock dividend, or if any distribution is made to the
holders of common stock other than a cash dividend, then
(i) the aggregate number and class of shares or other
securities that may be issued or transferred pursuant to
Paragraph 3 and pursuant to Paragraph 7 of Part I,
(ii) the number and class of shares or other securities
which are issuable under outstanding Stock Options,
and
(iii) the purchase price to be paid per share under
outstanding Stock Options shall be adjusted as provided
hereinafter.
(b) Adjustment under this Paragraph 2 shall be made in an equitable
manner by the Committee, whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding, and
conclusive.
3. General.
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this
Plan, as the Board shall approve.
(b) The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to
be retained in the employ of the Corporation, and all Employees
shall remain subject to discharge to the same extent as if the Plan
were not in effect.
(c) No Employee, and no beneficiary or other person claiming under or
through him, shall have any right, title or interest by reason of
any Stock Option to any particular assets of the Corporation, or
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any shares of Stock allocated or reserved for the purposes of the
Plan or subject to any Stock Option except as set forth herein.
The Corporation shall not be required to establish any fund or
make any other segregation of assets to assure the payment of any
Stock Option.
(d) No right under the Plan shall be subject to anticipation, sale,
assignment, pledge, encumbrance, or charge except by will or the law
of descent and distribution, and a Stock Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(e) Notwithstanding any other provision of this Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver
any certificate or certificates for shares of Stock under a Stock
Option, and the transferability of Stock acquired by exercise of a
Stock Option, shall be subject to all of the following conditions:
(i) Any registration or other qualification of such shares
under any state or federal law or regulation, or the
maintaining in effect of any such registration or other
qualification which the Board shall, in its absolute
discretion upon the advice of counsel, deem necessary or
advisable;
(ii) The obtaining of any other consent, approval, or permit
from any state or federal governmental agency which the
Board shall, in its absolute discretion upon the advice
of counsel, determine to be necessary or advisable; and
(iii) Each stock certificate issued pursuant to a Stock Option
shall bear the following legend:
"The transferability of this certificate and the shares of Stock
represented hereby are subject to restrictions, terms and conditions
contained in the Oxford Health Plans, Inc. 1991 Stock Option Plan,
and an Agreement between the registered owner of such Stock and
Oxford Health Plans, Inc. A copy of the Plan and Agreement are on
file in the office of the Secretary of Oxford Health Plans, Inc."
(f) All payments to Grantees or to their legal representatives shall
be subject to any applicable tax, community property, or other
statutes or regulations of the United States or of any state
having jurisdiction thereof. The Grantee may be required to pay to
the Corporation the amount of any withholding taxes which the
Corporation is required to withhold with respect to a Stock Option
or its exercise. In the event that such payment is not made when
due, the Corporation shall have the right to deduct, to the extent
permitted by law, from any payment of any kind otherwise due to such
person all or part of the amount required to be withheld.
(g) In the case of a grant of a Stock Option to any Employee of a
subsidiary of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares, if any,
covered by the Stock Option to the subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or
understanding that the subsidiary will transfer the shares to the
Employee in accordance with the terms of the provisions of the
Plan. For purposes of this Section , a subsidiary shall mean any
subsidiary corporation of the Corporation as defined in Section
425 of the Code.
(h) A Grantee entitled to Stock as a result of the exercise of a
Stock Option shall not be deemed for any purpose to be, or have
rights as, a shareholder of the Corporation by virtue of such
exercise, except to the extent a stock certificate is issued
therefor and then only from the date such certificate is issued.
No adjustments shall be made for dividends or distributions or
other rights for which the record date is prior to the date such
stock certificate is issued. The Corporation shall issue any
stock certificates required to be issued in connection with the
exercise of a Stock Option with reasonable promptness after such
exercise.
(i) The grant or exercise of Stock Options granted under the Plan shall
be subject to, and shall in all respects comply with, applicable
Delaware corporate law relating to such grant or exercise.
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