<PAGE> 1
As filed with the Securities and Exchange Commission on September 24, 1999
Registration No. 333-77529
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OXFORD HEALTH PLANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1118515
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(203) 852-1442
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
JEFFERY H. BOYD, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
OXFORD HEALTH PLANS, INC.
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(203) 852-1442
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------------
COPY TO:
DANIEL DUNSON, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered
this form are to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF SHARES AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TO BE TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock.......................... 22,530,000(2) $17.96875(3) $404,835,937.50(3) $112,544.39
Series D Cumulative Preferred Stock... 277,629.157 $525(4) 145,755,307.43(4) 40,519.98
Series E Cumulative Preferred Stock... 132,808.069 $1,000(4) 132,808,069(4) 36,920.64
Series A Warrants..................... 15,800,000 -- -- 0(5)
Series B Warrants..................... 6,730,000 -- -- 0(5)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Previously paid.
(2) In accordance with Rule 416 under the Securities Act of 1933, this
Registration Statement also covers an indeterminable number of shares of
common stock, $.01 par value, as may become issuable upon exercise of the
Series A Warrants or the Series B Warrants to prevent dilution resulting
from stock splits, stock dividends, and similar transactions in accordance
with the terms of the Series A Warrants and the Series B Warrants.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act based on the average high
and low price of Oxford Health Plans, Inc. common stock $.01 par value, on
April 23, 1999, as reported on the Nasdaq National Market.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act.
(5) Pursuant to Rule 457(g), no registration fee is required for the Series A
Warrants and the Series B Warrants since the shares of Common Stock
underlying such warrants are being registered hereby.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, PROSPECTUS DATED SEPTEMBER --, 1999
[OXFORD HEALTH PLANS LOGO]
22,530,000 shares of Common Stock
277,629.157 shares of Series D Cumulative Preferred Stock
132,808.069 shares of Series E Cumulative Preferred Stock
15,800,000 Series A Warrants
6,730,000 Series B Warrants
The shares of preferred stock, the warrants and the shares of common stock
issuable upon exercise of the warrants are being offered under this prospectus
by certain selling securityholders. The securities that were exchanged for the
preferred stock and the warrants originally were issued in a private placement
in May 1998. The shares of preferred stock listed above include 14,022.606
additional shares of Series D preferred stock and 16,908.793 additional shares
of Series E preferred stock that we expect to issue as payment on May 13, 2000
in respect of dividends accrued on existing shares.
We will not receive any of the proceeds from the sale of the preferred stock or
the warrants by the selling securityholders. However, we will receive proceeds
from any exercise of the warrants.
You should read this prospectus and the prospectus supplement, if any, relating
to the specific issue of preferred stock, warrants and shares of common stock
issuable upon exercise of the warrants carefully before you invest.
Our common stock is listed on the Nasdaq National Market under the symbol
"OXHP." On September --, 1999, the last reported sale price of our common stock
was $-- per share. We urge you to obtain a current sale price for our common
stock before you buy any of the securities offered under this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER -- , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary.......................... 1
Ratio of Earnings to Combined
Fixed Charges and Preference
Dividends...................... 8
Business......................... 9
Description of the Offered
Preferred Stock................ 9
Description of the Warrants...... 23
Registration Rights Agreement.... 26
Use of Proceeds.................. 27
Material United States Federal
Income Tax Consequences........ 28
Selling Securityholders.......... 41
Plan of Distribution............. 47
Validity of Securities........... 48
Experts.......................... 48
Where You Can Find More
Information.................... 49
Forward-looking Statements....... 50
</TABLE>
i
<PAGE> 4
REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about us from documents that are not included in or delivered with this
document. You can obtain documents incorporated by reference in this prospectus,
other than certain exhibits to those documents, by requesting them in writing or
by telephone from us at the following address:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Attention: Investor Relations
Telephone: (203) 852-1442
YOU WILL NOT BE CHARGED FOR ANY OF THE DOCUMENTS THAT YOU REQUEST.
See "Where You Can Find More Information" on page 49.
ii
<PAGE> 5
SUMMARY
This brief summary highlights selected information from this prospectus and
documents we have incorporated in this prospectus by reference. It does not
contain all of the information that is important to you. We urge you to read
carefully the entire prospectus, the documents incorporated in this prospectus
by reference and the other documents to which this prospectus refers, including
our consolidated financial statements and the notes to those financial
statements which are incorporated in this prospectus by reference.
OXFORD HEALTH PLANS, INC.
Oxford Health Plans, Inc. was incorporated under the laws of the State of
Delaware on September 17, 1984. We are a health care company currently providing
health care benefit plans primarily in New York, New Jersey and Connecticut. Our
product line includes:
- traditional health maintenance organizations which require the member to
choose a health care provider from the network of providers under
contract with us;
- health care benefit plans for Medicare beneficiaries;
- health care benefit plans, known as point-of-service plans, which provide
the member with the option of using a provider who is under contract with
us or one who is not under contract with us;
- health care benefit plans, known as preferred provider organizations,
which permit the member to choose any health care provider;
- health care benefit plans for individuals; and
- administrative services for groups that provide their own health care
insurance, known as self-funded plans.
We offer our products primarily through our health maintenance organization
subsidiaries, Oxford Health Plans (NY), Inc., Oxford Health Plans (NJ), Inc. and
Oxford Health Plans (CT), Inc., and through Oxford Health Insurance, Inc., our
health insurance subsidiary.
Our principal executive offices are located at 800 Connecticut Avenue,
Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442.
SECURITIES BEING OFFERED
This prospectus covers the offer and sale of the following:
- 277,629.157 shares of Series D Cumulative Preferred Stock, which we refer
to as the "Series D preferred stock," and 132,808.069 shares of Series E
Cumulative Preferred Stock, which we refer to as the "Series E preferred
stock." We sometimes refer to the Series D preferred stock and the Series
E preferred stock together as the "offered preferred stock." The terms of
the Series D preferred stock and the Series E preferred stock are
substantially similar except for their dividend rates and their use as
consideration for exercise of the warrants.
- 15,800,000 Series A Warrants, which we refer to as the "Series A
warrants," and 6,730,000 Series B Warrants, which we refer to as the
"Series B warrants." We sometimes refer to the Series A warrants and the
Series B warrants together as the "warrants."
- 22,530,000 shares of common stock, $.01 par value per share, issuable
upon exercise of the Series A warrants and the Series B warrants.
1
<PAGE> 6
We issued the warrants and the securities that were exchanged for the
offered preferred stock in May 1998 to the selling securityholders named on
pages 44 and 46 in a private placement. We made this private placement under an
investment agreement, dated as of February 23, 1998, between Oxford and TPG
Partners II, L.P., one of the selling securityholders. We have filed the
investment agreement as an exhibit to the registration statement of which this
prospectus is a part.
TERMS OF THE OFFERED PREFERRED STOCK
Stated Value.................... The stated value of each share of offered
preferred stock is $1,000.
Mandatory Redemption............ We must redeem all outstanding shares of
Series D preferred stock and Series E
preferred stock on May 13, 2008, at a
redemption price for each share equal to all
unpaid dividends accumulated to the date of
payment of the redemption price, plus the
stated value of the share, which is $1,000.
Series D Dividends.............. Holders of the Series D preferred stock are
entitled to receive dividends in the
following amounts and form:
BEFORE MAY 13, 2000:
- shares of Series D preferred stock
accumulate dividends at a rate of
5.319521% per year;
- we may choose to make payments of
dividends in cash or by the issuance
of additional shares of Series D
preferred stock; and
- an annual dividend payment in the
form of Series D preferred stock was
made on May 13, 1999.
ON OR AFTER MAY 13, 2000:
- shares of Series D preferred stock
accumulate dividends at a rate of
5.129810% per year;
- we are required to make an annual
dividend payment on May 13, 2000,
and, after that date, we are required
to pay dividends in equal quarterly
installments on the last day of
March, June, September and December
of each year commencing June 2000;
and
- on May 13, 2000, we may choose to
make payments of dividends in cash or
by the issuance of additional shares
of Series D preferred stock; after
May 13, 2000, we are required to make
payments of dividends in cash.
2
<PAGE> 7
Series E Dividends.............. Holders of the Series E preferred stock are
entitled to receive dividends in the
following amounts and form:
BEFORE MAY 13, 2000:
- shares of Series E preferred stock
accumulate dividends at a rate of
14.589214% per year;
- we may choose to make payments of
dividends in cash or by the issuance
of additional shares of Series E
preferred stock; and
- an annual dividend payment in the
form of Series E preferred stock was
made on May 13, 1999.
ON OR AFTER MAY 13, 2000:
- shares of Series E preferred stock
accumulate dividends at a rate of 14%
per year;
- we are required to make an annual
dividend payment on May 13, 2000,
and, after that date, we are required
to pay dividends in equal quarterly
installments on the last day of
March, June, September and December
of each year commencing June 2000;
and
- on May 13, 2000, we may choose to
make payments of dividends in cash or
by the issuance of additional shares
of Series E preferred stock; after
May 13, 2000, we are required to make
payments of dividends in cash.
Ranking......................... With respect to the right to receive
dividends and payments upon the liquidation,
dissolution or winding up of Oxford, the
offered preferred stock ranks:
- senior to our common stock and,
except as specified below, any other
class or series of capital stock that
we issue in the future;
- equally with each other class or
series of preferred stock which
provides that it ranks equally with
the offered preferred stock; and
- junior to each other class of
preferred stock which provides that
it ranks senior to the offered
preferred stock.
Currently, there are no classes of preferred
stock issued or outstanding that rank senior
to the Series D preferred stock or the
Series E preferred stock. The Series D
preferred stock and the
3
<PAGE> 8
Series E preferred stock have the same
ranking, and there are currently no other
classes of preferred stock that have the
same ranking as the Series D preferred stock
and Series E preferred stock. The holders of
each series of offered preferred stock must
consent for Oxford to be able to create a
class of preferred stock that ranks the same
or that ranks senior to that class of
offered preferred stock.
Liquidation Preference.......... Upon liquidation, dissolution or winding up
of Oxford, each holder of shares of offered
preferred stock is entitled to receive the
following amount before we make any payment
on securities that rank junior to the
offered preferred stock:
- dividends, if any, accumulated or
deemed to have accumulated on each
share of offered preferred stock held
by the holder to the date we make
liquidation distributions, whether or
not declared, and
- the stated value of each share of
offered preferred stock held by the
holder, which is $1,000.
If the assets or proceeds from a
liquidation, dissolution or winding up of
Oxford are insufficient to make these
payments, then we will distribute the assets
and proceeds ratably among holders of
offered preferred stock and any securities
that have the same ranking as the offered
preferred stock.
Optional Redemption............. We have the right to redeem all outstanding
shares of a series of offered preferred
stock on or after May 13, 2003, at a
redemption price for each share of that
series equal to all unpaid dividends
accumulated to the date of payment of the
redemption price, plus the stated value of
the share, which is $1,000.
Change of Control Redemption.... If a "change of control" occurs with respect
to Oxford, holders of offered preferred
stock may require us to redeem any or all of
the shares of offered preferred stock they
hold, at a redemption price for each share
equal to all unpaid dividends accumulated to
the date of payment of the redemption price,
plus the stated value of the share, which is
$1,000.
Generally, a change of control may occur
upon events such as:
- a merger or consolidation of Oxford;
- acquisition of majority control of
Oxford by a person;
4
<PAGE> 9
- a sale, lease or other transfer of
substantially all of our assets;
- a substantial change in our board of
directors; or
- adoption of a plan of liquidation or
dissolution.
For a more complete definition of a "change
of control," please see the section of this
prospectus entitled "Description of Offered
Preferred Stock -- Change of Control
Redemption" on page 14.
Exchange........................ We have the right to exchange a series of
offered preferred stock on any dividend
payment date for junior subordinated
debentures issued pursuant to an indenture.
We may effect an exchange only if:
- we have paid or set aside for payment
full cumulative dividends on all
outstanding shares of the series of
offered preferred stock to be
exchanged;
- we have amended our certificate of
incorporation to give holders of the
debentures the same power to vote
that they had as holders of offered
preferred stock; and
- the exchange could not result in any
materially adverse tax consequences
to TPG Partners II, one of the
selling securityholders, or any of
its affiliates.
The indenture that will govern the junior
subordinated debentures will have terms
comparable to the terms of the series of
offered preferred stock that is exchanged,
including an interest rate that is the same
as the dividend rate on the series of
offered preferred stock that is exchanged.
Limited Voting Rights........... Holders of offered preferred stock, other
than TPG Partners II, one of the selling
securityholders, and its affiliates,
generally will not have the right to vote,
unless:
- dividends are in arrears and we have
not paid dividends in full on May 13,
2000;
- dividends are in arrears and we have
not paid dividends in full for four
consecutive quarters; or
- we fail to redeem shares of offered
preferred stock when required to do
so.
Generally, if any of the above events occur,
then the number of directors on our board of
directors automatically will be increased by
two, and the
5
<PAGE> 10
holders of a majority of the outstanding
shares of offered preferred stock will have
the right to vote, voting together as a
single class, to elect the two new
directors. However, there are limitations on
this right, which are described in the
section of this prospectus entitled
"Description of Offered Preferred
Stock -- Voting Rights" on page 20.
We cannot take certain actions without the
consent of holders of a majority of shares
of each series of offered preferred stock,
including the creation of any class of
capital stock with a ranking equal to or
senior to the offered preferred stock or
that is redeemable on or before May 13,
2008.
For detailed information regarding the offered preferred stock, you should
refer to the section of this prospectus entitled "Description of the Offered
Preferred Stock" beginning on page 9.
TERMS OF THE WARRANTS
Exercise........................ Each Series A warrant and Series B warrant
entitles the holder to purchase one share of
our common stock, par value $.01 per share,
at an exercise price of $17.75 per share at
any time until the expiration date.
Expiration Date................. The expiration date for the Series A
warrants is the earlier of May 13, 2008 and
the date of redemption of all of the Series
D preferred stock.
The expiration date for the Series B
warrants is the earlier of May 13, 2008 and
the date of redemption of all of the Series
E preferred stock.
Adjustments..................... The warrants provide for adjustments to the
exercise price and the number of shares of
common stock that may be purchased upon
exercise to protect against dilution. The
warrants also provide for adjustments to the
exercise price and number of shares that may
be purchased upon exercise in the event of a
merger, consolidation, recapitalization or
other transaction that results in the
conversion of our common stock into the
right to receive other securities, property
or cash.
Warrant Agent................... ChaseMellon Shareholder Services, L.L.C.
For detailed information regarding the warrants, you should refer to the
section of this prospectus entitled "Description of the Warrants" beginning on
page 24.
6
<PAGE> 11
OTHER
Use of Proceeds................. We will not receive any proceeds from the
sale of the offered preferred stock or
warrants covered by this prospectus; the
selling securityholders will receive all
proceeds. However, we will receive proceeds
from any exercise of the warrants and we
intend to use those proceeds for future
capital contributions to our regulated
subsidiaries, as necessary, for repayment of
debt, and for general corporate purposes, or
as otherwise described in a prospectus
supplement.
Shelf Registration Statement.... Under the registration rights agreement,
dated as of February 23, 1998, between us
and TPG Partners II, one of the selling
securityholders, we have agreed to use our
reasonable best efforts to keep effective a
shelf registration statement under which the
offered preferred stock, the warrants and
the common stock issuable upon exercise of
the warrants, which together we sometimes
refer to as "registrable securities," may be
sold. Generally, we are required to keep the
shelf registration statement effective
until:
- 10 years after the date it is first
declared effective; or
- if earlier, the date that all
registrable securities have been sold
under the shelf registration
statement or the date on which TPG
Partners II and its assigns are no
longer entitled to appoint directors
to our board of directors under the
investment agreement and are
permitted to sell their registrable
securities without registration under
Rule 144(k) under the Securities Act.
Generally, we intend the shelf registration
statement to permit the selling
securityholders named in this document and a
limited group of their transferees to resell
the registrable securities from time to
time. Purchasers of the registrable
securities offered by means of this
prospectus will not have any rights under
the registration rights agreement, although
once sold under this registration statement
the registrable securities should be freely
tradeable except by purchasers who are our
"affiliates" or are "underwriters" of the
registrable securities for purposes of the
Securities Act. We have filed the
registration statement of which this
prospectus is a part with the Securities and
Exchange Commission in order to meet our
obligations under the registration rights
agreement.
Trading......................... Our common stock currently trades on the
Nasdaq National Market under the symbol
"OXHP."
7
<PAGE> 12
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERENCE DIVIDENDS
The ratio of earnings to combined fixed charges and preference dividends
for each of the periods indicated is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ --------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed
Charges and Preference
Dividends......................... * * * * 25.6 19.3 17.6
==== ==== ==== ==== ==== ==== ====
</TABLE>
- -------------------------
* Earnings were insufficient to cover fixed charges and preference dividends by
$642.9 million for the year 1998, $431.6 million for the year 1997, $1.3
million for the six months ended June 30, 1999 and $577.1 million for the six
months ended June 30, 1998.
For purposes of computing these ratios, we increased our combined earnings
before income taxes, as reported in our most recent annual report on Form 10-K/A
No. 2, as amended by our Form 10-K/A No. 3, and in our quarterly report on Form
10-Q for the quarter ended June 30, 1999, by the amount of our fixed charges. We
then divided the amount of earnings by the amount of fixed charges and
preference dividends, resulting in the ratio of earnings to combined fixed
charges and preference dividends. Fixed charges represent interest expense plus
the estimated interest factor in rental expense. We have not capitalized
interest in any period.
See "Where You Can Find Information" on page 49 for a description of how to
obtain these documents.
8
<PAGE> 13
BUSINESS
We provide health care benefit plans through our HMO and insurance
subsidiaries primarily in New York, New Jersey and Connecticut. Our product line
includes:
- traditional health maintenance organizations which require the member to
choose a health care provider from the network of providers under
contract with us;
- health care benefit plans for Medicare beneficiaries;
- health care benefit plans, known as point-of-service plans, which provide
the member with the option of using a provider who is under contract with
us or one who is not under contract with us;
- health care benefit plans, known as preferred provider organizations,
which permit the member to choose any health care provider;
- health care benefit plans for individuals; and
- administrative services for groups that provide their own health care
insurance, known as self-funded plans.
We distribute our products through several different internal channels,
including direct sales representatives, business representatives, inbound
telemarketing representatives and executive account representatives, as well as
through external insurance agents, brokers and consultants.
As of the date of this prospectus, we had a network of more than 50,000
providers under contract with us. The majority of the primary care physicians,
specialists and hospitals in our network have contracted directly with us. We
also have contracts with groups of providers such as physician hospital
organizations, individual practice associations and other physician groups. We
have entered into risk transfer agreements for the provision of health benefits
to some of our Medicare beneficiaries as well as for pharmacy benefits
management and laboratory and radiology services.
For a fuller description of our business, including the risks involved in
our business, refer to our most recently filed annual report on Form 10-K/A
No. 2, as amended by our Form 10-K/A No. 3, which is incorporated into this
prospectus by reference.
DESCRIPTION OF THE OFFERED PREFERRED STOCK
The following summarizes certain terms and provisions of the Series D
preferred stock and the Series E preferred stock. This summary is not complete
and is subject to, and qualified in its entirety by reference to, applicable
Delaware law and to the provisions of our certificate of incorporation, by-laws
and the certificates of designations, designating the Series D preferred stock
and the Series E preferred stock. These documents are filed as exhibits to the
registration statement of which this prospectus is a part.
AUTHORITY TO ISSUE PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors to
issue, without the approval of the stockholders, up to 2,000,000 shares of
preferred stock, $.01 par value. As of the date of this prospectus, we had
designated 300,000 shares of Series D preferred stock and had issued 263,606.551
shares of Series D preferred stock and had designated 300,000 shares of Series E
preferred stock and had issued 115,899.276 shares of Series E preferred stock.
We expect to issue an additional 14,022.606 shares of Series D preferred
9
<PAGE> 14
stock and 16,908.793 shares of Series E preferred stock as dividends on the
existing shares of the offered preferred stock through May 13, 2000.
Before issuing a series of preferred stock, our board of directors has the
right to designate, for that series of preferred stock:
- the serial designations;
- dividend rates;
- the offering price or prices;
- provisions for redemption or purchase;
- provisions for conversion;
- voting rights;
- special or relative rights in the event of a liquidation, distribution or
sale of assets or dissolution or winding up;
- provisions for a sinking fund; and
- any other rights, obligations or provisions which may be so determined to
the fullest extent permitted by Delaware law.
As described below, our board of directors cannot create any class of
capital stock with a ranking equal or senior to the offered preferred stock or
that is redeemable on or before May 13, 2008, without the consent of holders of
a majority of the shares of each series of the offered preferred stock.
GENERAL
The stated value of the offered preferred stock is $1,000 per share. The
offered preferred stock does not provide holders with preemptive rights. The
terms of the Series D preferred stock and Series E preferred stock are
substantially similar except for their dividend rates and as noted specifically
below.
Under the investment agreement, the selling securityholders named in this
prospectus purchased 245,000 shares of our Series A Cumulative Preferred Stock,
which we refer to as the "Series A preferred stock," 105,000 shares of our
Series B Cumulative Preferred Stock, which we refer to as the "Series B
preferred stock," Series A Warrants to purchase 15,800,000 shares of our common
stock, par value $.01 per share, and Series B Warrants to purchase 6,730,000
shares of our common stock for a total purchase price of $350 million. On
February 13, 1999, we entered into a share exchange agreement with the selling
securityholders to redistribute the total amount of dividends payable among the
shares of Series A preferred stock and Series B preferred stock. Under the share
exchange agreement, the 245,000 shares of Series A preferred stock were
exchanged for 260,146.909 shares of Series D preferred stock, and the 105,000
shares of Series B preferred stock were exchanged for 111,820.831 shares of
Series E preferred stock. The additional amounts of Series D preferred stock and
Series E preferred stock issued in the exchange are attributable to dividends
accrued on the Series A preferred stock and the Series B preferred stock,
respectively, through February 13, 1999. As a result of the exchange, the
selling securityholders hold only Series D preferred stock and Series E
preferred stock and, following the exchange, all shares of the Series A
preferred stock and Series B preferred stock were canceled. The terms of the
Series D preferred stock are substantially similar to the terms of the Series A
preferred stock and the terms of the Series E preferred stock are
10
<PAGE> 15
substantially similar to the terms of the Series B preferred stock, except, in
each case, with respect to applicable dividend rates and their use as
consideration for exercise of the warrants. The exchange was effected primarily
to facilitate the potential sale of the offered preferred stock by the selling
securityholders.
We conduct our operations primarily through subsidiaries. Therefore, our
ability to make required dividend payments depends in part on the earnings of
our subsidiaries and on our ability to receive funds from our subsidiaries
through dividends or other payments. Because payments due on the offered
preferred stock are obligations of Oxford alone, our subsidiaries are not
obligated to pay any amount due under the offered preferred stock or to make
funds available for dividends on the offered preferred stock in the form of
dividends or advances to us. In addition, various insurance and health
regulations applicable to our subsidiaries restrict their ability to pay
dividends to us. If we incur operating losses, we may be required to make
additional capital contributions to our subsidiaries in order to comply with
statutory capital requirements and payment of dividends by those subsidiaries
would likely not be permitted.
In addition, the offered preferred stock effectively is subordinated to all
outstanding indebtedness and other liabilities and commitments, including
accounts payable and other accrued liabilities, of our subsidiaries. Any right
we have to receive assets of one of our subsidiaries upon its liquidation or
reorganization, and the resulting right of holders of the offered preferred
stock to participate in those assets, effectively will be subordinated to the
claims of that subsidiary's creditors, except to the extent we are recognized as
a creditor of that subsidiary. If we are recognized as a creditor of that
subsidiary our claims would still be subordinated to any security interest in
the assets of the subsidiary and any indebtedness of the subsidiary that is
senior to indebtedness held by us.
ChaseMellon Shareholder Services, L.L.C. will be the transfer agent,
dividend disbursing agent and registrar for the offered preferred stock unless
otherwise specified in a prospectus supplement.
RANKING
With respect to the right to receive dividends and payments upon the
liquidation, dissolution or winding up of Oxford, the offered preferred stock
ranks:
- senior to our common stock and, except as specified below, any other
class or series of our capital stock we issue in the future;
- equally with each other class or series of preferred stock which by its
terms provides that it ranks equally with the offered preferred stock;
and
- junior to each other class of preferred stock which by its terms provides
that it ranks senior to the offered preferred stock.
Currently, there are no classes of preferred stock issued or outstanding
that rank senior to the Series D preferred stock or the Series E preferred
stock. The Series D preferred stock and the Series E preferred stock have the
same ranking, and there are currently no other classes of preferred stock that
have the same ranking as the Series D preferred stock and Series E preferred
stock. The consent of holders of each series of offered preferred stock is
required for Oxford to be able to create a class of preferred stock that has the
same ranking or that is senior to that class of offered preferred stock.
11
<PAGE> 16
MANDATORY REDEMPTION
On May 13, 2008, we are required to redeem all outstanding shares of the
offered preferred stock. For a description of the redemption price and
redemption procedures, see "-- Redemption Price and Procedures" below.
DIVIDENDS
We are required to pay dividends to holders of Series D preferred stock and
Series E preferred stock in the following amounts and manners:
<TABLE>
<CAPTION>
SERIES D PREFERRED STOCK SERIES E PREFERRED STOCK
------------------------- -------------------------
<S> <C> <C>
BEFORE MAY 13, 2000:
Dividend Rate Shares of Series D Shares of Series E
preferred stock preferred stock
accumulate dividends at a accumulate dividends at a
rate of 5.319521% per rate of 14.589214% per
year. year.
Form of Payment We may choose to make We may choose to make
payments of dividends in payments of dividends in
cash or by the issuance cash or by the issuance
of additional shares of of additional shares of
Series D preferred stock. Series E preferred stock.
ON OR AFTER MAY 13, 2000:
Dividend Rate Shares of Series D Shares of Series E
preferred stock preferred stock
accumulate dividends at a accumulate dividends at a
rate of 5.129810% per rate of 14% per year.
year.
Dividend Payment Dates We are required to make We are required to make
an annual dividend an annual dividend
payment on May 13, 2000, payment on May 13, 2000,
and, after that date, we and, after that date, we
are required to pay are required to pay
dividends in equal dividends in equal
quarterly installments on quarterly installments on
the last day of March, the last day of March,
June, September and June, September and
December of each year, December of each year,
commencing in June 2000. commencing in June 2000.
Form of Payment On May 13, 2000, we may On May 13, 2000, we may
choose to make payments choose to make payments
of dividends in cash or of dividends in cash or
by the issuance of by the issuance of
additional shares of additional shares of
Series D preferred stock; Series E preferred stock;
after May 13, 2000, we after May 13, 2000, we
are required to make are required to make
payments of dividends in payments of dividends in
cash. cash.
</TABLE>
If any date specified as a dividend payment date is not a business day, we
will pay the dividends due on the next business day, without interest. We will
pay dividends to holders of record as they appear on our stock record books 15
days prior to the relevant dividend payment date. We will pay dividends only
when, as and if declared by our board of directors, out of funds at the time
legally available for the payment of dividends.
12
<PAGE> 17
On May 13, 1999, we issued:
(a) a dividend in the amount of $13.29880250 per share of Series D preferred
stock in the form of 3,459.64236379 shares of Series D preferred stock to
the holders of record as of April 28, 1999; and
(b) a dividend in the amount of $36.47303500 per share of Series E preferred
stock in the form of 4,078.44508277 shares of Series E preferred stock to
the holders of record as of April 28, 1999.
These payments reflected dividends accumulated from February 13, 1999, the
date the offered preferred stock was issued in exchange for the Series A
preferred stock and the Series B preferred stock. Dividends that accumulated on
the Series A preferred stock and Series B preferred stock from May 13, 1998
through February 13, 1999, were satisfied by the issuance of additional shares
of Series D preferred stock and Series E preferred stock in the exchange. We
have paid all accrued dividends required to be paid on the offered preferred
stock to the date of this prospectus.
ACCUMULATION OF DIVIDENDS
Dividends began to accumulate on outstanding shares of the offered
preferred stock from the date of issuance, and accumulate day-to-day, whether or
not earned or declared, until the dividends are paid. Dividends accumulate on
the basis of a 360-day year consisting of twelve 30-day months and the actual
number of days elapsed in the period for which payable. Dividends payable at
more than one annual rate for any dividend period or partial dividend period
will be pro rated based on the number of days in the dividend period or partial
dividend period, and the actual number of days elapsed for which dividends are
payable, at the applicable annual rate.
ADDITIONAL DIVIDENDS
Whenever we do not pay in full any dividend that has accumulated through
any dividend payment date, or whenever we do not pay in full any redemption
payment on any payment date set for a redemption, additional dividends will
accumulate on the amount of the unpaid dividends or the unpaid redemption
payment. An unpaid amount is referred to as an "arrearage." Additional dividends
accumulate on an arrearage at the annual dividend rate then in effect or such
lesser rate as may be the maximum rate that is then permitted by applicable law.
Additional dividends in respect of any arrearage:
- will accumulate day-to-day, whether or not earned or declared, until the
arrearage is paid; and
- will be calculated as of each successive dividend payment date and will
constitute an additional arrearage from and after any dividend payment
date to the extent not paid on that dividend payment date.
We may declare and pay additional dividends in respect of any arrearage at
any time, in whole or in part, without reference to any regular dividend payment
date, to registered holders as they appear on our stock record books on the
record date fixed by our board of directors. The record date must be at least 10
days before the corresponding payment date. Repayment of any arrearage must be
made in cash.
METHOD OF PAYMENT
If we pay less than the total amount of accumulated dividends payable on
all outstanding shares of a series of offered preferred stock, then we will
allocate dividends pro
13
<PAGE> 18
rata on a share-by-share basis among all outstanding shares of that series. Once
dividends are payable in cash, dividends that we declare and pay in an amount
less than the full amount of dividends accumulated on a series of the offered
preferred stock and on any arrearage will be applied first to the earliest
dividend that has not yet been paid. We will make all cash payments of dividends
on the offered preferred stock in United States dollars.
LIQUIDATION PREFERENCES
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Oxford, a holder of offered preferred stock will be entitled to
receive out of the assets of Oxford, before we make any payment or distribute
any assets to the holders of any securities that rank junior to the offered
preferred stock, an amount per share equal to the sum of:
(1) the dividends, if any, accumulated on the offered preferred stock to
the date we make liquidation distributions, whether or not dividends
have been declared; and
(2) the stated value of the offered preferred stock, which is $1,000.
If these assets or proceeds are insufficient to satisfy all claims with the
same priority of payment as the offered preferred stock, then we will distribute
the available assets and proceeds ratably among the holders of the offered
preferred stock and any securities that have the same priority of payment as the
offered preferred stock. After we pay holders the full amount of the liquidation
preference to which they are entitled, they will not be entitled to participate
in any further distribution of our assets. Neither a consolidation nor merger of
Oxford nor a sale, conveyance, lease, exchange or transfer of all or part of
Oxford's assets will be a liquidation, dissolution or winding up of Oxford.
OPTIONAL REDEMPTION
On and after May 13, 2003, we have the right to redeem all the outstanding
shares of a series of the offered preferred stock, in whole but not in part in
accordance with the procedures described below.
CHANGE OF CONTROL REDEMPTION
If a "change of control" occurs, then holders of offered preferred stock
may require us to redeem any or all of their shares of offered preferred stock.
A "change of control" means the time that any of the following occurs:
(1) any person or group other than TPG Partners II, its affiliates,
Oxford or any of our subsidiaries, or any group comprised of those
persons, becomes, directly or indirectly, the beneficial owner, by
way of merger, consolidation or otherwise, of a majority of the
then-outstanding securities of Oxford entitled to vote in an election
of directors. This determination will be made after giving effect to
the conversion and exercise of all outstanding warrants, options and
other securities of Oxford convertible into or exercisable for
securities of Oxford entitled to vote in an election of directors,
whether or not the securities are then convertible or exercisable; or
(2) the sale, lease, transfer or other disposition of all or
substantially all of the assets of Oxford and our subsidiaries to any
person or group;
14
<PAGE> 19
(3) during any period of two consecutive calender years, the following
individuals cease to constitute a majority of our directors then in
office:
(a) directors who constituted our board of directors at the
beginning of the two-year period; together with
(b) new directors whose election by our board of directors or whose
nomination by stockholders was approved by at least a majority
of the directors then still in office, which approving directors
were directors:
- at the beginning of the two-year period; or
- whose election or nomination was previously approved by our
board of directors; or
- who were approved under the provisions of the investment
agreement or the applicable certificate of designations;
(4) Oxford consolidates or merges with or into another person, or any
person consolidates or merges with or into Oxford, and immediately
after the consolidation or merger, the persons who owned the
outstanding voting securities of Oxford immediately before the
consolidation or merger do not own, by reason of their prior
ownership, a majority of the outstanding voting securities of Oxford
or the surviving corporation; or
(5) the adoption of a plan relating to the liquidation or dissolution of
Oxford.
The procedures for redemption are described below.
REDEMPTION PRICE AND PROCEDURES
REDEMPTION PRICE
We will pay the redemption price of the offered preferred stock to be
redeemed in cash out of funds legally available for the payment of the
redemption price. The redemption price will be an amount per share equal to the
sum of:
(1) the amount, if any, of all unpaid dividends accumulated on the offered
preferred stock to be redeemed to the date of actual payment of the
redemption price, whether or not these dividends have been declared;
and
(2) the stated value of the offered preferred stock to be redeemed, which
is $1,000.
OPTIONAL REDEMPTION AND MANDATORY REDEMPTION PROCEDURES
If we redeem shares of offered preferred stock, we are required to send
notice of the redemption, including the redemption date, to the holders of
record of the offered preferred stock to be redeemed by first class mail,
postage prepaid, at each holder's address as it appears on our stock record
books. We are required to send the notice not more than 120 nor fewer than 90
days before the date fixed for redemption. If we irrevocably deposit funds
sufficient to pay the aggregate redemption price for the preferred stock to be
redeemed, as described below under "-- Deposit of Funds," at the same time or
prior to the delivery of a notice of redemption, then we are required to send
the notice of redemption not more than 120 days nor fewer than 30 days before
the fixed
15
<PAGE> 20
redemption date. However, TPG Partners II or any of its affiliates has the
option to request us to delay the fixed redemption date for a period of no more
than 30 days, if:
- the notice of redemption is delivered less than 60 days before the
redemption date; and
- TPG Partners II or any of its affiliates has used its reasonable best
efforts to complete a sale of some or all of its shares of the series of
offered preferred stock to be redeemed prior to the stated redemption
date but has not completed the sale.
We are required to notify the holders of the offered preferred stock to be
redeemed about this delay within five days of receiving the request from TPG
Partners II or its affiliates. We will not delay the redemption date in this
manner more than once.
Our board of directors may fix a record date to determine the holders of
offered preferred stock to be redeemed. This record date will not be more than
30 days before the date that we mail the notice of redemption. On or after the
redemption date, each holder of the shares called for redemption will be
required to surrender the certificate evidencing shares to us at the place
designated in the notice, and will be entitled to receive payment of the
redemption price when they surrender their certificate. No dividends will
accumulate after the redemption date, and after that date all rights of the
holders of offered preferred stock that is redeemed will cease and terminate,
except to the extent we default in payment on the redemption date.
As long as TPG Partners II or its affiliates hold any shares of a series of the
offered preferred stock, we may not deliver a notice of redemption with respect
to that series unless:
- the offered preferred stock is rated Baa or better by Moody's Investors
Service, or BBB or better by Standard & Poor's Ratings Group or, if the
offered preferred stock is not rated by Moody's and Standard & Poor's,
our unsecured debt is rated Baa or better by Moody's or BBB or better by
Standard & Poor's; or
- we have sufficient funds reasonably available under committed lines of
credit or other similar sources of financing established with financially
sound financing providers to pay, on the redemption date, the aggregate
redemption price and have reserved funds or availability for payment of
the total redemption price.
We may deliver a notice of redemption without complying with these two
conditions if we irrevocably deposit funds sufficient to pay the total
redemption price for the offered preferred stock to be redeemed, as described
below under "-- Deposit of Funds," before or at the same time we deliver the
notice of redemption.
Prior to any redemption date, other than in a mandatory redemption, we will
take all measures reasonably requested by TPG Partners II or its affiliates to
facilitate their sale or other disposition of the offered preferred stock to be
redeemed before the redemption date, including:
- participation in due diligence sessions and provision of information
about our management, business and financial condition;
- preparation of offering memoranda, private placement memoranda and other
similar documents; and
- preparation and delivery of other certificates or documents that TPG
Partners II or any of its affiliates reasonably requests.
16
<PAGE> 21
CHANGE OF CONTROL REDEMPTION PROCEDURES
We are required to send notice of any change of control to the holders of
record of the outstanding offered preferred stock not more than five days
following a change of control. This notice will describe the transaction
constituting such change of control and will set forth:
- each holder's right to require us to redeem any or all shares of offered
preferred stock held by him or her out of legally available funds;
- the redemption date, which will not be more than 30 days from the date of
the notice of the change of control; and
- the procedures to be followed by holders in exercising their right to
have their shares of offered preferred stock redeemed.
If more than 50 holders or groups of affiliated holders own shares of a
series of offered preferred stock and if the series of offered preferred stock
is listed on any national securities exchange or quoted on any national
quotation system, we also are required to give notice of a change of control by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York, within 30 days following the change of control. Our
failure to give a notice of a change of control, or the formal insufficiency of
any notice, will not prejudice the rights of holders of offered preferred stock
to have us redeem their shares.
If a holder of offered preferred stock elects to require us to redeem his
or her shares of offered preferred stock following a change of control, the
holder must deliver a written notice to us, in the form specified by us if we
did in fact give notice of a change of control as required, stating that the
holder wants us to redeem his or her shares, and specifying the number of shares
to be redeemed. This notice must be delivered prior to the redemption date set
forth in the notice of a change of control, or, if the notice of a change of
control is not given, at any time following the last day we were required to
give the notice of a change of control. If we do not give the required notice,
the redemption date for any holder that elects to redeem shares of offered
preferred stock will be the date that is the later of (x) 30 days following the
last day we were required to give the notice of change of control and (y) 15
days following the delivery of a notice of election by that holder. If 50 or
fewer holders or groups of affiliated holders own all of the shares of a series
of the offered preferred stock, the holders or groups of holders of that series
may deliver a notice or an election to redeem at any time within 90 days
following the occurrence of a change of control without awaiting receipt of a
notice of a change of control or the expiration of the time allowed for the
delivery of a notice of a change of control.
We are required to comply with the requirements of Rules 13e-4 and 14e-1
under the Securities Exchange Act of 1934 and any other securities laws and
regulations to the extent such laws and regulations are applicable in connection
with the repurchase of the shares of the offered preferred stock as a result of
a change of control. To the extent that the provisions of any securities laws or
regulations conflict with the redemption procedures described above, we will
comply with the applicable securities laws and regulations and will not be
deemed to have breached our obligations to the holders of offered preferred
stock.
DEPOSIT OF FUNDS
On or prior to any redemption date, we are required to deposit with our
transfer agent or other redemption agent, as a trust fund for the benefit of the
holders of the shares of
17
<PAGE> 22
the offered preferred stock to be redeemed, an amount of cash that is sufficient
to complete the redemption. We also are required to provide irrevocable
instructions and authority to the transfer agent or other redemption agent to
pay the redemption price to those holders whose shares are to be redeemed. This
deposit will constitute full payment to the holders, and from and after the date
of this deposit, all rights of the holders with respect to the shares of the
offered preferred stock that are to be redeemed, except the right to receive the
redemption price upon the surrender of their respective certificates, will cease
and terminate.
Dividends will not accumulate on any shares of offered preferred stock
after the redemption date for those shares unless we fail to deposit cash
sufficient to redeem those shares. If the holders of any shares of offered
preferred stock to be redeemed do not claim the cash deposited for redemption
within two years after the deposit, the transfer agent or other redemption agent
will pay the balance to us. Upon this payment, the transfer agent or other
redemption agent will be relieved of all responsibility to holders and the sole
right of holders, with respect to shares to be redeemed, will be to receive the
redemption price as our general creditors. Any interest accrued on the deposited
funds will belong to us and will be paid to us from time to time on demand.
EXCHANGE
We may exchange either or both series of offered preferred stock at any
time, to the extent permitted by applicable law, in whole but not in part, for
junior subordinated debentures issued pursuant to an indenture that will be
prepared in accordance with the investment agreement. We would issue a debenture
in principal amount of $1,000 in exchange for each share of the series of
offered preferred stock exchanged. The debentures would have terms comparable to
the terms of the offered preferred stock exchanged, including interest rates
that are the same as the dividend rates on the offered preferred stock to be
exchanged. The exchange may take place on any dividend payment date. The
exchange may take place at our offices and at any other place that our board of
directors designates.
Unless we receive the prior written consent of the holders of all
outstanding shares of the series of offered preferred stock to be exchanged, we
may not exchange any shares if:
(a) any dividends, to the extent payable or deemed payable through the date
of exchange, have not been paid or set aside for payment on all
outstanding shares of that series;
(b) we have failed to amend our certificate of incorporation pursuant to
Delaware law to give holders of the debentures the same power to vote
that they had as holders of offered preferred stock; or
(c) the exchange could result in any materially adverse tax consequence to
TPG Partners II or any of its affiliates.
In order to prevent an exchange of shares of offered preferred stock
because it could result in a material adverse tax consequence to TPG Partners II
or any of its affiliates, TPG Partners II or one of its affiliates must deliver
a written notice to us specifying in reasonable detail the nature of the tax
consequence, which must be a tax consequence other than the difference between
the tax treatment of distributions on the offered preferred stock and interest
payments on the debentures. TPG Partners II or one of its affiliates must
deliver that notice by the fifteenth day after it received the notice of
exchange. TPG Partners II and its affiliates have agreed not to deliver this
notice unless at
18
<PAGE> 23
the time, TPG Partners II and its affiliates beneficially own a total of at
least 1,000 shares of the series of offered preferred stock to be exchanged. If
we receive an objection notice, then we will not exchange the shares of offered
preferred stock held by TPG Partners II and its affiliates, and we will mail,
within 15 days after receipt of the notice, written notice that we are canceling
the proposed exchange of shares of offered preferred stock to each holder of
record of shares of offered preferred stock to which we mailed the notice of
exchange.
Before giving notice of our intention to exchange, we will execute and
deliver the indenture to a bank or trust company selected by our board of
directors and, if required by applicable law, will qualify the indenture under
the Trust Indenture Act of 1939.
We are required to mail written notice of our intention to exchange the
offered preferred stock for debentures to each holder of record of shares of the
series of offered preferred stock to be exchanged not less than 90 nor more than
120 days prior to the date fixed for exchange.
Prior to effecting any exchange, we are required to deliver to each holder
of shares of the series of offered preferred stock to be exchanged an opinion of
nationally recognized legal counsel which states that:
(1) each of the indenture and the debentures have been duly authorized and
executed by Oxford and, when delivered by us in exchange for shares of
offered preferred stock, will constitute valid and legally binding
obligations of Oxford enforceable against Oxford in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of
equity;
(2) the exchange of debentures for the shares of offered preferred stock
will not violate the provisions of the applicable certificate of
designations that govern the proposed exchange or of the Delaware
General Corporation Law; and
(3) the exchange of the debentures for the shares of offered preferred
stock is exempt from the registration requirements of the Securities
Act or, if no such exemption is available, that the debentures have
been duly registered for exchange under the Securities Act.
Upon the exchange of a series of offered preferred stock for debentures,
the rights of the holders of that series of offered preferred stock as our
stockholders will terminate, and the offered preferred stock will no longer be
outstanding.
Before any holder of offered preferred stock will be entitled to receive
debentures, a holder must surrender his or her certificates at our office or at
any other place that our board of directors may designate, and must state in
writing the name or names with addresses in which he or she wishes the
certificates for the debentures to be issued. After the surrender of
certificates, we will issue and deliver certificates for the debentures to the
holder, or to his or her nominee, at our office or other designated place. We
will exchange shares of offered preferred stock as of the close of business on
the date fixed for exchange as provided above, and the person entitled to
receive the debentures issuable upon exchange will be treated for all purposes,
including the accrual and payment of interest, as the record holder or holders
of debentures as of the close of business on that date.
19
<PAGE> 24
VOTING RIGHTS
RIGHTS OF TPG PARTNERS II
Under the terms of the offered preferred stock, TPG Partners II and its
affiliates have a right to vote their shares of offered preferred stock on all
matters voted on by holders of common stock. In those circumstances, TPG
Partners II and its affiliates vote together with the holders of common stock as
a single class. However, no other holder of offered preferred stock has those
voting rights and they are not transferable by TPG Partners II or its affiliates
to any subsequent holder of offered preferred stock. If TPG Partners II or its
affiliates transfer shares of offered preferred stock to an unaffiliated person,
and subsequently reacquire such shares, TPG Partners II and its affiliates would
not reacquire the right to vote such shares of offered preferred stock with
holders of common stock.
Under the investment agreement, TPG Partners II and its affiliates are
permitted to designate members of our board of directors. The number of
directors TPG Partners II and its affiliates are permitted to designate at any
time is dependent on the number of shares of common stock issued or issuable
upon exercise of warrants held by TPG Partners II and its affiliates. In
addition to the other voting rights described in this section, if at any time
the number of directors on our board of directors designated by TPG Partners II
and its affiliates is less than the number they are entitled to designate under
the investment agreement, TPG Partners II and its affiliates, voting separately
as a single class, are entitled to elect a number of additional directors to our
board of directors equal to the deficiency. This right terminates at the time
the requisite number of directors on our board of directors are designated by
TPG Partners II and its affiliates.
RIGHTS OF ALL HOLDERS
All holders of offered preferred stock, including TPG Partners II and its
affiliates, have the voting rights described below.
If:
(1) dividends payable on either series of offered preferred stock have been
in arrears and not paid in full for four consecutive quarterly periods
or if dividends on either series of offered preferred stock have been
in arrears and not paid in full on May 13, 2000; or
(2) we fail to satisfy our obligation to redeem shares of either series of
offered preferred stock under the relevant certificate of designations,
then the number of directors constituting our board of directors automatically
will be increased by two, and the holders of a majority of the outstanding
shares of offered preferred stock will have the exclusive right, voting together
as a single class, to elect the two additional directors, except under the
circumstances described below.
Under the investment agreement, TPG Partners II and its affiliates are
permitted to designate directors to our board of directors. However, TPG
Partners II and its affiliates are not permitted to elect and/or designate a
total of more than four directors to our board of directors. If at the time
holders of offered preferred stock have the right to elect additional directors,
(1) TPG Partners II and its affiliates together beneficially own a majority
of the outstanding shares of offered preferred stock; and
20
<PAGE> 25
(2) TPG Partners II and its affiliates are not permitted to elect one or
both of the additional directors because of the restrictions described
above,
then the holders of offered preferred stock, other than TPG Partners II and its
affiliates, will have the right to elect, voting together as a single class,
only one additional director.
Any additional director will continue as a director, and these additional
voting rights will continue until:
(1) we pay all dividends accumulated on the offered preferred stock in
full; and
(2) we satisfy any obligation to redeem the offered preferred stock that
has become due, or we set aside all necessary funds for the redemption
payment.
Upon the occurrence of these events, any additional director will cease to be a
director and the additional voting rights of the holders of offered preferred
stock will terminate subject to revesting if any subsequent failure to pay
dividends or redeem shares as described above occurs and subject to any rights
to elect directors of holders of any other series of our preferred stock.
The holders of offered preferred stock may exercise their right to elect
additional directors at any annual meeting of stockholders, at a special meeting
of stockholders held for this purpose, or by the written consent of the holders
of the minimum number of shares required to take action. As long as this right
to vote continues, and unless this right has been exercised by written consent
of the minimum number of shares required to take action, the chairman of our
board of directors may call, and upon the written request of holders of record
of 20% of the outstanding shares of either the Series D preferred stock or the
Series E preferred stock, addressed to our secretary at our principal office,
will call a special meeting of the holders of shares entitled to vote as
described above. This meeting will be held within 60 days after delivery of a
request to the secretary, at the place and upon the notice provided by law and
in the by-laws for meetings of stockholders.
Each director elected as described above will serve until the next annual
meeting or until his or her successor is elected and qualified, unless the
director's term of office has terminated as described above. If any vacancy
occurs among the directors elected as described above, the vacancy may be filled
for the unexpired portion of the term by the remaining director or directors
elected by the holders entitled to vote for directors as described above, or
their successor or successors in office, if any. If the vacancy is not filled
within 20 days after it is created or if all of the remaining directors elected
by the holders of offered preferred stock as described in this section cease to
serve as directors before their term expires, the holders of the shares then
outstanding and entitled to vote for the director as described above may elect
successors to hold office for the unexpired terms of any vacant directorships.
The holders of a majority of the shares entitled to vote for directors as
described above will have the right to remove with or without cause at any time
and replace any directors that they have elected, by written consent or at a
special meeting of the holders entitled to vote for directors as described
above.
We may not take the following actions, without the consent or affirmative
vote of the holders of at least a majority of the outstanding shares of a series
of offered preferred stock, voting separately as a class:
- authorize, create or issue, or increase the authorized amount of any
securities that rank senior or equal to the offered preferred stock for
the purpose of receiving dividends or distributions upon the liquidation,
dissolution or winding-up of Oxford;
21
<PAGE> 26
- authorize, create or issue, or increase the authorized amount of any
class or series of capital stock or any security convertible into or
exercisable for any class or series of capital stock, redeemable
mandatorily or redeemable at the option of the holder at any time on or
prior to May 13, 2008, whether or not redemption may occur only upon the
occurrence of a specified event;
- amend, alter or repeal any provision of our certificate of incorporation
or our by-laws, if the amendment, alteration or repeal alters or changes
the powers, preferences or special rights of the applicable series of
offered preferred stock so as to affect them materially and adversely; or
- authorize or take any other action if such action alters or changes any
of the rights of the applicable series of offered preferred stock in any
respect or otherwise would be inconsistent with the provisions of the
applicable certificate of designations and the holders of any class or
series of our capital stock are entitled to vote on that action.
No consent or vote of the holders of the outstanding shares of offered preferred
stock is required:
- for the creation or issuance by a trust formed at our direction of any
series of preferred securities of such trust for financing purposes in an
aggregate amount not to exceed $250,000,000; or
- to authorize, create or issue, or increase the authorized amount of, any
class or series of securities that rank junior to the offered preferred
stock, or any security convertible into a stock of any class or series of
securities that rank junior to the offered preferred stock, except to the
extent such action would violate the relevant certificate of
designations.
RESTRICTION ON DIVIDENDS
As long as any shares of offered preferred stock are outstanding, our board
of directors:
- may not declare, and we may not pay or set apart for payment any dividend
on any securities that rank junior to the offered preferred stock;
- may not make any payment on account of, or set apart for payment money
for a sinking or other similar fund for, the repurchase, redemption or
other retirement of, any securities that rank junior or equal to the
offered preferred stock or any warrants, rights or options exercisable
for or convertible into any securities that rank junior or equal to the
offered preferred stock, other than the repurchase, redemption or other
retirement of debentures or other debt securities that are convertible
into or exchangeable for any securities that rank junior or equal to the
offered preferred stock;
- may not make any distribution in respect of the securities that rank
junior to the offered preferred stock, either directly or indirectly, and
whether in cash, obligations, shares or other property, other than
distributions or dividends in securities that rank junior to the offered
preferred stock to the holders of securities that rank junior to the
offered preferred stock; and
- may not permit any corporation or other entities directly or indirectly
controlled by us to purchase or redeem any securities that rank junior or
equal to the offered preferred stock or any warrants, rights, calls or
options exercisable for or convertible
22
<PAGE> 27
into any securities that rank junior or equal to the offered preferred stock,
other than the repurchase, redemption or other retirement of debentures or other
debt securities that are convertible into or exchangeable for any securities
that rank junior or equal to the offered preferred stock
unless before or at the same time we take action, all accumulated and unpaid
dividends on shares of offered preferred stock not paid on the applicable dates,
including arrearages and accumulated dividends, have been paid.
When dividends are not paid in full upon the offered preferred stock, all
dividends declared on the offered preferred stock and any other series of
securities that ranks equally with the offered preferred stock, with respect to
dividends, will be declared and paid pro rata so that the amount of dividends
declared and paid will bear to each other the same ratio that accumulated
dividends, including interest accrued in respect of such accumulated dividends,
on the shares of offered preferred stock and those other securities bear to each
other.
The following actions are not prohibited by the restrictions described
above:
(1) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of offered preferred stock or any
security that ranks equal to the offered preferred stock with respect
to dividends or of any shares of preferred securities of a trust as
referred to above; or
(2) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value by us of any securities that rank junior to the
offered preferred stock with respect to dividends in accordance with
any obligation in existence at the time of original issuance of the
offered preferred stock.
NO INCONSISTENT OBLIGATIONS
We are not permitted to enter into any agreement or issue any security that
prohibits, conflicts or is inconsistent with, or would be breached by, our
performance of our obligations with respect to the offered preferred stock.
USE OF THE OFFERED PREFERRED STOCK FOR EXERCISE OF WARRANTS
Shares of offered preferred stock may be used as consideration for exercise
of the Series A warrants and the Series B warrants. For limitations on the
ability to use shares of offered preferred stock in this manner, see below under
"Description of Warrants -- Limitations on Use of the Offered Preferred Stock
for Exercise of Warrants."
DESCRIPTION OF THE WARRANTS
The following summarizes certain terms and provisions of the Series A
warrants and the Series B warrants. This summary is not complete and is subject
to, and qualified in its entirety by reference to, the warrant certificates,
applicable Delaware law, the provisions of our certificate of incorporation,
by-laws and the form of warrant agreement, pursuant to which the warrants will
be issued. These documents are filed as exhibits to the registration statement
of which this prospectus is a part.
GENERAL
The selling securityholders initially purchased the Series A warrants and
the Series B warrants in a private placement on May 13, 1998. At the date of
this prospectus,
23
<PAGE> 28
15,800,000 Series A warrants and 6,730,000 Series B warrants were outstanding.
The warrant agent for the Series A warrants and the Series B warrants is
ChaseMellon Shareholder Services, L.L.C.
Any warrants sold by selling securityholders under this prospectus will be
covered by a warrant agreement that will be entered into between Oxford and
ChaseMellon Shareholder Services, L.L.C., as warrant agent. The warrant agent
will act solely as an agent of Oxford in connection with the warrants and will
not assume any obligation or relationship of agency or trust for or with any
holder of warrants or beneficial owners of warrants. A copy of the form of
warrant agreement has been filed as an exhibit to the registration statement of
which this prospectus is a part.
EXERCISE
Each warrant entitles its holder to purchase one share of common stock at
an exercise price of $17.75 per share at any time until the expiration of the
warrants.
The exercise price of the warrants was determined by negotiation between us
and TPG Partners II and its affiliates and should not be construed as an
estimate of the value of our common stock or to imply that the price of our
common stock will increase or decrease.
We have reserved from our authorized but unissued shares a sufficient
number of shares of common stock for issuance upon the exercise of warrants.
The warrants provide for adjustment of their exercise price and for a
change in the number of shares that may be purchased upon exercise to protect
holders against dilution in the event of a stock dividend, stock split or
reverse split, upon issuance of shares of common stock at prices lower than the
market price of the common stock, upon distribution of a special dividend, or
upon a tender or exchange offer. The warrants also provide for adjustments to
the exercise price and number of shares that may be purchased upon exercise in
the event of a merger, consolidation, recapitalization or other transaction that
results in the conversion of our common stock into the right to receive other
securities, property or cash.
EXPIRATION OF WARRANTS
The Series A warrants expire on the earlier of:
- May 13, 2008; and
- the redemption of all of the Series D preferred stock, which we can do
only after May 13, 2003.
The Series B warrants expire until the earlier of:
- May 13, 2008; and
- the redemption of all of the Series E preferred stock, which we can do
only after May 13, 2003.
PROCEDURES FOR EXERCISE
You may exercise a warrant by surrendering the warrant certificate on or
before its expiration date, with the form of "Election to Exercise" on the
reverse side of the warrant certificate completed and executed, accompanied by
payment of the full exercise price for the number of shares for which the
warrant is being exercised.
24
<PAGE> 29
You may make payment of the exercise price:
- in cash;
- by certified or official bank check;
- by an exchange with us of a number of shares of offered preferred stock
having a total stated value plus accumulated and unpaid dividends equal
to the total exercise price (for limitations on the ability to use the
offered preferred stock in this manner, see below under "-- Limitations
on Use of the Offered Preferred Stock for Exercise of Warrants");
- by an exchange with us of outstanding warrants, other than the warrants
being exercised, the value of each of which will be determined by
subtracting the exercise price from the average closing price of our
common stock for the 10 trading days ending on the trading day before the
day the exercise occurs; or
- by any combination of the above.
Upon the surrender of the warrant certificate and payment of the exercise
price, we will promptly deliver the appropriate number of shares of common stock
to the holder, or to the persons designated by the holder in writing. If you
exercise fewer than all of the warrants represented by a certificate we will
issue, a new certificate for the remaining number of warrants.
LIMITATIONS ON USE OF THE OFFERED PREFERRED STOCK FOR EXERCISE OF WARRANTS
Holders of warrants may use shares of offered preferred stock as
consideration for the exercise of the warrants. However, before May 13, 2000,
holders of warrants may not use shares of Series D preferred stock as
consideration for exercise of warrants unless they use a percentage of the total
number of shares of the Series D preferred stock issued by us on February 13,
1999 that does not exceed the percentage of the total number of shares of Series
E preferred stock issued by us on February 13, 1999 that have been:
- redeemed by us;
- repurchased by us as a result of a change of control or otherwise;
- used as consideration in connection with the exercise of the warrants; or
- otherwise retired by us.
NO FRACTIONAL SHARES
We are not required to issue fractional shares of common stock. If any
fractional share would be issuable on the exercise of a warrant, instead of
issuing the fractional share we will pay the holder an amount in cash equal to
the market value of the fractional share.
NO RIGHTS AS A STOCKHOLDER
Holders of warrants do not have rights as stockholders of Oxford. For
instance, they do not have the right to vote, to receive dividends or to receive
notices of stockholder meetings.
OTHER
The holders of warrants have the opportunity to profit from a rise in the
market value of the common stock, with a resulting dilution in the interest of
all other stockholders. As a result, so long as the warrants are outstanding,
the terms on which we can obtain
25
<PAGE> 30
additional capital may be adversely affected. We expect the holders of the
warrants to exercise them at a time when we would, in all likelihood, be able to
obtain any needed capital by a new offering of securities on terms more
favorable than those provided for by the warrants.
REGISTRATION RIGHTS AGREEMENT
The summary of certain provisions of the registration rights agreement set
out below is subject to, and is qualified in its entirety by reference to, all
of the provisions of the registration rights agreement, a copy of which has been
filed as an exhibit to the registration statement of which this prospectus is a
part.
We are a party to a registration rights agreement with TPG Partners II.
Under the registration rights agreement, we agreed to use our reasonable best
efforts to keep effective a shelf registration statement at our expense,
covering offers and sales of the offered preferred stock, the warrants, the
common stock issuable upon the exercise of the warrants and any debentures
issued in respect of the offered preferred stock. We sometimes refer to the
securities covered by the registration rights agreement as the "registrable
securities." We filed the registration statement of which this prospectus is a
part with the SEC to comply with our obligations under the registration rights
agreement. Under the registration rights agreement, we are required to keep the
shelf registration statement effective until 10 years after the date it is
declared effective or, if earlier, the date that all registrable securities have
been sold under the shelf registration statement or on which TPG Partners II and
its affiliates are no longer entitled to board representation under the
investment agreement and are permitted to sell their registrable securities
without registration pursuant to Rule 144(k) under the Securities Act.
We will provide each holder of the registrable securities with copies of
this prospectus, notify each holder when the shelf registration statement has
been effective and take other actions described in the registration rights
agreement as are required to permit unrestricted sales of the registrable
securities. A holder that sells registrable securities under the shelf
registration statement is required to be named as a selling securityholder in
this prospectus and to deliver this prospectus to purchasers. Those holders also
will be subject to certain civil liability provisions under the Securities Act
in connection with these sales and are bound by the provisions of the
registration rights agreement, including certain indemnification obligations.
We also have agreed in the registration rights agreement to use our
reasonable best efforts to cause the offered preferred stock and warrants to be
listed on each securities exchange on which our securities are listed or quoted
and on each inter-dealer quotation system on which any of our securities are
quoted, in each case, at the time the registrable securities are sold.
If we file a registration statement under the Securities Act for an
underwritten offering of our securities for our own account or for the account
of holders, or if we offer securities convertible into or exchangeable for any
of our equity securities, the holders of registrable securities have agreed, if
requested, not to publicly sell or distribute any securities that are the same
as or similar to those being registered by us in connection with its sale, or
any securities convertible or exchangeable or exercisable for any such
securities during the period beginning 7 days before and ending no more than 90
days after the effective date of the registration statement filed by us.
26
<PAGE> 31
We have agreed, in the case of an underwritten offering of registrable
securities, if requested, not to effect any public sale or distribution of any
securities the same as or similar to those being sold in the underwritten
offering, or any securities convertible into or exchangeable or exercisable for
securities that are the same as or similar to those being sold, during the
period beginning 7 days before and ending no more than 90 days after the date of
the related underwriting agreement.
Purchasers of the registrable securities offered by means of this
prospectus will not have any rights under the registration rights agreement,
although once sold under this registration statement, the registrable securities
should be freely tradeable except by purchasers that are our "affiliates" or are
"underwriters" of the registrable securities for purposes of the Securities Act.
USE OF PROCEEDS
We will not receive any of the proceeds from any sale of the offered
preferred stock or warrants, all of which will be received by the selling
securityholders. The proceeds from the original sale of the securities that were
exchanged for the offered preferred stock and warrants on May 13, 1998 were
utilized, in part, to retire outstanding bridge notes, make capital
contributions to regulated subsidiaries and pay fees and expenses approximating
$39 million related to the sale of the securities that were exchanged for the
offered preferred stock and warrants. We have used and will use the balance for
subsidiary capital contributions, as necessary, and for general corporate
purposes, or as otherwise described in a prospectus supplement.
We will receive proceeds upon exercise of the Series A warrants and the
Series B warrants. In the event that all of the 15,800,000 outstanding Series A
warrants and 6,730,000 outstanding Series B warrants are exercised, we would
receive proceeds of approximately $399,907,500, excluding the expenses related
to the resale of the warrants under this prospectus. The exercise price of the
Series A warrants and the Series B warrants was determined by negotiation
between us and TPG Partners II and its affiliates based on the trading range of
our common stock during the negotiations.
<TABLE>
<CAPTION>
WARRANT
EXERCISE PROCEEDS TO
PRICE COMPANY(1)
-------- ------------
<S> <C> <C>
Per Series A Warrant........................... $17.75 $280,450,000
Per Series B Warrant........................... $17.75 $119,457,500
------------
Total.......................................... $399,907,500
============
</TABLE>
- -------------------------
(1) Assumes the exercise of all outstanding Series A warrants and Series B
warrants. As of the date of this prospectus, none of the warrants had been
exercised.
Selling securityholders holding warrants are not obligated to exercise
their warrants. We cannot be certain that holders of the warrants will choose to
exercise all or any of their warrants.
We intend to use the net proceeds received upon exercise of the warrants,
if any, for future capital contributions to our regulated subsidiaries, as
necessary, for repayment of debt and for general corporate purposes, or as
otherwise described in a prospectus supplement.
27
<PAGE> 32
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following describes the principal United States federal income tax
consequences of owning shares of offered preferred stock, warrants, shares of
common stock issuable upon exercise of the warrants, which we refer to as the
"warrant stock" and the junior subordinated debentures that you would receive if
we elected to exchange the offered preferred stock for debentures. It is the
opinion of Sullivan & Cromwell, our counsel. It applies to you only if you are
holding shares of offered preferred stock, warrants, shares of warrant stock and
the debentures as capital assets and you purchased shares of offered preferred
stock, warrants or shares of warrant stock in the offering at the offering
price. This discussion does not apply to you if you are a member of a class of
holders subject to special rules such as:
- a dealer in securities or currencies,
- a trader in securities that elects to mark to market,
- a bank,
- a tax-exempt organization,
- a life insurance company,
- a person that holds shares of offered preferred stock, warrants, shares
of warrant stock or the debentures as a hedge, or is hedged, against
currency or interest rate risks or that are part of a straddle or
conversion transaction, or
- a person whose functional currency is not the U.S. dollar.
This discussion is based on the Internal Revenue Code of 1986, its legislative
history, existing and proposed regulations thereunder, published rulings and
court decisions, all of which are subject to change, or changes in
interpretation, possibly with retroactive effect.
When we refer to a "United States holder" we mean a beneficial owner of
shares of offered preferred stock, warrants, shares of warrant stock or
debentures that is:
(1) a citizen or resident of the United States;
(2) a corporation organized under the laws of the United States or any
State;
(3) an estate the income of which is subject to United States federal
income taxation regardless of its source; or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions
of the trust.
You are a "non-United States holder" if you are a beneficial owner of
shares of offered preferred stock, warrants, shares of warrant stock or
debentures and are not a United States holder.
PROSPECTIVE PURCHASERS OF SHARES OF OFFERED PREFERRED STOCK, WARRANTS, SHARES OF
WARRANT STOCK OR DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER THE INTERNAL REVENUE CODE
AND THE LAWS OF ANY OTHER TAXING JURISDICTION, OF THE OWNERSHIP OF SHARES OF
OFFERED PREFERRED STOCK, WARRANTS, SHARES OF WARRANT STOCK AND DEBENTURES.
28
<PAGE> 33
TAXATION OF UNITED STATES HOLDERS
This section describes the tax consequences to a United States holder. If
you are not a United States holder, this section does not apply to you.
THE OFFERED PREFERRED STOCK
Distributions on the Offered Preferred Stock -- General
We do not have any accumulated earnings and profits as determined for
United States federal tax purposes, and there can be no assurance that we will
have earnings and profits in this or future tax years.
If we do not have any current or accumulated earnings and profits, as
determined for United States federal income tax purposes, in a given tax year,
any distribution on the offered preferred stock, including any distributions of
additional shares of offered preferred stock, generally would not be subject to
United States federal income taxation if your tax basis in the offered preferred
stock is greater than or equal to the amount of the distribution. However, the
distribution would reduce your tax basis in the offered preferred stock, but not
below zero. If any portion of the distribution exceeds your tax basis in the
offered preferred stock, that portion would be subject to United States federal
income taxation as capital gain that is recognized in the taxable year in which
you received the distribution. Until we have earnings and profits, no
distribution is eligible for the 70% dividends-received deduction allowable to
corporations.
If we have current or accumulated earnings and profits in a given tax year,
distributions on the offered preferred stock, including any distributions of
additional shares of offered preferred stock, would be taxable to you as
ordinary dividend income to the extent they are paid out of our current or
accumulated earnings and profits. Any portion of the distribution not paid out
of current or accumulated earnings and profits would be taxed as described in
the previous paragraph. Dividends would be eligible for the 70% dividends-
received deduction allowable to corporations, subject to the limitations
described below.
Distributions on the Offered Preferred Stock -- The Offered Preferred Stock
"Paid in Kind"
Until May 13, 2000, we may, at our option, pay dividends on the offered
preferred stock "in kind" through the issuance of additional offered preferred
stock. Dividends "paid in kind" will be treated as a distribution of an amount
equal to the fair market value of the additional offered preferred stock as of
the date of distribution, and will be taxed as described above under
"-- Distributions on Offered Preferred Stock -- General." This amount will also
be the initial issue price and tax basis of the newly distributed offered
preferred stock for United States federal income tax purposes.
If the redemption price of the offered preferred stock exceeds its offering
price, or the redemption price of the offered preferred stock issued as an
"in-kind" distribution exceeds its fair market value at the time the dividend is
"paid in kind," which we refer to, in either case, as a "redemption premium," by
one-fourth of one percent of the offered preferred stock's mandatory redemption
price multiplied by the number of complete years to its mandatory redemption,
you will be considered to have constructively received the entire amount of such
excess as a distribution over the period between issuance and redemption under a
constant yield method. If you purchased shares of offered preferred stock as a
unit together with the warrants, you must allocate your purchase price between
the offered preferred stock and the warrants based on their relative fair market
values to determine the offering price of the offered preferred stock. The
constant yield method would result in
29
<PAGE> 34
increasing accruals of income over the term of the offered preferred stock under
rules similar to those for accruing original issue discount on the debentures,
as described under "-- Debentures -- Original Issue Discount" beginning on page
33. The constructive distribution would be a dividend in the year such
distribution is considered to be received to the extent of our current and
accumulated earnings and profits. Your tax basis in the offered preferred stock
would be increased by the amount of any redemption premium included in income.
In addition, each issuance of the offered preferred stock with more than a de
minimis redemption premium might not be fungible with the other offered
preferred stock, which might adversely affect the liquidity of the offered
preferred stock.
Distributions on the Offered Preferred Stock -- Dividends-Received Deduction
If we have current or accumulated earnings and profits, amounts treated as
dividends would be eligible for the 70% dividends-received deduction allowable
to corporations, subject to the limitations described below.
If you are a corporation considering investing in the offered preferred
stock you should consider the effect of:
(1) Section 246A of the Internal Revenue Code, which reduces the dividends-
received deduction allowed to a corporate shareholder that has incurred
indebtedness that is "directly attributable" to an investment in
portfolio stock such as the offered preferred stock;
(2) Section 246(c) of the Internal Revenue Code, which, among other things,
disallows the dividends-received deduction in respect of any dividend
on a share of stock that is held for less than the minimum holding
period (generally at least 46 days during the 90-day period beginning
on the date which is 45 days before the date on which such share
becomes ex-dividend with respect to such dividend); and
(3) Section 1059 of the Internal Revenue Code, which, under certain
circumstances, reduces the basis of stock for purposes of calculating
gain or loss in a subsequent disposition by the portion of any
"extraordinary dividend" (as defined below) that is eligible for the
dividends-received deduction.
The President has currently proposed legislation that would eliminate the
70% dividends-received deduction for dividends on the offered preferred stock.
There can be no certainty whether, or in what form, such legislation will be
enacted or what its effective date would be.
Distributions on the Offered Preferred Stock -- Extraordinary Dividends
If you are a corporate United States holder, you are required to reduce
your tax basis, but not below zero, in the offered preferred stock by the
nontaxed portion of any "extraordinary dividend" if you did not hold the offered
preferred stock for more than two years before the earliest of the date the
dividend is declared, announced or agreed to. Generally, the nontaxed portion of
an extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction.
An extraordinary dividend on the offered preferred stock generally would be
a dividend that:
(1) equals or exceeds 5% of your adjusted tax basis in the offered
preferred stock, treating all dividends having ex-dividend dates within
an 85-day period as one dividend; or
(2) exceeds 20% of your adjusted tax basis in the offered preferred stock,
treating all dividends having ex-dividend dates within a 365-day period
as one dividend.
30
<PAGE> 35
In determining whether a dividend paid on the offered preferred stock is an
extraordinary dividend, you may elect to substitute the fair market value of the
stock for your tax basis for purposes of applying these tests, provided that the
fair market value as of the day before the ex-dividend date is established to
the satisfaction of the Secretary of the Treasury. An extraordinary dividend
also includes any amount treated as a dividend in the case of a redemption that
is either non-pro rata as to all stockholders or in partial liquidation,
regardless of your holding period and regardless of the size of the dividend. If
any part of the nontaxed portion of an extraordinary dividend is not applied to
reduce your tax basis as a result of the limitation on reducing your basis below
zero, that part would be treated as capital gain and would be recognized in the
taxable year in which the extraordinary dividend is received. CORPORATE UNITED
STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP OR DISPOSITION OF SHARES
OF OFFERED PREFERRED STOCK.
Sale or Exchange of the Offered Preferred Stock Other Than by Redemption
Upon the sale or other disposition of shares of offered preferred stock,
other than by redemption, you will generally recognize capital gain or loss
equal to the difference between the amount you realized upon the disposition and
your adjusted tax basis in the shares of offered preferred stock. This gain or
loss would be long-term capital gain or loss if at the time of sale, exchange or
other disposition you held the shares of offered preferred stock for more than
one year. Long-term capital gain of a non-corporate United States holder is
generally subject to a maximum tax rate of 20%. The deductibility of capital
losses is subject to limitations.
Redemption of the Offered Preferred Stock
A redemption of your shares of offered preferred stock generally would be a
taxable event and would be treated as if you sold the shares of offered
preferred stock if the redemption:
(1) results in a "complete termination" of your stock interest;
(2) is "substantially disproportionate"; or
(3) is "not essentially equivalent to a dividend."
In determining whether any of these tests has been met, you must take into
account the shares of offered preferred stock you actually own and the shares of
offered preferred stock you constructively own by reason of certain constructive
ownership rules set forth in Section 318 of the Internal Revenue Code.
If your shares of offered preferred stock are redeemed in a redemption that
meets one of the tests described above, you generally would recognize taxable
gain or loss equal to the difference between the amount of cash and the fair
market value of property, other than our stock or stock of our successor, you
received and your tax basis in the shares of offered preferred stock redeemed.
See below under "-- Special Rules Regarding the Redemption of the Offered
Preferred Stock For Debentures" for a description of the rules applicable to a
redemption in which you receive debentures. This gain or loss would be long-term
capital gain or capital loss if you held the shares of offered preferred stock
for more than one year.
If a redemption does not meet any of the tests described above, the cash
and the fair market value of property you receive generally would be taxed as a
dividend to the extent paid out of our current or accumulated earnings and
profits. Any amount in excess of our current or accumulated earnings and profits
would first reduce your tax basis in the shares
31
<PAGE> 36
of offered preferred stock and thereafter would be treated as capital gain. If a
redemption of the offered preferred stock is treated as a distribution that is
taxable as a dividend, your basis in the redeemed shares of offered preferred
stock would be transferred to your remaining shares of offered preferred stock,
if any.
Special Rules Regarding the Redemption of the Offered Preferred Stock For
Debentures
Pursuant to the rules discussed above under "-- Redemption of the Offered
Preferred Stock," if we redeem the offered preferred stock for debentures, it
will be treated either as an exchange giving rise to capital gain or loss or as
a dividend. In the case of an exchange of the offered preferred stock for
debentures that would be treated as a redemption giving rise to capital gain or
loss, the amount realized on the exchange would be equal to the "issue price" of
the debentures plus any cash received on the exchange. The issue price of a
debenture will be:
(1) its fair market value as of the exchange date if the debentures are
traded on an established securities market at any time during the
60-day period ending 30 days after the exchange date; or
(2) the fair market value of the offered preferred stock as of the exchange
date if such offered preferred stock is traded on an established
securities market at any time during the 60-day period ending 30 days
after the exchange date, but the debentures are not.
If neither the offered preferred stock nor the debentures are so traded, the
issue price of the debentures will be determined under Section 1274 of the
Internal Revenue Code, in which case the issue price will be the stated
principal amount of the debentures, provided that the yield on the debentures is
equal to or greater than the "applicable federal rate" in effect at the time the
debentures are issued. If the yield on the debentures is less than the
applicable federal rate, its issue price under Section 1274 of the Internal
Revenue Code will be equal to the present value as of the issue date of all
payments to be made on the debentures, discounted at the applicable federal
rate. It cannot be determined at the present time whether the offered preferred
stock or the debentures will, at the relevant time, be traded on an established
securities market within the meaning of the Treasury regulations or whether the
yield on the debentures will equal or exceed the applicable federal rate, as
discussed above.
If a redemption of the offered preferred stock for cash or an exchange of
the offered preferred stock for debentures is treated as a dividend, you:
(1) would not recognize any loss on the exchange;
(2) (A) would recognize dividend income, rather than capital gain, in an
amount equal to the fair market value of the debentures received
without regard to your basis in the shares of offered preferred stock
surrendered in the exchange, but only to the extent of its
proportionate share of our current or accumulated earnings and profits
and (B) would first reduce your tax basis in the shares of offered
preferred stock and thereafter would recognize capital gain, to the
extent that the distribution is not made out of our current or
accumulated earnings or profits; and
(3) the holding period for the debentures would begin on the day after the
day on which you acquired the debentures.
32
<PAGE> 37
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO WHETHER IN LIGHT OF YOUR OWN
PARTICULAR CIRCUMSTANCES, THE EXCHANGE WOULD BE TREATED AS A DIVIDEND OR AS A
SALE OR EXCHANGE. ADDITIONALLY, CORPORATE UNITED STATES HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE AVAILABILITY OF THE CORPORATE
DIVIDENDS-RECEIVED DEDUCTION AND THE POSSIBLE APPLICATION OF THE EXTRAORDINARY
DIVIDEND RULES OF SECTION 1059 OF THE INTERNAL REVENUE CODE TO AN EXCHANGE IF
THE DISTRIBUTION IS TAXABLE AS A DIVIDEND.
Depending upon your particular circumstances, the tax consequences of
holding debentures may be less advantageous than the tax consequences of holding
shares of offered preferred stock because, for example, payments of interest on
the debentures would be taxable as ordinary income, regardless of whether we
have current or accumulated earnings and profits, while distributions on the
offered preferred stock would not be immediately subject to United States
federal taxation if we do not have current or accumulated earnings and profits
in a given year and such distribution does not reduce your basis in the shares
of offered preferred stock below zero, and because, as discussed below under
"Debentures -- Original Issue Discount," debentures may be issued with greater
amounts of OID than the Redemption Premium with respect to the offered preferred
stock.
DEBENTURES
Original Issue Discount
Unless the debentures have a term of one year or less, the debentures would
be treated as issued at an original issue discount if the excess of the
debentures' "stated redemption price at maturity" over their issue price is more
than a "de minimis amount," as defined below. The manner in which the issue
price of the debentures would be determined is discussed under "The Offered
Preferred Stock -- Special Rules Regarding the Redemption of the Offered
Preferred Stock For Debentures." The stated redemption price at maturity of the
debentures is the total of all payments provided by the debenture other than the
stated interest payments.
In general, if the excess of the debenture's stated redemption price at
maturity over its issue price is less than one-fourth of one percent of the
debenture's stated redemption price at maturity multiplied by the number of
complete years to its maturity (the "de minimis amount"), then such excess, if
any, constitutes "de minimis original issue discount" and the debenture is not
issued with original issue discount ("OID"). In general, the debentures would
have OID if:
(1) the debentures are traded on an established securities market at any
time during the 60-day period ending 30 days after the exchange date,
and the fair market value of the securities is less than the stated
redemption price at maturity by more than the applicable de minimis
amount;
(2) the offered preferred stock is traded on an established securities
market at any time during the 60-day period ending 30 days after the
exchange date, and the debentures are not, and the fair market value of
the offered preferred stock is less than the debentures' stated
redemption price at maturity by more than the applicable de minimis
amount; or
(3) neither the debentures nor the offered preferred stock are traded on an
established securities market at any time during the 60-day period
ending 30 days
33
<PAGE> 38
after the exchange date, the yield on the debentures is less than the
applicable federal rate by more than the applicable de minimis amount,
and the present value as of the issue date of all payments to be made
on the debentures, discounted at the applicable federal rate, is less
than the debentures' stated redemption price at maturity by more than
the applicable de minimis amount.
Unless you elect to treat all interest as original issue discount as described
below under "-- Election to Treat All Interest as Original Issue Discount," you
must include the de minimis OID in income as stated principal payments on the
debenture are made.
Generally, if your debenture matures more than one year from its date of
issue, you must include OID in income calculated on a constant-yield method
without regard to the receipt of cash attributable to such income, and generally
you will have to include in income increasingly greater amounts of OID over the
life of the debenture. The amount of OID includible in income is the sum of the
daily portions of OID with respect to the debenture for each day during the
taxable year or portion of the taxable year on which you hold the debenture,
which we refer to as "accrued OID." The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. You may select an accrual period of any length
with respect to your debenture and you may vary the length of each accrual
period over the term of the debenture as long as:
(1) no accrual period is longer than one year; and
(2) each scheduled payment of interest or principal on the debenture occurs
on either the final or first day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of:
(a) the product of the debenture's adjusted issue price at the beginning of
the accrual period and the debenture's yield to maturity (determined on
the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period), over
(b) the sum of the payments of qualified stated interest on the debenture
allocable to the accrual period.
The "adjusted issue price" of a debenture at the beginning of any accrual
period is the issue price of the debenture increased by:
(x) the amount of accrued OID for each prior accrual period, and decreased
by
(y) the amount of any payments previously made on the debenture that were
not qualified stated interest payments.
For purposes of determining the amount of OID allocable to an accrual period, if
an interval between payments of qualified stated interest on your debenture
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest that
is payable on the first day of the accrual period immediately following the
interval) is allocated pro rata on the basis of relative lengths to each accrual
period in the interval, and the adjusted issue price at the beginning of each
accrual period in the interval must be increased by the amount of any qualified
stated interest that has accrued prior to the first day of the accrual period
but that is not payable until the end of the interval. The amount of OID
allocable to an initial short accrual period may be computed using any
reasonable method if all other accrual
34
<PAGE> 39
periods other than a final short accrual period are of equal length. The amount
of OID allocable to the final accrual period is the difference between:
(x) the amount payable at the maturity of the debenture (other than any
payment of qualified stated interest), and
(y) the debenture's adjusted issue price as of the beginning of the final
accrual period.
Election to Treat All Interest as Original Issue Discount
You may elect to include in gross income all interest that accrues on your
debenture using the constant-yield method described above under the heading
"Original Issue Discount," with the modifications described below. For purposes
of this election, interest includes stated interest, OID, de minimis original
issue discount and unstated interest.
If you make this election for your debenture, then, when you apply the
constant-yield method:
- the issue price of the debenture would equal the issue price as
determined under "The Offered Preferred Stock -- Special Rules Regarding
the Redemption of the Offered Preferred Stock For Debentures" beginning
on page 32,
- the issue date of the debenture would be the exchange date,
- and no payments on the debenture would be treated as payments of
qualified stated interest.
This election would generally apply only to the debenture with respect to which
it is made and may not be revoked without the consent of the Internal Revenue
Service.
Pursuant to section 163 of the Internal Revenue Code, the "disqualified
portion" of the OID accruing on certain debt instruments may be treated as a
dividend eligible for the dividend-received deduction. The corporation issuing
such debt instruments is not allowed to deduct the "disqualified portion" of the
OID accruing on the debt instrument and is allowed to deduct the remainder of
the OID only when paid.
This treatment will apply to "applicable high yield discount obligations"
or "AHYDOs", which, generally, are debt instruments that have a term of more
than five years, have a yield to maturity that equals or exceeds five percentage
points above the "applicable federal rate" and have "significant" OID. A debt
instrument is treated as having "significant" OID if the aggregate amount that
would be includible in gross income with respect to such debt instrument for
periods before the close of any accrual period ending five years or more after
the date of issue exceeds the sum of:
(1) the aggregate amount of interest to be paid in cash under the debt
instrument before the close of such accrual period, and
(2) the product of the initial issue price of such debt instrument and its
yield to maturity.
For purposes of determining whether a debenture is an AHYDO, holders are bound
by the issuer's determination of the appropriate accrual period. It is
impossible to determine at the present time whether a debenture will be treated
as an AHYDO.
If a debenture is treated as an AHYDO, a corporate United States holder
would be treated as receiving dividend income, to the extent of our current and
accumulated earnings and profits, solely for purposes of the dividend-received
deduction, in an amount
35
<PAGE> 40
equal to the "dividend equivalent portion" of the "disqualified portion" of the
OID. The "disqualified portion" of the OID is equal to the lesser of:
(1) the amount of OID, or
(2) the portion of the "total return", that is, the excess of all payments
to be made with respect to such obligation over its issue price, on the
obligation that bears the same ratio to the obligation's total return
as the "disqualified yield", that is, the extent to which the yield
exceeds the applicable federal rate plus 6%, bears to the obligation's
yield to maturity.
The dividend equivalent portion of the disqualified portion is the amount that
would have been treated as a dividend if we had distributed it with respect to
our stock. Our deduction for OID will be substantially deferred with respect to
a debenture that is treated as an AHYDO. In addition, such deduction will be
disallowed if and to the extent that the yield on such AHYDO exceeds the
applicable federal rate by more than 6%.
Purchase, Sale, Retirement and Other Disposition of the Debentures
Your adjusted tax basis in the debentures you receive in exchange for
shares of offered preferred stock will, in general, be equal to the initial tax
basis of such debentures, that is, the issue price of the debentures, if the
exchange is treated as a redemption giving rise to capital gain or the fair
market value of the debentures on the exchange date, if the exchange is treated
as a dividend, increased by OID you previously included in your income. Upon the
sale, exchange or retirement of a debenture, you will generally recognize
capital gain or loss equal to the difference between the amount realized, not
including any amounts attributable to accrued and unpaid interest, and your tax
basis in the debenture.
OWNERSHIP AND DISPOSITION OF WARRANTS
The warrants may be sold individually or as a unit. Each unit is comprised
of one or more shares of offered preferred stock and one or more warrants. If
you purchase a unit you must allocate your purchase price between the offered
preferred stock and the warrants based on their relative fair market values to
determine your tax basis in the shares of offered preferred stock and the
warrants and the amount of redemption premium, if any, on the offered preferred
stock. If the warrant is sold individually, your tax basis in a warrant will be
its purchase price.
Sale of a Warrant
Generally, you will recognize gain or loss upon the sale of a warrant in an
amount equal to the difference between the amount realized on the sale and your
adjusted tax basis in the warrant. Your adjusted tax basis in a warrant
purchased in the offering as a unit will be the portion of the initial offering
price allocable to a warrant, adjusted as described below under "-- Adjustments
Under the Warrants." Gain or loss attributable to the sale of the warrants will
constitute capital gain or loss if you would have held the warrant stock as a
capital asset and will be long-term capital gain or loss if you held the
warrants for more than one year.
36
<PAGE> 41
Exercise of a Warrant, Disposition of Common Shares, and Dividends
In general, you will not recognize gain or loss upon the exercise of a
warrant, except with respect to cash, if any, paid in lieu of the issuance of
fractional shares. Upon exercise of a warrant with cash, your tax basis in the
shares of warrant stock acquired will be the sum of:
(a) your adjusted tax basis in the warrant, and
(b) the cash paid upon exercise of the warrant.
If you receive any cash in lieu of fractional shares of warrant stock, you
will recognize gain or loss, and the character and amount of gain or loss will
be determined as if you had received such fractional shares and then immediately
sold them for cash. Your holding period of the stock acquired upon exercise of a
warrant begins on the day following the day of exercise.
Expiration of the Warrants
Upon the expiration of an unexercised warrant, you will recognize a loss
equal to your adjusted tax basis of the warrant. A loss realized upon expiration
of the warrant will be capital loss if you would have held the warrant stock as
a capital asset and will be long-term capital loss if you held the warrant for
more than one year.
Adjustments Under the Warrants
Pursuant to the terms of the warrants, the number of shares of warrant
stock you may purchase upon exercise of the warrants is subject to adjustment
from time to time upon the occurrence of certain events. In certain
circumstances, a change in conversion ratio or any transaction having a similar
effect may be treated as a distribution if your proportionate interest in the
earnings and profits of the issuer is increased by such change or transaction.
Thus, under certain future circumstances which may or may not occur, an
adjustment pursuant to the terms of the warrants may be treated as a taxable
distribution to the extent of our current or accumulated earnings and profits,
without regard to whether you receive any cash or other property. If you receive
such a taxable distribution, your tax basis in the warrants will be increased by
an amount equal to the taxable distribution.
WARRANT STOCK
Any distributions you receive on the warrant stock will be taxable as
ordinary income to the extent of our current and accumulated earnings and
profits. If we do not have current or accumulated earnings or profits, the
payment will first offset your basis in the warrant stock and any amount that
exceeds your basis will be treated as capital gain. Any gain or loss upon the
sale or exchange of shares of warrant stock will be capital gain or loss, and
will be long-term capital gain or loss if you owned the shares of warrant stock
for more than one year.
TAXATION OF NON-UNITED STATES HOLDERS
This section describes the tax consequences to non-United States holders.
If you are a United States holder, this section does not apply to you.
37
<PAGE> 42
INTEREST PAYMENTS
Under present United States federal income tax law, and subject to the
discussion of backup withholding below, if you are the beneficial owner of a
debenture and we or our paying agents make payments to you of principal,
premium, if any, and interest, including OID, you will not be subject to United
States federal withholding tax if, in the case of interest or OID:
(a) you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock entitled to vote;
(b) you are not a controlled foreign corporation that is related to us
through stock ownership; and
(c) either:
(1) you certify to us or our agent, under penalties of perjury, that
you are not a United States holder and provide your name and
address; or
(2) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course
of its trade or business (a "financial institution") and holds the
debenture certifies to us or our agent under penalties of perjury
that it, or a financial institution between it and you, has
received such statement from you and furnishes the payor with a
copy thereof.
Recently finalized United States Treasury Regulations, which we refer to as the
"Final Withholding Regulations," would provide for alternative methods for
satisfying the certification requirement. The Final Withholding Regulations also
would require, in the case of debentures held by a foreign partnership, that:
(1) the certification be provided by the partners rather than by the
partnership; and
(2) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships. The Final
Regulations are effective for payments made after December 31, 2000.
DIVIDEND INCOME
Dividends paid to you will be subject to withholding of United States
federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are "effectively connected"
with your conduct of a trade or business within the United States, and they are
attributable to your United States permanent establishment, if an applicable
income tax treaty so requires as a condition for subjecting you to United States
income tax on a net income basis. Such "effectively connected" dividends,
generally, are not subject to withholding tax if you satisfy certain
certification requirements. Instead, "effectively connected" dividends are taxed
at rates applicable to United States citizens, resident aliens and domestic
United States corporations. In addition, if you are a non-United States
corporation, you may, under certain circumstances, be subject to an additional
"branch profits tax" on "effectively connected" dividends at a 30% rate or at a
lower rate if you are eligible for the benefits of an applicable income tax
treaty.
Under current United States Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payor has
38
<PAGE> 43
knowledge to the contrary, for purposes of the 30% withholding discussed above.
Under current interpretations of United States Treasury Regulations, this
presumption also applies for purposes of determining whether a lower withholding
rate applies under an income tax treaty.
Under the Final Withholding Regulations, you must satisfy certain
certification requirements in order to claim the benefit of a lower treaty rate.
See "-- Taxation of Non-United States Holders -- Interest Payments" beginning on
page 37.
If you are eligible for a reduced rate of United States withholding tax
under a tax treaty, you may obtain a refund of any amount withheld in excess of
that rate by filing a refund claim with the United States Internal Revenue
Service.
SALE OR DISPOSITION
You will not be subject to United States federal income tax in respect of a
sale or disposition of shares of offered preferred stock or shares of warrant
stock, or, to the extent of your basis in the shares of offered preferred stock
or shares of warrant stock, on distributions paid on the offered preferred stock
or warrant stock if we do not have current or accumulated earnings and profits,
warrants or debentures unless:
(1) the gain is effectively connected with your trade or business in the
United States, and is attributable to your permanent establishment
maintained in the United States, if an applicable income tax treaty so
requires as a condition for you to be subject to United States taxation
on a net income basis in respect of capital gain;
(2) if you are an individual, you are present in the United States for 183
or more days in the taxable year of the sale and certain other
conditions apply; or
(3) we are or have been a "United States real property holding corporation"
for federal income tax purposes.
We have not been, are not and do not anticipate becoming a "United States real
property holding corporation" for federal income tax purposes. If you are a
corporation, your "effectively connected" gains may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
ESTATE TAXES
If you are an individual who at death is not a citizen or resident of the
United States, your debenture will not be includible in your gross estate for
purposes of the United States federal estate tax as a result of your death if:
(a) you did not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock entitled to vote; and
(b) the income on the debenture would not have been effectively connected
with your United States trade or business at your death.
If you are a non-United States holder of shares of offered preferred stock,
warrants or shares of warrant stock at the time of your death, they will be
included in your gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
39
<PAGE> 44
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a United States holder, other than certain exempt
recipients, such as corporations, information reporting requirements will apply
to dividends paid in respect of your shares of offered preferred stock and
warrant stock, including the accrual of the redemption premium, to principal and
interest paid in respect of your debentures, and to the proceeds received on the
sale, exchange or redemption of your shares of offered preferred stock,
debentures, warrants or warrant stock, and "backup withholding" at a rate of 31%
will apply to the payments if you fail to provide an accurate taxpayer
identification number or you are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns. You should consult your tax advisor concerning
the application of information reporting and backup withholding to the preferred
stock, debentures, warrants or warrant stock.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your United States federal income tax liability
provided the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
Under current law, if you are a non-United States holder of a debenture,
information reporting on Internal Revenue Service Form 1099 and backup
withholding will not apply to payments of principal, premium, if any, and
interest, including OID, made by us or a paying agent; provided, that you
certify to us or our agent, under penalties of perjury, that you are not a
United States holder and provide your name and address, or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the debenture, certifies to us or our agent, under
penalties of perjury, that such statement has been received from you or by a
financial institution between it and you and furnishes as the payor with a copy
thereof; and provided further that the payor does not have actual knowledge that
you are a United States person. We or a paying agent, however, may report, on
Internal Revenue Service Form 1042-S, payments of interest, including OID, on
the debentures. See above, "Taxation of Non-United States Holders -- Interest
Payments" with respect to the rules under the Final Withholding Regulations.
In general, if you are a non-United States holder, dividends paid to you
are not subject to United States information reporting requirements and backup
withholding tax if you are either subject to the 30% withholding tax, discussed
above, or are not subject to the 30% withholding tax because you are eligible
for the benefits of an income tax treaty. However, dividend payments will be
reported for purposes of the 30% withholding tax discussed above. If you do not
meet any of the requirements listed above to exempt you from backup withholding
tax and fail to provide certain information, including a United States taxpayer
identification number, or otherwise establish a status as an "exempt recipient,"
you may be subject to backup withholding of United States federal income tax at
a rate of 31% on dividends paid.
Under current law, dividends paid to an address in a foreign country are
generally treated as exempt from backup withholding and information reporting
unless the person making the payment has definite knowledge that the recipient
is a United States person. However, under the Final Withholding Regulations
discussed above, dividend payments generally will be subject to information
reporting and backup withholding unless certain certification requirements are
met.
40
<PAGE> 45
In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States of
the proceeds of a sale of shares of offered preferred stock or warrant stock
through an office outside the United States of a non-United States broker.
However, United States information reporting, but not backup withholding,
requirements will apply to a payment made outside the United States of the
proceeds of a sale of shares of offered preferred stock or warrant stock through
an office outside the United States of a broker:
(1) that is a United States person;
(2) that derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States;
(3) that is a "controlled foreign corporation" as to the United States; or
(4) with respect to payments made after December 31, 2000, that is a
foreign partnership, if at any time during its tax year, one or more of
its partners are U.S. persons, as defined in U.S. Treasury regulations,
who in the aggregate hold more than 50% of the income or capital
interest in the partnership or if, at any time during its tax year, the
foreign partnership is engaged in a United States trade or business,
unless the broker has documentary evidence in its records that the holder or
beneficial owner is a non-United States person or the holder or beneficial owner
otherwise establishes an exemption.
Payment of the proceeds of the sale of shares of offered preferred stock and
shares of warrant stock to or through a United States office of a broker is
currently subject to both United States backup withholding and information
reporting unless the holder certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.
SELLING SECURITYHOLDERS
This section sets forth information with respect to each selling
securityholder for whom we are registering securities for offer and sale to the
public under the registration statement of which this prospectus is a part. The
securities offered hereby are comprised of:
- 277,629.157 shares of Series D preferred stock, including 14,022.606
additional shares of Series D preferred stock that we expect to issue as
dividends on existing shares through May 13, 2000;
- 132,808.069 shares of Series E preferred stock, including 16,908.793
additional shares of Series E preferred stock that we expect to issue as
dividends on existing shares through May 13, 2000;
- 15,800,000 Series A warrants;
- 6,730,000 Series B warrants;
- 15,800,000 shares of common stock issuable upon exercise of the Series A
warrants; and
- 6,730,000 shares of common stock issuable upon exercise of the Series B
warrants.
41
<PAGE> 46
In addition to the information included in this section, if shares of
offered preferred stock, warrants or common stock are offered by a selling
securityholder under this prospectus, a prospectus supplement, if required, will
include the following information:
- the amount of shares of offered preferred stock, warrants or shares of
common stock to be offered for the selling securityholder's account;
- the amount of shares of offered preferred stock, warrants or shares of
common stock to be owned by the selling securityholder after completion
of the offering; and
- the percentage of the series of offered preferred stock, warrants or
common stock, if one percent or more, to be owned by the selling
securityholder after completion of the offering.
Under the investment agreement, the selling securityholders named in this
prospectus purchased 245,000 shares of our Series A preferred stock, 105,000
shares of our Series B preferred stock and the warrants for a total sum of $350
million. On February 13, 1999, we entered into a share exchange agreement with
the selling securityholders to redistribute the total amount of the dividends
payable among the shares of Series A preferred stock and Series B preferred
stock. Under the share exchange agreement, the 245,000 shares of Series A
preferred stock were exchanged for 260,146.909 shares of Series D preferred
stock, and the 105,000 shares of Series B preferred stock were exchanged for
111,820.831 shares of Series E preferred stock. The additional amounts of Series
D preferred stock and Series E preferred stock issued in the exchange are
attributable to dividends accrued on the offered preferred stock through
February 13, 1999. As a result of the exchange, the selling securityholders hold
only Series D preferred stock and Series E preferred stock and following the
exchange all shares of the Series A preferred stock and Series B preferred stock
were cancelled. The terms of the Series D preferred stock are substantially
similar to the terms of the Series A preferred stock and the terms of the Series
E preferred stock are substantially similar to the terms of the Series B
preferred stock, except with respect to applicable dividend rates. The exchange
was effected primarily to facilitate the potential sale of shares of offered
preferred stock by the selling securityholders.
As of the date of this prospectus, the selling securityholders held a total
of 263,606.551 shares of Series D preferred stock and 115,899.276 shares of
Series E preferred stock. Through May 13, 2000, we expect to issue an additional
14,022.606 shares of Series D preferred stock and 16,908.793 shares of Series E
preferred stock to satisfy our obligation to pay dividends on the outstanding
shares of offered preferred stock.
Under the investment agreement, we agreed to increase the number of our
directors to a minimum of 11 directors and a maximum of 13 directors and to
appoint Norman C. Payson, M.D., as our chief executive officer and as a
director. We also agreed that TPG Partners II and its affiliates would be
entitled to nominate four directors to our board of directors. Dr. Payson was
elected chief executive officer and joined the board of directors in May 1998.
David Bonderman, Jonathan J. Coslet and James G. Coulter were nominated by TPG
Partners II and its affiliates pursuant to the investment agreement and joined
the board of directors in May 1998. Kent J. Thiry was also nominated by TPG
Partners II and its affiliates pursuant to the investment agreement and joined
the board of directors in August 1998.
Mr. Bonderman is a director and president, Mr. Coulter is a director and
vice president, and Mr. Coslet is an executive of TPG Advisors II, Inc. TPG
Advisors II, Inc. is the general partner of TPG GenPar II, L.P., which is the
general partner of selling securityholders TPG Partners II, L.P., TPG Parallel
II, L.P. and TPG Investors II, L.P.
42
<PAGE> 47
The investment agreement also contains covenants which restrict our ability
to take significant actions without the consent of TPG Partners II and its
affiliates, including mergers, consolidations and certain issuances of equity
securities. In connection with the investment agreement, we also entered into a
registration rights agreement in which we agreed to register the offered
preferred stock, the warrants, the common stock issuable upon exercise of the
warrants and any debentures issued in respect of the offered preferred stock
under the Securities Act for offer and sale by the selling securityholders and
certain holders to whom they may transfer those securities. For a summary of
certain provisions of the registration rights agreement, see "Registration
Rights Agreement" beginning on page 26.
We have filed with the SEC under the Securities Act a Registration
Statement on Form S-3, of which this prospectus forms a part, with respect to
the offer and sale of the securities described in this prospectus. We have
agreed, among other things, to bear certain expenses in connection with the
registration and sale of the securities being offered by the selling
securityholders. For more information regarding these expenses see "Plan of
Distribution" beginning on page 47.
The following table provides the name of each selling securityholder and
the number of shares of offered preferred stock and warrants held by each
selling securityholder as of the date of this prospectus. All these securities
have been registered for offer and sale under the registration statement of
which this prospectus is a part. As noted in the table, we expect to issue
additional shares of offered preferred stock as dividends on existing shares of
offered preferred stock through May 13, 2000. Those additional shares have been
registered for offer and sale by the selling securityholders under the
registration statement of which this prospectus is a part.
43
<PAGE> 48
<TABLE>
<CAPTION>
# OF SHARES OFFERED PREFERRED STOCK HELD
-----------------------------------------
NAME OF BENEFICIAL OWNER SERIES D SERIES E
- ------------------------ ------------------- ------------------
<S> <C> <C>
TPG Partners II, L.P.(1)................................. 179,851.36901207 79,074.83089156
TPG Parallel II, L.P.(2)................................. 12,273.52103150 5,396.27029441
TPG Investors II, L.P.(3)................................ 18,760.35104746 8,248.31968026
Chase Equity Associates, L.P.(4)......................... 11,297.42362988 4,967.11183212
Oxford Acquisition Corp.(5).............................. 3,765.80787663 1,655.70394404
DLJ Merchant Banking Partners II, L.P.(6)................ 18,977.51980797 8,343.64407533
DLJ Merchant Banking Partners II-A, L.P.(7).............. 755.31346554 332.24459144
DLJ Offshore Partners II, C.V.(8)........................ 932.84440829 410.61457812
DLJ Diversified Partners, L.P.(9)........................ 1,109.29940595 487.88076218
DLJ Diversified Partners-A, L.P.(10)..................... 412.08697621 181.02363122
DLJMB Funding II, Inc.(11)............................... 3,369.86007703 1,481.30312860
DLJ Millennium Partners, L.P.(12)........................ 306.64435566 134.66392078
DLJ Millennium Partners-A, L.P.(13)...................... 60.25292603 26.49126311
DLJ EAB Partners, L.P.(14)............................... 84.99966350 37.52928940
UK Investment Plan 1997 Partners(15)..................... 502.46636526 220.76052587
DLJ ESC II L.P.(16)...................................... 4,124.09759745 1,813.54772003
DLJ First ESC, L.P.(17).................................. 36.58213365 16.55703944
DLJ Capital Corporation(18).............................. 100.06289501 44.15210517
Sprout Growth II, L.P.(19)............................... 4,617.95640185 2,030.99683802
The Sprout CEO Fund, L.P.(20)............................ 76.39210264 34.21788151
Sprout Capital VIII, L.P.(21)............................ 2,066.89055171 907.32576134
Sprout Venture Capital, L.P.(22)......................... 124.80963248 54.08632884
</TABLE>
- ---------------
(1) We expect to issue 9,567.23134338 additional shares of Series D preferred
stock and 11,536.39629891 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(2) We expect to issue 652.89252871 additional shares of Series D preferred
stock and 787.27342127 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(3) We expect to issue 997.96081364 additional shares of Series D preferred
stock and 1,203.36500956 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(4) We expect to issue 600.96882245 additional shares of Series D preferred
stock and 724.66257481 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(5) We expect to issue 200.32294082 additional shares of Series D preferred
stock and 241.55419160 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(6) We expect to issue 1,009.51315146 additional shares of Series D preferred
stock and 1,217.27208955 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
44
<PAGE> 49
(7) We expect to issue 40.17905842 additional shares of Series D preferred
stock and 48.47187445 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(8) We expect to issue 49.62285420 additional shares of Series D preferred
stock and 59.90543952 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(9) We expect to issue 59.00941485 additional shares of Series D preferred
stock and 71.17796846 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(10) We expect to issue 21.92105324 additional shares of Series D preferred
stock and 26.40992495 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(11) We expect to issue 179.26041447 additional shares of Series D preferred
stock and 216.11048342 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(12) We expect to issue 16.31201089 additional shares of Series D preferred
stock and 19.64640758 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(13) We expect to issue 3.20516705 additional shares of Series D preferred stock
and 3.86486707 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
(14) We expect to issue 4.52157495 additional shares of Series D preferred stock
and 5.47522834 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
(15) We expect to issue 26.72880382 additional shares of Series D preferred
stock and 32.20722555 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(16) We expect to issue 219.38223776 additional shares of Series D preferred
stock and 264.58235787 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(17) We expect to issue 1.94599428 additional shares of Series D preferred stock
and 2.41554192 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
(18) We expect to issue 5.32286671 additional shares of Series D preferred stock
and 6.44144511 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
(19) We expect to issue 245.65316057 additional shares of Series D preferred
stock and 296.30647503 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
(20) We expect to issue 4.06369394 additional shares of Series D preferred stock
and 4.99211996 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
(21) We expect to issue 109.94867695 additional shares of Series D preferred
stock and 132.37169700 additional shares of Series E preferred stock as
dividends on the existing shares through May 13, 2000.
45
<PAGE> 50
(22) We expect to issue 6.63927461 additional shares of Series D preferred stock
and 7.89077026 additional shares of Series E preferred stock as dividends
on the existing shares through May 13, 2000.
<TABLE>
<CAPTION>
# OF WARRANTS HELD
--------------------------------------
NAME OF BENEFICIAL OWNER SERIES A WARRANTS SERIES B WARRANTS
- ------------------------ ----------------- -----------------
<S> <C> <C>
TPG Partners II, L.P. ...................................... 10,779,898 4,591,691
TPG Parallel II, L.P. ...................................... 735,648 313,349
TPG Investors II, L.P. ..................................... 1,124,455 478,961
Chase Equity Associates, L.P. .............................. 677,142 288,428
Oxford Acquisition Corp. ................................... 225,714 96,142
DLJ Merchant Banking Partners II, L.P. ..................... 1,137,465 484,503
DLJ Merchant Banking Partners II-A, L.P. ................... 45,299 19,295
DLJ Offshore Partners II, C.V. ............................. 55,935 23,825
DLJ Diversified Partners, L.P. ............................. 66,501 28,326
DLJ Diversified Partners-A, L.P. ........................... 24,696 10,519
DLJMB Funding II, Inc. ..................................... 201,951 86,022
DLJ Millennium Partners, L.P. .............................. 18,392 7,834
DLJ Millennium Partners-A, L.P. ............................ 3,587 1,528
DLJ EAB Partners, L.P. ..................................... 5,107 2,175
UK Investment Plan 1997 Partners............................ 30,095 12,819
DLJ ESC II L.P. ............................................ 247,193 105,292
DLJ First ESC, L.P. ........................................ 2,189 932
DLJ Capital Corporation..................................... 5,998 2,555
Sprout Growth II, L.P. ..................................... 276,790 117,899
The Sprout CEO Fund, L.P. .................................. 4,579 1,950
Sprout Capital VIII, L.P. .................................. 123,885 52,769
Sprout Venture Capital, L.P. ............................... 7,481 3,186
</TABLE>
46
<PAGE> 51
PLAN OF DISTRIBUTION
The selling securityholders now hold shares of offered preferred stock and
the warrants covered by this prospectus. As used in the rest of this section of
the prospectus, the term "selling securityholders" includes the selling
securityholders named in the table under "Selling Securityholders" in this
prospectus and some of their pledgees, donees, transferees or other successors
in interest selling securities received from a named selling securityholder
after the date of this prospectus. The shares of offered preferred stock, the
warrants and the shares of common stock covered by this prospectus are referred
to in this section as the "securities." The selling securityholders may offer
and sell, from time to time, some or all of the securities under this
prospectus. We have registered the securities for offer and sale by the selling
securityholders so that the securities will be freely tradeable by them.
Registration of the securities does not mean, however, that the securities
necessarily will be offered or sold. We will not receive any proceeds from any
sale by the selling securityholders of the securities. See "Use of Proceeds" on
page 27 for information about the use of proceeds from the original sale of the
securities. We will pay all costs, expenses and fees in connection with the
registration of the securities, including fees of our counsel and accountants,
fees payable to the SEC, listing fees, and the reasonable fees and disbursements
of one law firm selected as counsel for the selling securityholders in
connection with the registration. The selling securityholders will pay all
underwriting discounts and commissions and similar selling expenses, if any,
attributable to the sale of the securities.
The selling securityholders may sell the securities from time to time, at
market prices prevailing at the time of sale, at prices related to market
prices, at a fixed price, at prices subject to change or at negotiated prices,
by a variety of methods including the following:
- on markets where our securities are traded or on an exchange in
accordance with the rules of the exchange;
- in privately negotiated transactions;
- through broker-dealers, which may act as agents or principals;
- in a block trade in which a broker-dealer will attempt to sell a block of
securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- through one or more underwriters on a firm commitment or best-efforts
basis;
- directly to one or more purchasers;
- through agents;
- through option transactions, forward contracts, equity swaps or other
derivative transactions relating to the securities;
- through short sales of the securities;
- in any combination of the above; or
- by any other legally available means.
In effecting sales, brokers or dealers engaged by the selling
securityholders may arrange for other brokers or dealers to participate.
Broker-dealer transactions may include:
- purchases of the securities by a broker-dealer as principal and resales
of the securities by the broker-dealer for its account pursuant to this
prospectus;
- ordinary brokerage transactions; or
- transactions in which the broker-dealer solicits purchasers.
47
<PAGE> 52
If we or the selling securityholders enter into a material arrangement with
any underwriter, broker, dealer or other agent for the sale of any securities
through a secondary distribution or a purchase by a broker or dealer, or if we
or the selling securityholders make other material changes in the plan of
distribution of the securities, we will file a prospectus supplement, if
necessary, under the Securities Act disclosing the material terms and conditions
of such arrangement. If we or the selling securityholders use an underwriter or
underwriters in the sale of securities, we and the selling securityholders
expect to execute an underwriting agreement with the underwriter or underwriters
at the time an agreement for the sale is reached. We will set forth the
underwriter or underwriters with respect to an underwritten offering of
securities and the other material terms and conditions of the underwriting in a
prospectus supplement relating to such offering and, if we or the selling
securityholders use an underwriting syndicate, we will set forth the managing
underwriter or underwriters on the cover of the prospectus supplement. In
connection with the sale of securities, underwriters will receive compensation
in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
The selling securityholders and any underwriters, broker-dealers or agents
participating in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the securities by the selling securityholders and any commissions
received by any such underwriters, broker-dealers or agents may be deemed to be
underwriting commissions under the Securities Act. We agreed to indemnify the
selling securityholders and each person or entity which participates as or may
be deemed to be an underwriter in the offering or sale of the selling
securityholders' securities against certain liabilities (and to contribute to
payments in respect those liabilities), including liabilities arising under the
Securities Act. The selling securityholders may agree to indemnify any agent or
broker-dealer that participates in transactions involving offers or sales of the
securities against certain liabilities, including liabilities arising under the
Securities Act.
VALIDITY OF SECURITIES
The validity of the shares of offered preferred stock, the warrants, and
the shares of common stock offered hereby will be passed upon for us by Sullivan
& Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of Oxford Health Plans, Inc. at
December 31, 1998, and for the year then ended, included in Oxford Health Plans,
Inc.'s annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3,
for the fiscal year ended December 31, 1998, which is incorporated in this
prospectus by reference, have been audited by Ernst & Young LLP, independent
auditors, and at December 31, 1997, and for each of the years in the two-year
period ended December 31, 1997, by KPMG LLP, independent auditors, as set forth
in their respective reports thereon included therein and incorporated in this
prospectus by reference. These consolidated financial statements are
incorporated in this prospectus by reference in reliance upon such reports given
on the authority of these firms as experts in accounting and auditing.
48
<PAGE> 53
With respect to the unaudited condensed consolidated interim financial
information for the three-month period ended March 31, 1999 and the three-month
and six-month periods ended June 30, 1999 and 1998 incorporated by reference in
this prospectus, Ernst & Young LLP has reported that it has applied limited
procedures in accordance with professional standards for a review of such
information. Ernst & Young LLP's separate reports, included in Oxford Health
Plans, Inc.'s quarterly report on Form 10-Q/A No. 2 for the quarter ended March
31, 1999, and Oxford Health Plans, Inc. quarterly report on Form 10-Q for the
quarter ended June 30, 1999 and incorporated in this prospectus by reference,
states that it did not audit and it does not express an opinion on that interim
financial information. Accordingly, the degree of reliance on its reports on
such information should be restricted considering the limited nature of the
review procedures applied. The independent auditors are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for its reports
on the unaudited interim financial information because those reports are not a
"report" or a "part" of the registration statement prepared or certified by the
auditors within the meaning of Sections 7 and 11 of the Securities Act of 1933.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a registration
statement on Form S-3 to register these securities. This prospectus, which forms
part of the registration statement, does not contain all of the information
included in that registration statement. For further information about Oxford
and the securities offered in this prospectus, you should refer to the
registration statement and its exhibits.
You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. We file our SEC materials electronically with the SEC, so you
can also review our filings by accessing the web site maintained by the SEC at
http://www.sec.gov. This site contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
Our principal executive offices are located at 800 Connecticut Avenue,
Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442.
The SEC allows us to "incorporate by reference" the information we file
with them, which means we can disclose important information to you by referring
you to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and are incorporating them by reference into this
prospectus:
- Our annual report on Form 10-K/A No. 2 for the fiscal year ended
December 31, 1998, filed on August 26, 1999, as amended by our Form
10-K/A No. 3, filed on August 30, 1999 (File No. 0-19442);
- Our quarterly report on Form 10-Q/A No. 2 for the quarter ended March
31, 1999, filed on August 26, 1999 (File No. 0-19442);
49
<PAGE> 54
- Our quarterly report on Form 10 -Q for the quarter ended June 30, 1999,
filed on August 16, 1999 (file No. 0-19442); and
- Our current reports on Form 8-K dated January 8, 1999 (filed on January
8, 1999), January 29, 1999 (filed on January 29, 1999), February 25,
1999 (filed on February 25, 1999 and amended on March 19, 1999), April
29, 1999 (filed on April 29, 1999), May 12, 1999 (filed on May 13,
1999), June 30, 1999 (filed on July 1, 1999), July 20, 1999 (filed on
July 22, 1999) and July 29, 1999 (filed on August 2, 1999) (File No.
0-19442); and
- The description of our common stock contained in the Registration
Statement on Form 8-A dated August 1, 1991, filed pursuant to Section 12
of the Exchange Act (File No. 0-19442).
We also are incorporating into this prospectus all documents subsequently
filed by us pursuant to Section 13(a), 13(c) 14 or 15(d) of the Securities
Exchange Act of 1934.
We will provide without charge to each person, including any person having
a control relationship with that person, to whom a prospectus is delivered, a
copy of any or all of the information that has been incorporated by reference in
this prospectus but not delivered with this prospectus. If you would like to
obtain this information from us, please direct your request, either in writing
or by telephone, to:
Investor Relations
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
(203) 852-1442
FORWARD-LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are "forward-looking statements," as such term is defined
in the Private Securities Litigation Reform Act of 1995. We wish to caution you
that these forward-looking statements are only predictions, and actual events or
results may differ materially as a result of risks that we face, including those
risks set forth in our annual report on Form 10-K/A No. 2, as amended by our
Form 10-K/A No. 3, for the fiscal year ended December 31, 1998, under the
heading "Cautionary Statement Regarding Forward-Looking Statements", and any
risks set forth in any prospectus supplement. These forward-looking statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "plans," "may," "will," "would," "could," "should," or "anticipates"
or the negative of these words or other variations of these words or other
comparable words, or by discussions of strategy that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to
statements concerning:
- future results of operations or financial position;
- future ability to make required payments on the preferred stock; and
- future tax treatment of the offered preferred stock, warrants and
debentures.
50
<PAGE> 55
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING, COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY US OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF COMMON STOCK,
SHARES OF OFFERED PREFERRED STOCK, AND/OR WARRANTS IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE
HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................. 1
Ratio of Earnings to Combined Fixed
Charges and Preference
Dividends......................... 8
Business............................ 9
Description of the Offered Preferred
Stock............................. 9
Description of the Warrants......... 23
Registration Rights Agreement....... 26
Use of Proceeds..................... 27
Material United States Federal
Income Tax Consequences........... 28
Selling Securityholders............. 41
Plan of Distribution................ 47
Validity of Securities.............. 48
Experts............................. 48
Where You Can Find More
Information....................... 49
Forward-Looking Statements.......... 50
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[OXFORD HEALTH PLANS LOGO]
22,530,000 shares of
Common Stock
277,629.157 shares of Series D
Cumulative Preferred Stock
132,808.069 shares of Series E Cumulative Preferred Stock
15,800,000 Series A Warrants
6,730,000 Series B Warrants
-------------
Prospectus
-------------
September -- , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered are:
<TABLE>
<S> <C>
Registration Fee.......................................... $189,985.01
Fees and Expenses of Accountants.......................... --
Fees and Expenses of Counsel.............................. --
Blue Sky Fees and Expenses................................ --
Printing and Engraving Expenses........................... --
Rating Agency Fees........................................ --
Agent's Fees.............................................. --
Miscellaneous............................................. --
-----------
Total........................................... $ --
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
against expenses, fines, judgments and settlements incurred by any director,
officer or employee of Oxford in the event of pending or threatened civil,
criminal, administrative or investigative proceedings, if such person was, or
was threatened to be made, a party by reason of the fact that he is or was a
director, officer or employee of Oxford. Section 145 also provides that the
indemnification provided for therein shall not be deemed exclusive of any other
rights to which those seeking indemnification may otherwise be entitled.
Article Eighth of the Second Amended and Restated Certificate of
Incorporation, as amended, of Oxford provides that Oxford shall indemnify its
officers and directors to the fullest extent permitted by law. Article Ninth of
the Second Amended and Restated Certification of Incorporation, as amended, of
Oxford provides that to the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
Oxford shall not be liable to Oxford or its stockholders for monetary damages
for breach of fiduciary duty as a director.
Section 6.4 of the Amended and Restated By-laws of Oxford states:
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The
Corporation shall indemnify to the fullest extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, including any action
instituted by or on behalf of the Corporation, by reason of the fact that such
person or such person's testator or intestate is or was a director or officer of
the Corporation or serves or served at the request of the Corporation any other
enterprise as a director or officer. Expenses incurred by any such person in
defending any such actions, suit or proceeding shall be paid or reimbursed by
the Corporation promptly upon receipt by it of an undertaking of such person to
repay such expense if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any person
by this by-law shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing to serve as a
director or officer as provided above. No amendment of this
II-1
<PAGE> 57
by-law shall impair the rights of any person arising at any time with respect to
events occurring prior to such amendment. To the extent permitted by Delaware
law, the Board may cause the Corporation to indemnify and reimburse other
employees of the Corporation as it deems appropriate. For purposes of this
by-law, the term "Corporation" shall include any predecessor of the Corporation
and any constituent corporation (including any constituent of a constituent)
absorbed by the Corporation in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint venture, trust or
employee benefit plan; service "at the request of the Corporation" shall include
service as a director or officer of the Corporation, which imposes duties on, or
involves services by, such director or officer with respect to any other
enterprise or any employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on a person with respect to an employee benefit plan,
shall be deemed to be indemnifiable expenses; and action by a person with
respect to any employee benefit plan which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan shall be
deemed to be action not opposed to the best interests of the Corporation.
Section 145 of the Delaware General Corporation Law permits the
indemnification provided for by the above by-law provision. The statute further
permits Oxford to insure itself for such indemnification.
Oxford maintains insurance coverage for its directors and officers with
respect to certain liabilities incurred in their capacities as such and for
Oxford with respect to any payments which it becomes obligated to make to such
persons under the foregoing by-law and statutory provisions.
II-2
<PAGE> 58
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2 Investment Agreement, dated February 23, 1998, between
Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated
by reference to Exhibit 10(r) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.1 Second Amended and Restated Certificate of Incorporation, as
amended, of Oxford Health Plans, Inc., incorporated by
reference to Exhibit 3(a) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.1(a) Certificate of Designations for the Series D Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.1(b) Certificate of Designations for the Series E Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.2 Form of Series A Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.3 Form of Series B Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.4 Amended and Restated By-laws of Oxford Health Plans, Inc.,
incorporated by reference to Exhibit 3(b) of Oxford's Annual
Report on Form 10-K/A for the period ended December 31, 1998
(File No. 0-19442)
4.5 Form of Warrant Agreement*
5 Opinion of Sullivan & Cromwell as to Legality*
8 Opinion of Sullivan & Cromwell as to Tax Matters*
10 Registration Rights Agreement, dated February 23, 1998,
between Oxford Health Plans, Inc. and TPG Oxford LLC,
incorporated by reference to Exhibit 10(s) of Oxford's
Annual Report on Form 10-K/A for the period ended December
31, 1998 (File No. 0-19442)
12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preference Dividends*
15 Letter of Ernst & Young LLP Re Unaudited Condensed
Consolidated Interim Financial Information*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of KPMG LLP*
23.3 Consent of Sullivan & Cromwell (included in their opinion
filed as Exhibit 5)
</TABLE>
- -------------------------
* Filed herewith
II-3
<PAGE> 59
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high and of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification by the
registrant against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
II-4
<PAGE> 60
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
4. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-5
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norwalk, State of Connecticut, on September 24, 1999.
Oxford Health Plans, Inc.
By: /s/ NORMAN C. PAYSON, M.D.
-----------------------------------
Norman C. Payson, M.D.
Chief Executive Officer
II-6
<PAGE> 62
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ NORMAN C. PAYSON, M.D. Principal Executive September 24, 1999
- ------------------------------------------------ Officer, and
Norman C. Payson, M.D. Director
/s/ YON Y. JORDEN Principal Financial September 24, 1999
- ------------------------------------------------ Officer
Yon Y. Jorden
/s/ KURT B. THOMPSON Principal Accounting September 24, 1999
- ------------------------------------------------ Officer
Kurt B. Thompson
/s/ FRED F. NAZEM Chairman of the Board September 24, 1999
- ------------------------------------------------
Fred F. Nazem
/s/ DAVID BONDERMAN Director September 24, 1999
- ------------------------------------------------
David Bonderman
Director
- ------------------------------------------------
Jonathan J. Coslet
/s/ JAMES G. COULTER Director September 24, 1999
- ------------------------------------------------
James G. Coulter
/s/ ROBERT B. MILLIGAN, JR. Director September 24, 1999
- ------------------------------------------------
Robert B. Milligan, Jr.
/s/ MARCIA J. RADOSEVICH, PH.D. Director September 24, 1999
- ------------------------------------------------
Marcia J. Radosevich, Ph.D.
/s/ BENJAMIN H. SAFIRSTEIN, M.D. Director September 24, 1999
- ------------------------------------------------
Benjamin H. Safirstein, M.D.
/s/ THOMAS A. SCULLY Director September 24, 1999
- ------------------------------------------------
Thomas A. Scully
/s/ KENT J. THIRY Director September 24, 1999
- ------------------------------------------------
Kent J. Thiry
/s/ STEPHEN F. WIGGINS Director September 24, 1999
- ------------------------------------------------
Stephen F. Wiggins
</TABLE>
II-7
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2 Investment Agreement, dated February 23, 1998, between
Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated
by reference to Exhibit 10(r) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File
No. 0-19442)
4.1 Second Amended and Restated Certificate of Incorporation, as
amended, of Oxford Health Plans, Inc., incorporated by
reference to Exhibit 3(a) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File
No. 0-19442)
4.1(a) Certificate of Designations for the Series D Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.1(b) Certificate of Designations for the Series E Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.2 Form of Series A Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File
No. 0-19442)
4.3 Form of Series B Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File
No. 0-19442)
4.4 Amended and Restated By-laws of Oxford Health Plans, Inc.,
incorporated by reference to Exhibit 3(b) of Oxford's
Annual Report on Form 10-K/A for the period ended December
31, 1998 (File No. 0-19442)
4.5 Form of Warrant Agreement*
5 Opinion of Sullivan & Cromwell as to Legality*
8 Opinion of Sullivan & Cromwell as to Tax Matters*
10 Registration Rights Agreement, dated February 23, 1998,
between Oxford Health Plans, Inc. and TPG Oxford LLC,
incorporated by reference to Exhibit 10(s) of Oxford's
Annual Report on Form 10-K/A for the period ended December
31, 1998 (File No. 0-19442)
12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preference Dividends*
15 Letter of Ernst & Young LLP Re Unaudited Condensed
Consolidated Interim Financial Information*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of KPMG LLP*
23.3 Consent of Sullivan & Cromwell (included in their opinion
filed as exhibit 5)
</TABLE>
- -------------------------
* Filed herewith
<PAGE> 1
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
dated as of September -, 1999
between
OXFORD HEALTH PLANS, INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Warrant Agent
-----------------------------------------------------
Series A Warrants and Series B Warrants
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES.................................................................................................. 1
RECITALS................................................................................................. 1
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions................................................................................ 1
SECTION 1.2. Other Obligations.......................................................................... 3
ARTICLE II
TRANSFERABILITY
SECTION 2.1. Registration............................................................................... 3
SECTION 2.2. Form, Execution and Delivery of Warrant Certificates....................................... 3
SECTION 2.3. Transfer................................................................................... 5
SECTION 2.4. Legend on Warrant Shares................................................................... 5
SECTION 2.5. Exchange of Warrant Certificate............................................................ 5
SECTION 2.6. Cancellation of Warrant Certificates....................................................... 5
SECTION 2.7. Treatment of Holders of Warrant Certificates............................................... 6
ARTICLE III
EXERCISE OF WARRANTS
SECTION 3.1. Exercise of Warrants....................................................................... 6
ARTICLE IV
PAYMENT OF TAXES
SECTION 4.1. Payment of Taxes........................................................................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
MUTILATED OR MISSING WARRANT
SECTION 5.1. Mutilated or Missing Warrant............................................................... 8
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.1. Warrant Agent.............................................................................. 8
SECTION 6.2. Limitations on Warrant Agent's Obligations................................................. 9
SECTION 6.3. Compliance with Applicable Laws............................................................ 11
SECTION 6.4. Appointment, Resignation and Appointment of Successor...................................... 11
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Amendments................................................................................. 12
SECTION 7.2. Notices and Demands to the Company and Warrant Agent....................................... 13
SECTION 7.3. Successors................................................................................. 13
SECTION 7.4. Governing Law; Choice of Forum; Etc........................................................ 13
SECTION 7.5. Delivery of Prospectus..................................................................... 14
SECTION 7.6. Obtaining of Governmental Approvals........................................................ 14
SECTION 7.7. Benefits of Warrant Agreement.............................................................. 14
SECTION 7.8. Headings................................................................................... 14
SECTION 7.9. Severability............................................................................... 15
SECTION 7.10. Counterparts............................................................................... 15
SECTION 7.11. Inspection of Agreement.................................................................... 15
EXHIBITS
EXHIBIT A. Form of Series A Warrant Certificate
EXHIBIT B. Form of Series B Warrant Certificate
</TABLE>
ii
<PAGE> 4
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of -, 1999 (as amended, supplemented or
otherwise modified from time to time, this "Agreement"), between Oxford Health
Plans, Inc., a Delaware corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C., a New Jersey limited liability company, as Warrant Agent (the
"Warrant Agent").
W I T N E S S E T H:
WHEREAS, the holders named on Schedule A hereto (the "Existing
Holders") purchased the Series A Warrants (the "Series A Warrants") to purchase
Warrant Shares and the Series B Warrants (the "Series B Warrants", and together
with the Series A Warrants, the "Warrants") to purchase Warrants Shares on May
13, 1998 pursuant to an Investment Agreement, dated as of February 23, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Investment
Agreement"), by and between the Company and TPG Partners II, L.P.;
WHEREAS, the Existing Holders may sell the Warrants evidenced by
warrant certificates issued pursuant to this Agreement (the "Warrant
Certificates");
WHEREAS, nothing in this Agreement is intended to alter or reduce the
existing rights of the Existing Holders; and
WHEREAS, the Warrant Agent has acted on behalf of the Company, and the
Company desires the Warrant Agent to continue to act on behalf of the Company,
and the Warrant Agent is willing so to act, in connection with the issuance,
transfer, exchange, exercise and cancellation of the Warrants;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Board of Directors" means the board of directors of the
Company.
<PAGE> 5
"Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Common Stock" means the Company's common stock, $.01 par
value per share.
"Company" has the meaning set forth in the preamble hereto.
"Existing Holders" has the meaning set forth in the preamble
hereto.
"Expiration Date" means the earlier of (i) May 13, 2008, and
(ii) the date of an Optional Redemption.
"Expiration Time" means 5:00 P.M., New York City time, on the
Expiration Date.
"Investment Agreement" has the meaning set forth in the
preamble hereto.
"Optional Redemption" means, with respect to the Series A
Warrants, a redemption of the Series D Preferred Stock pursuant to
Article V, Section A of the Series D Certificate of Designations, and,
with respect to the Series B Warrants, a redemption of the Series E
Preferred Stock pursuant to Article V, Section A of the Series E
Certificate of Designations.
"Person" means any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Securities Act" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Series D Certificate of Designations" means the Certificate
of Designations for the Series D Preferred Stock filed by the Company
with the Secretary of State of the State of Delaware.
"Series E Certificate of Designations" means the Certificate
of Designations for the Series E Preferred Stock filed by the Company
with the Secretary of State of the State of Delaware.
"Series D Preferred Stock" means the Series D Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
2
<PAGE> 6
"Series E Preferred Stock" means the Series E Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
"Warrant" has the meaning set forth in the preamble hereto.
"Warrant Agent" has the meaning set forth in the preamble
hereto.
"Warrant Certificate" has the meaning in the preamble hereto.
"Warrantholder" has the meaning set forth in Section 2.1.
"Warrant Register" has the meaning set forth in Section 2.1
hereof.
"Warrant Shares" means the shares of Common Stock issued, or
issuable upon, exercise of the Warrants.
SECTION 1.2. Other Obligations. Nothing in this Agreement shall permit
the Company or the Warrant Agent to authorize or take any action that alters or
reduces the rights of the Existing Holders under the Investment Agreement or the
Warrants and in the event of any inconsistency between the provisions of this
Agreement, on the one hand, and the Warrants or the Investment Agreement, on the
other hand, the provisions of the Warrants, and/or in the case of the Existing
Holders, the Investment Agreement, shall control.
ARTICLE II
TRANSFERABILITY
SECTION 2.1. Registration. The Warrants shall be issued only in
registered form. The Warrant Agent shall keep, at its corporate trust office,
books (the "Warrant Register") in which, subject to such reasonable regulations
as it may prescribe, it shall register Warrant Certificates in accordance with
Section 2.2 including transfers, exchanges, exercises and cancellations of
outstanding Warrant Certificates. Whenever any Warrant Certificates are
surrendered for transfer or exchange in accordance with Section 2.3 or Section
2.5, an authorized officer of the Warrant Agent shall manually countersign and
deliver the Warrant Certificates which the holder thereof (the "Warrantholder")
making the transfer or exchange is entitled to receive.
SECTION 2.2. Form, Execution and Delivery of Warrant Certificates. (a)
One or more certificates evidencing Series A Warrants to purchase not more than
15,800,000 Warrant Shares and one or more certificates evidencing Series B
Warrants to purchase not more than 6,730,000 Warrant Shares may be executed by
the Company and delivered
3
<PAGE> 7
to the Warrant Agent upon the execution of this Warrant Agreement or from time
to time thereafter. The Warrants shall be issued pursuant to this Agreement only
in exchange for Warrants held by Existing Holders or upon transfer of Warrants
by the Existing Holders pursuant to the Company's registration statement on Form
S-3 (File No. 333-77529) or upon any subsequent transfer of Warrants.
(b) Each Warrant Certificate, whenever issued hereunder, shall be in
registered form substantially in the form set forth in Exhibit A hereto, in the
case of Series A Warrants, or in the form set forth in Exhibit B hereto, in the
case of Series B Warrants, which Exhibits are hereby incorporated herein by
reference, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement. Each Warrant
Certificate shall be printed, lithographed, typewritten, mimeographed or
engraved or otherwise reproduced in any other manner as may be approved by the
officers executing the same (such execution to be conclusive evidence of such
approval) and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as the officers of the Company executing the same may approve (such
execution to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of this Agreement, the Investment Agreement or
the Warrants or as may be required to comply with any law or with any rule or
regulation made pursuant thereto, or with any regulation of any stock exchange
on which the Warrants or the Warrant Shares may be listed, or to conform to
usage. Each Warrant Certificate shall be signed on behalf of the Company by its
chairman or vice-chairman of the board of directors, or its president or
vice-president, and by its treasurer or an assistant treasurer, or its secretary
or an assistant secretary. The signature of any such officer on any Warrant
Certificate may be manual or by facsimile. Each Warrant Certificate, when so
signed on behalf of the Company, shall be delivered to the Warrant Agent
together with an order for the countersignature and delivery of such Warrants by
the Warrant Agent.
(c) The Warrant Agent shall, upon receipt of any Warrant Certificate
duly executed on behalf of the Company, countersign such Warrant Certificate and
deliver such Warrant Certificate to or upon the order of the Company. Each
Warrant Certificate shall be dated the date of its countersignature.
(d) No Warrant Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, and no Warrant evidenced
thereby may be exercised, unless such Warrant Certificate has been countersigned
by the manual signature of the Warrant Agent. Such signature by the Warrant
Agent upon any Warrant Certificate executed by the Company shall be conclusive
evidence that such Warrant Certificate has been duly issued under the terms of
this Agreement.
(e) If any officer of the Company who has signed any Warrant
Certificate either manually or by facsimile signature shall cease to be such
officer before such Warrant
4
<PAGE> 8
Certificate shall have been countersigned and delivered by the Warrant Agent,
such Warrant Certificate nevertheless may be countersigned and delivered as
though the person who signed such Warrant Certificate had not ceased to be such
officer of the Company; and any Warrant Certificate may be signed on behalf of
the Company by such persons as, at the actual date of the execution of such
Warrant Certificate, shall be the proper officers of the Company as specified in
this Section 2.2, regardless of whether at the date of the execution of this
Agreement any such person was such officer.
(f) The Warrantholders shall be entitled to receive Warrants in
physical, certificated registered form.
SECTION 2.3. Transfer. A Warrant Certificate may be sold or otherwise
transferred at any time (except as such sale or transfer may be restricted
pursuant to the Securities Act or any applicable state securities laws) and any
such sale or transfer shall be effected on the Warrant Register upon surrender
of such Warrant Certificate at the corporate trust office of the Warrant Agent,
duly endorsed by the Warrantholder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute, and the Warrant Agent shall countersign and deliver, as provided in
Section 2.2, a new Warrant Certificate or Warrant Certificates in appropriate
denomination to the Person or Persons entitled thereto.
SECTION 2.4. Legend on Warrant Shares. If and for so long as required
by the Investment Agreement, the Warrant Certificates shall contain a legend as
set forth in Section 8.10 of the Investment Agreement. Such legend may be
changed only upon notice by the Company to the Warrant Agent, which notice will
be given in accordance with Section 8.10 of the Investment Agreement.
SECTION 2.5. Exchange of Warrant Certificate. Any Warrant Certificate
may be exchanged for another certificate or certificates of like tenor entitling
the Warrantholder to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitles such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant Certificate shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute, and the Warrant Agent shall
countersign and deliver, as provided in Section 2.2., to the Person entitled
thereto a new Warrant Certificate or Certificates as so requested.
SECTION 2.6. Cancellation of Warrant Certificates. Any Warrant
Certificate surrendered to the Warrant Agent for transfer, exchange or exercise
of the Warrants evidenced thereby shall be promptly canceled by the Warrant
Agent and shall not be reissued and, except as expressly permitted by this
Agreement, no Warrant Certificate shall be issued hereunder in lieu thereof. The
Warrant Agent shall deliver to the
5
<PAGE> 9
Company from time to time or otherwise dispose of canceled Warrant Certificates
in a manner satisfactory to the Company. Any Warrant Certificate surrendered to
the Company for transfer, exchange or exercise of the Warrants evidenced thereby
shall be promptly delivered to the Warrant Agent and such transfer, exchange or
exercise shall not be effective until such Warrant Certificate has been received
by the Warrant Agent.
SECTION 2.7. Treatment of Holders of Warrant Certificates. Every
Warrantholder consents and agrees with the Company, the Warrant Agent and with
every subsequent Warrantholder that until the Warrant Certificate is transferred
on the books of the Warrant Agent, the Company and the Warrant Agent may treat
the registered Warrantholder of such Warrant Certificate as the absolute owner
of the Warrants evidenced thereby for any purpose and as the person entitled to
exercise the rights attaching to the Warrants evidenced thereby, any notice to
the contrary notwithstanding.
ARTICLE III
EXERCISE OF WARRANTS
SECTION 3.1. (a) A Warrantholder may exercise the Warrants, in whole or
in part, by presentation and surrender to the Warrant Agent of the Warrant
Certificate together with the attached Election to Exercise, in accordance with
Section 4.2 of the Warrant Certificate. If the date specified as the exercise
date is not a Business Day, the Warrants will be deemed to be received and
exercised on the next succeeding day which is a Business Day. If the Warrants
are received or deemed to be received after the Expiration Date, the exercise
thereof will be null and void and any funds delivered to the Warrant Agent will
be returned to the Warrantholder as soon as practicable. In no event will
interest accrue on funds deposited with the Warrant Agent in respect of an
exercise or attempted exercise of Warrants. The validity of any exercise of
Warrants will be determined by the Warrant Agent in its sole discretion and such
determination will be final and binding upon the Warrantholder and the Company.
Neither the Company nor the Warrant Agent shall have any obligation to inform a
Warrantholder of the invalidity of any exercise of Warrants. The Warrant Agent
shall deposit all funds received by it in payment of the Exercise Price in the
account of the Company maintained with the Warrant Agent for such purpose and
shall advise the Company upon its request by telephone at the end of each day on
which funds for the exercise of the Warrants are received of the amount so
deposited to its account. The Warrant Agent shall promptly confirm such
telephonic advice to the Company in writing.
(b) The Warrant Agent shall, by 11:00 A.M. on the second Business Day
following the exercise date of any Warrant, advise the Company and the transfer
agent and registrar in respect of the Warrant Shares issuable upon such exercise
as to the number of Warrants exercised in accordance with the terms and
conditions of this
6
<PAGE> 10
Agreement, the instructions of each Warrantholder with respect to delivery of
the Warrant Shares issuable upon such exercise, and the delivery of definitive
Warrant Certificates evidencing the balance, if any, of the Warrants remaining
after such exercise, and such other information as the Company or such transfer
agent and registrar shall reasonably require.
(c) On the terms and subject to the conditions set forth in this
Agreement and in the Warrant Certificate, upon presentation and surrender of the
Warrant Certificate and payment of the aggregate Exercise Price as set forth in
Section 4.2 of the Warrant Certificate, the Company shall promptly issue and
cause to be delivered to the Warrant Agent a certificate or certificates (in
such name or names as the Warrantholder may designate in writing) for the
specified number of duly authorized, fully paid and non-assessable Warrant
Shares issuable upon exercise, and shall deliver to the Warrantholder cash, as
provided in Section 11 of the Warrant Certificate, with respect to any
Fractional Warrant Shares otherwise issuable upon such surrender. Upon receipt
of such Warrant Shares, the Warrant Agent shall transmit such Warrant Shares to
the Warrantholder, or to such Persons as the Warrantholder may designate in
writing together with, or preceded by, the prospectus in accordance with Section
7.5 hereof. The Company agrees that it will provide such information and
documents to the Warrant Agent as may be necessary for the Warrant Agent to
fulfill its obligations under this Agreement. In the event that the Warrants are
exercised in part prior to the Expiration Time, the Company shall issue and
cause to be delivered to the Warrant Agent a certificate or certificates (in
such name or names as the Warrantholder may designate in writing) evidencing any
remaining unexercised Warrants. Upon receipt of such Warrant Certificate, the
Warrant Agent shall countersign and deliver such Warrant Certificate to the
Warrantholder, or to such persons as the Warrantholder may designate in writing.
ARTICLE IV
PAYMENT OF TAXES
SECTION 4.1. Payment of Taxes. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the Warrants evidenced by this Warrant Certificate
or certificates representing such shares or securities (other than income taxes
imposed on the Warrantholder); provided that the Company shall not be required
to pay any such tax or other charge that may be imposed in connection with any
transfer involved in the issue of any certificate for Warrant Shares or other
securities or property, or payment of cash, to any Person other than the holder
of the Warrant Certificate surrendered upon exercise, and in case of any such
tax or charge, the Warrant Agent and the Company shall not be required to issue
any security or
7
<PAGE> 11
property or pay any cash until such tax or charge has been paid or it has been
established to the Warrant Agent's and the Company's satisfaction that no such
tax or charge is payable.
ARTICLE V
MUTILATED OR MISSING WARRANT
SECTION 5.1. Mutilated or Missing Warrant. If any Warrant Certificate
is lost, stolen, mutilated or destroyed, the Company shall issue and the Warrant
Agent shall countersign, in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, upon receipt of a proper
affidavit or other evidence reasonably satisfactory to the Company and the
Warrant Agent (and surrender of any mutilated Warrant Certificate) and bond of
indemnity in form and amount and with corporate surety reasonably satisfactory
to the Company and the Warrant Agent in each instance protecting the Company and
the Warrant Agent, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants as the Warrant Certificate so lost, stolen,
mutilated or destroyed. Any such new Warrant Certificate shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone. An applicant for such substitute Warrant Certificate
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe. All
Warrant Certificates shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.1. Warrant Agent. The Company hereby appoints ChaseMellon
Shareholder Services, L.L.C. as Warrant Agent of the Company in respect of the
Warrants upon the terms and subject to the conditions herein set forth, and
ChaseMellon Shareholder Services, L.L.C. hereby accepts such appointment. The
Warrant Agent shall have the powers and authority granted to and conferred upon
it hereby and such further powers and authority to act on behalf of the Company
as the Company may hereafter grant to or confer upon it.
8
<PAGE> 12
SECTION 6.2. Limitations on Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof, including the following, to all of which the Company agrees:
(a) Compensation and Indemnification. The Company agrees to
pay the Warrant Agent compensation to be agreed upon with the Company
for all services rendered by the Warrant Agent and to reimburse the
Warrant Agent for all reasonable out-of-pocket expenses (including
reasonable counsel fees) incurred by the Warrant Agent in connection
with the services rendered by it hereunder. The Company also agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct on the part of the Warrant Agent, arising out of
or in connection with its acting as Warrant Agent hereunder. Anything
to the contrary notwithstanding, in no event shall the Warrant Agent be
liable for special, punitive, indirect, consequential or incidental
loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Warrant Agent has been advised of the
likelihood of such loss or damage.
(b) Agent for the Company. In acting in the capacity of
Warrant Agent under this Agreement, the Warrant Agent is acting solely
as agent of the Company and does not assume any obligation or
relationship of agency or trust with any of the owners or holders of
the Warrants.
(c) Counsel. The Warrant Agent may consult with counsel
satisfactory to it (which may be counsel to the Company), and the
written advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the
written advice or opinion of such counsel.
(d) Documents. The Warrant Agent shall be authorized and
protected and shall incur no liability for or in respect of any action
taken, suffered or omitted by it in reliance upon any notice,
direction, consent, certificate, affidavit, statement or other paper or
document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) Certain Transactions. The Warrant Agent, and its officers,
directors and employees, may become the owner of, or acquire any
interest in, any Warrant, with the same rights that it or they would
have were it not the Warrant Agent hereunder, and, to the extent
permitted by applicable law, it or they may engage or be interested in
any financial or other transaction with the Company and may act on, or
as a depositary, trustee or agent for, any committee or body of holders
of Warrants or Warrant Shares, or other securities or obligations of
the Company as freely as if it were not the Warrant Agent hereunder.
Nothing in this Agreement
9
<PAGE> 13
shall be deemed to prevent the Warrant Agent from acting as trustee
under either Indenture.
(f) No Liability for Interest. The Warrant Agent shall not be
under any liability for interest on any monies at any time received by
it pursuant to any of the provisions of this Agreement.
(g) No Liability for Invalidity. The Warrant Agent shall not
be under any responsibility with respect to the validity or sufficiency
of this Agreement or the execution and delivery hereof (except the due
execution and delivery hereof by the Warrant Agent) or with respect to
the validity or execution of the Warrant Certificates (except its
countersignature thereon).
(h) No Responsibility for Recitals. The recitals contained in
this Agreement and in the Warrant Certificates (except as to the
Warrant Agent's countersignature thereon) shall be taken as the
statements of the Company and the Warrant Agent assumes no
responsibility hereby for the correctness of the same.
(i) No Implied Obligations. The Warrant Agent shall be
obligated to perform such duties as are specifically set forth herein
and no implied duties or obligations shall be read into this Agreement
against the Warrant Agent. The Warrant Agent shall not be under any
obligation to take any action hereunder which may tend to involve it in
any expense or liability, the payment of which within a reasonable time
is not, in its opinion, assured to it. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the
Company of any Warrant Certificate authenticated by the Warrant Agent
and delivered by it to the Company pursuant to this Agreement or for
the application by the Company of the proceeds of the issue and sale,
or exercise, of the Warrants. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance
of its covenants or agreements contained in this Agreement or in any
Warrant Certificate or in the case of the receipt of any written demand
from a Warrantholder with respect to such default, including, without
limiting the generality of the foregoing, any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise or,
except as provided in Section 7.2 hereof, to make any demand upon the
Company.
(j) Instructions from Company. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer or the
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for
any action taken, suffered or omitted to be taken by it in good faith
in accordance with instructions of any such officers.
10
<PAGE> 14
(k) Delegation. The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it to perform any duty hereunder either
itself or by or through its attorneys or agents.
SECTION 6.3. Compliance with Applicable Laws. The Warrant Agent agrees
to comply with all applicable federal and state laws imposing obligations on it
in respect of the services rendered by it under this Agreement and in connection
with the Warrants, including (but not limited to) the provisions of United
States federal income tax laws regarding information reporting and backup
withholding. The Warrant Agent shall be responsible for its failure to comply
with any such laws imposing obligations on it, including (but not limited to)
any liability for its failure to comply with any applicable provisions of United
States federal income tax laws regarding information reporting and backup
withholding.
SECTION 6.4. Appointment, Resignation and Appointment of Successor. (a)
The Company agrees, for the benefit of the Warrantholders from time to time,
that there shall at all times be a Warrant Agent hereunder until all the
Warrants issued hereunder have been exercised or have expired in accordance with
their terms, which Warrant Agent shall be appointed in the Borough of Manhattan,
The City of New York, and shall have a capital and surplus of at least
$50,000,000.
(b) The Warrant Agent may at any time resign as such agent by giving
written notice to the Company of such intention on its part, specifying the date
on which it desires such resignation to become effective; provided that such
date shall not be less than three months after the date on which such notice is
given, unless the Company agrees to accept such notice less than three months
prior to such date of effectiveness. The Company may remove the Warrant Agent at
any time by giving written notice to the Warrant Agent of such removal,
specifying the date on which it desires such removal to become effective. Such
resignation or removal shall take effect upon the appointment by the Company, as
hereinafter provided, of a successor Warrant Agent (as set forth in subsection
(a)) and the acceptance of such appointment by such successor Warrant Agent. The
obligation of the Company under Section 6.2(a) shall continue to the extent set
forth therein notwithstanding the resignation or removal of the Warrant Agent.
(c) If at any time the Warrant Agent shall resign, or shall cease to be
qualified as set forth in subsection (a), or shall be removed, or shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall file
a petition seeking relief under any applicable Federal or State bankruptcy or
insolvency law or similar law, or make an assignment for the benefit of its
creditors or consent to the appointment of a receiver, conservator or custodian
of all or any substantial part of its property, or shall admit in writing its
inability to pay or to meet its debts as they mature, or if a receiver or
custodian of it or of all or any substantial part of its property shall be
appointed, or if an order of any court shall be entered for relief against it
under the provisions of any applicable Federal
11
<PAGE> 15
or State bankruptcy or similar law, or if any public officer shall have taken
charge or control of the Warrant Agent or of its property or affairs, for the
purpose of rehabilitation, conservation or liquidation, a successor Warrant
Agent, qualified as set forth in subsection (a), shall be appointed by the
Company by an instrument in writing, filed with the successor Warrant Agent.
Upon the appointment as herein provided of a successor Warrant Agent and
acceptance by the latter of such appointment, the Warrant Agent so superseded
shall cease to be Warrant Agent under this Agreement.
(d) Any successor Warrant Agent appointed under this Agreement shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment, and thereupon such successor Warrant
Agent, without any further act, deed or conveyance, shall become vested with all
the authority, rights, powers, trusts, immunities, duties and obligations of
such predecessor with like effect as if originally named as Warrant Agent under
this Agreement, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Warrant Agent shall be entitled to receive, all
monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent under this Agreement.
(e) Any Person into which the Warrant Agent may be merged or converted
or any Person with which the Warrant Agent may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Warrant
Agent shall be a party, or any Person to which the Warrant Agent shall sell or
otherwise transfer all or substantially all the assets and business of the
Warrant Agent, in each case provided that it shall be qualified as set forth in
subsection (a), shall be the successor Warrant Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, including, without limitation, any
successor to the Warrant Agent first named above.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Amendments. (a) This Agreement and any Warrant Certificate
may be amended by the parties hereto by executing a supplemental warrant
agreement (a "Supplemental Agreement"), without the consent of the Warrantholder
of any Warrant, for the purpose of (i) curing any ambiguity, or curing,
correcting or supplementing any defective provision contained herein, or making
any other provisions with respect to matters or questions arising under this
Agreement that is not inconsistent with the provisions of this Agreement, the
Warrant Certificates or the Investment Agreement, (ii) evidencing the succession
of another Person to the Company and the assumption by any such successor of the
covenants of the Company contained in this Agreement and the
12
<PAGE> 16
Warrants, (iii) evidencing and providing for the acceptance of appointment by a
successor Warrant Agent with respect to the Warrants, (iv) adding to the
covenants of the Company for the benefit of the Warrantholders or surrendering
any right or power conferred upon the Company under this Agreement, (v)
appointing a successor Warrant Agent, or (vi) amending this Agreement and the
Warrants in any manner that the Company may deem to be necessary or desirable
and that will not adversely affect the interests of the Warrantholders.
(b) Without the consent of each Warrantholder of Warrants affected
thereby, no amendment may be made that (i) changes the Warrants so as to reduce
the number of Warrant Shares purchasable upon exercise of the Warrants or so as
to increase the exercise price, (ii) shortens the period of time during which
the Warrants may be exercised, (iii) otherwise adversely affects the exercise
rights of the Warrantholders in any material respect, or (iv) reduces the number
of unexercised Warrants the consent of the Warrantholders of which is required
for amendment of this Agreement or the Warrants.
(c) Notwithstanding anything contained herein to the contrary, the
Warrant Agent may, but shall not be required to, enter any supplement or
amendment that affects the Warrant Agent's own rights, duties, obligations or
immunities under this Agreement.
SECTION 7.2. Notices and Demands to the Company and Warrant Agent. If
the Warrant Agent shall receive any notice or demand addressed to the Company by
the Warrantholder, the Warrant Agent shall promptly forward such notice or
demand to the Company.
SECTION 7.3. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrantholder shall bind
and inure to the benefit of their respective successors and permitted assigns
hereunder.
SECTION 7.4. Governing Law; Choice of Forum; Etc. The validity,
construction and performance of Agreement shall be governed by, and interpreted
in accordance with, the laws of New York without reference to its conflict of
laws rules. The Company and the Warrantholder (the "parties hereto") agree that
the appropriate and exclusive forum for any disputes arising out of this
Agreement solely between or among any or all of the Company, the Warrant Agent
and the Existing Holders and/or any Person who has become a Warrantholder shall
be the United States District Court for the Southern District of New York, and,
if such court will not hear any such suit, the courts of the state of the
Company's incorporation, and the parties hereto irrevocably consent to the
exclusive jurisdiction of such courts, and agree to comply with all requirements
necessary to give such courts jurisdiction. The parties hereto further agree
that the parties will not bring suit with respect to any disputes, except as
expressly set forth below, arising out of this Agreement for the execution or
enforcement of judgment, in any jurisdiction other
13
<PAGE> 17
than the above specified courts. Each of the parties hereto irrevocably consents
to the service of process in any action or proceeding hereunder by the mailing
of copies thereof by registered or certified airmail, postage prepaid, if to (i)
the Warrant Agent, at 111 Founders Plaza, Suite 1100, East Hartford, CT 06108,
Attention: Joan Hayes; (ii) the Company, at 800 Connecticut Avenue, Norwalk,
Connecticut, 06854, Attention: General Counsel, or at such other address
specified by the Company in writing to the Warrant Agent and (iii) any
Warrantholder, at the address of such Warrantholder specified in the Warrant
Register. The foregoing shall not limit the rights of any party hereto to serve
process in any other manner permitted by the law or to obtain execution of
judgment in any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of indebtedness. The parties agree to waive
any and all rights that they may have to a jury trial with respect to disputes
arising out of this Agreement.
SECTION 7.5. Delivery of Prospectus. The Company shall furnish to the
Warrant Agent sufficient copies of a prospectus relating to the Warrant Shares
deliverable upon exercise of Warrants and complying in all material respects
with the Securities Act of 1933, as amended (the "Prospectus"), and the Warrant
Agent agrees that upon the exercise of any Warrant, the Warrant Agent shall
deliver a Prospectus to the Warrantholder of such Warrant, prior to or
concurrently with the delivery of the Warrant Shares issued upon such exercise.
SECTION 7.6. Obtaining of Governmental Approvals. The Company shall
from time to time take all action which may be necessary to obtain and keep
effective any and all permits, consents and approvals of governmental agencies
and authorities and securities acts filings under United States Federal and
state laws, which the Company may deem necessary or appropriate in connection
with the issuance, sale, transfer and delivery of the Warrants, the exercise of
the Warrants, the issuance, sale, transfer and delivery of the Warrant Shares to
be issued upon exercise of Warrants or upon the expiration of the period during
which the Warrants are exercisable.
SECTION 7.7. Benefits of Warrant Agreement. Nothing in this Agreement
or any Warrant Certificate shall be construed to give to any Person other than
the Company, the Warrant Agent and the Warrantholders any legal or equitable
right, remedy or claim under this Agreement or any Warrant Certificate and this
Agreement or any Warrant Certificate shall be for the sole and exclusive benefit
of the Company, the Warrant Agent and the Warrantholders.
SECTION 7.8. Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
14
<PAGE> 18
SECTION 7.9. Severability. If any provision in this Agreement or in any
Warrant Certificate shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provisions in any other jurisdiction, shall not in any
way be affected or impaired thereby.
SECTION 7.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.11. Inspection of Agreement. A copy of this Agreement shall
be available at all reasonable times at the corporate trust office of the
Warrant Agent and at the office of the Company at 800 Connecticut Avenue,
Norwalk, CT 06854, for inspection by any Warrantholder. The Warrant Agent may
require any such Warrantholder to submit satisfactory proof of ownership for
inspection by it.
15
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
OXFORD HEALTH PLANS, INC.
By: __________________________
Name:
Title:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: __________________________
Name:
Title:
16
<PAGE> 20
Exhibit A
Form of Series A Warrant Certificate
<PAGE> 21
No. [Number of Warrants]
SERIES A WARRANTS
Exercisable commencing May 13, 1998;
Void after Expiration Time (as defined herein)
OXFORD HEALTH PLANS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, ____________________, or
registered assigns (the "Warrantholder"), is the owner of ______________Warrants
(as defined below), each of which entitles the Warrantholder to purchase from
the Company one fully paid, duly authorized and nonassessable share of Common
Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any
time from and after May 13, 1998 (the "Issue Date") and continuing up to the
Expiration Time (as defined herein) at a per share exercise price determined
according to the terms and subject to the conditions set forth in this
certificate (the "Warrant Certificate"). The number of shares of Common Stock
issuable upon exercise of each such Warrant and the exercise price per share of
Common Stock are subject to adjustment from time to time pursuant to the
provisions of Sections 8 and 9 of this Warrant Certificate. The Warrants
evidenced by this Warrant Certificate are part of a series of warrants to
purchase up to 15,800,000 shares of Common Stock (collectively, the "Warrants"),
issued pursuant to an Investment Agreement, dated as of February 23, 1998 (as it
may be amended, supplemented or otherwise modified from time to time, the
"Investment Agreement"), by and between TPG Oxford LLC, a Delaware limited
liability company (the "Investor"), and the Company, or pursuant to the Warrant
Agreement, dated as of ________, 1999 (as it may be amended, supplemented or
otherwise modified from time to time, the "Warrant Agreement"), between the
Company and ChaseMellon Shareholder Services, L.L.C., as Warrant Agent.
Section 1.1. Other Obligations. The parties hereby acknowledge that,
pursuant to the Warrant Agreement, nothing in the Warrant Agreement shall permit
the Company or the Warrant Agent to authorize or take action that alters or
reduces the rights of the Existing Holders (as defined therein) under the
Investment Agreement or the Warrants and, in the event of any inconsistency
between the provisions of the Warrant Agreement, on the one hand, and this
Warrant Certificate or the Investment Agreement, on the other hand, the
provisions of this Warrant Certificate and/or, in the case of the Existing
Holders, the Investment Agreement shall control.
Section 1.2. Definitions. As used in this Warrant Certificate, the
following terms shall have the meanings set forth below:
"Board of Directors" means the board of directors of the
Company.
A-2
<PAGE> 22
"Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Certificate of Designations" means the Certificate of
Designations therefor, with respect to the Series D Preferred Stock or
the Series E Preferred Stock, as the case may be, filed by the Company
with the Secretary of State of the State of Delaware.
"Certificate of Incorporation" means the Second Amended and
Restated Certificate of Incorporation of the Company, as amended from
time to time.
"Closing Price" with respect to a share of Common Stock on any
day means, subject to Section 9.1(f) hereof, the last reported sale
price on that day or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices, regular
way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on
Nasdaq or, if the shares of Common Stock are not quoted on Nasdaq, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not quoted on Nasdaq and
not listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the high bid
and low asked prices on such other nationally recognized quotation
system then in use, or, if on any such day the shares of Common Stock
are not quoted on any such quotation system, the average of the closing
bid and asked prices as furnished by a professional market maker
selected by the Board of Directors making a market in the shares of
Common Stock. If the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price" means the fair
market value of a share of Common Stock, as determined in good faith by
the Board of Directors.
"Common Stock" has the meaning set forth in the preamble
hereto.
"Company" has the meaning set forth in the preamble hereto.
"Equity Securities" of any Person means any and all common
stock, preferred stock, any other class of capital stock and
partnership or limited liability company interests of such Person or
any other similar interests of any Person that is not a corporation,
partnership or limited liability company.
"Exercise Price" has the meaning set forth in Section 8
hereof.
A-3
<PAGE> 23
"Expiration Date" means the earlier of (i) May 13, 2008, and
(ii) the date of an Optional Redemption.
"Expiration Time" means 5:00 P.M., New York City time, on the
Expiration Date.
"Fractional Warrant Share" means any fraction of a whole share
of Common Stock issued, or issuable upon, exercise of the Warrants.
"Investment Agreement" has the meaning set forth in the
preamble hereto.
"Investor" has the meaning set forth in the preamble hereto.
"Issue Date" has the meaning set forth in the preamble hereto.
"Nasdaq" means The Nasdaq Stock Market's National Market.
"Offer Time" has the meaning set forth in Section 9.1(e)
hereof.
"Optional Redemption" means a redemption of the Series D
Preferred Stock pursuant to Article V, Section A of the Certificate of
Designations therefor.
"Organic Change" means, with respect to any Person, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or merger of such
Person into, any other Person, any merger of another Person into such
Person (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of such Person), and any sale or transfer or
lease of all or substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which is the
subject of Section 9.1(b)) pursuant to which any class or series of
Equity Securities of such Person is converted into the right to receive
other securities, cash or other property.
"Person" means any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Securities Act" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Senior Preferred Stock" means the Series D Preferred Stock
and Series E Preferred Stock.
A-4
<PAGE> 24
"Series D Preferred Stock" means the Series D Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
"Series E Preferred Stock" means the Series E Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
"Stated Value" means the stated value of the Series D
Preferred Stock or the Series E Preferred Stock, as the case may be, in
each case as set forth in the Certificate of Designations therefor.
"Trading Day" means any day on which Nasdaq is open for
trading, or if the shares of Common Stock are not quoted on Nasdaq, any
day on which the principal national securities exchange or national
quotation system on which the shares of Common Stock are listed,
admitted to trading or quoted is open for trading, or if the shares of
Common Stock are not so listed, admitted to trading or quoted, any
Business Day.
"Warrant" has the meaning set forth in the preamble hereto.
"Warrant Agent" means the Person named or otherwise appointed
as such as set forth in Section 10 hereof.
"Warrant Agreement" has the meaning set forth in the preamble
hereto.
"Warrant Certificate" has the meaning in the preamble hereto.
"Warrant Market Price" means the average of the Closing Prices
of a share of Common Stock for the ten consecutive Trading Days ending
on the Trading Day immediately prior to the day on which the Election
to Exercise is delivered.
"Warrant Register" has the meaning set forth in Section 2.2
hereof.
"Warrant Shares" means the shares of Common Stock issued, or
issuable upon, exercise of the Warrants.
"Warrantholder" has the meaning set forth in the preamble
hereto.
Section 2. Transferability.
2.1 Registration. The Warrants shall be issued only in
registered form.
2.2 Transfer. The Warrants evidenced by this Warrant
Certificate may be sold or otherwise transferred at any time (except as such
sale or transfer may be
A-5
<PAGE> 25
restricted pursuant to the Securities Act or any applicable state securities
laws) and any such sale or transfer shall be effected on the books of the
Company (the "Warrant Register") maintained at the corporate trust office of the
Warrant Agent upon surrender of this Warrant Certificate at the corporate trust
office of the Warrant Agent for registration of transfer duly endorsed by the
Warrantholder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. Upon any registration of transfer, the Company shall execute, and the
Warrant Agent shall countersign and deliver a new Warrant Certificate or
Certificates in appropriate denominations to the Person or Persons entitled
thereto.
2.3. Legend on Warrant Shares. If and for so long as required
by the Investment Agreement, this Warrant Certificate shall contain a legend as
set forth in Section 8.10 of the Investment Agreement.
Section 3. Exchange of Warrant Certificate. Any Warrant
Certificate may be exchanged for another certificate or certificates of like
tenor entitling the Warrantholder to purchase a like aggregate number of Warrant
Shares as the certificate or certificates surrendered then entitles such
Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant
Certificate shall make such request in writing delivered to the Warrant Agent,
and shall surrender, properly endorsed, the certificate evidencing the Warrant
to be so exchanged. Thereupon, the Company shall execute, and the Warrant Agent
shall countersign and deliver to the Person entitled thereto a new Warrant
Certificate or certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1. Duration of Warrant. On the terms and subject to the
conditions set forth in this Warrant Certificate, the Warrantholder may exercise
the Warrants evidenced hereby, in whole or in part, at any time and from time to
time after the Issue Date and before the Expiration Time. If the Warrants
evidenced hereby are not exercised by the Expiration Time, they shall become
void, and all rights hereunder shall thereupon cease.
4.2. Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in
this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced
hereby, in whole or in part, by presentation and surrender to the Warrant Agent
of this Warrant Certificate together with the attached Election to Exercise duly
filled in and signed, and accompanied by payment to the Company of the Exercise
Price for the number of Warrant Shares specified in such Election to Exercise.
Payment of the aggregate Exercise Price shall be made (i) in cash in an amount
equal to the aggregate Exercise Price; (ii) by certified or official bank check
in an amount equal to the aggregate Exercise Price; (iii) by
A-6
<PAGE> 26
an exchange (which shall be treated as a recapitalization) with the Company of a
number of shares of Senior Preferred Stock having an aggregate Stated Value plus
accumulated and unpaid dividends thereon equal to the aggregate Exercise Price;
(iv) by an exchange (which shall be treated as a recapitalization) with the
Company of outstanding Warrants (other than the Warrants being exercised) having
an aggregate Warrant Market Price which, after subtracting the aggregate
Exercise Prices thereof, equals the aggregate Exercise Price of the Warrants
being exercised; or (v) by any combination of the foregoing; provided, however,
that (except to the extent expressly permitted by the proviso in Section 5(b) of
the Share Exchange Agreement, dated as of February 13, 1999, by and among the
Company and the investors named therein) the Warrantholders may not use shares
of Series D Preferred Stock pursuant to clause (iii) or (v) in connection with
any exercise prior to May 13, 2000.
(b) On the terms and subject to the conditions set forth in
this Warrant Certificate, upon such presentation and surrender of this Warrant
Certificate and payment of such aggregate Exercise Price as set forth in
paragraph (a) hereof, the Company shall promptly issue and cause to be delivered
to the Warrant Agent a certificate or certificates (in such name or names as the
Warrantholder may designate in writing) for the specified number of duly
authorized, fully paid and non-assessable Warrant Shares issuable upon exercise,
and shall deliver to the Warrantholder cash, as provided in Section 11 hereof,
with respect to any Fractional Warrant Shares otherwise issuable upon such
surrender. Upon receipt of such Warrant Shares, the Warrant Agent shall transmit
such Warrant Shares to the Warrantholder, or to such Persons as the
Warrantholder may designate in writing. In the event that the Warrants evidenced
by this Warrant Certificate are exercised in part prior to the Expiration Time,
the Company shall issue and cause to be delivered to the Warrant Agent a
certificate or certificates (in such name or names as the Warrantholder may
designate in writing) evidencing any remaining unexercised Warrants. Upon
receipt of such Warrant Certificate, the Warrant Agent shall countersign and
deliver such Warrant Certificate to the Warrantholder, or to such persons as the
Warrantholder may designate in writing.
(c) Each Person in whose name any certificate for Warrant
Shares is issued shall for all purposes be deemed to have become the holder of
record of the Warrant Shares represented thereby on the first date on which both
the Warrant Certificate evidencing the respective Warrants was surrendered and
payment of the Exercise Price and any applicable taxes was made, irrespective of
date of issue or delivery of such certificate.
Section 5. Payment of Taxes. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the
A-7
<PAGE> 27
Warrants evidenced by this Warrant Certificate or Certificates representing such
shares or securities (other than income taxes imposed on the Warrantholder);
provided that the Company shall not be required to pay any such tax or other
charge that may be imposed in connection with any transfer involved in the issue
of any certificate for Warrant Shares or other securities or property, or
payment of cash, to any Person other than the holder of the Warrant Certificate
surrendered upon exercise, and in case of any such tax or charge, the Warrant
Agent and the Company shall not be required to issue any security or property or
pay any cash until such tax or charge has been paid or it has been established
to the Warrant Agent's and the Company's satisfaction that no such tax or charge
is payable.
Section 6. Mutilated or Missing Warrant. If any Warrant
Certificate is lost, stolen, mutilated or destroyed, the Company shall issue and
the Warrant Agent shall countersign, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, upon receipt
of a proper affidavit or other evidence reasonably satisfactory to the Company
and the Warrant Agent (and surrender of any mutilated Warrant Certificate) and
bond of indemnity in form and amount and with corporate surety reasonably
satisfactory to the Company and the Warrant Agent in each instance protecting
the Company and the Warrant Agent, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants as the Warrant Certificate so
lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at
any time enforceable by anyone. An applicant for such substitute Warrant
Certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
All Warrant Certificates shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
Section 7. Reservation of Shares. The Company hereby agrees
that there shall be reserved for issuance and delivery upon exercise of this
Warrant, free from preemptive rights, the number of shares of authorized but
unissued shares of Common Stock as shall be required for issuance or delivery
upon exercise of the Warrants evidenced by this Warrant Certificate. The Company
further agrees that it will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by the Company. Without limiting the
generality of the foregoing, the Company agrees that before taking any action
which would cause an
A-8
<PAGE> 28
adjustment reducing the Exercise Price below the then-par value of Warrant
Shares issuable upon exercise hereof, the Company shall from time to time take
all such action that may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock at the
Exercise Price as so adjusted.
Section 8. Exercise Price. The price per share (the "Exercise
Price") at which Warrant Shares shall be purchasable upon the exercise of the
Warrants evidenced by this Warrant Certificate shall be $17.75, subject to
adjustment pursuant to Section 9 hereof.
Section 9. Adjustment of Exercise Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of the Warrants
evidenced by this Warrant Certificate and the Exercise Price thereof shall be
subject to adjustment from time to time after the date hereof upon the happening
of certain events, as follows:
9.1. Adjustments to Exercise Price. The Exercise Price shall
be subject to adjustment as follows:
(a) Stock Dividends. In case the Company after the date hereof
shall pay a dividend or make a distribution to all holders of shares of
Common Stock in shares of Common Stock, then in any such case the
Exercise Price in effect at the opening of business on the day
following the record date for the determination of stockholders
entitled to receive such dividend or distribution shall be reduced to a
price obtained by multiplying such Exercise Price by a fraction of
which (x) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date and (y) the
denominator shall be the sum of such number of shares of Common Stock
outstanding and the total number of shares of Common Stock constituting
such dividend or distribution, such reduction to become effective
immediately after the opening of business on the day following such
record date. For purposes of this subsection (a), the number of shares
of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(b) Stock Splits and Reverse Splits. In case after the date
hereof outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Exercise Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely, in case after the date hereof outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common
Stock, the Exercise Price in effect at the opening of business
A-9
<PAGE> 29
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(c) Issuances Below Market. In case the Company after the date
hereof shall issue rights or warrants to holders of shares of Common
Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Closing Price per share on the
record date for the determination of stockholders entitled to receive
such rights or warrants, the Exercise Price in effect at the opening of
business on the day following such record date shall be adjusted to a
price obtained by multiplying such Exercise Price by a fraction of
which (x) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date plus the
number of shares of Common Stock that the aggregate offering price of
the total number of shares so to be offered would purchase at such
Closing Price and (y) the denominator shall be the number of shares of
Common Stock outstanding at the close of business on such record date
plus the number of additional shares of Common Stock so to be offered
for subscription or purchase, such adjustment to become effective
immediately after the opening of business on the day following such
record date; provided, however, that no adjustment shall be made if the
Company issues or distributes to each Warrantholder the rights or
warrants that each Warrantholder would have been entitled to receive
had the Warrants held by such Warrantholder been exercised prior to
such record date; and provided, further, that in no event shall the
fact that the Series B Warrants of the Company become exercisable for
shares of Common Stock upon occurrence of the Shareholder Approval (as
defined in the Investment Agreement) constitute an issuance of rights
or warrants pursuant to this Section 9.1(c). For purposes of this
subsection (c), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any rights or warrants in respect of shares of
Common Stock held in the treasury of the Company. Rights or warrants
issued by the Company to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which
rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, including shares of Common
Stock issued upon exercise of the Warrants evidenced by this Warrant
Certificate, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events (a "Trigger Event"), shall
for purposes of this subsection (c) not be deemed issued until the
occurrence of the earliest Trigger Event.
A-10
<PAGE> 30
(d) Special Dividends. In case the Company after the date
hereof shall distribute to all holders of shares of Common Stock
evidences of its indebtedness or assets (excluding any regular periodic
cash dividend), Equity Securities (other than Common Stock) or rights
to subscribe (excluding those referred to in subsection (c) above) for
Equity Securities other than Common Stock, in each such case the
Exercise Price in effect immediately prior to the close of business on
the record date for the determination of stockholders entitled to
receive such distribution shall be adjusted to a price obtained by
multiplying such Exercise Price by a fraction of which (x) the
numerator shall be the Closing Price per share of Common Stock on such
record date, less the then-current fair market value as of such record
date (as determined by the Board of Directors in its good faith
judgment) of the portion of assets or evidences of indebtedness or
Equity Securities or subscription rights so distributed applicable to
one share of Common Stock, and (y) the denominator shall be such
Closing Price, such adjustment to become effective immediately prior to
the opening of business on the day following such record date;
provided, however, that no adjustment shall be made (1) if the Company
issues or distributes to each Warrantholder the subscription rights
referred to above that each Warrantholder would have been entitled to
receive had the Warrants held by such Warrantholder been exercised
prior to such record date or (2) if the Company grants to each
Warrantholder the right to receive, upon the exercise of the Warrants
held by such Warrantholder at any time after the distribution of the
evidences of indebtedness or assets or Equity Securities referred to
above, the evidences of indebtedness or assets or Equity Securities
that such Warrantholder would have been entitled to receive had such
Warrants been exercised prior to such record date. The Company shall
provide any Warrantholder, upon receipt of a written request therefor,
with any indenture or other instrument defining the rights of the
holders of any indebtedness, assets, subscription rights or Equity
Securities referred to in this subsection (d). Rights or warrants
issued by the Company to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which
rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, including shares of Common
Stock issued upon exercise of the Warrants evidenced by this Warrant
Certificate, in each case in clauses (i) through (iii) until the
occurrence of a Trigger Event, shall for purposes of this subsection
(d) not be deemed issued until the occurrence of the earliest Trigger
Event.
(e) Tender or Exchange Offer. In case a tender or exchange
offer made by the Company or any subsidiary of the Company for all or
any portion of the Common Stock shall be consummated and such tender
offer shall involve an aggregate consideration having a fair market
value (as determined by the Board of Directors in its good faith
judgment) at the last time (the "Offer Time") tenders
A-11
<PAGE> 31
may be made pursuant to such tender or exchange offer (as it may be
amended) that, together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors in its good faith
judgment), as of the Offer Time, of consideration payable in respect of
any tender or exchange offer by the Company or any such subsidiary for
all or any portion of the Common Stock consummated preceding the Offer
Time and in respect of which no Exercise Price adjustment pursuant to
this subsection (e) has been made, exceeds 5% of the product of the
Closing Price of the Common Stock at the Offer Time multiplied by the
number of shares of Common Stock outstanding (including any tendered
shares) at the Offer Time, the Exercise Price shall be reduced so that
the same shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the Offer Time by a fraction of
which (x) the numerator shall be (i) the product of the Closing Price
of the Common Stock at the Offer Time multiplied by the number of
shares of Common Stock outstanding (including any tendered shares) at
the Offer Time minus (ii) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based
on the acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered and not
withdrawn as of the Offer Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y)
the denominator shall be the product of (i) such Closing Price at the
Offer Time multiplied by (ii) such number of outstanding shares at the
Offer Time minus the number of Purchased Shares, such reduction to
become effective immediately prior to the opening of business on the
day following the Offer Time. For purposes of this subsection (e), the
number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock.
(f) Closing Price Determination. For the purpose of any
computation under subsections (c) and (d) of this Section 9.1, the
Closing Price of Common Stock on any date shall be deemed to be the
average of the Closing Prices for the five consecutive Trading Days
ending not later than the day in question and commencing on a day
selected at random in good faith by the Company which is not more than
20 Trading Days before the day in question, provided, however, that (i)
if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Exercise
Price pursuant to this Section 9 occurs on or after the 20th Trading
Day prior to the day in question and prior to the "ex" date for the
issuance or distribution requiring such computation, the Closing Price
for each Trading Day prior to the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the same fraction
which the Exercise Price is so required to be adjusted as a result of
such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the
A-12
<PAGE> 32
Exercise Price pursuant to this Section 9 occurs on or after the "ex"
date for the issuance or distribution requiring such computation and on
or prior to the day in question, the Closing Price for each Trading Day
on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by
which the Exercise Price is so required to be adjusted as a result of
such other event, and (iii) if the "ex" date for the issuance or
distribution requiring such computation is on or prior to the day in
question, after taking into account any adjustment required pursuant to
clause (ii) of this proviso, the Closing Price for each Trading Day on
or after such "ex" date shall be adjusted by adding thereto the fair
market value on the day in question (as determined by the Board of
Directors in a manner consistent with any determination of such value
for the purposes of subsection (d) of this Section 9.1) of the assets,
evidences of indebtedness, Equity Securities or subscription rights
being distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For the purposes of
any computation under subsection (e) of this Section 9.1, the Closing
Price on any date shall be deemed to be the average of the daily
Closing Prices for the five consecutive Trading Days ending not later
than the Offer Time of such tender or exchange offer and commencing on
a day selected at random in good faith by the Company which date shall
be on or after the latest (the "Commencement Date") of (i) the date 20
Trading Days before the date in question, (ii) the date of commencement
of the tender or exchange offer requiring such computation and (iii)
the date of the last amendment, if any, of such tender or exchange
offer involving a change in the maximum number of shares for which
tenders are sought or a change in the consideration offered; provided,
however, that if the "ex" date for any event (other than the tender or
exchange offer requiring such computation) that requires an adjustment
to the Exercise Price pursuant to this Section 9 occurs on or after the
Commencement Date and prior to the Offer Time for the tender or
exchange offer requiring such computation, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by
which the Exercise Price is so required to be adjusted as a result of
such other event. For purposes of this subsection (f), the term "ex"
date, (i) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on Nasdaq
or on the relevant exchange or in the relevant market from which the
Closing Price was obtained without the right to receive such issuance
or distribution, (ii) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades regular way on Nasdaq or such exchange or in
such market after the time at which such subdivision or combination
becomes effective, and (iii) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades
regular way on Nasdaq or such exchange or in such market after the
Offer Time of such tender or exchange offer.
A-13
<PAGE> 33
(g) Minimum Adjustment Requirement. No adjustment shall be
required unless such adjustment would result in an increase or decrease
of at least $0.01 in the Exercise Price then subject to adjustment;
provided, however, that any adjustments that are not made by reason of
this subsection (g) shall be carried forward and taken into account in
any subsequent adjustment. In case the Company shall at any time issue
shares of Common Stock by way of dividend on any stock of the Company
or subdivide or combine the outstanding shares of Common Stock, said
amount of $0.01 specified in the preceding sentence (as theretofore
increased or decreased, if said amount shall have been adjusted in
accordance with the provisions of this subsection (g)) shall forthwith
be proportionately increased in the case of such a combination or
decreased in the case of such a subdivision or stock dividend so as
appropriately to reflect the same.
(h) Calculations. All calculations under this Section 9.1
shall be made to the nearest $0.01.
(i) Certificate. Whenever an adjustment in the Exercise Price
is made as required or permitted by the provisions of this Section 9.1,
the Company shall promptly file with the Warrant Agent a certificate of
its chief financial officer setting forth (A) the adjusted Exercise
Price as provided in this Section 9.1 and a brief statement of the
facts requiring such adjustment and the computation thereof and (B) the
number of shares of Common Stock (or portions thereof) purchasable upon
exercise of a Warrant after such adjustment in the Exercise Price in
accordance with Section 9.2 hereof and the record date therefor, and
promptly after such filing shall mail or cause to be mailed a notice of
such adjustment to each Warrantholder at his or her last address as the
same appears on the Warrant Register. Such certificate, in the absence
of manifest error, shall be conclusive and final evidence of the
correctness of such adjustment. The Warrant Agent shall be entitled to
rely upon such certificate, and shall be under no duty or
responsibility with respect to any such certificate except to exhibit
the same to any Warrantholder desiring inspection thereof.
(j) Notice. In case:
(i) the Company shall declare any dividend or any
distribution of any kind or character (whether in cash,
securities or other property) on or in respect of shares of
Common Stock or to the stockholders of the Company (in their
capacity as such), excluding any regular periodic cash
dividend paid out of current or retained earnings (as such
terms are used in generally accepted accounting principles);
or
A-14
<PAGE> 34
(ii) the Company shall authorize the granting to the
holders of shares of Common Stock of rights to subscribe for
or purchase any shares of capital stock or of any other right;
or
(iii) of any reclassification of shares of Common
Stock (other than a subdivision or combination of outstanding
shares of Common Stock), or of any consolidation or merger to
which the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the
Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall mail
or cause to be mailed to the Warrantholders, at their last addresses as they
shall appear upon the Warrant Register, at least 30 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or, if a record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend, distribution or
rights are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and, if applicable, the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
(including cash) deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up. Failure to give any such
notice, or any defect therein, shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) Section 305. Anything in this Section 9.1 to the contrary
notwithstanding, the Company shall be entitled, but not required, to
make such reductions in the Exercise Price, in addition to those
required by this Section 9.1, as it in its discretion shall determine
to be advisable, including, without limitation, in order that any
dividend in or distribution of shares of Common Stock or shares of
capital stock of any class other than Common Stock, subdivision,
reclassification or combination of shares of Common Stock, issuance of
rights or warrants, or any other transaction having a similar effect,
shall not be treated as a distribution of property by the Company to
its stockholders under Section 305 of the Internal Revenue Code of
1986, as amended, or any successor provision and shall not be taxable
to them.
(l) No Adjustment. Anything to the contrary herein
notwithstanding, no adjustment to the Exercise Price or the number of
shares of Common Stock
A-15
<PAGE> 35
purchasable upon exercise of a Warrant shall be made pursuant to this
Section 9.1 or Section 9.2 as a result of, or in connection with, the
issuance of options or rights to purchase Common Stock issued to
employees of the Company or its Subsidiaries pursuant to a stock option
or other similar plan adopted by the Board of Directors or an
employment agreement approved by the Board of Directors, or the
modification, renewal or extension of any such plan or agreement if
approved by the Board of Directors.
(m) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for purposes of taking any
action that requires an adjustment of the Exercise Price under this
Section 9, and shall, thereafter and before the effective date of such
action, legally abandon its plan to take such action, then thereafter
no adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
9.2. Adjustment to Number of Warrant Shares. Upon each
adjustment of the Exercise Price pursuant to Section 9.1 hereof the number of
Warrant Shares purchasable upon exercise of a Warrant outstanding prior to the
effectiveness of such adjustment shall be adjusted to the number, calculated to
the nearest one-hundredth of a share, obtained by (x) multiplying the number of
Warrant Shares purchasable immediately prior to such adjustment upon the
exercise of a Warrant by the Exercise Price in effect prior to such adjustment
and (y) dividing the product so obtained by the Exercise Price in effect after
such adjustment of the Exercise Price.
9.3. Organic Change.
(a) Company Survives. Upon the consummation of an Organic
Change (other than a transaction in which the Company is not the surviving
entity), lawful provision shall be made as part of the terms of such transaction
whereby the terms of the Warrant Certificates shall be modified, without payment
of any additional consideration therefor, so as to provide that upon exercise of
Warrants following the consummation of such Organic Change, the Warrantholders
of such Warrants shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change, assuming such holder of
Warrant Shares (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which a sale,
transfer or lease of all or substantially all of the assets of the Company was
made, as the case may be (a "Constituent Person"), or an Affiliate of a
Constituent Person, and (ii) failed to exercise his rights of election, if any,
as to the kind and amount of securities, cash and other property receivable upon
such Organic Change (provided that if the kind and amount of securities, cash
and other property receivable
A-16
<PAGE> 36
upon such Organic Change is not the same for each share of Common Stock held
immediately prior to such Organic Change by others than a Constituent Person or
an Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing shares"), then for the purpose of this
subsection (a) the kind and amount of securities, cash and other property
receivable upon such Organic Change by each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares); provided, however, that no adjustment shall be made as a
result of such Organic Change to the Exercise Price or the number of Warrant
Shares notwithstanding any provision of Section 9 hereof unless any event
requiring any such adjustment shall have occurred or shall occur prior to, upon
or after such Organic Change. Lawful provision also shall be made as part of the
terms of the Organic Change so that all other terms of the Warrant Certificates
shall remain in full force and effect following such an Organic Change. The
provisions of this Section 9.3(a) shall similarly apply to successive Organic
Changes.
(b) Company Does Not Survive. The Company shall not enter into
an Organic Change that is a transaction in which the Company is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to each
Warrantholder, without payment of any additional consideration therefor, with
terms that provide that upon the exercise of the Warrants, the Warrantholders of
such Warrants shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change, assuming such holder of
Warrant Shares (i) is not a Constituent Person or an Affiliate of a Constituent
Person and (ii) failed to exercise his rights of election, if any, as to the
kind and amount of securities, cash and other property receivable upon such
Organic Change (provided that if the kind and amount of securities, cash and
other property receivable upon such Organic Change is not the same for each
non-electing share, then for the purpose of this subsection (b) the kind and
amount of securities, cash and other property receivable upon such Organic
Change by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares); provided,
however, that no adjustment shall be made as a result of such Organic Change to
the Exercise Price or the number of Warrant Shares notwithstanding any provision
of Section 9 hereof unless any event requiring any such adjustment shall have
occurred or shall occur prior to, upon or after such Organic Change. The
certificate or articles of incorporation or other constituent document of the
surviving entity shall provide for such adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be equivalent to the adjustments provided for in
Section 9.1 hereof.
9.4. Statement on Warrants. The form of Warrant Certificate
need not be changed because of any adjustment made pursuant to Section 8,
Section 9.1 or Section
A-17
<PAGE> 37
9.2 hereof, and Warrants issued after such adjustment may state the same
Exercise Price and the same number of Warrant Shares as are stated in this
Warrant Certificate.
Section 10. Warrant Agent. The Company shall cause to be
appointed in the Borough of Manhattan, The City of New York, a Warrant Agent,
having a capital and surplus of at least $50,000,000. Initially, Chase Mellon
Shareholder Services, L.L.C. will act as Warrant Agent.
Section 11. Fractional Interests. The Company shall not be
required to issue Fractional Warrant Shares on the exercise of the Warrants
evidenced by this Warrant Certificate. If any Fractional Warrant Share would,
but for the provisions of this Section 11, be issuable on the exercise of the
Warrants evidenced by this Warrant Certificate (or specified portions thereof),
the Company shall pay an amount in cash equal to the fraction of a Warrant Share
represented by such Fractional Warrant Share multiplied by the Closing Price on
the day of such exercise.
Section 12. No Rights as Shareholder. Nothing in this Warrant
Certificate shall be construed as conferring upon the Warrantholder or its
transferees any rights as a shareholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a shareholder with
respect to any meeting of shareholders for the election of directors of the
Company or any other matter.
Section 13. Successors. All the covenants and provisions of
this Warrant Certificate by or for the benefit of the Company or the
Warrantholder shall bind and inure to the benefit of their respective successors
and permitted assigns hereunder.
Section 14. Governing Law; Choice of Forum, Etc. The validity,
construction and performance of this Warrant Certificate shall be governed by,
and interpreted in accordance with, the laws of New York without reference to
its conflict of laws rules. The Company and the Warrantholder (the "parties
hereto") agree that the appropriate and exclusive forum for any disputes arising
out of this Warrant Certificate solely between or among any or all of the
Company, on the one hand, and the Investor and/or any Person who has become a
Warrantholder, on the other, shall be the United States District Court for the
Southern District of New York, and, if such court will not hear any such suit,
the courts of the state of the Company's incorporation, and the parties hereto
irrevocably consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
parties hereto further agree that the parties will not bring suit with respect
to any disputes, except as expressly set forth below, arising out of this
Warrant Certificate for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the parties hereto
irrevocably consents to the service of process in any action or proceeding
hereunder by the mailing of copies thereof by registered or certified airmail,
A-18
<PAGE> 38
postage prepaid, if to (i) the Company, at 800 Connecticut Avenue, Norwalk,
Connecticut, 06854, Attention: General Counsel, or at such other address
specified by the Company in writing to the Warrant Agent, and (ii) any
Warrantholder, at the address of such Warrantholder specified in the Warrant
Register. The foregoing shall not limit the rights of any party hereto to serve
process in any other manner permitted by the law or to obtain execution of
judgment in any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of indebtedness. The parties agree to waive
any and all rights that they may have to a jury trial with respect to disputes
arising out of this Agreement.
Section 15. Benefits of this Agreement. Nothing in this
Warrant Certificate shall be construed to give to any Person other than the
Company and the Warrantholder any legal or equitable right, remedy or claim
under this Warrant Certificate, and this Warrant Certificate shall be for the
sole and exclusive benefit of the Company and the Warrantholder. This Warrant
Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Warrant Agent.
A-19
<PAGE> 39
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed, as of this __ day of ________________, ______________.
OXFORD HEALTH PLANS, INC.
By:__________________________
Name:
Title:
Attest:
__________________________
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Warrant Agent
By:__________________________
Name:
Title:
A-20
<PAGE> 40
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To OXFORD HEALTH PLANS, INC.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, Warrant Shares, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of [COMPLETE WHERE
APPLICABLE]:
cash or a certified or official bank check in the amount of
$__________; and/or
$__________ Stated Value of Senior Preferred Stock (as to
which $ of accumulated dividends are unpaid), of which
$____________ Stated Value and the corresponding accumulated
dividends should be applied toward the payment of such Warrant
Shares; and/or
_______ number of Warrants, valued at $__________ each (such
value arrived at by subtracting the Exercise Price of
$__________ from the Warrant Market Price of $__________, both
the Exercise Price and Warrant Market Price determined in
accordance with the provisions of the Warrant Certificate);
For a total purchase price of $__________.
If the Stated Value and accumulated and unpaid dividends of
the shares of Senior Preferred Stock or the value of the Warrants evidenced by
the Warrant Certificate delivered herewith exceeds that portion of the payment
which is to be paid by the surrender of such shares or Warrants, you are
authorized, as agent of the undersigned, to deliver to the Company such shares
or Warrant Certificate delivered herewith for exchange into smaller
denominations in order that you may deliver to the undersigned new shares of
Senior Preferred Stock or Warrant Certificates, in Stated Value or number as the
case may be, equal to the difference between the Stated Value or number as the
case may be, of the Senior Preferred Stock or Warrants surrendered, less the
Stated Value or number as the case may be, thereof, used to purchase Warrant
Shares.
A-21
<PAGE> 41
Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay any cash for any Fractional Warrant Shares to (please print name
address and social security or other identifying number)*:
Name:
Address:
Soc. Sec. #:
AND, if said number of Warrant Shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of the undersigned for the balance remaining of the Warrant Shares
purchasable thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**
* The Warrant Certificate and the Investment Agreement contain restrictions on
the sale and other transfer of the Warrants evidenced by such Warrant
Certificate.
** The above signature should correspond exactly with the name on the face of
this Warrant Certificate or with the name of the assignee appearing in the
assignment form below.
A-22
<PAGE> 42
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ______ Warrant Shares of the Company, evidenced by the
within Warrant Certificate hereby irrevocably constituting and appointing
_________________ Attorney to transfer said Warrants on the books of the
Company, with full power of substitution in the premises.
Dated: ,
Signature of Registered Holder*
Signature Guaranteed:
Signature of Guarantor
* The above signature should correspond exactly with the name on the face of
this Warrant Certificate.
A-23
<PAGE> 43
Exhibit B
Form of Series B Warrant Certificate
B-1
<PAGE> 44
No. [Number of Warrants]
SERIES B WARRANTS
Exercisable commencing May 13, 1998;
Void after Expiration Time (as defined herein)
OXFORD HEALTH PLANS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, ____________________, or
registered assigns (the "Warrantholder"), is the owner of ______________Warrants
(as defined below), each of which entitles the Warrantholder to purchase from
the Company one fully paid, duly authorized and nonassessable share of Common
Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any
time from and after May 13, 1998 (the "Issue Date") and continuing up to the
Expiration Time (as defined herein) at a per share exercise price determined
according to the terms and subject to the conditions set forth in this
certificate (the "Warrant Certificate"). The number of shares of Common Stock
issuable upon exercise of each such Warrant and the exercise price per share of
Common Stock are subject to adjustment from time to time pursuant to the
provisions of Sections 8 and 9 of this Warrant Certificate. The Warrants
evidenced by this Warrant Certificate are part of a series of warrants to
purchase up to 6,730,000 shares of Common Stock (collectively, the "Warrants"),
issued pursuant to an Investment Agreement, dated as of February 23, 1998 (as it
may be amended, supplemented or otherwise modified from time to time, the
"Investment Agreement"), by and between TPG Oxford LLC, a Delaware limited
liability company (the "Investor"), and the Company, or pursuant to the Warrant
Agreement, dated as of ________, 1999 (as it may be amended, supplemented or
otherwise modified from time to time, the "Warrant Agreement"), between the
Company and ChaseMellon Shareholder Services, L.L.C., as Warrant Agent.
Section 1.1. Other Obligations. The parties hereby acknowledge
that, pursuant to the Warrant Agreement, nothing in the Warrant Agreement shall
permit the Company or the Warrant Agent to authorize or take action that alters
or reduces the rights of the Existing Holders (as defined therein) under the
Investment Agreement or the Warrants and, in the event of any inconsistency
between the provisions of the Warrant Agreement, on the one hand, and this
Warrant Certificate or the Investment Agreement, on the other hand, the
provisions of this Warrant Agreement and/or, in the case of the Existing
Holders, the Investment Agreement shall control.
Section 1.2 Definitions. As used in this Warrant Certificate,
the following terms shall have the meanings set forth below:
"Board of Directors" means the board of directors of the
Company.
B-2
<PAGE> 45
"Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Certificate of Designations" means, with respect to the
Series D Preferred Stock or the Series E Preferred Stock, as the case
may be, the Certificate of Designations therefor filed by the Company
with the Secretary of State of the State of Delaware.
"Certificate of Incorporation" means the Second Amended and
Restated Certificate of Incorporation of the Company, as amended from
time to time.
"Closing Price" with respect to a share of Common Stock on any
day means, subject to Section 9.1(f) hereof, the last reported sale
price on that day or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices, regular
way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on
Nasdaq or, if the shares of Common Stock are not quoted on Nasdaq, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not quoted on Nasdaq and
not listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the high bid
and low asked prices on such other nationally recognized quotation
system then in use, or, if on any such day the shares of Common Stock
are not quoted on any such quotation system, the average of the closing
bid and asked prices as furnished by a professional market maker
selected by the Board of Directors making a market in the shares of
Common Stock. If the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price" means the fair
market value of a share of Common Stock, as determined in good faith by
the Board of Directors.
"Common Stock" has the meaning set forth in the preamble
hereto.
"Company" has the meaning set forth in the preamble hereto.
"Equity Securities" of any Person means any and all common
stock, preferred stock, any other class of capital stock and
partnership or limited liability company interests of such Person or
any other similar interests of any Person that is not a corporation,
partnership or limited liability company.
"Exercise Price" has the meaning set forth in Section 8
hereof.
"Expiration Date" means the earlier of (i) May 13, 2008, and
(ii) the date of an Optional Redemption.
B-3
<PAGE> 46
"Expiration Time" means 5:00 P.M., New York City time, on the
Expiration Date.
"Fractional Warrant Share" means any fraction of a whole share
of Common Stock issued, or issuable upon, exercise of the Warrants.
"Investment Agreement" has the meaning set forth in the
preamble hereto.
"Investor" has the meaning set forth in the preamble hereto.
"Issue Date" has the meaning set forth in the preamble hereto.
"Nasdaq" means The Nasdaq Stock Market's National Market.
"Offer Time" has the meaning set forth in Section 9.1(e)
hereof.
"Optional Redemption" means a redemption of the Series E
Preferred Stock pursuant to Article V, Section A of the Certificate of
Designations therefor.
"Organic Change" means, with respect to any Person, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or merger of such
Person into, any other Person, any merger of another Person into such
Person (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of such Person), and any sale or transfer or
lease of all or substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which is the
subject of Section 9.1(b)) pursuant to which any class or series of
Equity Securities of such Person is converted into the right to receive
other securities, cash or other property.
"Person" means any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Securities Act" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Senior Preferred Stock" means the Series D Preferred Stock
and Series E Preferred Stock.
"Series D Preferred Stock" means the Series D Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
B-4
<PAGE> 47
"Series E Preferred Stock" means the Series E Cumulative
Preferred Stock, par value $0.01 per share, of the Company.
"Stated Value" means the stated value of the Series D
Preferred Stock or the Series E Preferred Stock , as the case may be,
as set forth in the Certificate of Designations therefor.
"Trading Day" means any day on which Nasdaq is open for
trading, or if the shares of Common Stock are not quoted on Nasdaq, any
day on which the principal national securities exchange or national
quotation system on which the shares of Common Stock are listed,
admitted to trading or quoted is open for trading, or if the shares of
Common Stock are not so listed, admitted to trading or quoted, any
Business Day.
"Warrant" has the meaning set forth in the preamble hereto.
"Warrant Agent" means the Person named or otherwise appointed
as such as set forth in Section 10 hereof.
"Warrant Agreement" has the meaning set forth in the preamble
hereto.
"Warrant Certificate" has the meaning in the preamble hereto.
"Warrant Market Price" means the average of the Closing Prices
of a share of Common Stock for the ten consecutive Trading Days ending
on the Trading Day immediately prior to the day on which the Election
to Exercise is delivered.
"Warrant Register" has the meaning set forth in Section 2.2
hereof.
"Warrant Shares" means the shares of Common Stock issued, or
issuable upon, exercise of the Warrants.
"Warrantholder" has the meaning set forth in the preamble
hereto.
Section 2. Transferability.
2.1 Registration. The Warrants shall be issued only in
registered form.
2.2 Transfer. The Warrants evidenced by this Warrant
Certificate may be sold or otherwise transferred at any time (except as such
sale or transfer may be restricted pursuant to the Securities Act or any
applicable state securities laws) and any such sale or transfer shall be
effected on the books of the Company (the "Warrant Register") maintained at the
corporate trust office of the Warrant Agent upon surrender of this Warrant
Certificate at the corporate trust
B-5
<PAGE> 48
office of the Warrant Agent for registration of transfer duly endorsed by the
Warrantholder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. Upon any registration of transfer, the Company shall execute, and the
Warrant Agent shall countersign and deliver a new Warrant Certificate or
Certificates in appropriate denominations to the Person or Persons entitled
thereto.
2.3. Legend on Warrant Shares. If and for so long as required
by the Investment Agreement, this Warrant Certificate shall contain a legend as
set forth in Section 8.10 of the Investment Agreement.
Section 3. Exchange of Warrant Certificate. Any Warrant
Certificate may be exchanged for another certificate or certificates of like
tenor entitling the Warrantholder to purchase a like aggregate number of Warrant
Shares as the certificate or certificates surrendered then entitles such
Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant
Certificate shall make such request in writing delivered to the Warrant Agent,
and shall surrender, properly endorsed, the certificate evidencing the Warrant
to be so exchanged. Thereupon, the Company shall execute, and the Warrant Agent
shall countersign and deliver to the Person entitled thereto a new Warrant
certificate or certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1. Duration of Warrant. On the terms and subject to the
conditions set forth in this Warrant Certificate, the Warrantholder may exercise
the Warrants evidenced hereby, in whole or in part, at any time and from time to
time after the Issue Date and before the Expiration Time. If the Warrants
evidenced hereby are not exercised by the Expiration Time, they shall become
void, and all rights hereunder shall thereupon cease.
4.2. Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in
this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced
hereby, in whole or in part, by presentation and surrender to the Warrant Agent
of this Warrant Certificate together with the attached Election to Exercise duly
filled in and signed, and accompanied by payment to the Company of the Exercise
Price for the number of Warrant Shares specified in such Election to Exercise.
Payment of the aggregate Exercise Price shall be made (i) in cash in an amount
equal to the aggregate Exercise Price; (ii) by certified or official bank check
in an amount equal to the aggregate Exercise Price; (iii) by an exchange (which
shall be treated as a recapitalization) with the Company of a number of shares
of Senior Preferred Stock having an aggregate Stated Value plus accumulated and
unpaid dividends thereon equal to the aggregate Exercise Price; (iv) by an
exchange (which shall be treated as a recapitalization) with the Company of
outstanding Warrants (other than the Warrants being exercised) having an
aggregate Warrant Market Price which, after subtracting the aggregate Exercise
Prices thereof, equals the aggregate Exercise Price of the Warrants being
exercised; or (v) by any combination of the foregoing; provided,
B-6
<PAGE> 49
however, that (except to the extent expressly permitted by the proviso in
Section 5(b) of the Share Exchange Agreement, dated as of February 13, 1999, by
and among the Company and the investors named therein) the Warrantholders may
not use shares of Series D Preferred Stock pursuant to clause (iii) or (v) in
connection with any exercise prior to May 13, 2000.
(b) On the terms and subject to the conditions set forth in
this Warrant Certificate, upon such presentation and surrender of this Warrant
Certificate and payment of such aggregate Exercise Price as set forth in
paragraph (a) hereof, the Company shall promptly issue and cause to be delivered
to the Warrant Agent a certificate or certificates (in such name or names as the
Warrantholder may designate in writing) for the specified number of duly
authorized, fully paid and non-assessable Warrant Shares issuable upon exercise,
and shall deliver to the Warrantholder cash, as provided in Section 11 hereof,
with respect to any Fractional Warrant Shares otherwise issuable upon such
surrender. Upon receipt of such Warrant Shares, the Warrant Agent shall transmit
such Warrant Shares to the Warrantholder, or to such Persons as the
Warrantholder may designate in writing. In the event that the Warrants evidenced
by this Warrant Certificate are exercised in part prior to the Expiration Time,
the Company shall issue and cause to be delivered to the Warrant Agent a
certificate or certificates (in such name or names as the Warrantholder may
designate in writing) evidencing any remaining unexercised Warrants. Upon
receipt of such Warrant Certificate, the Warrant Agent shall countersign and
deliver such Warrant Certificate to the Warrantholder, or to such persons as the
Warrantholder may designate in writing.
(c) Each Person in whose name any certificate for Warrant
Shares is issued shall for all purposes be deemed to have become the holder of
record of the Warrant Shares represented thereby on the first date on which both
the Warrant Certificate evidencing the respective Warrants was surrendered and
payment of the Exercise Price and any applicable taxes was made, irrespective of
date of issue or delivery of such certificate.
Section 5. Payment of Taxes. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the Warrants evidenced by this Warrant Certificate
or certificates representing such shares or securities (other than income taxes
imposed on the Warrantholder); provided that the Company shall not be required
to pay any such tax or other charge that may be imposed in connection with any
transfer involved in the issue of any certificate for Warrant Shares or other
securities or property, or payment of cash, to any Person other than the holder
of the Warrant Certificate surrendered upon exercise, and in case of any such
tax or charge, the Warrant Agent and the Company shall not be required to issue
any security or property or pay any cash until such tax or charge has been paid
or it has been established to the Warrant Agent's and the Company's satisfaction
that no such tax or charge is payable.
B-7
<PAGE> 50
Section 6. Mutilated or Missing Warrant. If any Warrant
Certificate is lost, stolen, mutilated or destroyed, the Company shall issue and
the Warrant Agent shall countersign, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, upon receipt
of a proper affidavit or other evidence reasonably satisfactory to the Company
and the Warrant Agent (and surrender of any mutilated Warrant Certificate) and
bond of indemnity in form and amount and with corporate surety reasonably
satisfactory to the Company and the Warrant Agent in each instance protecting
the Company and the Warrant Agent, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants as the Warrant Certificate so
lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at
any time enforceable by anyone. An applicant for such substitute Warrant
Certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
All Warrant Certificates shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
Section 7. Reservation of Shares. The Company hereby agrees
that there shall be reserved for issuance and delivery upon exercise of this
Warrant, free from preemptive rights, the number of shares of authorized but
unissued shares of Common Stock as shall be required for issuance or delivery
upon exercise of the Warrants evidenced by this Warrant Certificate. The Company
further agrees that it will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by the Company. Without limiting the
generality of the foregoing, the Company agrees that before taking any action
which would cause an adjustment reducing the Exercise Price below the then-par
value of Warrant Shares issuable upon exercise hereof, the Company shall from
time to time take all such action that may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at the Exercise Price as so adjusted.
Section 8. Exercise Price. The price per share (the "Exercise
Price") at which Warrant Shares shall be purchasable upon the exercise of the
Warrants evidenced by this Warrant Certificate shall be $17.75, subject to
adjustment pursuant to Section 9 hereof.
Section 9. Adjustment of Exercise Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of the Warrants
evidenced by this Warrant Certificate and the Exercise Price thereof shall be
subject to adjustment from time to time after the date hereof upon the happening
of certain events, as follows:
B-8
<PAGE> 51
9.1. Adjustments to Exercise Price. The Exercise Price shall
be subject to adjustment as follows:
(a) Stock Dividends. In case the Company after the date hereof
shall pay a dividend or make a distribution to all holders of shares of
Common Stock in shares of Common Stock, then in any such case the
Exercise Price in effect at the opening of business on the day
following the record date for the determination of stockholders
entitled to receive such dividend or distribution shall be reduced to a
price obtained by multiplying such Exercise Price by a fraction of
which (x) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date and (y) the
denominator shall be the sum of such number of shares of Common Stock
outstanding and the total number of shares of Common Stock constituting
such dividend or distribution, such reduction to become effective
immediately after the opening of business on the day following such
record date. For purposes of this subsection (a), the number of shares
of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(b) Stock Splits and Reverse Splits. In case after the date
hereof outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Exercise Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely, in case after the date hereof outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common
Stock, the Exercise Price in effect at the opening of business on the
day following the day upon which such combination becomes effective
shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination becomes effective.
(c) Issuances Below Market. In case the Company after the date
hereof shall issue rights or warrants to holders of shares of Common
Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Closing Price per share on the
record date for the determination of stockholders entitled to receive
such rights or warrants, the Exercise Price in effect at the opening of
business on the day following such record date shall be adjusted to a
price obtained by multiplying such Exercise Price by a fraction of
which (x) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date plus the
number of shares of Common Stock that the aggregate offering price of
the total number of shares so to be offered would purchase at such
Closing Price and (y) the denominator shall be the number of shares of
Common Stock outstanding at the close of business on such record date
plus the number of additional shares of Common Stock so to be offered
for
B-9
<PAGE> 52
subscription or purchase, such adjustment to become effective
immediately after the opening of business on the day following such
record date; provided, however, that no adjustment shall be made if the
Company issues or distributes to each Warrantholder the rights or
warrants that each Warrantholder would have been entitled to receive
had the Warrants held by such Warrantholder been exercised prior to
such record date; and provided, further, that in no event shall the
fact that the Series B Warrants of the Company become exercisable for
shares of Common Stock upon occurrence of the Shareholder Approval (as
defined in the Investment Agreement) constitute an issuance of rights
or warrants pursuant to this Section 9.1(c). For purposes of this
subsection (c), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any rights or warrants in respect of shares of
Common Stock held in the treasury of the Company. Rights or warrants
issued by the Company to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which
rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, including shares of Common
Stock issued upon exercise of the Warrants evidenced by this Warrant
Certificate, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events (a "Trigger Event"), shall
for purposes of this subsection (c) not be deemed issued until the
occurrence of the earliest Trigger Event.
(d) Special Dividends. In case the Company after the date
hereof shall distribute to all holders of shares of Common Stock
evidences of its indebtedness or assets (excluding any regular periodic
cash dividend), Equity Securities (other than Common Stock) or rights
to subscribe (excluding those referred to in subsection (c) above) for
Equity Securities other than Common Stock, in each such case the
Exercise Price in effect immediately prior to the close of business on
the record date for the determination of stockholders entitled to
receive such distribution shall be adjusted to a price obtained by
multiplying such Exercise Price by a fraction of which (x) the
numerator shall be the Closing Price per share of Common Stock on such
record date, less the then-current fair market value as of such record
date (as determined by the Board of Directors in its good faith
judgment) of the portion of assets or evidences of indebtedness or
Equity Securities or subscription rights so distributed applicable to
one share of Common Stock, and (y) the denominator shall be such
Closing Price, such adjustment to become effective immediately prior to
the opening of business on the day following such record date;
provided, however, that no adjustment shall be made (1) if the Company
issues or distributes to each Warrantholder the subscription rights
referred to above that each Warrantholder would have been entitled to
receive had the Warrants held by such Warrantholder been exercised
prior to such record date or (2) if the Company grants to each
Warrantholder the right to receive, upon the exercise of the Warrants
held by such Warrantholder at any time after the distribution of the
evidences of indebtedness or assets or Equity Securities referred to
above, the evidences of
B-10
<PAGE> 53
indebtedness or assets or Equity Securities that such Warrantholder
would have been entitled to receive had such Warrants been exercised
prior to such record date. The Company shall provide any Warrantholder,
upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of any indebtedness,
assets, subscription rights or Equity Securities referred to in this
subsection (d). Rights or warrants issued by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase Equity Securities, which rights or warrants (i) are deemed to
be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of
Common Stock, including shares of Common Stock issued upon exercise of
the Warrants evidenced by this Warrant Certificate, in each case in
clauses (i) through (iii) until the occurrence of a Trigger Event,
shall for purposes of this subsection (d) not be deemed issued until
the occurrence of the earliest Trigger Event.
(e) Tender or Exchange Offer. In case a tender or exchange
offer made by the Company or any subsidiary of the Company for all or
any portion of the Common Stock shall be consummated and such tender
offer shall involve an aggregate consideration having a fair market
value (as determined by the Board of Directors in its good faith
judgment) at the last time (the "Offer Time") tenders may be made
pursuant to such tender or exchange offer (as it may be amended) that,
together with the aggregate of the cash plus the fair market value (as
determined by the Board of Directors in its good faith judgment), as of
the Offer Time, of consideration payable in respect of any tender or
exchange offer by the Company or any such subsidiary for all or any
portion of the Common Stock consummated preceding the Offer Time and in
respect of which no Exercise Price adjustment pursuant to this
subsection (e) has been made, exceeds 5% of the product of the Closing
Price of the Common Stock at the Offer Time multiplied by the number of
shares of Common Stock outstanding (including any tendered shares) at
the Offer Time, the Exercise Price shall be reduced so that the same
shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the Offer Time by a fraction of which (x)
the numerator shall be (i) the product of the Closing Price of the
Common Stock at the Offer Time multiplied by the number of shares of
Common Stock outstanding (including any tendered shares) at the Offer
Time minus (ii) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered and not withdrawn as of the Offer
Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the denominator shall be
the product of (i) such Closing Price at the Offer Time multiplied by
(ii) such number of outstanding shares at the Offer Time minus the
number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day following the
Offer Time. For purposes of this subsection (e), the number of shares
of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company but shall include
B-11
<PAGE> 54
shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock.
(f) Closing Price Determination. For the purpose of any
computation under subsections (c) and (d) of this Section 9.1, the
Closing Price of Common Stock on any date shall be deemed to be the
average of the Closing Prices for the five consecutive Trading Days
ending not later than the day in question and commencing on a day
selected at random in good faith by the Company which is not more than
20 Trading Days before the day in question, provided, however, that (i)
if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Exercise
Price pursuant to this Section 9 occurs on or after the 20th Trading
Day prior to the day in question and prior to the "ex" date for the
issuance or distribution requiring such computation, the Closing Price
for each Trading Day prior to the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the same fraction
which the Exercise Price is so required to be adjusted as a result of
such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Exercise Price pursuant to this Section 9 occurs on
or after the "ex" date for the issuance or distribution requiring such
computation and on or prior to the day in question, the Closing Price
for each Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Exercise Price is so required to be
adjusted as a result of such other event, and (iii) if the "ex" date
for the issuance or distribution requiring such computation is on or
prior to the day in question, after taking into account any adjustment
required pursuant to clause (ii) of this proviso, the Closing Price for
each Trading Day on or after such "ex" date shall be adjusted by adding
thereto the fair market value on the day in question (as determined by
the Board of Directors in a manner consistent with any determination of
such value for the purposes of subsection (d) of this Section 9.1) of
the assets, evidences of indebtedness, Equity Securities or
subscription rights being distributed applicable to one share of Common
Stock as of the close of business on the day before such "ex" date. For
the purposes of any computation under subsection (e) of this Section
9.1, the Closing Price on any date shall be deemed to be the average of
the daily Closing Prices for the five consecutive Trading Days ending
not later than the Offer Time of such tender or exchange offer and
commencing on a day selected at random in good faith by the Company
which date shall be on or after the latest (the "Commencement Date") of
(i) the date 20 Trading Days before the date in question, (ii) the date
of commencement of the tender or exchange offer requiring such
computation and (iii) the date of the last amendment, if any, of such
tender or exchange offer involving a change in the maximum number of
shares for which tenders are sought or a change in the consideration
offered; provided, however, that if the "ex" date for any event (other
than the tender or exchange offer requiring such computation) that
requires an adjustment to the Exercise Price pursuant to this Section 9
occurs on or after the Commencement Date and prior to the Offer Time
for the tender or exchange offer requiring such computation, the
Closing Price for each Trading Day prior to the "ex" date
B-12
<PAGE> 55
for such other event shall be adjusted by multiplying such Closing
Price by the same fraction by which the Exercise Price is so required
to be adjusted as a result of such other event. For purposes of this
subsection (f), the term "ex" date, (i) when used with respect to any
issuance or distribution, means the first date on which the Common
Stock trades regular way on Nasdaq or on the relevant exchange or in
the relevant market from which the Closing Price was obtained without
the right to receive such issuance or distribution, (ii) when used with
respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on
Nasdaq or such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (iii) when used with
respect to any tender or exchange offer means the first date on which
the Common Stock trades regular way on Nasdaq or such exchange or in
such market after the Offer Time of such tender or exchange offer.
(g) Minimum Adjustment Requirement. No adjustment shall be
required unless such adjustment would result in an increase or decrease
of at least $0.01 in the Exercise Price then subject to adjustment;
provided, however, that any adjustments that are not made by reason of
this subsection (g) shall be carried forward and taken into account in
any subsequent adjustment. In case the Company shall at any time issue
shares of Common Stock by way of dividend on any stock of the Company
or subdivide or combine the outstanding shares of Common Stock, said
amount of $0.01 specified in the preceding sentence (as theretofore
increased or decreased, if said amount shall have been adjusted in
accordance with the provisions of this subsection (g)) shall forthwith
be proportionately increased in the case of such a combination or
decreased in the case of such a subdivision or stock dividend so as
appropriately to reflect the same.
(h) Calculations. All calculations under this Section 9.1
shall be made to the nearest $0.01.
(i) Certificate. Whenever an adjustment in the Exercise Price
is made as required or permitted by the provisions of this Section 9.1,
the Company shall promptly file with the Warrant Agent a certificate of
its chief financial officer setting forth (A) the adjusted Exercise
Price as provided in this Section 9.1 and a brief statement of the
facts requiring such adjustment and the computation thereof and (B) the
number of shares of Common Stock (or portions thereof) purchasable upon
exercise of a Warrant after such adjustment in the Exercise Price in
accordance with Section 9.2 hereof and the record date therefor, and
promptly after such filing shall mail or cause to be mailed a notice of
such adjustment to each Warrantholder at his or her last address as the
same appears on the Warrant Register. Such certificate, in the absence
of manifest error, shall be conclusive and final evidence of the
correctness of such adjustment. The Warrant Agent shall be entitled to
rely upon such certificate, and shall be under no duty or
responsibility with respect to any such certificate except to exhibit
the same to any Warrantholder desiring inspection thereof.
B-13
<PAGE> 56
(j) Notice. In case:
(a) the Company shall declare any dividend or any
distribution of any kind or character (whether in cash,
securities or other property) on or in respect of shares of
Common Stock or to the stockholders of the Company (in their
capacity as such), excluding any regular periodic cash
dividend paid out of current or retained earnings (as such
terms are used in generally accepted accounting principles);
or
(b) the Company shall authorize the granting to the
holders of shares of Common Stock of rights to subscribe for
or purchase any shares of capital stock or of any other right;
or
(c) of any reclassification of shares of Common Stock
(other than a subdivision or combination of outstanding shares
of Common Stock), or of any consolidation or merger to which
the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the
Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall mail
or cause to be mailed to the Warrantholders, at their last addresses as they
shall appear upon the Warrant Register, at least 30 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or, if a record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend, distribution or
rights are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and, if applicable, the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
(including cash) deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up. Failure to give any such
notice, or any defect therein, shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) Section 305. Anything in this Section 9.1 to the contrary
notwithstanding, the Company shall be entitled, but not required, to
make such reductions in the Exercise Price, in addition to those
required by this Section 9.1, as it in its discretion shall determine
to be advisable, including, without limitation, in order that any
dividend in or distribution of shares of Common Stock or shares of
capital stock of any class other than Common Stock, subdivision,
reclassification or combination of shares of Common Stock, issuance of
rights or warrants, or any other transaction having a similar effect,
shall not be
B-14
<PAGE> 57
treated as a distribution of property by the Company to its
stockholders under Section 305 of the Internal Revenue Code of 1986, as
amended, or any successor provision and shall not be taxable to them.
(l) No Adjustment. Anything to the contrary herein
notwithstanding, no adjustment to the Exercise Price or the number of
shares of Common Stock purchasable upon exercise of a Warrant shall be
made pursuant to this Section 9.1 or Section 9.2 as a result of, or in
connection with, the issuance of options or rights to purchase Common
Stock issued to employees of the Company or its Subsidiaries pursuant
to a stock option or other similar plan adopted by the Board of
Directors or an employment agreement approved by the Board of
Directors, or the modification, renewal or extension of any such plan
or agreement if approved by the Board of Directors.
(m) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for purposes of taking any
action that requires an adjustment of the Exercise Price under this
Section 9, and shall, thereafter and before the effective date of such
action, legally abandon its plan to take such action, then thereafter
no adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
9.2. Adjustment to Number of Warrant Shares. Upon each
adjustment of the Exercise Price pursuant to Section 9.1 hereof the number of
Warrant Shares purchasable upon exercise of a Warrant outstanding prior to the
effectiveness of such adjustment shall be adjusted to the number, calculated to
the nearest one-hundredth of a share, obtained by (x) multiplying the number of
Warrant Shares purchasable immediately prior to such adjustment upon the
exercise of a Warrant by the Exercise Price in effect prior to such adjustment
and (y) dividing the product so obtained by the Exercise Price in effect after
such adjustment of the Exercise Price.
9.3. Organic Change.
(a) Company Survives. Upon the consummation of an Organic
Change (other than a transaction in which the Company is not the surviving
entity), lawful provision shall be made as part of the terms of such transaction
whereby the terms of the Warrant Certificates shall be modified, without payment
of any additional consideration therefor, so as to provide that upon exercise of
Warrants following the consummation of such Organic Change, the Warrantholders
of such Warrants shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change, assuming such holder of
Warrant Shares (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which a sale,
transfer or lease of all or substantially all of the assets of the Company was
made, as the case may be (a "Constituent Person"), or an Affiliate of a
Constituent Person, and (ii) failed to exercise his rights of election, if any,
as to the kind and amount of securities, cash and other property receivable upon
such Organic Change (provided that if the kind and amount of securities, cash
and other
B-15
<PAGE> 58
property receivable upon such Organic Change is not the same for each share of
Common Stock held immediately prior to such Organic Change by others than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing shares"), then for the
purpose of this subsection (a) the kind and amount of securities, cash and other
property receivable upon such Organic Change by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares); provided, however, that no adjustment shall be made as a
result of such Organic Change to the Exercise Price or the number of Warrant
Shares notwithstanding any provision of Section 9 hereof unless any event
requiring any such adjustment shall have occurred or shall occur prior to, upon
or after such Organic Change. Lawful provision also shall be made as part of the
terms of the Organic Change so that all other terms of the Warrant Certificates
shall remain in full force and effect following such an Organic Change. The
provisions of this Section 9.3(a) shall similarly apply to successive Organic
Changes.
(b) Company Does Not Survive. The Company shall not enter into
an Organic Change that is a transaction in which the Company is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to each
Warrantholder, without payment of any additional consideration therefor, with
terms that provide that upon the exercise of the Warrants, the Warrantholders of
such Warrants shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change, assuming such holder of
Warrant Shares (i) is not a Constituent Person or an Affiliate of a Constituent
Person and (ii) failed to exercise his rights of election, if any, as to the
kind and amount of securities, cash and other property receivable upon such
Organic Change (provided that if the kind and amount of securities, cash and
other property receivable upon such Organic Change is not the same for each
non-electing share, then for the purpose of this subsection (b) the kind and
amount of securities, cash and other property receivable upon such Organic
Change by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares); provided,
however, that no adjustment shall be made as a result of such Organic Change to
the Exercise Price or the number of Warrant Shares notwithstanding any provision
of Section 9 hereof unless any event requiring any such adjustment shall have
occurred or shall occur prior to, upon or after such Organic Change. The
certificate or articles of incorporation or other constituent document of the
surviving entity shall provide for such adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be equivalent to the adjustments provided for in
Section 9.1 hereof.
9.4. Statement on Warrants. The form of Warrant Certificate
need not be changed because of any adjustment made pursuant to Section 8,
Section 9.1 or Section 9.2
B-16
<PAGE> 59
hereof, and Warrants issued after such adjustment may state the same Exercise
Price and the same number of Warrant Shares as are stated in this Warrant
Certificate.
Section 10. Warrant Agent. The Company shall cause to be
appointed in the Borough of Manhattan, The City of New York, a Warrant Agent,
having a capital and surplus of at least $50,000,000. Initially, ChaseMellon
Shareholder Services, L.L.C., will act as Warrant Agent.
Section 11. Fractional Interests. The Company shall not be
required to issue Fractional Warrant Shares on the exercise of the Warrants
evidenced by this Warrant Certificate. If any Fractional Warrant Share would,
but for the provisions of this Section 11, be issuable on the exercise of the
Warrants evidenced by this Warrant Certificate (or specified portions thereof),
the Company shall pay an amount in cash equal to the fraction of a Warrant Share
represented by such Fractional Warrant Share multiplied by the Closing Price on
the day of such exercise.
Section 12. No Rights as Shareholder. Nothing in this Warrant
Certificate shall be construed as conferring upon the Warrantholder or its
transferees any rights as a shareholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a shareholder with
respect to any meeting of shareholders for the election of directors of the
Company or any other matter.
Section 13. Successors. All the covenants and provisions of
this Warrant Certificate by or for the benefit of the Company or the
Warrantholder shall bind and inure to the benefit of their respective successors
and permitted assigns hereunder.
Section 14. Governing Law; Choice of Forum, Etc. The validity,
construction and performance of this Warrant Certificate shall be governed by,
and interpreted in accordance with, the laws of New York without reference to
its conflict of laws rules. The Company and the Warrantholders (the "parties
hereto") agree that the appropriate and exclusive forum for any disputes arising
out of this Warrant Certificate solely between or among any or all of the
Company, on the one hand, and the Investor and/or any Person who has become a
Warrantholder, on the other, shall be the United States District Court for the
Southern District of New York, and, if such court will not hear any such suit,
the courts of the state of the Company's incorporation, and the parties hereto
irrevocably consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
parties hereto further agree that the parties will not bring suit with respect
to any disputes, except as expressly set forth below, arising out of this
Warrant Certificate for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the parties hereto
irrevocably consents to the service of process in any action or proceeding
hereunder by the mailing of copies thereof by registered or certified airmail,
postage prepaid, if to (i) the Company, at 800 Connecticut Avenue, Norwalk,
Connecticut, 06854, Attention: General Counsel, or at such other address
specified by the Company in writing to the Warrant Agent, and (ii) any
Warrantholder, at the address of such Warrantholder specified in the Warrant
Register.
B-17
<PAGE> 60
The foregoing shall not limit the rights of any party hereto to serve process in
any other manner permitted by the law or to obtain execution of judgment in any
other jurisdiction. The parties further agree, to the extent permitted by law,
that final and unappealable judgment against any of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of the
fact and the amount of indebtedness. The parties agree to waive any and all
rights that they may have to a jury trial with respect to disputes arising out
of this Agreement.
Section 15. Benefits of this Agreement. Nothing in this
Warrant Certificate shall be construed to give to any Person other than the
Company and the Warrantholder any legal or equitable right, remedy or claim
under this Warrant Certificate, and this Warrant Certificate shall be for the
sole and exclusive benefit of the Company and the Warrantholder. This Warrant
Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Warrant Agent.
B-18
<PAGE> 61
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed, as of this __ day of __________________, _____________________.
OXFORD HEALTH PLANS, INC.
By:______________________
Name:
Title:
Attest:
______________________
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C. , as Warrant Agent
By:______________________
Name:
Title:
B-19
<PAGE> 62
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To OXFORD HEALTH PLANS, INC.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, Warrant Shares, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of [COMPLETE WHERE
APPLICABLE]:
cash or a certified or official bank check in the amount of
$__________; and/or
$__________ Stated Value of Senior Preferred Stock (as to
which $__________ of accumulated dividends are unpaid), of
which $____________ Stated Value and the corresponding
accumulated dividends should be applied toward the payment of
such Warrant Shares; and/or
_______ number of Warrants, valued at $__________ each (such
value arrived at by subtracting the Exercise Price of
$__________ from the Warrant Market Price of $__________, both
the Exercise Price and Warrant Market Price determined in
accordance with the provisions of the Warrant Certificate);
For a total purchase price of $__________.
If the Stated Value and accumulated and unpaid dividends of
the shares of Senior Preferred Stock or the value of the Warrants evidenced by
the Warrant Certificate delivered herewith exceeds that portion of the payment
which is to be paid by the surrender of such shares or Warrants, you are
authorized, as agent of the undersigned, to deliver to the Company such shares
or Warrant Certificate delivered herewith for exchange into smaller
denominations in order that you may deliver to the undersigned new shares of
Senior Preferred Stock or Warrant Certificates, in Stated Value or number as the
case may be, equal to the difference between the Stated Value or number as the
case may be, of the Senior Preferred Stock or Warrants surrendered, less the
Stated Value or number as the case may be, thereof, used to purchase Warrant
Shares.
B-20
<PAGE> 63
Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay any cash for any Fractional Warrant Shares to (please print name
address and social security or other identifying number)*:
Name:
Address:
Soc. Sec. #:
AND, if said number of Warrant Shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of the undersigned for the balance remaining of the Warrant Shares
purchasable thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**
* The Warrant Certificate and the Investment Agreement contain restrictions on
the sale and other transfer of the Warrants evidenced by such Warrant
Certificate.
** The above signature should correspond exactly with the name on the face of
this Warrant Certificate or with the name of the assignee appearing in the
assignment form below.
B-21
<PAGE> 64
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ______ Warrant Shares of the Company, evidenced by the
within Warrant Certificate hereby irrevocably constituting and appointing
_________________ Attorney to transfer said Warrants on the books of the
Company, with full power of substitution in the premises.
Dated: ,
Signature of Registered Holder*
Signature Guaranteed:
Signature of Guarantor
* The above signature should correspond exactly with the name on the face of
this Warrant Certificate.
B-22
<PAGE> 1
EXHIBIT 5
September *, 1999
Oxford Health Plans, Inc.,
800 Connecticut Avenue,
Norwalk, Connecticut 06854
Dear Sirs:
In connection with the registration under the Securities Act of 1933 (the
"Act") of 277,629.157 shares of Series D Cumulative Preferred Stock, without
par value (the "Series D Preferred"), of Oxford Health Plans, Inc., a Delaware
corporation (the "Company"); 132,808.069 shares of Series E Cumulative
Preferred Stock, without par value (the "Series E Preferred"), of the Company;
15,800,000 Series A Warrants and 6,730,000 Series B Warrants (together the
"Warrants") of the Company, and the 22,530,000 shares of Common Stock, par
value $.01 per share, of the Company initially issuable upon exercise of the
Warrants (the "Shares") (the Series D Preferred, the Series E Preferred, the
Warrants and the Shares collectively, the "Securities"), we, as your counsel,
have examined such corporate records, certificates and other documents, and
such questions of law, as we have considered necessary or appropriate for the
purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion,
when the registration statement on Form S-3 (File No. 333-77529), as amended
(the "Registration Statement"), relating to the Securities has become
effective under the Act and the Securities have been duly issued and sold as
contemplated by the Registration Statement, the Series D Preferred, the Series
E Preferred and the Warrants will be validly issued, fully paid and
nonassessable, and the Shares, when duly issued upon exercise of the Warrants,
will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United
States, the laws of the State of New York and the General Corporation Law of
the State of Delaware, and we are expressing no opinion as to the effect of
the laws of any other jurisdiction.
We have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity
of Securities" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
<PAGE> 1
Exhibit 8
September *, 1999
Oxford Health Plans, Inc.,
800 Connecticut Avenue,
Norwalk, Connecticut 06854.
Ladies and Gentlemen:
We have acted as your counsel in connection with the registration under the
Securities Act of 1933 (the "Act") of 277,629.157 shares of Series D Cumulative
Preferred Stock, without par value, of Oxford Health Plans, Inc., a Delaware
corporation (the "Company"), 132,808.069 shares of Series E Preferred Stock,
without par value, of the Company, 15,800,000 Series A Warrants of the Company,
6,730,000 Series B Warrants of the Company and 22,530,000 shares of common
stock, par value $.01 per share, of the Company. We hereby confirm to you that
our opinion is as set forth under the caption "Material United States Federal
Income Tax Consequences" in the prospectus, dated September *, 1999 (the
"Prospectus"), included in the related Registration Statement on Form S-3, as
amended, that you filed with the Securities and Exchange Commission (the
"Registration Statement").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Material
United States Federal Income Tax Consequences." In giving such consent, we do
not admit that we are in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
<PAGE> 1
EXHIBIT 12
OXFORD HEALTH PLANS, INC. & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31
--------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes.............. $ 21,200 $(571,359) $(615,229) $(431,611) $172,049 $91,501 $49,926
Add back fixed charges...... 25,211 30,677 59,030 8,000 7,000 5,000 3,000
--------- --------- --------- --------- -------- ------- -------
Total earnings (loss)....... $ 46,411 $(540,682) $(556,199) $(423,611) $179,049 $96,501 $52,926
========= ========= ========= ========= ======== ======= =======
Fixed charges:
Interest (none
capitalized)............ $ 20,211 $ 22,677 $ 43,030 $ -- $ -- $ -- $ --
Interest component of
rental payments......... 5,000 8,000 16,000 8,000 7,000 5,000 3,000
--------- --------- --------- --------- -------- ------- -------
Total fixed charges..... $ 25,211 $ 30,677 $ 59,030 $ 8,000 $ 7,000 $ 5,000 $ 3,000
Preference dividends and
amortization.............. $ 22,459 $ 5,718 $ 27,668 -- -- -- --
--------- --------- --------- --------- -------- ------- -------
Total fixed charges and
preference
dividends............. $ 47,670 $ 36,395 $ 86,698 $ 8,000 $ 7,000 $ 5,000 $ 3,000
========= ========= ========= ========= ======== ======= =======
Ratio of earnings to fixed
charges and preference
dividends................. * * * * 25.6 19.3 17.6
========= ========= ========= ========= ======== ======= =======
</TABLE>
- -------------------------
* Earnings were insufficient to cover fixed charges and preference dividends by
$642.9 million for the year 1998, $431.6 million for the year 1997, $1.3
million for the six months ended June 30, 1999 and $577.1 million for the six
months ended June 30, 1998.
For purposes of computing these ratios, we increased our combined earnings
before income taxes, as reported in our most recent annual report on Form 10-K/A
No. 2, as amended by our Form 10-K/A No. 3, and in our quarterly report on Form
10-Q for the quarter ended June 30, 1999, by the amount of our fixed charges. We
then divided the amount of earnings by the amount of fixed charges and
preference dividends, resulting in the ratio of earnings to combined fixed
charges and preference dividends. Fixed charges represent interest expense plus
the estimated interest factor in rental expense. We have not capitalized
interest in any period.
<PAGE> 1
Exhibit 15
Letter of Ernst & Young LLP
Re Unaudited Condensed Consolidated Interim Financial Information
To Oxford Health Plans, Inc.:
We are aware of the incorporation by reference in the Registration Statement
(Form S-3 No. 333-77529) of Oxford Health Plans, Inc. for the registration of
22,530,000 shares of its common stock, 277,629.157 shares of Series D
Cumulative Preferred Stock, 132,808.069 shares of Series E Cumulative Preferred
Stock, 15,800,000 Series A Warrants and 6,730,000 Series B Warrants of our
report dated May 5, 1999 relating to the unaudited condensed consolidated
interim financial statements of Oxford Health Plans, Inc. that are included in
its Form 10-Q/A No. 2 for the quarter ended March 31, 1999, and our report
dated August 6, 1999 relating to the unaudited condensed consolidated interim
financial statements of Oxford Health Plans, Inc. that are included in its Form
10-Q for the quarter ended June 30, 1999.
/s/ Ernst & Young LLP
Stamford, Connecticut
September 24, 1999
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Oxford Health Plans, Inc.:
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-77529) and the related Prospectus of
Oxford Health Plans, Inc. for the registration of 22,530,000 shares of its
common stock, 277,629.157 shares of Series D Cumulative Preferred Stock,
132,808.069 shares of Series E Cumulative Preferred Stock, 15,800,000 Series A
Warrants and 6,730,000 Series B Warrants and to the incorporation by reference
therein of our report dated March 9, 1999, with respect to the consolidated
financial statements and schedules of Oxford Health Plans, Inc. included in its
Annual Report on Form 10-K/A No. 2, as amended by Form 10-K/A No. 3, for the
year ended December 31, 1998, filed with Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
September 24, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Oxford Health Plans, Inc.:
We consent to incorporation by reference in the Registration Statement on Form
S-3 of Oxford Health Plans, Inc., related to the registration of common stock,
Series D and Series E Cumulative Preferred Stock and Series A and Series B
Warrants, of our reports dated February 23, 1998, relating to the consolidated
balance sheet of Oxford Health Plans, Inc. and subsidiaries as of December 31,
1997, and the related statements of operations, shareholders' equity (deficit)
and comprehensive earnings (loss), and cash flows for each of the years in the
two-year period ended December 31, 1997, and the related consolidated financial
statement schedules, which reports appear in the December 31, 1998 annual report
on Form 10-K/A No. 2, as amended by Form 10-K/A No.3, of Oxford Health Plans,
Inc. and subsidiaries.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
/S/ KPMG LLP
Stamford, Connecticut
September 24, 1999
