<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1999
REGISTRATION NO. 333-77525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
OXFORD HEALTH PLANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6324 06-1118515
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</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 OFFER TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) OFFERING PRICE REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------------------------------
11% Senior Notes due 2005.... $200,000,000 100% $200,000,000 $55,600
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f).
(2) Previously paid.
-------------------------
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, DATED AUGUST 26, 1999
PROSPECTUS
[OXFORD HEALTH PLANS, INC. LOGO]
Exchange Offer for
$200,000,000
11% Senior Notes due 2005
This is an offer to exchange the outstanding, unregistered Oxford 11%
Senior Notes due 2005 that you now hold for new, substantially identical 11%
Senior Notes due 2005 that will be free of the transfer restrictions that apply
to the old notes. THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 28, 1999, UNLESS WE EXTEND IT. You must tender your old, unregistered
notes by the deadline to obtain new, registered notes and the liquidity benefits
they offer.
The new notes will not trade on any established exchange. The new notes
have the same financial terms and covenants as the old notes, and are subject to
the same business and financial risks.
SEE "RISK FACTORS," BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
EXCHANGE OF OLD NOTES FOR THE NEW NOTES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is August 30, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES 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.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary......................... 1
Risk Factors.................... 10
Forward-Looking Statements...... 21
Use of Proceeds................. 23
Capitalization.................. 24
Business........................ 25
The Exchange Offer.............. 25
Description of the New Notes.... 38
Book-Entry; Delivery and Form... 72
Material United States Federal
Income Tax Considerations..... 73
Description of Term Loan
Agreement..................... 73
Description of Preferred Stock
and Warrants.................. 75
Plan of Distribution............ 77
Validity of the New Notes....... 78
Experts......................... 79
Where You Can Find More
Information................... 79
</TABLE>
<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. IF YOU
WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY SEPTEMBER 23, 1999 IN ORDER TO
RECEIVE THEM BEFORE THE EXCHANGE OFFER EXPIRES ON SEPTEMBER 28, 1999.
Financial and other information relating to our business is contained in
this prospectus, including "Summary Historical Consolidated Financial and
Operating Data" on page 8.
See "Where You Can Find More Information" on page 79.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER WOULD CONTRAVENE SECURITIES OR BLUE SKY LAWS.
i
<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.
THE EXCHANGE OFFER
The Exchange Offer.............. We are offering to exchange $1,000
principal amount of our 11% Senior Notes
due 2005 which have been registered under
the Securities Act of 1933, which we refer
to as "new notes," for each $1,000
principal amount of our outstanding 11%
Senior Notes due 2005 which were issued on
May 13, 1998 in a private offering, which
we refer to as "old notes." In order to
exchange an old note, you must tender the
old note properly and we must accept the
old note for exchange. We will exchange all
notes validly tendered and not validly
1
<PAGE> 6
withdrawn. As of the date of this
prospectus, there is $200 million aggregate
principal amount of old notes outstanding.
Expiration and Exchange Dates... This offer will expire at 5:00 p.m., New
York City time, on September 28, 1999,
unless we extend it. We will consummate the
exchange and issue the new notes as soon as
possible after that date.
Registration Rights............. You have the right to exchange the old
notes that you now hold for new notes with
substantially identical terms. We intend to
satisfy these rights through this exchange
offer. After the exchange offer is
complete, you will no longer be entitled to
any exchange or registration rights with
respect to your notes.
Conditions...................... This offer is conditioned only upon
compliance with the securities laws. The
offer applies to any and all notes validly
tendered by the deadline.
Resale without Further
Registration.................... We believe that you may offer for resale,
resell and otherwise transfer the new notes
without complying with the registration and
prospectus delivery provisions of the
Securities Act so long as the following
statements are true:
(1) you acquire the new notes issued in
the exchange offer in the ordinary
course of your business;
(2) you are not an "affiliate," as
defined under Rule 405 of the
Securities Act, of Oxford; and
(3) you are not participating, and do not
intend to participate, and have no
arrangement or understanding with any
person to participate, in the
distribution of the new notes issued
to you in the exchange offer.
By signing the letter of transmittal and
tendering your notes as described below,
you will be making representations to this
effect.
If you are a broker-dealer that acquired
old notes as a result of market-making or
other trading activities, you must deliver
a prospectus in connection with any resale
of the new notes as described in this
summary under "Restrictions on Sale by
Broker-Dealers" on page 3.
We base our belief on interpretations by
the staff of the Securities and Exchange
Commission in no-action letters issued to
other issuers in exchange
2
<PAGE> 7
offers like ours. We cannot guarantee that
the SEC would make a similar decision about
this exchange offer. If our belief is wrong
you could incur liability under the
Securities Act. We will not indemnify you
against this liability, which means we will
not protect you against any loss incurred
as a result of this liability under the
Securities Act.
Liability under the Securities
Act............................. You also may incur liability under the
Securities Act if:
(1) any of the representations listed
above are not true; and
(2) you transfer any new note issued to
you in the exchange offer without:
- delivering a prospectus meeting
the requirements of the Securities
Act; or
- an exemption from the requirements
under the Securities Act to
register your new notes.
We do not assume or indemnify you against
liability under these circumstances, which
means we will not protect you against any
loss incurred as a result of this liability
under the Securities Act.
Restrictions on Sale by Broker-
Dealers....................... Each broker-dealer that has received new
notes for its own account in exchange for
old notes that were acquired as a result of
market-making or other trading activities
must acknowledge in a letter of transmittal
that it will deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resale of the new
notes. A broker-dealer may use this
prospectus for a period of one year from
the date of this prospectus for an offer to
resell, a resale or other retransfer of the
new notes issued to it in the exchange
offer.
Procedures for Tendering Old
Notes........................... Each holder of old notes who wishes to
accept the exchange offer must either:
- complete, sign and date the
accompanying letter of transmittal, or
a facsimile of the letter of
transmittal, have the signatures on the
letter of transmittal guaranteed, if
required, and deliver the letter of
transmittal together with old notes and
any other required documents to the
exchange agent; or
3
<PAGE> 8
- arrange for The Depository Trust
Company to transmit certain required
information to the exchange agent in
connection with a book-entry transfer.
You must mail or otherwise deliver this
documentation or information to The Chase
Manhattan Bank, as exchange agent or The
Depository Trust Company at the address set
forth in "The Exchange Offer -- Exchange
Agent" on page 36.
Special Procedures for
Beneficial Owners............... If you hold old notes registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee and you wish
to tender your old notes in the exchange
offer, you should contact the registered
holder of the old notes promptly and
instruct it to tender on your behalf. If
you wish to tender on your own behalf, you
must, before completing and executing the
letter of transmittal for the exchange
offer and delivering your old notes, either
arrange to have your old notes registered
in your name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time.
Failure to Exchange Will Affect
You Adversely................... If you are eligible to participate in the
exchange offer and you do not tender your
old notes, you will not have any further
registration or exchange rights and your
old notes will continue to be subject to
restrictions on transfer. As a result of
these restrictions on transfer and the
availability of new notes, the liquidity of
the old notes could be adversely affected.
Guaranteed Delivery
Procedures...................... If you wish to tender your old notes and:
- time will not permit your required
documents to reach the exchange agent
by the expiration date of the exchange
offer;
- you cannot complete the procedure for
book-entry transfer on time; or
- your old notes are not immediately
available,
then you must comply with the procedures
described in this prospectus under "The
Exchange Offer -- Guaranteed Delivery
Procedures" on page 34.
4
<PAGE> 9
Withdrawal Rights............... You may withdraw your tender of old notes
at any time before the offer expires.
Federal Income Tax
Consequences.................... The exchange will not be a taxable event
for United States federal income tax
purposes. You will not recognize any
taxable gain or loss or any interest income
as a result of the exchange.
Exchange Agent.................. The Chase Manhattan Bank is serving as the
exchange agent in connection with the
exchange offer. The Chase Manhattan Bank
also serves as trustee under the indenture
governing the notes.
Absence of Appraisal Rights..... As a holder of old notes, neither the
General Corporation Law of the State of
Delaware nor the indenture governing the
old notes or that will govern the new
notes, gives you appraisal or dissenters'
rights.
THE NEW NOTES
The new notes have the same financial terms and covenants as the old notes.
We sometimes refer to the old notes and new notes together as the "notes." The
terms of the new notes are as follows:
Issuer.......................... Oxford Health Plans, Inc.
Securities Offered.............. $200,000,000 principal amount of 11% Senior
Notes due 2005.
Maturity........................ May 15, 2005.
Interest Rate................... 11% per year.
Interest Payment Dates.......... Interest on the old notes began accruing on
May 13, 1998, when we issued the old notes.
Interest is payable on the old notes and
will be payable on the new notes
semi-annually in arrears on each May 15 and
November 15. The last interest payment date
prior to the date of this prospectus was May
15, 1999. Interest on the new notes began
accruing on May 15, 1999 and the first
interest payment date for the new notes will
be November 15, 1999.
Ranking......................... The new notes will be senior unsecured
indebtedness of Oxford. The new notes:
- will rank senior to all our subordinated
indebtedness;
- will rank equally with all existing and
future senior indebtedness, including
borrowings under the term loan agreement
described in this
5
<PAGE> 10
prospectus under "Description of Term
Loan Agreement" on page 73; and
- will be effectively subordinated to all
our existing and future secured
indebtedness, including indebtedness under
the term loan agreement, to the extent of
the value of the assets securing the
indebtedness under the term loan agreement
and will be structurally subordinated to
indebtedness and other liabilities of our
subsidiaries. As of June 30, 1999, we had
approximately $350 million of senior
indebtedness, including the old notes. As
of June 30, 1999, our subsidiaries had
approximately $779 million of
indebtedness, including trade payables.
Indebtedness under the term loan agreement
is secured by substantially all of our
assets.
Optional Redemption............. On and after May 15, 2002, we will have the
right to redeem any or all of the new notes
at the following redemption prices plus
accrued and unpaid interest and liquidated
damages, if any, on the new notes to the
date of redemption:
<TABLE>
<CAPTION>
% OF
12-MONTH PERIOD PRINCIPAL
BEGINNING ON MAY 15, AMOUNT
-------------------- ------------
<S> <C>
2002...................... 105.500%
2003...................... 102.750
2004 and afterwards....... 100.000
</TABLE>
For more information on optional redemption,
see "Description of the New
Notes -- Optional Redemption" on page 39.
Optional Redemption After Equity
Offerings..................... On and before May 15, 2001, we have the
right to use the net cash proceeds of one or
more equity offerings to redeem up to
33 1/3% of the aggregate principal amount of
notes originally outstanding at 111% of the
principal amount, plus accrued and unpaid
interest and liquidated damages, if any, to
the redemption date. However, at least
66 2/3% of the original aggregate principal
amount of notes must remain outstanding
immediately after the redemption of the
notes and the redemption must occur within
60 days of the closing of the equity
offering. For more information on redemption
after equity offerings, see "Description of
the New Notes -- Optional Redemption" on
page 39.
Change of Control Offer......... If an event treated as a change of control
of Oxford occurs, each holder of new notes
will have the right to require us to make an
offer to purchase from it all or any part of
the new notes it holds then
6
<PAGE> 11
outstanding at a purchase price in cash
equal to 101% of their aggregate principal
amount, plus accrued and unpaid interest and
liquidated damages, if any, on the new notes
to the date of purchase.
A number of factors may limit our ability to
repurchase new notes in a change of control
offer. The term loan agreement provides that
certain change of control events with
respect to Oxford require us to prepay
mandatorily amounts outstanding under the
term loan agreement at 101% of principal
plus accrued and unpaid interest. We may
not, however, have sufficient resources to
repay indebtedness under the term loan
agreement, and we may not have sufficient
resources to repurchase new notes tendered
in a change of control offer. We currently
have borrowed $150 million under the term
loan agreement. As of the date of this
prospectus, if a change of control event
occurred, we would be required to prepay
$151.5 million. Furthermore, any future
credit agreements or other agreements
relating to senior indebtedness to which we
become a party may contain similar
restrictions and provisions. For more
information about a change of control offer
please see "Description of the New
Notes -- Repurchase at the Option of
Holders -- Change of Control" on page 40.
Covenants....................... The indenture under which we issued the old
notes, and under which we will issue the new
notes, contains covenants for your benefit
which, among other things, and subject to
important exceptions, restrict our ability
and the ability of our subsidiaries to:
- pay any dividend or make any payment or
distribution;
- incur additional indebtedness;
- incur liens;
- sell, transfer, convey or otherwise
dispose of certain assets or any capital
stock of a principal subsidiary;
- create or cause any restriction on the
ability of any restricted subsidiary to
pay dividends;
- enter into transactions with affiliates;
and
- merge or consolidate.
See "Description of the New
Notes -- Covenants" on page 44 for more
information about the covenants.
7
<PAGE> 12
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
We have summarized below our historical consolidated statement of
operations data and balance sheet information. The historical financial
information for each year in the five-year period ended December 31, 1998 is
derived from and is qualified by reference to our audited Consolidated Financial
Statements included in our annual report on Form 10-K/A No. 2 for the fiscal
year ended December 31, 1998, which is incorporated in this prospectus by
reference, and the related historical financial information for the six-month
periods ended June 30, 1999 and June 30, 1998, is derived from unaudited
financial statements filed with the Securities and Exchange Commission.
We have restated per share amounts and weighted-average number of common
share amounts to reflect the two-for-one stock splits in 1996 and 1995. In
addition, in July 1995, we completed a merger with OakTree Health Plan, Inc.
whereby OakTree was merged into one of our subsidiaries. We accounted for the
merger as a pooling of interests and, accordingly, we have restated all prior
period consolidated financial statements as if the merger took place at the
beginning of these prior periods. The term medical loss ratio is defined as
health care services expense as a percentage of premiums earned.
All of the data should be read in conjunction with and are qualified by
reference to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in our annual report on Form 10-K/A No. 2 for
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(In thousands, except per share amounts and operating statistics)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES AND EARNINGS:
Operating revenues............ $2,067,957 $2,378,350 $4,630,166 $4,179,816 $3,032,569 $1,745,975 $ 752,832
Investment and other income,
net....................... 43,129 42,385 89,245 71,448 42,620 19,711 7,479
Net earnings (loss)......... 12,296 (552,922) (596,792) (291,288) 99,623 52,398 28,231
Net earnings (loss)
attributable to common
shares.................... (10,163) (558,640) (624,460) (291,288) 99,623 52,398 28,231
FINANCIAL POSITION:
Working capital............. 223,031 192,888 209,443 85,790 451,957 103,448 71,731
Total assets................ 1,435,004 1,751,201 1,637,750 1,390,101 1,356,397 611,149 331,084
Long-term debt.............. 350,000 350,000 350,000 -- -- -- --
Redeemable preferred
stock..................... 321,275 276,866 298,816 -- -- -- --
Common shareholders' equity
(deficit)................. (191,763) (121,104) (181,105) 349,216 598,170 220,033 132,394
NET EARNINGS (LOSS) PER COMMON
SHARE:
Basic....................... $ (.13) $ (7.00) $ (7.79) (3.70) $ 1.34 $ .78 $ .43
Diluted..................... $ (.13) $ (7.00) $ (7.79) (3.70) $ 1.25 $ .71 $ .40
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic....................... 80,970 79,817 80,120 78,635 74,285 67,450 65,410
Diluted..................... 80,970 79,817 80,120 78,635 79,662 73,344 70,554
OPERATING STATISTICS:
Enrollment.................. 1,668,700 2,004,700 1,881,400 2,008,100 1,535,500 1,007,700 513,000
Fully insured member
months.................... 9,886,500 11,938,300 23,081,900 21,584,700 15,604,400 9,338,610 4,101,863
Self-funded member months... 319,400 405,500 765,500 602,900 474,200 514,200 524,000
Medical loss ratio.......... 85.4% 100.2% 94.4% 94.0% 80.1% 77.5% 74.1%
</TABLE>
8
<PAGE> 13
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges 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 Fixed Charges...... 1.8 * * * 25.6 19.3 17.6
</TABLE>
- -------------------------
* Earnings were insufficient to cover fixed charges by $615.2 million for the
year 1998, $431.6 million for the year 1997 and $571.4 million for the six
months ended June 30, 1998.
For purposes of computing these ratios, we increased our earnings before
income taxes, as reported in our most recent annual report on Form 10-K/A No. 2
and in our quarterly report on Form 10-Q for the quarter ended June 30, 1999, by
the fixed charges. We then divided the amount of earnings by the amount of fixed
charges, resulting in the ratio of earnings to fixed charges. 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 More Information" on page 79 for a description of
how to obtain these documents.
9
<PAGE> 14
RISK FACTORS
An investment in the new notes involves a number of risks, some or all of
which could be substantial and are inherent in our business. We urge you to
consider carefully the following information about these risks, together with
the other information in this prospectus before participating in the exchange.
The new notes, like the old notes, entail the following risks:
RISKS SPECIFICALLY RELATED TO OXFORD
IF WE ARE UNABLE TO FULLY IMPLEMENT OUR TURNAROUND PLAN, WE ARE LIKELY TO INCUR
FURTHER LOSSES, WHICH COULD AFFECT THE VALUE OF THE NEW NOTES.
Our ability to control net losses depends, to a large extent, on the
success of our "Turnaround Plan."
Our Turnaround Plan includes:
- focusing on our core commercial and Medicare markets in the New York
tri-state area;
- disposing of or restructuring noncore businesses;
- reducing administrative costs;
- reducing payments to physicians and other providers;
- completing and operationalizing risk transfer agreements and other
provider agreements;
- reducing unnecessary utilization of hospital and other services;
- strengthening commercial underwriting;
- increasing commercial group premiums; and
- improving service levels and strengthening operations.
If we are unable to fully implement our Turnaround Plan, we are likely to
incur further losses, which could affect the value of the new notes. We incurred
net losses attributable to common stock of $291 million in 1997 and $624 million
in 1998 and we may incur additional losses in 1999. A significant portion of the
loss incurred in 1998 was associated with restructuring charges and write-downs
of strategic investments relating to our Turnaround Plan. As a result of losses
at some of our HMO and insurance subsidiaries in 1997 and 1998, we were required
to make capital contributions to these subsidiaries, and we expect that we will
be required to make additional capital contributions in 1999. We also made
significant additions to our reserves for medical claims, and we experienced
significant levels of retroactive member and group terminations as well as
difficulties with collection of premium receivables.
We cannot assure that we will implement the Turnaround Plan in the manner
described above, or that the Turnaround Plan will be successful. We also cannot
assure that our other efforts to control net losses will be successful.
Furthermore, despite our efforts to the contrary, implementation of the
Turnaround Plan could adversely affect
10
<PAGE> 15
members and employer groups, or physicians, hospitals and other health care
providers and ultimately sales and renewals of our health plans. The Turnaround
Plan also calls for increasing commercial premiums to appropriately reflect
Oxford's healthcare and administrative costs. We cannot assure that we will be
successful in achieving appropriate premium increases or that recent or future
regulatory changes will not adversely affect our premium pricing. Moreover, we
cannot predict the impact of adverse publicity, legal and regulatory proceedings
or other future events on our membership, operations and financial results,
including ongoing financial losses. Reductions in membership associated with the
above would adversely affect our future results.
IF WE DO NOT RECEIVE FAVORABLE OUTCOMES FROM ONGOING LITIGATION AND GOVERNMENTAL
PROCEEDINGS, WE COULD INCUR FURTHER LOSSES, WHICH COULD AFFECT OUR ABILITY TO
PAY THE NEW NOTES.
We are a defendant in a large number of purported securities class action
lawsuits and shareholder derivative lawsuits which were filed after the
substantial decline in the price of our common stock in October 1997. If we do
not receive favorable outcomes, we could incur further losses, which could
affect our ability to pay the new notes.
The complaints in the purported securities class action lawsuits were filed
on behalf of purchasers of our securities during varying periods beginning on
February 6, 1996 through December 9, 1997. The complaints generally allege that
defendants violated Section 10(b) of the Securities Exchange Act of 1934 by
making false and misleading statements and by failing to disclose certain
allegedly material information regarding changes in our computer system, and our
membership enrollment, revenues, medical expenses, and ability to collect on our
accounts receivable. Some of these purported securities class action complaints
also assert claims against the individual defendants alleging violations of
Section 20(a) of the Securities Exchange Act of 1934 and claims against all of
the defendants for negligent misrepresentation. The complaints also allege that
in violation of Section 20A of the Securities Exchange Act of 1934 some of the
individual defendants disposed of our common stock while its price was
artificially inflated by allegedly false and misleading statements and
omissions.
The shareholder derivative actions were commenced on our behalf against us
and our directors. The complaints generally allege that defendants breached
their fiduciary obligations to us, mismanaged the business and wasted our assets
in planning and implementing certain changes to our computer system, by making
misrepresentations concerning the status of those changes in our computer
system, by failing to design and to implement adequate financial controls and
information systems for us, and by making misrepresentations concerning our
membership enrollment, revenues, profits and medical costs in our financial
statements and other public representations. The complaints further allege that
some of the defendants breached their fiduciary obligations to us by disposing
of our common stock while the price of that common stock was artificially
inflated by their alleged misstatements and omissions.
The complaints in both the purported securities class action lawsuits and
the derivative actions seek unspecified damages, attorneys' and experts' fees
and costs, and such other relief as the court deems proper. The costs incurred
as a result of the defense of these lawsuits, management's time commitments
involved in the defense of these lawsuits, and the ultimate result of these
lawsuits, may cause us to incur further losses which could affect our ability to
pay the new notes.
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We are also the subject of examinations, investigations and inquiries by
several governmental agencies, including the New York State Insurance
Department, the federal Health Care Financing Administration, other state
departments of insurance and health, the New York State Attorney General and the
Securities and Exchange Commission. The results of these governmental inquiries
could adversely affect our results of operations, financial condition,
membership growth and ability to retain members through the imposition of
sanctions, required changes in operations and potential limitations on
enrollment. In addition, evidence obtained in governmental proceedings could be
used adversely against us in civil proceedings. We cannot predict the outcomes
of these lawsuits, governmental examinations, investigations and inquiries.
IF WE CANNOT INFLUENCE OR ACCURATELY PREDICT OUR FUTURE HEALTH CARE COSTS, OUR
HEALTH CARE SERVICE EXPENSE AS A PERCENTAGE OF OUR PREMIUM REVENUE WILL
INCREASE, WHICH COULD AFFECT OUR ABILITY TO PAY THE NEW NOTES.
If we cannot influence or accurately predict our future health care costs,
we cannot price our premiums appropriately. We use a large portion of our
premium revenue to pay the costs of health care services and supplies delivered
to our members. We price much of our premium revenue before services are
delivered and the related costs are incurred, usually on a prospective annual
basis. Although we try to calculate the premiums that we charge based, in part,
on our estimate of future health care costs over the fixed premium period,
factors such as competition, regulations and other circumstances may limit our
ability to base our calculation of premiums on estimated costs.
The number of individual services rendered and the cost of each service
affect our total health care costs. In addition, many factors may and often do
cause actual health care costs to exceed what we estimated and reflected in
premiums. These factors include: new technologies and health care practices,
hospital costs, changes in demographics and trends, new legally mandated
benefits or practices, selection biases, increases in unit costs paid to
providers, major epidemics, catastrophes, inability to establish acceptable
compensation arrangements with providers, operational and regulatory issues
which could delay, prevent or impede those arrangements, and higher utilization
of medical services, including higher out-of-network utilization under point of
service plans. We cannot assure that we will be successful in mitigating the
effect of any or all of the above-listed or other factors.
The results of operations that we report for any particular quarter include
reserves for estimates of the cost incurred for covered services received by our
enrollees during that period for which claims have not been received or
processed. We base these estimates on historical data, patterns of claim payment
and receipt, expected medical cost inflation, seasonality patterns and changes
in membership. However, our prior rapid growth, delays in paying claims,
erroneous payment or denial of claims, and the changing speed of payment of
claims affect our ability to rely on historical data. Because we base these
reserves on estimates, our results of operations may be adjusted in a later
period to reflect actual costs. Any adjustments to these estimates made in the
later period could significantly change our results of operations for that
period.
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IF WE CONTINUE TO EXPERIENCE HIGH ADMINISTRATIVE COSTS, OUR ADMINISTRATIVE
EXPENSE AS A PERCENTAGE OF OUR PREMIUM REVENUE WILL INCREASE, WHICH COULD AFFECT
OUR ABILITY TO PAY THE NEW NOTES.
In 1997, 1998 and the first half of 1999, we experienced high levels of
administrative costs. If we cannot control the level of our administrative
costs, our premium revenue may not adequately cover our health care service
expense and our administrative costs. This may result in financial losses which
could affect our ability to pay the new notes.
Although we intend to attempt to significantly reduce administrative
expenses, we may continue to be adversely affected by high administrative costs
associated with our efforts to strengthen our operations and service levels and
address systems issues, including those related to Year 2000 readiness. Although
a reduction in administrative expenses is a key element of our Turnaround Plan,
we may experience significant service and systems infrastructure problems in
1999 and beyond which could have a significant impact on administrative costs.
Further, we have experienced high levels of employee attrition over the last
several quarters which has significantly increased our administrative costs. We
expect to continue to experience employee attrition in 1999.
CHANGES TO THE LAWS, RULES AND REGULATIONS THAT GOVERN OUR BUSINESS COULD
INCREASE OUR ADMINISTRATIVE AND HEALTH CARE COSTS, CHANGE OUR PRODUCT LINE OR
CAUSE OUR MEMBERS OR OUR CONTRACTED HEALTH CARE PROVIDERS TO DISENROLL, WHICH
COULD AFFECT OUR ABILITY TO PAY THE NEW NOTES.
Our business is heavily regulated on federal, state and local levels. The
laws, rules and regulations governing our business and interpretations of those
laws, rules and regulations are subject to frequent change. Changes to these
laws, rules and regulations could increase our administrative and health care
costs, could require that we change our products or could cause our members or
our contracted health care providers to disenroll which could cause us to incur
losses and could affect our ability to repay the new notes. The agencies
administering those regulations have broad latitude to enforce them. The
regulations that govern our business relate to, among other things, cash
reserves, minimum net worth, licensing requirements, approval of policy language
and benefits, mandatory products and benefits, provider compensation
arrangements, member disclosure, premium rates and periodic examinations by
state and federal agencies. Existing or future laws and rules could force us to
change how we do business, restrict revenue and enrollment growth, increase our
health care and administrative costs and capital requirements, and increase our
liability for medical malpractice or other actions.
A significant portion of our revenues relate to the federal Medicare
program. The laws regulating this program generally are subject to frequent
change, including changes that may reduce the number of persons enrolled or
eligible, reduce the amount of reimbursement or payment levels, or reduce or
increase our administrative or health care costs under this program. These
changes have adversely affected our results and willingness to participate in
this program in the past and may also do so in the future.
The following are examples of proposed and recently enacted federal and
state legislation, rules and regulations that could result in an increase in our
costs of doing business:
- President Clinton proposed expanding Medicare coverage to individuals
between the ages of 55 and 64 and proposed coverage of prescription
drugs;
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- the federal Health Care Financing Administration which oversees Medicare
announced its intent to modify the method under which health care plans
are paid by imposing a risk adjustment;
- the U.S. Department of Labor is engaged in an ongoing enforcement program
of the Employee Retirement Income Security Act of 1974 which could result
in an increase in our exposure under state law for claims that relate to
self-funded plans that we administer;
- New York State is currently considering legislation concerning (i) the
Health Care Reform Act which could increase the level of assessments for
graduate medical education and bad debt and charity care, and (ii)
individual and small group risk pools and subsidies and managed care
mandates and practice;
- the New Jersey State legislature enacted legislation requiring the State
of New Jersey effective January 2000 to fine health plans $10,000 for
rejecting or not paying an unreasonably large or disproportionate number
of eligible claims and for not paying interest on late claims;
- the National Association of Insurance Commissioners adopted new minimum
capitalization requirements, known as risk-based capital rules, which are
currently being considered for adoption by each of the states in which we
do business and which could result in an increase in the capital required
for our regulated subsidiaries;
- the New Jersey Department of Banking and Insurance published solvency
regulations that will result in additional capital requirements for New
Jersey health care plans and proposed a guarantee fund into which all
health care plans will be required to contribute to pay the claims of
failed plans;
- the New York Superintendent of Insurance announced an intention to
strengthen current solvency regulations to allow the New York State
Insurance Department to take over failing health plans without a court
order;
- effective July 1, 1999 New York State Law gives members the right to an
independent external appeal when health care services are denied by their
health plan or insurer on the basis that the services are not medically
necessary or that the services are experimental or investigational;
- the Connecticut General Assembly enacted this year a comprehensive update
to their managed care act, including coverage mandates of several
conditions, such as mental health as well as experimental treatments and
drugs that have completed phase III clinical trials. In addition, members
may access the current external review process on an expedited basis for
all other experimental treatments if their life expectancy is two years
or less;
- the United States Senate passed along party lines S. 1344, the Patients
Bill of Rights Act of 1999, which mandates a host of disclosure, access
and member and physician service requirements primarily on self funded
plans;
- legislation has been introduced in the New Jersey Assembly regulating
organized delivery systems which assume financial risk; and
- the New York State Insurance Department issued rule interpretations in
Circular Letter 13, effective February 1, 2000, which requires Oxford and
competing health plans to fully community-rate all HMO-based point-of
service products, which will
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impact the current methodology for determining premium rates for Oxford's
large group business.
We must obtain and maintain regulatory approvals to market many of our
products. In addition, state and federal regulations limit our ability to adjust
rates for and benefits provided under our products. Delays in obtaining or
failures to obtain or maintain these approvals and the effect of state and
federal regulations could adversely affect our revenue, number of members and
costs.
We also must obtain regulatory approvals if we or any of our HMO or
insurance subsidiaries undergo a change in control. The applicable regulatory
authorities approved the purchase of preferred stock and warrants by TPG
Partners II, L.P. and its affiliates under the Investment Agreement, dated as of
February 23, 1998, by and between us and TPG Partners II, L.P. That approval
process included a review by the regulators of the terms of the preferred stock,
the warrants, the old notes, the new notes and the term loan agreement. We
describe the term loan agreement later in this prospectus under the title
"Description of Term Loan Agreement," and we describe the preferred stock and
warrants later in this prospectus under the title "Description of Preferred
Stock and Warrants."
We are also subject to various governmental reviews, audits and
investigations. This governmental oversight could result in the loss of
licensure or of the right to participate in certain programs, or in the
imposition of fines, penalties and other sanctions. In addition, disclosure of
any adverse investigation or audit results or sanctions could damage our
reputation and make it more difficult for us to sell our products and services.
IF WE CANNOT MANAGE OUR INFORMATION SYSTEMS PROBLEMS, WE MAY NOT BE ABLE TO
ACCURATELY PERFORM CERTAIN IMPORTANT FUNCTIONS SUCH AS CLAIMS PAYMENT AND GROUP
AND INDIVIDUAL BILLING WHICH COULD INCREASE OUR ADMINISTRATIVE COSTS AND CAUSE
OUR MEMBERS OR OUR CONTRACTED HEALTH CARE PROVIDERS TO DISENROLL.
If we cannot manage our information systems problems, we may not be able to
accurately perform certain important functions such as claims payment and group
and individual billing. If we cannot perform these functions and if we cannot
otherwise maintain effective and efficient information systems, we could
experience loss of existing members and contracted health care providers,
difficulty in attracting new members, member and provider complaints, regulatory
problems, increases in administrative costs and other adverse consequences. All
of these consequences could affect our ability to pay the new notes.
We experienced rapid growth in our business and in our staff in the period
from 1986, when we began operations, through 1997. We have been affected, and
will continue to be affected, by our ability to manage this growth effectively,
including our ability to continue to develop processes and systems to support
our operations. In September 1996, we converted a significant part of our
business operations to a new computer operating system. Unanticipated software
and hardware problems that arose in connection with the conversion resulted in
significant delays in our claims payments and group and individual billing and
adversely affected claims payment and billing.
We do not intend to promote significant membership or revenue growth in
1999 because our priority in 1999 will continue to be to attempt to strengthen
our service and systems infrastructure, reduce medical and administrative
spending and increase premium rates. We may not be successful in mitigating the
existing system problems that have resulted in payment delays and claims
processing errors, in developing processes and
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systems to support our operations and in improving our service levels. In the
future, the process of improving existing systems, developing processes and
systems to support our operations and improving service levels may be delayed
and additional systems issues may arise.
IF WE EXPERIENCE A DISRUPTION IN OUR HEALTH CARE PROVIDER NETWORK, WE MAY NOT BE
ABLE TO ADEQUATELY MARKET OUR PRODUCTS AND SERVICE OUR MEMBERSHIP, WHICH COULD
DECREASE THE PRICE OF THE NEW NOTES.
We are subject to the risk of disruption in our health care provider
network. The network physicians, hospitals and other health care providers could
terminate their contracts with us, demand higher payments or take other actions
which could have a material adverse effect on our ability to market our products
and service our membership. A reduction in membership resulting from a reduction
in network size or adverse physician recommendations would reduce revenues and
increase health care services expense, which adverse financial results could
affect the price of the new notes. Our difficulties in accurately and timely
paying claims has adversely affected our relations with our providers as certain
providers have threatened to institute or have instituted actions to recover
overdue claims, have sought advances or have threatened to terminate
participation in our network. Furthermore, the effect of mergers and
consolidations of health care providers or potential unionization of, or
concerted action by, physicians in our service areas could enhance the
providers' bargaining power with respect to demands for higher reimbursement
levels and changes to our utilization review and administrative procedures.
YEAR 2000 PROBLEMS MAY DISRUPT OUR OPERATIONS.
Year 2000 issues involve the inability of certain computerized systems and
technologies to recognize and/or correctly process certain dates, including
January 1, 2000. A failure to timely resolve our own Year 2000 issues or the
failure of our external vendors to resolve their Year 2000 issues could have a
material adverse effect on our results of operations, liquidity and financial
condition. Further, our estimates for the future costs and timely and successful
completion of our Year 2000 program are subject to uncertainties that could
cause actual results to differ from those currently projected by us. Our plan to
identify and address Year 2000 issues is described in our annual report on Form
10-K/A No. 2 for the fiscal year ended December 31, 1998.
IF WE CONTINUE TO RECEIVE NEGATIVE PUBLICITY, WE COULD EXPERIENCE A DISRUPTION
IN OUR PROVIDER NETWORK, A DECREASE IN THE RENEWAL OF EXISTING MEMBERS AND A
DECREASE IN OUR ABILITY TO ENROLL NEW MEMBERS.
Events at Oxford over the course of the last two years have resulted in
adverse publicity. We are currently the defendant in a large number of lawsuits
and the subject of various governmental reviews, audits and investigations. As a
partial result of these lawsuits and governmental inquiries, we became the focus
of media attention. This publicity and the underlying recent events at Oxford
may cause some of our providers to terminate or require significant changes in
their relationship with us, may decrease the number of existing members who will
renew with us and may limit our ability to attract new members.
In addition, the managed care industry, in general, receives significant
negative publicity. This publicity has led to increased legislation, regulation
and review of industry practices. These factors may adversely affect our ability
to market our products or services or require us to change our products and
services and may increase the regulatory burdens
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under which we operate, further increasing the costs of doing business and
adversely affecting our results of operations.
IF WE CANNOT COLLECT THE ADVANCES MADE TO PROVIDERS, WE MAY NEED TO MAKE
ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR REGULATED SUBSIDIARIES, WHICH WOULD
LIMIT THE FUNDS AVAILABLE TO PAY THE NEW NOTES.
As part of our attempts to reduce delays in processing claims for payment
in 1997, we advanced approximately $276 million to providers pending our
disposition of claims for payment. As of June 30, 1999, approximately $106.0
million, net of allowances, remained outstanding. If we cannot collect these
advances, we may need to make additional capital contributions to our regulated
subsidiaries, which would limit the funds available to pay the new notes.
The New York State Insurance Department required us to obtain written
acknowledgments of these advances from the recipients of the advances, and the
New Jersey Department of Banking and Insurance required us to provide collateral
for repayment of the advances by setting aside $15 million in trust at the
parent company. If we are unable to receive written acknowledgments or we fail
to maintain the collateral, the insurance regulators may not continue to
recognize these advances as admissible assets for regulatory purposes. If the
insurance regulators do not recognize these advances as admissible assets, the
capital of some of our regulated subsidiaries could be impaired. We may be
required to make additional capital contributions to compensate for any
impairment. Although we believe that the advances will be repaid, we cannot
assure that this will occur.
CHANGES IN REGULATORY, MARKET OR HEALTH CARE PROVIDER CONDITIONS IN ANY OF OUR
CORE STATES COULD INCREASE OUR ADMINISTRATIVE COSTS AND CAUSE OUR MEMBERS AND
OUR CONTRACTED HEALTH CARE PROVIDERS TO DISENROLL.
Changes in regulatory, market or health care provider conditions in any of
our core states could affect significantly our costs of doing business and our
relations with our members and providers. If our costs of doing business
increase or a significant number of our members or contracted healthcare
providers disenroll, our ability to pay the new notes may be affected.
Our commercial and Medicare business is concentrated in New York, New
Jersey and Connecticut, with more than 80% of our tri-state premium revenues
received from our New York business. In addition, our revenue under our Medicare
contracts with the Health Care Financing Administration represented 21.9% of our
premiums earned during 1998. Examples of changes in regulatory conditions that
could affect our financial results would be a decrease in the premium we receive
for Medicare members or the imposition of mandatory benefits in any of these
core states.
BECAUSE A HIGH LEVEL OF COMPETITION EXISTS IN OUR MARKET AREA, WE MAY NOT BE
ABLE TO OBTAIN AND RETAIN MEMBERS AND PROVIDERS, WHICH COULD AFFECT OUR REVENUES
AND OUR ABILITY TO REPAY THE NEW NOTES.
HMOs and health insurance companies operate in a highly competitive
environment. We have numerous competitors, including for-profit and
not-for-profit HMOs, preferred provider organizations and indemnity insurance
carriers. Some of these competitors have substantially larger enrollments and
greater financial resources than we do. We also compete with HMOs and managed
care plans sponsored by large health insurance companies, such as CIGNA
Corporation, Aetna U.S. Healthcare Inc., UnitedHealth
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Group and Blue Cross/Blue Shield. These competitors have a large enrollment in
our service areas and, in some cases, greater financial resources than we have.
In addition, Aetna U.S. Healthcare, Inc. has announced an agreement to acquire
the health plan business of The Prudential Insurance Company which will
significantly increase our competition in New York and New Jersey. We believe
that additional consolidation of competitors is likely and that additional
competitors may enter our markets in the future.
The cost of providing benefits is in many instances the controlling factor
in obtaining and retaining employer groups, and some of our competitors have set
premium rates at levels below our rates for comparable products. We anticipate
that premium pricing will continue to be highly competitive. We also compete
with other health plans, including hospital systems, to contract with physicians
and other providers. Our information systems problems and related disruptions to
our business over the course of the last two years may have a negative impact on
our future ability to compete for commercial group business and Medicare members
and for contracts with providers.
RISKS RELATED TO THE NEW NOTES
OUR SUBSTANTIAL INDEBTEDNESS MAY AFFECT THE PRICE OF THE NOTES AND OUR ABILITY
TO PAY THE NEW NOTES.
As of the date of this prospectus, we have aggregate outstanding
indebtedness of approximately $350 million, including the notes and borrowings
under the term loan agreement. The degree to which we are leveraged could have
adverse consequences to holders of the new notes, including the following:
- existing limitations under the indenture and the term loan agreement may
impair our ability to obtain additional financing in the future for
working capital, acquisitions or other purposes;
- if we need to use a significant portion of the cash that we generate to
make interest and other payments on our debt obligations, our flexibility
in planning for or reacting to changes in market conditions may be
limited, because we would be unable to use that money for other purposes;
- we may be more vulnerable in the event of a downturn in our business
because there may be insufficient funds to pay principal and interest on
our indebtedness; and
- a default on the new notes may result in a decrease in the market price
of the new notes.
We believe that cash flow from the operations of our subsidiaries, together
with other available sources of liquidity, will be adequate to permit us to make
required payments of principal and interest on our indebtedness and to fund the
working capital requirements of our subsidiaries. However, we cannot assure that
our cash flow from operations will be adequate. In addition, various insurance
and health regulations may restrict the ability of our subsidiaries to pay
dividends to us.
To the extent that cash flow from operations and parent company cash
balances are insufficient to satisfy our cash requirements, we may seek to
obtain additional funds. We may raise these funds through additional borrowings,
the sale of additional equity capital or the acquisition of other businesses
that would provide cash flow. However, we would raise these funds only to the
extent permitted by the indenture and the term loan agreement.
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Although the indenture and the term loan agreement permit us to incur additional
indebtedness, these agreements contain limitations on incurring indebtedness.
We cannot assure that the indenture and the term loan agreement would
permit us to raise additional funds in these manners. Furthermore, if we were
permitted to take these actions under the indenture or term loan agreement, we
may not be able to raise additional funds on satisfactory terms, in a timely
manner or at all, and we cannot assure that the additional funds would enable us
to make any payments due on the new notes.
Our ability to satisfy our obligations on the notes and under other debt
instruments will be dependent upon our future performance, including
implementation of the Turnaround Plan, which will be subject to prevailing
economic conditions and to financial, business and other factors, including
factors beyond our control.
BECAUSE THE NOTES THAT YOU HOLD ARE UNSECURED, YOU MAY NOT BE FULLY REPAID IF WE
BECOME INSOLVENT.
The new notes will not be secured by any of our assets or the assets of our
subsidiaries. Therefore, you may not be fully repaid if we become insolvent. The
term loan agreement is secured by a first priority security interest in
substantially all of our assets and the assets of our subsidiaries, other than
regulated subsidiaries, which are prohibited from providing security interests.
If we became insolvent, the holders of the secured debt would receive payments
from the assets used as security before the holders of the new notes receive
payments.
BECAUSE THE NEW NOTES ARE STRUCTURALLY SUBORDINATED TO THE OBLIGATIONS OF OUR
SUBSIDIARIES, YOU MAY NOT BE FULLY REPAID IF WE BECOME INSOLVENT.
We conduct our operations primarily through our subsidiaries. Therefore,
our ability to make required principal and interest payments with respect to
indebtedness, including the new notes, 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 the new notes are obligations of Oxford
alone, our subsidiaries are not obligated to pay any amounts due under the new
notes or to make funds available for the new notes in the form of dividends or
advances to us. In addition, various insurance and health regulations applicable
to our subsidiaries restrict the ability of our subsidiaries to pay dividends to
us. If we incur operating losses in 1999 we may be required to make additional
capital contributions to our subsidiaries in order to comply with applicable
statutory capital requirements. To the extent of any applicable requirements,
these funds would not be available to us for payment of principal and interest
with respect to our indebtedness, including the new notes.
Furthermore, the new notes effectively will be 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 any of our subsidiaries upon its liquidation or
reorganization, and the consequent right of holders of the new notes to
participate in those assets, effectively will be subordinated to the claims of
that subsidiary's creditors, except to the extent that 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. As of June 30, 1999, the aggregate
liabilities of our subsidiaries were approximately $779 million, consisting
primarily of medical costs payable.
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BECAUSE AGREEMENTS GOVERNING OUR INDEBTEDNESS IMPOSE SUBSTANTIAL RESTRICTIONS
AND LIMITATIONS ON US, OUR ABILITY TO EFFECTIVELY RUN OUR BUSINESS MAY BE
IMPAIRED AND WE MAY NOT BE ABLE TO FULLY REPAY THE NEW NOTES.
The term loan agreement and the indenture that governs the old notes and
that will govern the new notes contain a number of covenants that, among other
things, limit or restrict our ability to:
- dispose of our assets;
- incur additional indebtedness;
- repay other indebtedness;
- pay dividends;
- enter into certain investments or acquisitions;
- repurchase or redeem capital stock;
- engage in mergers or consolidations; or
- engage in certain transactions with subsidiaries and affiliates and
certain other corporate activities.
These limitations and restrictions may restrict our ability to finance our
future operations or capital needs or may prohibit us from engaging in other
business activities that may be in our interest. As a result, we may not be able
to fully repay the new notes.
Furthermore, in the event of any default under the term loan agreement, the
lenders under the term loan agreement could elect to declare all borrowings
outstanding under the term loan agreement, together with accrued interest and
other fees, to be due and payable, to require us to apply all of our available
cash to repay all outstanding borrowings or to prevent us from making debt
service payments on the new notes. If the indebtedness under the term loan
agreement or the new notes is accelerated, we could not assure that our assets
would be sufficient to repay all outstanding indebtedness in full.
BECAUSE THE TERM LOAN AGREEMENT BEARS FLOATING INTEREST RATES WHICH COULD RISE,
WE MAY NOT HAVE SUFFICIENT CAPITAL TO MAKE INTEREST PAYMENTS ON THE NEW NOTES.
The $150 million that we borrowed under the term loan agreement bears
interest at floating rates. If the interest rates on indebtedness under the term
loan agreement increase, the amounts available for the payment of principal and
interest on the new notes will decrease. As a result, we may not be able to make
the payments of principal and interest on the new notes.
AGREEMENTS RELATING TO INDEBTEDNESS MAY PROHIBIT US FROM REPURCHASING THE NOTES
UPON A CHANGE IN CONTROL.
The term loan agreement prohibits us from purchasing any of the new notes
and also provides that certain change of control events with respect to Oxford
would constitute a default under the term loan agreement. Any future credit
agreements or other agreements relating to indebtedness to which we become a
party may contain similar restrictions and provisions. In the event a change of
control occurs at a time when we are prohibited from purchasing the new notes,
we could seek the consent of our lenders to the purchase of the new notes or
could attempt to refinance the borrowings that contain the prohibition against
purchasing the new notes. If we do not obtain the consent of our lenders to
purchase the
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new notes or repay the borrowings, we will remain prohibited from purchasing the
new notes. In this case, our failure to purchase the tendered new notes would
constitute an event of default under the indenture which would, in turn,
constitute a default under the term loan agreement and/or other indebtedness.
Furthermore, we cannot assure that we will have sufficient resources to satisfy
our repurchase obligation with respect to the new notes following a change of
control.
THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, SO YOU MAY BE UNABLE TO SELL NEW
NOTES.
The new notes are new securities for which there is currently no market.
Consequently, the new notes will be relatively illiquid, and you may be unable
to sell your new notes. We do not intend to apply for listing of the new notes
on any securities exchange or for the inclusion of the new notes in any
automated quotation system. Accordingly, we cannot assure you that a market for
the new notes will develop. If a market for the new notes does develop, the new
notes could trade at prices that may be higher or lower than their principal
amount, depending on many factors. These factors include prevailing interest
rates, our operating results and markets for similar securities. Historically
the market for non-investment grade debt, such as the notes, has been subject to
disruptions that have caused substantial volatility in the prices of similar
securities. If a market develops for the new notes, such a market may be subject
to similar disruptions.
FORWARD-LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are "forward-looking statements," as 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
set forth in this prospectus under "Risk Factors." 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. These forward-looking statements include, but are not limited to
statements concerning:
- future results of operations or financial position;
- future liquidity;
- future health care and administrative costs;
- future premium rates and yields for commercial and Medicare business;
- future growth or loss of membership and membership composition;
- future health care benefits;
- future provider network;
- future provider utilization rates;
- future medical loss ratio levels;
- future claims payment, service performance and other systems and
operations matters;
- future administrative loss ratio levels;
- our readiness for Year 2000;
- proposed efforts to control health care and administrative costs;
- future dispositions of certain businesses and assets;
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<PAGE> 26
- future provider payment and risk-sharing agreements with health care
providers;
- the Turnaround Plan;
- future enrollment levels;
- future government regulation and relations and the impact of new laws and
regulations;
- the future of the health care industry; and
- the impact on Oxford of recent events, legal proceedings and regulatory
investigations and examinations, and other statements contained herein
regarding matters that are not historical facts.
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<PAGE> 27
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes as
described in this prospectus. We will receive in exchange old notes in like
principal amount. The old notes surrendered in exchange for the new notes will
be retired and canceled and cannot be reissued. Accordingly, the issuance of the
new notes will not result in any change in our indebtedness.
We used the cash proceeds from the issuance of the old notes, together with
the proceeds from the sale of preferred stock and warrants for $350 million
under the investment agreement with TPG Partners II, L.P. and borrowings of $150
million under the term loan agreement, to retire outstanding bridge notes, to
make capital contributions to regulated subsidiaries and to pay fees and
expenses approximating $39 million related to these transactions. We have used
and will use the balance for future subsidiary capital contributions, as
necessary, and for general corporate purposes.
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<PAGE> 28
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999, as
adjusted to give effect to the exchange offer. The issuance of the new notes
will not affect our capitalization.
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
AS
ACTUAL ADJUSTED
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Long-term debt:
11% Senior Notes -- due May 2005..................... $ 200,000 $ --
11% Senior Notes -- due May 2005..................... -- 200,000
Term loan due May 2003............................... 150,000 150,000
--------- ---------
Total............................................. 350,000 350,000
Obligations under capital leases....................... 10,779 10,779
Redeemable preferred stock:
Series D............................................. 221,815 221,815
Series E............................................. 99,460 99,460
--------- ---------
Total............................................. 321,275 321,275
Shareholders' equity (deficit):
Common stock, $.01 par value, authorized 400,000,000
shares; issued and outstanding 81,315,284
shares............................................ 813 813
Additional paid-in capital........................... 494,812 494,812
Accumulated deficit.................................. (679,994) (679,994)
Accumulated other comprehensive earnings............. (7,394) (7,394)
--------- ---------
Total shareholders' equity (deficit).............. (191,763) (191,763)
--------- ---------
Total capitalization.............................. $ 490,291 $ 490,291
========= =========
</TABLE>
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<PAGE> 29
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 refer to our most recently filed
annual report on Form 10-K/A No. 2, which is incorporated into this prospectus
by reference. For a description of the risks involved in our business, refer to
the section of this prospectus entitled "Risk Factors."
THE EXCHANGE OFFER
BACKGROUND
We originally sold the outstanding 11% Senior Notes due 2005 on May 13,
1998, in a transaction exempt from the registration requirements of the
Securities Act. Donaldson, Lufkin & Jenrette Securities Corporation, as the
initial purchaser, subsequently resold the notes to qualified institutional
buyers under Rule 144A and to persons in offshore transactions under Regulation
S under the Securities Act. As of the date of this prospectus, $200 million
aggregate principal amount of old notes is outstanding.
As a condition to the initial sale of the old notes, we entered into a
registration rights agreement with Donaldson, Lufkin & Jenrette under which we
agreed that we would, at our own cost:
(1) file an exchange offer registration statement under the Securities Act
with the SEC; and
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<PAGE> 30
(2) use our best efforts:
(a) to have the exchange offer registration statement declared
effective under the Securities Act at the earliest possible time;
(b) to cause the exchange offer registration statement to be effective
continuously;
(c) to keep the exchange offer open for no less than 20 business days;
and
(d) to cause the exchange offer to be consummated no later than the
30th business day after the exchange offer registration statement
is declared effective by the SEC.
We agreed to issue and exchange the new notes for all old notes tendered
and not withdrawn before the expiration of the exchange offer. We filed a copy
of the registration rights agreement as an exhibit to the registration statement
which includes this prospectus. The summary in this prospectus of provisions of
the registration rights agreement does not purport to be complete and is subject
to, and is qualified in its entirety by, all the provisions of the registration
rights agreement. We intend to satisfy some of our obligations under the
registration rights agreement with the registration statement.
TERMS OF THE EXCHANGE OFFER
We will offer the new notes in exchange for surrender of the old notes. We
will keep the exchange offer open for at least 20 business days, or longer if
required by applicable law, after the date notice of the exchange offer is
mailed to the holders of the old notes.
Upon the terms and subject to the conditions contained in this prospectus
and in the letter of transmittal which accompanies this prospectus, we will
accept any and all old notes validly tendered and not withdrawn before 5:00
p.m., New York City time, on the expiration date of the exchange offer. We will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding old notes accepted in the exchange offer. Holders may
tender some or all of their old notes under the exchange offer. However, you may
tender old notes only in integral multiples of $1,000.
The form and terms of the new notes will be the same as the form and terms
of the old notes except that:
(1) the new notes will bear a different CUSIP number from the old notes;
(2) the new notes will be registered under the Securities Act and,
therefore, will not bear legends restricting their transfer;
(3) the new notes will not contain certain terms providing for payment of
liquidated damages under circumstances relating to the timing of the
exchange offer, which are described in the registration rights
agreement; and
(4) holders of the new notes will not be entitled to any of the
registration rights under the registration rights agreement, which will
terminate upon consummation of the exchange offer.
The new notes will evidence the same debt as the old notes and will be issued
under, and be entitled to the benefits of, the indenture governing the old
notes. As a result, we will treat both series of notes as a single class of debt
securities under the indenture.
As of the date of this prospectus, $200 million in aggregate principal
amount of the old notes is outstanding. All of it is registered in the name of
Cede & Co., as nominee for
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<PAGE> 31
The Depository Trust Company. Solely for reasons of administration, we fixed the
close of business on August 26, 1999 as the record date for the exchange offer
for purposes of determining the persons to whom this prospectus and the letter
of transmittal will be mailed initially. We will not fix a record date for
determining holders of the old notes entitled to participate in this exchange
offer.
In connection with the exchange offer, holders of old notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the indenture governing the old notes. We intend to conduct the
exchange offer in accordance with the registration rights agreement and the
applicable requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the SEC related to exchange offers.
We will be deemed to have accepted validly tendered old notes when, as and
if we have given oral notice of acceptance, confirmed in writing, or written
notice of acceptance to The Chase Manhattan Bank, exchange agent for the
exchange offer. The exchange agent will act as agent for the tendering holders
for the purpose of receiving the new notes from us.
If we do not accept tendered old notes for exchange because of an invalid
tender, the occurrence of certain other events specified in this prospectus or
if holders submit old notes for a greater principal amount than the holder
desires to exchange, we will return the certificates for the unaccepted old
notes without expense to the tendering holder. If you tender old notes by
book-entry transfer in the exchange agent account at The Depository Trust
Company in accordance with the book-entry transfer procedures described below,
any non-exchanged old notes will be credited to an account maintained with The
Depositary Trust Company as promptly as practicable after the expiration date of
the exchange offer.
We will pay all charges and expenses, other than transfer taxes in certain
circumstances, in connection with the exchange offer. See "-- Fees and
Expenses." Holders who tender old notes in the exchange offer will therefore not
need to pay brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of old notes
in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date of the exchange offer is 5:00 p.m., New York City time,
on September 28, 1999, unless we extend the exchange offer, in which case the
expiration date is the latest date and time to which we extend the exchange
offer.
In order to extend the exchange offer, we:
- will notify the exchange agent of any extension by oral notice confirmed
in writing, or written notice; and
- will issue a press release or other public announcement of the extension,
which will include disclosure of the approximate number of old notes
deposited to date, before 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right:
- to delay accepting any old notes, to extend the exchange offer, or to
amend or terminate the exchange offer if any of the conditions described
below under "-- Conditions" have not been satisfied, by giving oral
notice confirmed in writing,
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<PAGE> 32
or written notice of the amendment, nonacceptance, delay, extension or
termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner.
We will promptly announce any event described above by making a timely
release to PR Newswire, and we may or we may not do so by other means as well.
If we amend the exchange offer in a manner determined by us to constitute a
material change, we will promptly disclose that amendment in a manner reasonably
calculated to inform holders of the old notes.
We will have no obligation to publish, advertise, or otherwise communicate
any public announcement of any delay, extension, amendment or termination that
we may choose to make, other than by making a timely release to PR Newswire.
INTEREST ON THE NEW NOTES
Interest on the old notes began accruing on May 13, 1998 when we issued the
old notes. Interest is payable on the old notes and will be payable on the new
notes semi-annually in arrears on each May 15 and November 15. The new notes
will accrue cash interest on the same terms as the old notes, that is, at the
rate of 11% per year from May 13, 1998. The last interest payment date prior to
the date of this prospectus was May 15, 1999. Interest on the new notes began
accruing on May 15, 1999 and the first interest payment date for the new notes
will be November 15, 1999.
RESALE OF THE NEW NOTES
We believe that you will be allowed to resell the new notes to the public
without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act,
if you can make the representations set forth in the letter of transmittal,
described in "-- Procedures for Tendering -- Representations upon Tendering Old
Notes." However, if you intend to participate in a distribution of the new
notes, you must comply with the registration requirements of the Securities Act
and deliver a prospectus, unless an exemption from registration is otherwise
available. In addition, you cannot be an "affiliate" of Oxford as defined in
Rule 405 under the Securities Act. You have to represent to us in the letter of
transmittal accompanying this prospectus that you meet these conditions
exempting you from the registration requirements.
We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in the context of a
no-action letter. Therefore, you cannot be sure that the SEC will treat it in
the same way it has treated other exchange offers in the past. If our belief is
wrong you could incur liability under the Securities Act. We are not
indemnifying you for any liability under the Securities Act, which means we will
not protect you against any loss incurred as a result of this liability under
the Securities Act.
A broker-dealer that has bought old notes for market-making or other
trading activities has to deliver a prospectus in order to resell any new notes
it has received for its own account in the exchange. A broker-dealer may use
this prospectus to resell any of its new notes. We agreed in the registration
rights agreement to send this prospectus to any broker-dealer that requests
copies for a period of up to one year after the registration
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<PAGE> 33
statement relating to this exchange offer is declared effective. See "Plan of
Distribution" on p. 77 for more information regarding broker-dealers.
SHELF REGISTRATION STATEMENT
If :
(1) applicable law or SEC policy do not permit the exchange offer; or
(2) any holder of Transfer Restricted Securities, as defined below,
notifies us prior to the 20th business day following the consummation
of the exchange offer that:
(a) law or SEC policy prohibit it from participating in the exchange
offer, or
(b) it may not resell the new notes acquired by it in the exchange
offer to the public without delivering a prospectus, and this
prospectus is not appropriate or available for public resales by
it, or
(c) it is a broker-dealer and holds old notes acquired directly from us
or one of our affiliates,
then we will file with the SEC a shelf registration statement to register for
public resale the Transfer Restricted Securities held by the holder who provides
us with certain information for inclusion in the shelf registration statement.
"Transfer Restricted Securities" means each old note or new note until the
earliest of the date on which:
- a person other than a broker-dealer exchanges the old note in the
exchange offer and the holder of the related new note is entitled to
resell it to the public without complying with the prospectus delivery
requirements of the Securities Act;
- following the exchange by a broker-dealer in the exchange offer, the
broker-dealer sells the new note to a purchaser who receives a copy of
this prospectus from the broker-dealer on or prior to the date of sale;
- such old note or new note has been registered under the Securities Act
and has been disposed of in accordance with the shelf registration
statement; or
- such old note or new note is distributed to the public under Rule 144
under the Securities Act.
We will then use our best efforts to cause the shelf registration statement
to become effective on or prior to the 90th day after the date on which we
become obligated to file the shelf registration statement. We will also use our
best efforts to keep effective the shelf registration statement for a period of
at least two years following the date on which the shelf registration statement
first becomes effective under the Securities Act.
LIQUIDATED DAMAGES
If:
(1) we fail to file an exchange offer registration statement with the SEC
on or prior to the filing deadline under the registration rights
agreement;
(2) the exchange offer registration statement is not declared effective by
the SEC on or prior to the later of the 360th day after May 13, 1998 or
the 90th day after the filing of the exchange offer registration
statement with the SEC on or prior to the filing deadline;
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<PAGE> 34
(3) the exchange offer is not completed on or before the 30th business day
after the exchange offer registration statement is declared effective;
(4) we are obligated to file the shelf registration statement and we fail
to file the shelf registration statement with the SEC on or prior to
the 30th day after this filing obligation arises;
(5) we are obligated to file a shelf registration statement and the shelf
registration statement is not declared effective on or prior to the
90th day after the filing of the shelf registration statement; or
(6) the exchange offer registration statement or the shelf registration
statement, as the case may be, is declared effective but afterwards it
ceases to be effective or usable in connection with resales of the
transfer restricted securities, for such time of non-effectiveness or
non-usability,
then we agree to pay to each holder of Transfer Restricted Securities affected
by the above liquidated damages in an amount equal to U.S.$0.05 per week per
U.S.$1,000 in principal amount of Transfer Restricted Securities held by the
holder for each week or portion of the Transfer Restricted Securities that the
circumstance listed in (1) through (6) above continues for the first 90-day
period immediately following the occurrence of these circumstances. The amount
of the liquidated damages will increase by an additional U.S.$0.05 per week per
U.S.$1,000 in principal amount of Transfer Restricted Securities for each
subsequent 90-day period until all of the circumstances listed in (1) through
(6) above, are cured, up to a maximum amount of liquidated damages of U.S.$0.50
per week per U.S.$1,000 in principal amount of Transfer Restricted Securities.
We will not be required to pay liquidated damages for more than one circumstance
listed in (1) through (6) above at any given time. Following the cure of all of
these circumstances, the accrual of liquidated damages will cease.
As of the date of this prospectus, liquidated damages of U.S.$0.25 per
U.S.$1,000 in principal amount of Transfer Restricted Securities have accrued
because the registration statement of which this prospectus is a part was not
declared effective by July 29, 1999, the 90th day after the filing of the
registration statement. The accrual of liquidated damages ceased on August 30,
1999, when the registration statement was declared effective.
We will pay all accrued liquidated damages to holders entitled to
liquidated damages by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no accounts have been specified.
PROCEDURES FOR TENDERING
GENERAL
You may tender your own old notes in the exchange offer. To tender in the
exchange offer, a holder must do the following:
(1) properly complete, sign and date the letter of transmittal, or a
facsimile of the letter of transmittal;
(2) have the signatures on the letter of transmittal or facsimile of the
letter of transmittal guaranteed if the letter of transmittal so
requires; and
(3) except as discussed in "-- Guaranteed Delivery Procedures," mail or
otherwise deliver the letter of transmittal, or facsimile, together
with the old notes and any other required documents, to the exchange
agent at the address listed below
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<PAGE> 35
under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer.
The exchange agent must receive the old notes, a completed letter of
transmittal and all other required documents at the address listed below under
"-- Exchange Agent" before 5:00 p.m., New York City time, on the expiration date
for the tender to be effective. You may deliver your old notes by using the
book-entry transfer procedures described below, as long as the exchange agent
receives confirmation of the book-entry transfer before the expiration date.
DTC authorizes its participants that hold old notes on behalf of beneficial
owners of old notes through DTC to tender their old notes as if they were
holders. To effect a tender of old notes, DTC participants should either:
(1) complete and sign the letter of transmittal, or a manually signed
facsimile of the letter, have the signature on the letter of
transmittal or facsimile of the letter of transmittal guaranteed by the
instructions to the letter of transmittal so require, and mail or
deliver the letter of transmittal, or the manually signed facsimile, to
the exchange agent according to the procedure described in
"-- Procedures for Tendering" or
(2) transmit their acceptance to DTC through its automated tender offer
program for which the transaction will be eligible and follow the
procedure for book-entry transfer described in "-- Procedures for
Tendering -- Book-Entry Transfer."
By tendering, each holder will make the representations described under the
heading "-- Representations upon Tendering Old Notes." Each participating
broker-dealer must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. See "Plan of Distribution."
The tender by a holder and our acceptance of the tender will constitute the
agreement between the holder and us set forth in this prospectus and in the
letter of transmittal.
THE HOLDER ELECTS AND HAS THE SOLE RISK OF THE METHOD OF DELIVERY OF OLD
NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
HOLDERS SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL, OLD NOTES OR BOOK-ENTRY
CONFIRMATION SHOULD BE SENT TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS ON THEIR BEHALF.
BENEFICIAL OWNERS
If you hold old notes and your old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
tender your old notes, you should contact the registered holder promptly and
instruct it to tender on your behalf. See "Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included
with the letter of transmittal.
If you hold old notes that are registered as described above and you want
to tender on your own behalf, you must, prior to completing and executing the
letter of transmittal and delivering your old notes, either make appropriate
arrangements to register ownership of
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<PAGE> 36
the old notes in your name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
SIGNATURES ON LETTER OF TRANSMITTAL
Generally, an eligible guarantor institution must guarantee signatures on a
letter of transmittal or a notice of withdrawal unless the old notes are
tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of an eligible guarantor institution.
An "eligible guarantor institution" is:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
- a commercial bank or trust company having an office or correspondent in
the United States; or
- an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal.
If a person other than the registered holder of any old notes listed in the
letter of transmittal signed the letter of transmittal, the old notes must be
endorsed or accompanied by a properly completed bond power signed by the
registered holder as the registered holder's name appears on the old notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any old notes or bond powers, these
persons should so indicate when signing, and unless waived by us, submit with
the letter of transmittal evidence satisfactory to us of their authority to so
act.
BOOK-ENTRY TRANSFER
Within two business days after the date of this prospectus the exchange
agent will establish a new account or utilize an existing account with respect
to the old notes at the book-entry transfer facility, The Depository Trust
Company, for the purpose of facilitating the exchange offer. Subject to the
establishment of the accounts, any financial institution that is a participant
in DTC's system may make book-entry delivery of old notes by causing DTC to
transfer the old notes into the exchange agent's account with respect to the old
notes in accordance with DTC's procedures. Although delivery of the old notes
may be effected through book-entry transfer into the exchange agent's account at
DTC, the exchange agent must receive an appropriate letter of transmittal
properly completed and duly executed with any required signature guarantee or an
agent's message and all other required documents at its address listed below
under "-- Exchange Agent" on or before the expiration date of the exchange
offer, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under those procedures.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
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<PAGE> 37
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent, which states that DTC has received an express
acknowledgment from the participant in DTC tendering the old notes stating:
- the aggregate principal amount of old notes which have been tendered by
the participant;
- that the participant has received and agrees to be bound by the terms of
the letter of transmittal; and
- that we may enforce this agreement against the participant.
Delivery of an agent's message will also constitute an acknowledgement from
the tendering DTC participant that the representations contained in the letter
of transmittal and described below under "Representations Upon Tendering Old
Notes" are true and correct.
ACCEPTANCE OF TENDERED NOTES
We will determine, in our sole discretion, all questions as to the
validity, form, acceptance, withdrawal and eligibility, including time of
receipt, of tendered old notes, which determination will be final and binding.
We reserve the absolute right:
(1) to reject any and all old notes not properly tendered;
(2) to reject any old notes if our acceptance would, in the opinion of our
counsel, be unlawful; and
(3) to waive any defects, irregularities or conditions of tender as to
particular old notes.
Our interpretation of the terms and conditions of the exchange offer, including
the instructions in the letter of transmittal, will be final and binding on all
parties.
Unless waived, you must cure any defects or irregularities in connection
with tenders of old notes within a period of time that we will determine.
Neither we, nor the exchange agent nor any other person will be liable for
failure to give notice of any defect or irregularity with respect to any tender
of old notes. We will not deem a tender of an old note to have been made until
the defects or irregularities mentioned above have been cured or waived.
The exchange agent will return to the tendering holders any old notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date of the exchange offer.
REPRESENTATIONS UPON TENDERING OLD NOTES
By surrendering old notes in the exchange offer, you will be telling us
that, among other things:
(1) you are acquiring the new notes issued in the exchange offer in the
ordinary course of your business;
(2) you are not an "affiliate," as defined in Rule 405 under the Securities
Act, of Oxford;
(3) you are not participating, and do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the new notes issued to you in the exchange offer;
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<PAGE> 38
(4) you have full power and authority to tender, sell, assign and transfer
the old notes tendered;
(5) we will acquire good, marketable and unencumbered title to the old
notes being tendered, free and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional sale agreements or
other obligations relating to their sale or transfer, and not subject
to any adverse claim when the old notes are accepted by us; and
(6) you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer
for the purposes of distributing the new notes, you must comply with
the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale of the new notes, and you
cannot rely on the position of the SEC's staff in their no-action
letters.
If you are a broker-dealer and you will receive new notes for your own account
in exchange for old notes that were acquired as a result of market-making
activities or other trading activities, you will be required to acknowledge in
the letter of transmittal that you will deliver a prospectus in connection with
any resale of the new notes.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your old notes and:
- you cannot deliver your old notes, the letter of transmittal or any other
required documents to the exchange agent prior to the expiration date;
- you cannot complete the procedure for book-entry transfer, before the
expiration date; or
- your old notes are not immediately available in order for you to meet the
expiration date deadline,
then you may participate in the exchange offer if:
(1) the tender is made through an eligible guarantor institution;
(2) prior to the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed
notice of guaranteed delivery, substantially in the form provided by
us, by facsimile transmission, mail or hand delivery, containing:
(a) the name and address of the holder, the certificate number or
numbers of the old notes, if applicable, and the principal amount of
old notes tendered;
(b) a statement that the tender is being made thereby; and
(c) a guarantee that, within three business days after the expiration
date, the eligible guarantor institution will deposit the letter of
transmittal or facsimiles of the letter of transmittal, together
with the certificate or certificates representing the old notes in
proper form for transfer or an agent's message and a confirmation of
book-entry transfer of the old notes into the exchange agent's
account at DTC, and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution
with the exchange agent; and
(3) the exchange agent receives, within three business days after the
expiration date
(a) a properly completed and executed letter of transmittal or facsimile
or an agent's message in the case of a book-entry transfer;
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<PAGE> 39
(b) the certificate or certificates representing all tendered old notes
in proper form for transfer or a confirmation of book-entry transfer
of the old notes into the exchange agent's account at the book-entry
transfer facility; and
(c) all other documents required by the letter of transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender of old notes at any time prior to 5:00 p.m., New York City time, on the
expiration date of the exchange offer.
To withdraw a tender of old notes in the exchange offer, the exchange agent
must receive a letter or facsimile transmission notice of withdrawal at its
address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York
City time, on the expiration date. Any notice of withdrawal must:
(1) specify the name of the person who deposited the old notes to be
withdrawn;
(2) identify the old notes to be withdrawn including the certificate number
or numbers, if applicable, and aggregate principal amount of old notes
to be withdrawn or, in the case of old notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited and
otherwise comply with the procedures of the transfer agent;
(3) be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee under the
indenture governing the old notes register the transfer of the old
notes into the name of the person withdrawing the tender; and
(4) specify the name in which the old notes being withdrawn are to be
registered, if different from that of the person who deposited the
notes.
We will determine in our sole discretion all questions as to the validity,
form and eligibility, including time of receipt, of notices of withdrawal, and
our determination will be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer, and we will not issue new notes, unless the old notes so
withdrawn are validly retendered. We will return any old notes that you have
tendered but that we do not accept for exchange to the holder of the notes
without cost to the holder as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. You may retender properly withdrawn
old notes by following one of the procedures described above under
"-- Procedures for Tendering" at any time before the expiration date.
CONDITIONS
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange new notes for, any old notes and we may
terminate the exchange offer as provided in this prospectus before the
acceptance of the old notes, if:
(1) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us, or any material
adverse development has occurred in any existing action or proceeding
with respect to us or any of our subsidiaries;
(2) any law, statute, rule or regulation is proposed, adopted or enacted,
or the staff of the SEC interprets any existing law, statute, rule or
regulation in a manner,
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<PAGE> 40
which, in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us; or
(3) we have not obtained any governmental approval that we, in our
reasonable discretion, deem necessary for the completion of the
exchange offer as contemplated by this prospectus.
The conditions listed above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any of these conditions. We
may waive these conditions in our reasonable discretion in whole or in part at
any time and from time to time. If we fail at any time to exercise any of the
above rights, the failure will not be deemed a waiver of those rights, and those
rights will be deemed ongoing rights which may be asserted at any time and from
time to time.
If we determine in our reasonable discretion that any of the conditions are
not satisfied, we may:
(1) refuse to accept any old notes and return all tendered old notes to the
tendering holders;
(2) extend the exchange offer and retain all old notes tendered before the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw these old notes; or
(3) waive unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes that have not been withdrawn. If
this waiver constitutes a material change to the exchange offer, we
will disclose the by means of a prospectus supplement that will be
distributed to the registered holders.
EXCHANGE AGENT
We have appointed The Chase Manhattan Bank as exchange agent for the
exchange offer. You should direct any questions and requests for assistance and
requests for additional copies of this prospectus or of the letter of
transmittal to The Chase Manhattan Bank, addressed as follows:
BY MAIL, HAND OR OVERNIGHT COURIER:
55 Water Street
Room 234, North Building
New York, NY 10041
Attn: Carlos Esteves
BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY):
(212) 638-7380 or (212) 638-7381
CONFIRM BY TELEPHONE:
(212) 638-0828
The Chase Manhattan Bank also acts as trustee under the indenture governing
the notes.
FEES AND EXPENSES
We will pay the expenses of this exchange offer. We are making the
principal solicitation by mail. However, our officers and regular employees may
make additional solicitation by telegraph, facsimile transmission, e-mail,
telephone or in person. We have not retained any dealer-manager in connection
with the exchange offer and will not make any payments to brokers, dealers or
others soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and
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<PAGE> 41
will reimburse it for its reasonable out-of-pocket expenses in connection with
providing the services.
We will pay any transfer taxes applicable to the exchange of old notes. If,
however, a transfer tax is imposed for any reason other than the exchange, then
the person surrendering the notes will pay the amount of any transfer taxes. If
you do not submit satisfactory evidence of payment of taxes or of an exemption
with the letter of transmittal, we will bill you directly for the amount of
those transfer taxes.
ACCOUNTING TREATMENT
We will record the new notes at the same carrying value as the old notes as
reflected in our accounting records on the date of exchange. Accordingly, we
will not recognize a gain or loss for accounting purposes. We will amortize the
expenses of the exchange offer and the unamortized expenses related to the
issuance of the old notes over the term of the notes.
VOLUNTARY PARTICIPATION
Participation in the exchange offer is voluntary and holders of old notes
should carefully consider whether to accept the terms and condition of this
offer. We urge holders of the old notes to consult their financial and tax
advisors in making their own decisions on what action to take with respect to
the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who are eligible to participate in the exchange offer
but who do not tender their old notes will not have any further registration
rights, and their old notes will continue to be subject to restrictions on
transfer. Accordingly, you may resell the old notes that are not exchanged only:
- to us, upon redemption of notes or otherwise;
- so long as the old notes are eligible for resale under Rule 144A under
the Securities Act, to a person whom the seller reasonably believes is a
"qualified institutional buyer" within the meaning of Rule 144A
purchasing for its own account or for the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;
- in accordance with Rule 144 under the Securities Act or another exemption
from the registration requirements of the Securities Act;
- outside the United States to a foreign person in accordance with the
requirements of Regulation S under the Securities Act; or
- under an effective registration statement under the Securities Act,
in each case in accordance with all other applicable securities laws.
REGULATORY APPROVALS
There are no federal or state regulatory requirements that we must comply
with and there are no approvals that we must obtain in connection with the
exchange offer. However, the applicable state regulatory authorities that
regulate our business requested copies of all documentation relating to our
indebtedness, including the new notes. We intend to provide these regulators
with copies of the material documents related to the exchange offer, including
this registration statement.
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DESCRIPTION OF THE NEW NOTES
GENERAL
We issued the old notes, and we will issue the new notes, under the
Indenture, dated as of May 13, 1998 between us and The Chase Manhattan Bank, as
trustee. The following description of the material provisions of the indenture
is only a summary. More specific terms as well as the definitions of relevant
terms can be found in the indenture and the Trust Indenture Act of 1939, which
is applicable to the indenture. Capitalized terms used in this prospectus and
not otherwise defined will have the meanings given to them in the indenture. For
definitions of some terms used in the indenture and referred to in the following
summary, see "-- Definitions" below. References in this section to the "notes"
are references to both old notes and new notes.
We will consider the old notes and the new notes collectively to be a
single class for all purposes under the indenture, including waivers,
amendments, redemptions and offers to purchase.
The old notes are and the new notes will be senior unsecured obligations of
Oxford and:
- will rank senior in right of payment to all our subordinated
indebtedness;
- will rank equally in right of payment with all existing and future senior
indebtedness, including borrowings under the term loan agreement, dated
as of May 13, 1998, by and among us, the financial institutions listed in
the term loan agreement as lenders, DLJ Capital Funding, Inc. as
syndication agent and IBJ Schroder Bank & Trust Company, as facility
manager; and
- will be effectively subordinated to all our existing and future secured
indebtedness, including indebtedness under the term loan agreement, to
the extent of the value of the assets securing this indebtedness, and the
notes will be structurally subordinated to indebtedness and other
liabilities of our subsidiaries, including any guarantees of our
subsidiaries of indebtedness under the term loan agreement.
As of the date of this prospectus, we had approximately $350.0 million of
senior indebtedness, including the old notes.
Restrictions in the indenture on our ability and the ability of our
restricted subsidiaries to incur additional indebtedness, to make certain asset
sales, to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of our assets or the assets
of our restricted subsidiaries, may make more difficult or discourage a takeover
of us, whether favored or opposed by our management. The indenture may not
afford holders of notes protection in all circumstances from the adverse aspects
of a leveraged transaction, reorganization, restructuring, merger or similar
transaction.
As of the date of this prospectus, all of our subsidiaries constitute
restricted subsidiaries for the purposes of the indenture. Under certain
circumstances, we will be able to designate future subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the indenture.
PRINCIPAL, MATURITY AND INTEREST
The new notes will be limited in aggregate principal amount to $200 million
and will mature on May 15, 2005. In this prospectus we offer new notes in
aggregate principal
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amount of $200 million in exchange for the old notes. Interest on the new notes
will accrue at the rate of 11% per annum and will be payable semi-annually in
arrears on May 15 and November 15, commencing on November 15, 1999, to holders
of record on the immediately preceding May 1 and November 1. Interest on the new
notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of original issuance. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months. We
will issue the new notes in fully registered form without coupons in
denominations of $1,000 and integral multiples of $1,000.
Principal, premium, if any, liquidated damages, if any, and interest on the
new notes will be payable, and the new notes may be presented for registration
of transfer or exchange, at the corporate trust office of the trustee or another
office or agency of Oxford as determined by us. We may change the office or
agency without prior notice to holders of the new notes, and any of our
Subsidiaries may act as paying agent or registrar.
At our option, we may make payment of liquidated damages, if any, or
interest by check mailed to the holders of the new notes at their respective
addresses in the register of holders of new notes. However, we must make all
payments with respect to new notes, if the holders have given wire transfer
instructions to the trustee by the record date, by wire transfer of immediately
available funds to the accounts specified by the holders of the new notes.
OPTIONAL REDEMPTION
We cannot redeem new notes prior to May 15, 2002, unless we redeem them out
of the net proceeds of certain issuances of our equity interests or in the case
of a change of control. We have the option to redeem the new notes after May 15,
2002, in whole or in part, upon not less than 30 nor more than 60 days' notice
to each holder of new notes to be redeemed, at the following redemption prices
expressed as percentages of principal amount of the new notes, plus accrued and
unpaid interest and liquidated damages, if any, to the redemption date, if
redeemed during the 12-month period beginning on May 15 of the years indicated
in the table below:
<TABLE>
<CAPTION>
12-MONTH PERIOD
BEGINNING ON MAY 15, PERCENTAGE
-------------------- ----------
<S> <C>
2002...................................................... 105.500%
2003...................................................... 102.750
2004 and afterwards....................................... 100.000
</TABLE>
At any time on or before May 15, 2001, we may redeem for cash up to 33 1/3%
of the original aggregate principal amount of the notes issued under the
indenture with the net proceeds from public issuances of our equity interests
other than disqualified stock at a redemption price of 111% of principal amount,
plus any accrued and unpaid interest and liquidated damages, if any, to the
redemption date. However, at least 66 2/3% of the original aggregate principal
amount of the notes issued under the indenture must remain outstanding
immediately after each redemption. A redemption of this type must occur within
60 days of the date of the closing of the public offering of equity interests.
Equity interest means capital stock, warrants, options or other rights to
acquire capital stock but excluding any debt security that is convertible into,
or exchangeable for, capital stock.
If we do not redeem all of the new notes, the trustee will select new notes
or portions of the notes for redemption on a pro rata basis, by lot or by the
method it deems fair and appropriate. New notes may be redeemed in part in
multiples of $1,000 principal amount
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only. We will send notices of redemption by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of new notes to be
redeemed at its registered address.
If we redeem any new note in part only, the notice of redemption that
relates to the new note will state the portion of the principal amount of the
new note to be redeemed. We will issue a new note in principal amount equal to
the unredeemed portion of the note in the name of its holder upon cancellation
of the original new note. On and after the redemption date, interest will cease
to accrue on new notes or portions of them called for redemption unless we
default in the payment of interest on the new notes.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
we are not required to make any mandatory redemption, purchase or sinking fund
payments with respect to the new notes prior to the maturity date.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The indenture provides that when a "Change of Control" occurs, each holder
of notes will have the right to require us to repurchase all or any part equal
to $1,000 or an integral multiple of $1,000 of the holder's notes in an offer,
referred to below as a "Change of Control Offer". The offer price will be in
cash equal to 101% of the aggregate principal amount of the notes plus accrued
and unpaid interest and liquidated damages, if any, to the date of purchase. We
refer to this amount as the "Change of Control Payment." Within 30 days
following any Change of Control, we will mail a notice to each holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase the notes under the procedures required by the indenture
and described in the notice. We will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations under the
Exchange Act to the extent these laws and regulations apply in connection with
the repurchase of the new notes as a result of a Change of Control. The
definition of Change of Control is provided under "-- Definitions."
The Change of Control Offer will remain open for a period of 20 business
days following its commencement and no longer, except to the extent that a
longer period is required by applicable law. No later than five business days
after the termination of the offer period, we will purchase all notes validly
tendered and not properly withdrawn in the Change of Control Offer. Payment for
any notes so purchased will be made in the same manner as interest payments are
made on the notes.
If the date on which we purchase notes in a Change of Control is on or
after an interest record date and on or before the related interest payment
date, any accrued and unpaid interest and liquidated damages, if any, will be
paid to the person in whose name a new note is registered at the close of
business on the interest record date. No additional interest will be payable to
holders who tender notes in the Change of Control Offer.
On the purchase date, we will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly tendered in
the Change of Control Offer;
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(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all notes or portions of notes so tendered; and
(3) deliver or cause to be delivered to the trustee the new notes so
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by us.
The paying agent will promptly mail to each holder of notes tendered the Change
of Control Payment for the notes and the trustee will promptly authenticate and
mail, or cause to be transferred by book entry, to each holder a note equal in
principal amount to any unpurchased portion of the notes surrendered, if any.
Each note must be in a principal amount of $1,000 or an integral multiple of
$1,000. We will promptly return any notes not accepted in the Change of Control
Offer. We will publicly announce the results of the Change of Control Offer on
the date on which we purchase notes upon a Change of Control.
Except as described above, the indenture does not contain provisions that
permit the holders of notes to require us to redeem the notes in the event of a
takeover, recapitalization or similar restructuring, including an issuer
recapitalization or similar transaction with management. In addition, the
existence of the holder's right to require us to repurchase the holder's notes
upon the occurrence of a Change of Control may or may not deter a third party
from seeking to acquire us in a transaction that would constitute a Change of
Control.
A number of factors may limit our ability to repurchase notes in a Change
of Control Offer. The term loan agreement provides that certain change of
control events with respect to Oxford would require us to prepay mandatorily
amounts outstanding under the term loan agreement at 101% of the aggregate
principal amount of the notes plus accrued and unpaid interest. However, each
lender has the right to waive its entitlement to prepayment. In addition,
certain events that may obligate us to prepay outstanding obligations under the
term loan agreement do not constitute a Change of Control under the indenture.
We may not have sufficient resources to repay indebtedness under the term loan
agreement, and we may not have sufficient resources to repurchase tendered
notes. Furthermore, any future credit agreements or other agreements relating to
senior indebtedness to which we become a party may contain similar restrictions
and provisions. In the event a Change of Control occurs at a time when we are
directly or indirectly prohibited from purchasing notes, we could seek the
consent of our lenders to the purchase of notes or could attempt to refinance
the borrowings that contain this prohibition. If we do not obtain the consent or
repay the borrowings, the purchase of notes will remain prohibited. Our failure
to purchase tendered notes may constitute a breach of the indenture which would,
in turn, constitute a default under the term loan agreement and could lead to
the acceleration of the indebtedness under the term loan agreement. In the event
of a default and acceleration of indebtedness, the security granted in respect
of the term loan agreement could result in the holders of the notes receiving
less ratably than our other creditors.
ASSET SALES
The indenture provides that we will not, and will not permit any of our
restricted subsidiaries to, engage in an asset sale, as defined in
"-- Definitions," unless:
(1) we, or our restricted subsidiary, as the case may be, receive
consideration at the time of asset sale at least equal to the fair
market value of the assets or equity interests sold or otherwise
disposed of and, in the case of a lease of assets, a lease
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providing for rent and other conditions which are no less favorable to
us, or our restricted subsidiary, as the case may be, in any material
respect than the then prevailing market conditions, evidenced in each
case by a resolution of the Board of Directors of the entity set forth
in an officers' certificate delivered to the trustee; and
(2) at least 75%, 100% in the case of lease payments, of the consideration
for the asset sale received by us or our restricted subsidiary is in
the form of cash or cash equivalents. The amount of any liabilities of
us or any restricted subsidiary, as shown on our most recent balance
sheet or the most recent balance sheet of our restricted subsidiary,
other than contingent liabilities and liabilities that are by their
terms subordinated to the notes, that are assumed by the transferee of
the assets under a customary novation agreement that releases us or our
restricted subsidiary from further liability will be deemed to be cash
for the purposes of this clause (2).
Within 364 days after the receipt of any Net Proceeds, as defined in
"-- Definitions," from an asset sale, we, or the restricted subsidiary, as
applicable, either:
(1) may apply the Net Proceeds:
(a) to make an investment in, to make a capital expenditure relating
to, or to acquire other tangible assets in, the commercial group
health benefit business in New York, New Jersey or Connecticut;
(b) to the reduction of indebtedness under the term loan agreement or
the permanent reduction of any of our other indebtedness that ranks
equally with and without preference to the notes or the permanent
reduction of any long-term indebtedness of a restricted subsidiary;
or
(c) to make capital contributions to regulated restricted subsidiaries
covering commercial lives operating in New York, New Jersey or
Connecticut which contributions are required by law or requested in
writing to be made by the appropriate state regulatory authorities;
or
(2) with respect to Net Proceeds received from an asset sale by a regulated
restricted subsidiary which are not permitted by appropriate state
regulatory authorities to be distributed or otherwise transferred,
retain the Net Proceeds as capital of the regulated restricted
subsidiary.
Any Net Proceeds from asset sales that are not applied or invested or
committed to be applied or invested, as provided above will be deemed to
constitute "excess proceeds." If the aggregate amount of excess proceeds exceeds
$20 million, then on the earlier of:
(1) the 365th day after an asset sale; or
(2) the date that our Board of Directors or the restricted subsidiary
determines not to apply the Net Proceeds relating to the asset sale in
the manner set forth above, then we must make an offer to all holders
of notes, an "Asset Sale Offer," to purchase the maximum principal
amount of notes that may be purchased out of the excess proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount
of the notes plus accrued and unpaid interest and liquidated damages,
if any, on the notes to the date of purchase, in accordance with the
procedures in the indenture. To the extent that the aggregate amount of
notes tendered in an Asset Sale Offer is less than the excess proceeds,
we may use any remaining excess proceeds for general corporate
purposes. If the aggregate
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<PAGE> 47
principal amount of notes surrendered by holders of notes exceeds the
amount of excess proceeds, the trustee will select the notes to be
purchased on a pro rata basis, by lot or by another method as the
trustee deems fair and appropriate. We will purchase the notes only in
increments of $1,000. Upon completion of the Asset Sale Offer, the
amount of excess proceeds will be reset at zero.
The Asset Sale Offer will remain open for a period of 20 business days
following its commencement and no longer, except to the extent that applicable
law requires a longer period. No later than five business days after the
termination of the Asset Sale Offer period, we will purchase the principal
amount of notes required to be purchased under this covenant or, if less than
the required amount has been tendered, all notes tendered in response to the
Asset Sale Offer. Payment for any notes so purchased will be made in the same
manner as interest payments are made on the notes.
If the date that we purchase notes in an Asset Sale Offer is on or after an
interest record date and on or before the related interest payment date, then we
will pay any accrued and unpaid interest and liquidated damages, if any, to the
person in whose name a note is registered at the close of business on the
interest record date, and no additional interest will be payable to holders who
tender notes in the Asset Sale Offer.
On or before the date that we purchase notes in an Asset Sale Offer, we
will, to the extent lawful, accept for payment, on a pro rata basis to the
extent necessary, the principal amount of notes or portions of notes required to
be purchased under this covenant tendered in the Asset Sale Offer, or if less
than the required amount has been tendered, all notes tendered, and will deliver
to the trustee an officers' certificate stating that we accepted the notes or
portions of notes for payment in accordance with the terms of this covenant. We,
the Depositary or the paying agent, as the case may be, will promptly, but in
any case not later than five days after the date that we purchase new notes in
an Asset Sale Offer, mail or deliver to each tendering holder an amount equal to
the purchase price of the notes tendered by the holder and accepted by us for
purchase, and we will promptly issue a note, and the trustee, upon delivery of
an officers' certificate from us, will authenticate and mail or deliver the note
to the holder, in a principal amount equal to any unpurchased portion of the
note surrendered. Any note not so accepted will be promptly mailed or delivered
by us to the holder of the note. We will publicly announce the results of the
Asset Sale Offer on the date that we purchase the notes in an Asset Sale Offer.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations under securities laws to the
extent those laws and regulations apply in connection with the repurchase of the
notes in an Asset Sale Offer.
The indenture also provides that:
(1) a sale of the stock or assets of FPA Medical Management, Inc. will be
for cash only;
(2) at least 50% of the consideration received by us or a restricted
subsidiary from the sale of stock or assets of Oxford Specialty
Holdings, Inc., Oxford Specialty Management, Inc., Specialty Management
Company (NY) IPA, Inc., Specialty Management Company (PA) IPA, Inc.,
Specialty Management Company (NJ) IPA, Inc. and Specialty Management
Company (CT) IPA, Inc. and Oxford Health Plans (NH), Inc. will be cash
or marketable securities;
(3) there will be no restrictions on the consideration received by us and
our restricted subsidiaries from the sale of the stock or assets of or
indebtedness issued by a
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Minority Investment or the New York, New Jersey, Florida or
Pennsylvania Medicaid business, Oxford Health Plans (IL), Inc. or
Oxford Health Plans (FL), Inc.; and
(4) the consideration received by us and our restricted subsidiaries from
all other Excluded Asset Sales will be cash.
We and our restricted subsidiaries will sell all the marketable securities
for cash no later than the earlier of 60 days from receipt and the termination
or expiration of any governmental limitation of the sale.
We have agreed to cause our restricted subsidiaries to transfer to us all
consideration received by the restricted subsidiaries from asset sales and
Excluded Asset Sales as promptly as practicable, except in the case of asset
sales to the extent the proceeds from the asset sale are applied as set forth in
clause (1)(c) or (2) of the second paragraph of this section.
COVENANTS
RESTRICTED PAYMENTS
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any payment or distribution on
account of our or any of our restricted subsidiaries' equity interests,
including, without limitation, any payment in connection with any
merger or consolidation involving us other than:
(a) dividends or distributions payable in equity interests other than
our disqualified stock;
(b) dividends or distributions payable to us or any of our wholly owned
subsidiaries; or
(c) dividends payable in preferred stock in accordance with the
investment agreement, dated as of February 28, 1998, by and between
us and TPG Partners II, L.P.;
(2) make any payment, other than in equity interests other than
disqualified stock, in connection with any settlement or resolution of
any claims, investigations, proceedings and ligation arising out of or
relating to federal or state law relating to the purchase or sale of
securities, including, without limitation, stockholders' derivative
actions involving us or any of our restricted subsidiaries, excluding
Qualified Insurance Payments;
(3) purchase, redeem or otherwise acquire or retire for value any of our
equity interests or any of our restricted subsidiaries, other than any
equity interests owned by us or any of our restricted subsidiaries;
(4) prepay, purchase, redeem, defease or otherwise acquire or retire for
value prior to its stated maturity any indebtedness that is
subordinated to the new notes; or
(5) make any Restricted Investment.
We refer to the payments and other actions set forth above in clauses (1)
through (5) as "Restricted Payments." We may make, and may permit our restricted
subsidiaries to
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make, Restricted Payments if at the time of and after giving effect to the
Restricted Payment:
(a) no Default or Event of Default under the indenture has occurred and is
continuing or would occur as a consequence of making the Restricted
Payment;
(b) at the time of the Restricted Payment and after giving pro forma effect
to the Restricted Payment as if the Restricted Payment had been made at
the beginning of the applicable four quarter period, the Fixed Charge
Coverage Ratio for our most recently ended four full fiscal quarters
for which internal financial statements are available immediately
preceding the date on which the Restricted Payment is made is at least
2.25 to 1; and
(c) the Restricted Payment when taken together with all other Restricted
Payments relating to the period does not exceed 50% of our consolidated
net income for the most recently ended four fiscal quarters for which
internal financial statements are available immediately preceding the
date on which the Restricted Payment is made.
The foregoing provisions will not prohibit the following transactions, as
long as, in the case of transactions described in clauses (2) through (6) below,
no Default or Event of Default occurred and is continuing after the transaction:
(1) the payment of any dividend within 60 days after the date of its
declaration, if at the date of declaration the payment would have
complied with the provisions of the indenture;
(2) the making of any Restricted Payment, other than the payment, of a
dividend either in exchange for or out of the proceeds of the
substantially concurrent sale, other than to a subsidiary of, or from
substantially concurrent additional capital contributions in respect
of, our equity interests, other than disqualified stock;
(3) the redemption, repurchase, retirement or other acquisition of any of
our equity interests either in exchange for or out of the proceeds of,
the substantially concurrent sale, other than to a subsidiary of, or
from substantially concurrent additional capital contributions in
respect of, our other equity interests, other than any disqualified
stock;
(4) the defeasance, redemption or repurchase of subordinated indebtedness
with the net cash proceeds from:
(a) an incurrence of Permitted Refinancing Indebtedness; or
(b) the substantially concurrent sale, other than to a subsidiary of,
or from substantially concurrent additional capital contributions
in respect of, our equity interests, other than disqualified stock;
(5) an exchange of disqualified stock for disqualified stock that
constitutes Permitted Refinancing Indebtedness; and
(6) any dividend or other distribution made by any of our wholly owned
subsidiaries to another of our wholly owned subsidiary or to us.
As of the date of this prospectus, all of our subsidiaries were restricted
subsidiaries. The Board of Directors may designate any subsidiary to be an
Unrestricted Subsidiary if this designation would not cause a Default or Event
of Default. For purposes of making this determination, all outstanding
Investments after May 13, 1998 by us and our restricted
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subsidiaries, except to the extent repaid in cash, in the subsidiary that will
be designated an Unrestricted Subsidiary will be deemed to be Restricted
Payments at the time of designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. The designation
as an Unrestricted Subsidiary will only be permitted if the Restricted Payment
would be permitted at the time of designation and if the subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments other than cash will be the fair
market value on the date of the Restricted Payment of the assets proposed to be
transferred by us or the applicable restricted subsidiary, as the case may be,
for the Restricted Payment. The fair market value of the assets will be
evidenced by a resolution of the Board of Directors set forth in an officers'
certificate delivered to the trustee. Not later than the date of making any
Restricted Payment, we will deliver to the trustee an officers' certificate
stating that the Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this covenant were computed. These
calculations may be based upon our latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
any indebtedness, including Acquired Indebtedness. In addition, we will not
issue any disqualified stock and will not permit any of our restricted
subsidiaries to issue any shares of preferred stock.
However, we may incur indebtedness, including Acquired Indebtedness, or
issue shares of disqualified stock if:
(1) the Fixed Charge Coverage Ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately prior to the date on which the additional indebtedness is
incurred or the disqualified stock is issued would have been at least 2
to 1, determined on a pro forma basis, including a pro forma
application of the net proceeds from the incurrence of indebtedness or
issuance of disqualified stock, as if the additional indebtedness had
been created, incurred, issued, assumed or guaranteed or the
disqualified stock had been issued, as the case may be, at the
beginning of the four-quarter period; and
(2) no Default or Event of Default occurred and is continuing or would
occur as a consequence of the incurrence of indebtedness or issuance of
disqualified stock.
The foregoing provisions will not apply to:
(a) the incurrence of indebtedness under the term loan agreement, and
any guarantees by our subsidiaries with respect to the
indebtedness under the term loan agreement, as long as the
aggregate principal amount of all indebtedness outstanding under
the term loan agreement does not at any time exceed $150 million;
(b) the incurrence of indebtedness represented by the new notes;
(c) all Existing Indebtedness;
(d) the incurrence by us or our restricted subsidiaries of
indebtedness represented by Capital Lease Obligations, Purchase
Money Obligations or similar financing transactions relating to
our properties, assets and rights acquired
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after May 13, 1998, as long as the aggregate principal amount of
the indebtedness under this clause (d) does not exceed 100% of the
cost of the properties, assets and rights acquired after May 13,
1998;
(e) the incurrence by us or any restricted subsidiary of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or
refund, indebtedness of the applicable entity that was permitted
by the indenture to be incurred;
(f) the incurrence by us or any restricted subsidiaries of
intercompany indebtedness between or among us and any wholly owned
subsidiaries or between or among any wholly owned subsidiaries;
provided, however, that:
(1) any subsequent issuance or transfer of equity interests that
results in any indebtedness described above being held by a
person other than a wholly owned subsidiary; and
(2) any sale or other transfer of any indebtedness described
above to a person that is neither Oxford nor a wholly owned
subsidiary will be deemed, in each case, to constitute an
incurrence of indebtedness described above by us or the
restricted subsidiary, as the case may be;
(g) the incurrence, assumption or creation of Hedging Obligations of
us or one of our restricted subsidiaries pursuant to interest rate
protection obligations, but only to the extent that the stated
aggregate notional amounts of these obligations do not exceed 100%
of the aggregate principal amount of the indebtedness covered by
these interest rate protection obligations;
(h) the incurrence by us or any restricted subsidiaries of
indebtedness constituting reimbursement obligations with respect
to letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of
workers' compensation claims or self-insurance, or other
indebtedness with respect to reimbursement-type obligations
regarding workers' compensation claims;
(i) the incurrence by us or any restricted subsidiaries of obligations
in respect of performance and surety bonds and completion
guarantees provided by us or any restricted subsidiaries in the
ordinary course of business;
(j) the incurrence or assumption by us or any of our restricted
subsidiaries of indebtedness arising from our agreements or the
agreements of restricted subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case,
incurred or assumed by us or a restricted subsidiary in connection
with the disposition of any business, assets or a subsidiary,
other than Guarantees of indebtedness incurred by any person
acquiring all or any portion of the business, assets or a
subsidiary for the purpose of financing the acquisition or
otherwise, as long as the maximum assumable liability in respect
of all this indebtedness does not exceed the gross proceeds
actually received by us and our restricted subsidiaries in
connection with the disposition; and
(k) the incurrence by us and our restricted subsidiaries of
indebtedness in an aggregate principal amount of up to $50 million
which will be in addition to amounts which may be incurred as
described in to clauses (a) through (j) above.
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Notwithstanding any other provision of this covenant, a guarantee of
indebtedness permitted by the terms of the indenture at the time the
indebtedness was incurred will not constitute a separate incurrence of
indebtedness.
In the event that indebtedness falls within more than one category of
permitted indebtedness under the indenture, we will determine the applicable
category and the indebtedness will only be counted once. If indebtedness is
issued at less than the principal amount of the indebtedness, the amount of such
indebtedness for purposes of the above limitations will equal the amount of the
liability as determined in accordance with GAAP. Accrual of interest, the
accretion of accreted value and the payment of interest in the form of
additional indebtedness will not be deemed to be an incurrence of indebtedness
for purposes of this covenant.
SALE AND LEASEBACK TRANSACTIONS
We will not, and will not permit any of our restricted subsidiaries to,
enter into any sale and leaseback transaction unless:
(1) we could have incurred:
(a) indebtedness in an amount equal to the Attributable Debt relating
to the sale and leaseback transaction under the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the
covenant "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(b) a lien to secure the indebtedness under the covenant described in
"-- Liens;"
(2) the net cash proceeds of the sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the Board of Directors and set forth in an officers' certificate
delivered to the trustee, of the property that is the subject of the
sale and leaseback transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and the proceeds of the transaction are applied in
compliance with, the covenant under "-- Repurchase at the Option of
Holders -- Asset Sales."
LIENS
We will not, and will not permit any of our restricted subsidiaries to:
(1) create, incur, assume or otherwise cause or suffer to exist or become
effective any lien securing indebtedness of any kind, other than
Permitted Liens, upon any of our current or future property or assets,
or upon any income or profits therefrom; or
(2) assign or convey any right to receive income from any of our current or
future property or assets
unless contemporaneously therewith, effective provision is made to secure the
indebtedness under the indenture and the notes on an equal and ratable basis
with, or prior to in the case of liens with respect to obligations subordinated
to the notes, the indebtedness so secured for so long as the indebtedness is
secured by the lien.
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LIMITATION ON SALE OF STOCK OR ASSETS OF PRINCIPAL SUBSIDIARIES
Except for a transaction subject to the provisions of the indenture
described below under "-- Merger, Consolidation or Sale of Assets," or a
transaction described under the definition of "Excluded Asset Sales," we:
(1) will not, and will not permit any subsidiary to, directly or
indirectly, sell, transfer, convey or otherwise dispose of, other than
to us or one of our wholly owned subsidiaries, any capital stock of a
Principal Subsidiary or any securities convertible into or warrants,
rights or options to subscribe for capital stock of any Principal
Subsidiary; and
(2) will not permit any Principal Subsidiary to issue, sell, transfer,
convey or otherwise dispose of, other than to us or one of our wholly
owned subsidiaries, any of its capital stock or securities convertible
into, or rights, warrants or options to subscribe for, its capital
stock or sell, transfer, convey or otherwise dispose of any of its
group contracts or subscriber contracts relating to commercial group
health benefit plans.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any restricted
subsidiary to:
(1) pay dividends or make any other distributions to us or any of our
restricted subsidiaries on our capital stock or with respect to any
other interest or participation in, or measured by, its profits;
(2) pay any indebtedness owed to us or any of our restricted subsidiaries;
(3) make loans or advances to us or any of our restricted subsidiaries; or
(4) transfer any of our properties or assets or those of our restricted
subsidiaries to us or any of our restricted subsidiaries.
The foregoing provisions will not prohibit encumbrances or restrictions
existing under or by reason of:
(a) Existing Indebtedness as in effect on the date of the indenture;
(b) the term loan agreement as in effect as of May 13, 1998, and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, as
long as the amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
are no more restrictive with respect to the dividend and other
payment restrictions than those contained in the term loan
agreement as in effect on May 13, 1998;
(c) the indenture and the notes;
(d) any instrument governing Acquired Indebtedness or capital stock of
a person acquired by us or any of our restricted subsidiaries as in
effect at the time of the acquisition, except to the extent the
Acquired Indebtedness was incurred in connection with or in
contemplation of the acquisition, which encumbrance or restriction
is not applicable to any person, or the properties or
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assets of any person, other than the person, or the property or
assets of the person, so acquired;
(e) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described
in clause (4) above on the property so acquired;
(f) customary non-assignment provisions in licenses, leases and
agreements relating to intellectual property entered into in the
ordinary course of business and consistent with past practices;
(g) agreements relating to the financing of the acquisition of real or
tangible personal property acquired after the date of the
indenture, as long as the encumbrance or restriction relates only
to the property which is acquired and in the case of any
encumbrance or restriction that constitutes a lien, the lien
constitutes a Purchase Money Lien;
(h) any law or any governmental regulation or order or under any
agreement or understanding with any regulatory body or agency; as
long as, if the order would prevent us from making a payment under
the indenture, we have used our reasonable efforts to have the
order diminished or removed by any regulator authorized to do so
and to obtain any exemptive orders from the relevant regulator with
respect to the encumbrance or restriction to the extent such
exemptive orders are reasonably practicable under applicable laws
and regulations; or
(i) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a subsidiary under an
agreement that has been entered into for the sale or disposition of
all or substantially all of the capital stock or assets of the
subsidiary.
TRANSACTIONS WITH AFFILIATES
We will not, and will not permit any of our restricted subsidiaries to,
sell, lease, transfer or otherwise dispose of any of our or their properties or
assets to any Affiliate, or purchase any property or assets from any Affiliate,
or enter into or make any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate, each of the foregoing, an
"Affiliate Transaction," unless:
(1) the Affiliate Transaction is in the ordinary course of business;
(2) the terms of the Affiliate Transaction are fair and reasonable to us or
the restricted subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by us or the restricted
subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis between unaffiliated parties; and
(3) we deliver to the trustee:
(a) with respect to any Affiliate Transaction entered into after the
date of the indenture involving aggregate consideration in excess
of $1 million, a resolution of the Board of Directors set forth in
an officers' certificate certifying that the Affiliate Transaction
complies with clause (1) above and that the Affiliate Transaction
has been approved by a majority of the disinterested members of the
Board of Directors; and
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(b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5 million, an opinion as to the
fairness to us or the restricted subsidiary of the Affiliate
Transaction from a financial point of view issued by an investment
banking firm or appraisal firm of national standing.
The following will not be deemed to be Affiliate Transactions:
- the transactions contemplated by the investment agreement with TPG
Partners and the preferred stock and warrants or any exchange of
disqualified stock under paragraph (e) of the section entitled
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" or
amendment to the certificates of designations that govern the preferred
stock in lieu of any exchange;
- reasonable fees and compensation paid to, and indemnity provided on
behalf of, our officers and directors or the officers and directors of
any restricted subsidiary as determined in good faith by the appropriate
Board of Directors or senior management;
- transactions with customers, clients, suppliers, joint venture partners
or purchasers or sellers of goods or services, in each case in the
ordinary course of business, including, without limitation, under joint
venture agreements and otherwise in compliance with the terms of the
indenture and which comply with the terms of clause (2) above;
- transactions constituting Permitted Investments;
- any employment agreement entered into by us or any of our restricted
subsidiaries in the ordinary course of business and consistent with the
past practice of us or the restricted subsidiary, including, without
limitation, any employment agreements entered into prior to the date of
the indenture, and
- transactions between or among us and/or our Restricted Subsidiaries.
LIMITATION AS TO UNRESTRICTED SUBSIDIARIES
We will not permit any Unrestricted Subsidiary to create, assume, incur,
guarantee or otherwise become liable in respect of any indebtedness except
Non-Recourse Debt. If any indebtedness ceases to be Non-Recourse Debt, this
event will be deemed to constitute an incurrence of indebtedness by us or a
restricted subsidiary. We and our restricted subsidiaries will not designate,
create or purchase any Unrestricted Subsidiary, unless our Board of Directors
has made a determination that the designation, creation and operation of the
Unrestricted Subsidiary is not reasonably expected to materially and adversely
affect the financial condition, business or operations of Oxford and its
restricted subsidiaries taken together as a whole. Our Board of Directors will
set forth this determination in the resolution approving the designation,
creation or purchase, which will be conclusive evidence of compliance with this
covenant.
LIMITATIONS ON ISSUANCE OF GUARANTEES
We will not permit any restricted subsidiary, directly or indirectly, to
guarantee or secure any indebtedness that ranks equally with, and without
preference to the notes, other than the term loan agreement, or any Subordinated
Indebtedness unless the restricted subsidiary simultaneously executes and
delivers a supplemental indenture to the trustee providing for the guarantee of
the payment of the notes by the restricted subsidiary. In addition, in the case
of any Subordinated Indebtedness, the guarantee of the notes must be
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senior to any guarantee of the Subordinated Indebtedness. Any guarantee by a
restricted subsidiary of the notes will provide by its terms that it will be
automatically and unconditionally released and discharged upon either:
(1) the release or discharge of the guarantee of payment of indebtedness
that ranks equally with, and without preference to the notes, or any
Subordinated Indebtedness, as applicable; or
(2) any sale, exchange or transfer, to any person not our Affiliate, of all
of our stock in, or all or substantially all the assets of, the
restricted subsidiary, which sale, exchange or transfer is made in
compliance with the applicable provisions of the indenture, including,
without limitation, the provisions set forth under the section entitled
"-- Merger, Consolidation or Sale of Assets."
LIMITATION ON BUSINESS ACTIVITIES
We will not, and will not permit any of our restricted subsidiaries to,
engage in any business other than:
(1) a business, the majority of whose revenues are derived from providing,
or arranging to provide, or administering, managing or monitoring
healthcare services of any business or activity that is reasonably
similar thereto or reasonable extension, development or expansion
thereof or ancillary thereto, including, without limitation, issuance
of health insurance, and such business activities incidental or related
to the issuance of health insurance; and
(2) acting as a holding company for companies engaged in the businesses
specified in (1) above.
PAYMENTS FOR CONSENTS
Neither we nor any of our subsidiaries will, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the indenture or the
notes unless the consideration is offered to be paid or is paid to all holders
of the notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to the consent, waiver or agreement.
REPORTS
So long as any new notes are outstanding, we will furnish to the holders of
new notes all financial information that would be required to be contained in a
filing with the SEC on Form 10-K, 10-Q or 8-K if we were required to file these
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and, with respect to the annual financial statements
only, a report on the annual financial statements by our independent public
accountants. In addition, we will file a copy of this information and reports
with the SEC for public availability unless the SEC will not accept such a
filing, and make this information available to securities analysts and
prospective investors upon request. We also have agreed that, for so long as any
notes remain outstanding, we will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered under Rule 144A(d)(4) under the Securities Act during any period
in which we are not subject to Section 13 or 15(d) of the Exchange Act.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
We will not, in a single transaction or series of related transactions:
(1) consolidate or merge with or into another corporation, person or
entity; or
(2) directly and/or indirectly through our restricted subsidiaries sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our properties or assets determined on a
consolidated basis for us and our restricted subsidiaries taken as a
whole in one or more related transactions, to another corporation,
person or entity,
unless:
(a) we are the surviving corporation, or the entity or the person
formed by or surviving the consolidation or merger, or to which the
sale, assignment, transfer, lease, conveyance or other disposition
is made, is a corporation organized or existing under the laws of
one of the states of the United States or the District of Columbia;
(b) the entity or person formed by or surviving the consolidation or
merger or the entity or person to which the sale, assignment,
transfer, lease, conveyance or other disposition is made, assumes
all our obligations under the notes and the indenture under a
supplemental indenture in a form reasonably satisfactory to the
trustee;
(c) immediately after the transaction no Default or Event of Default
will occur and be continuing or result as a consequence of the
transaction;
(d) except in the case of a merger of us with or into one of our wholly
owned subsidiaries, we or the entity or person formed by or
surviving the consolidation or merger, or to which the sale,
assignment, transfer, lease, conveyance or other disposition is
made:
(1) will have consolidated net worth immediately after the
transaction equal to or greater than our consolidated net
worth immediately preceding the transaction; and
(2) will be permitted to incur, at the time of the transaction
and after giving pro forma effect to the transaction as if
the transaction had occurred at the beginning of the
applicable four-quarter period, at least $1.00 of additional
indebtedness under the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock";
(e) if any of our property or assets would thereupon become subject to
any lien, the outstanding notes are secured equally and ratably
with, or prior to, the obligation or liability secured by the lien,
unless we could create the lien without equally and ratably
securing the new notes; and
(f) we deliver to the trustee an officers' certificate and an opinion
of counsel addressed to the trustee with respect to the foregoing
matters.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following constitutes an Event of Default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes;
(2) default in payment when due of the principal of or premium, if any, on
the notes;
(3) our failure to comply with the provisions described under
"-- Repurchase at the Option of Holders -- Change of Control,"
"-- Repurchase at the Option of Holders -- Asset Sales,"
"-- Covenants -- Restricted Payments," or "-- Covenants -- Merger,
Consolidation or Sale of Assets;"
(4) our failure for 30 days after notice to comply with any of our other
agreements in the indenture or the notes is given to us by the trustee
or to us and the trustee by the holders of at least 25% in principal
amount of the outstanding notes;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by us or any of our restricted
subsidiaries, or the payment of which is guaranteed by us or any of our
restricted subsidiaries, other than indebtedness owed to us or one of
our wholly owned subsidiaries, whether the indebtedness or guarantee
now exists or is created after the date of the indenture, if either:
(a) the default is caused by a failure to pay when due, after giving
effect to any grace period related to the failure to pay, any
principal of or premium, if any, or interest on the indebtedness;
or
(b) the default results in the acceleration of the indebtedness prior
to its express maturity and, in each case, the principal amount of
the indebtedness, together with the principal amount of any other
indebtedness under which there has been a payment default as
described in clause (a) above or the maturity of which has been so
accelerated, aggregates $10 million or more;
(6) our failure or the failure by any of our restricted subsidiaries to pay
final judgments aggregating in excess of $10 million, net of any
amounts with respect to which a reputable and creditworthy insurance
company has acknowledged liability in writing, which judgments are not
paid or discharged or stayed for a period of 60 days; and
(7) specified events of bankruptcy or insolvency with respect to us or any
of our Significant Subsidiaries or group of restricted subsidiaries
that, together taken, as of the latest audited consolidated financial
statements for us and our Subsidiaries, would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding notes may
declare all the new notes to be due and payable immediately. If an Event of
Default arising from certain events of bankruptcy or insolvency occurs with
respect to us, any Significant Subsidiary or any group of restricted
subsidiaries that, taken together, as of the latest audited consolidated
financial statements for us and our subsidiaries, would constitute a Significant
Subsidiary, all outstanding notes will become due and payable without further
action or notice.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of
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the then outstanding new notes may direct the trustee in its exercise of any
trust or power. The trustee may withhold from holders of the notes notice of any
continuing Default or Event of Default, except a Default or Event of Default
relating to the payment of principal or interest, if it determines that
withholding notice is in their interest.
In the event the new notes are accelerated because an Event of Default
occurred and is continuing as a result of the acceleration of any indebtedness
described in clause (5) above, the declaration of acceleration of the new notes
will be automatically annulled if the holders of any indebtedness described in
clause (5) above have rescinded the declaration of acceleration in respect of
the indebtedness within 30 days of the date of the declaration and if:
(1) the annulment of the acceleration of notes would not conflict with any
judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or
interest on the notes that became due solely because of the
acceleration of the notes, have been cured or waived.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may waive, on behalf of the holders of all
of the notes, any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, premium and liquidated damages, if
any, on the notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture, and we are required upon becoming aware of any
Default or Event of Default to deliver to the trustee a statement specifying the
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
None of our directors, officers, employees, incorporators or stockholders,
as such, will have any liability for any of our obligations under the notes, the
indenture or for any claim based on, in respect of, or by reason of, those
obligations or their creation. Each holder of notes by accepting a note waives
and releases all liability described in the prior sentence. The waiver and
release are part of the consideration for issuance of the notes. This waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding notes. This is referred to as "legal
defeasance." Legal defeasance means that we are deemed to have paid and
discharged the entire indebtedness represented by the outstanding notes, except
for:
- the rights of holders of outstanding notes to receive payments in respect
of the principal of, premium, if any, and interest and liquidated damages
on the new notes when the payments are due from the trust referred to
below;
- our obligations with respect to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes
and the maintenance of an office or agency for payment and money for
security payments held in trust;
- the rights, powers, trusts, duties and immunities of the trustee, and our
obligations in connection with those rights, powers, trusts, duties and
immunities; and
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- the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture. We refer to this as "covenant defeasance." After that, any omission
to comply with the obligations will not constitute a Default or Event of Default
with respect to the notes. In the event covenant defeasance occurs, certain
events, but not including nonpayment, bankruptcy, receivership, rehabilitation
and insolvency events, described under "Events of Default and Remedies" will no
longer constitute an Event of Default with respect to the notes.
In order to exercise either legal defeasance or covenant defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the benefit
of the holders of the notes, cash in U.S. dollars, noncallable U.S.
government obligations, or a combination of the two, in amounts
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest and liquidated damages on the outstanding notes on
the stated maturity or on the applicable redemption date, as the case
may be, and we must specify whether the notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:
(a) we have received from, or there has been published by, the Internal
Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable U.S. federal income tax law,
in either case to the effect that, and based on the ruling or change,
the opinion of counsel will confirm that, the holders of the outstanding
notes will not recognize income, gain or loss for federal income tax
purposes as a result of the legal defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if the legal defeasance had not
occurred;
(3) in the case of covenant defeasance, we must deliver to the trustee an
opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if the covenant defeasance had not occurred;
(4) no Default or Event of Default occurred and is continuing on the date
of the deposit, other than a Default or Event of Default resulting from
the borrowing of funds to be applied to the deposit, or insofar as
Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of
deposit;
(5) the legal defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under, any material agreement
or instrument, other than the indenture, to which we or any of our
subsidiaries is a party or by which we or any of our subsidiaries is
bound;
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(6) we must deliver to the trustee an opinion of counsel to the effect that
on the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the
holders of notes over our other creditors with the intent of defeating,
hindering, delaying or defrauding our creditors or others; and
(8) we must deliver to the trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent provided for
relating to the legal defeasance or the covenant defeasance have been
complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, together with all other
transfer documentation required by the indenture. We may require a holder to pay
any taxes and fees required by law or permitted by the indenture. We are not
required to transfer or exchange any note selected for redemption. Also, we are
not required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed. For more specific information, see
"Book-Entry; Delivery and Form."
The registered holder of a note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
The indenture or the notes may be amended or supplemented with the consent
of the holders of at least a majority in principal amount of the notes then
outstanding, including consents obtained in connection with a tender offer or
exchange offer for notes, and any existing default or compliance with any
provision of the indenture or the notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding notes,
including consents obtained in connection with a tender offer or exchange offer
for notes.
However, an amendment or waiver may not, without the consent of each holder
affected, with respect to any notes held by a non-consenting holder:
(1) reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes, other
than provisions relating to the covenants described above under the
caption "-- Repurchase at the Option of Holders;"
(3) reduce the rate of or change the time for payment of interest on or
liquidated damages, if any, with respect to the note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on or liquidated damages, if any, with
respect to the notes, except a rescission of acceleration of the new
notes by the holders of at least a majority in aggregate principal
amount of the notes and a waiver of the payment default that resulted
from the acceleration;
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(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of holders of notes to receive payments
of principal of or premium or liquidated damages, if any, or interest
on the notes;
(7) waive a redemption payment with respect to any note; or
(8) make any change in the foregoing amendment and waiver provisions.
We and the trustee, however, may amend or supplement the indenture or the
notes WITHOUT THE CONSENT of any holder of notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of our obligations to holders of notes in
the case of a merger, consolidation or sale of assets;
(4) to make any change that would provide any additional rights or benefits
to the holders of notes or that does not adversely affect the legal
rights under the indenture of any holder; or
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act or to
provide for the succession of a successor trustee.
CONCERNING THE TRUSTEE
The indenture contains some limitations on the rights of the trustee,
should it become our creditor, to obtain payment of claims in some cases, or to
realize on some property received in respect of any claim as security or
otherwise. The trustee will be permitted to engage in other transactions.
However, if it acquires any conflicting interest, it must eliminate the conflict
within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default will
occur, which will not be cured, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to these provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless the holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
DEFINITIONS
Set forth below are certain defined terms used in the indenture and the
summary of the terms of the new notes. Reference is made to the indenture for
the full definition of all the terms, as well as any other capitalized terms
used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified person:
(1) indebtedness of any other person existing at the time such other person
is merged with or into or became a restricted subsidiary or is
designated a restricted
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subsidiary of such specified person, including, without limitation,
indebtedness incurred in connection with, or in contemplation of, such
other person merging with or into or becoming a subsidiary or
restricted subsidiary of such specified person; and
(2) indebtedness secured by a lien encumbering any asset acquired by such
specified person.
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a person shall
be deemed to be control.
"ASSET SALE" means:
(1) the sale, lease (other than an operating lease) conveyance or other
disposition of any assets (including, without limitation, by way of a
sale and leaseback, including any disposition by means of a merger,
consolidation or similar transaction and including the issuance, sale
or other transfer of any of the capital stock of any restricted
subsidiary of such person) other than to us or to any of our wholly
owned subsidiaries (including the receipt of proceeds of insurance paid
on account of the loss of or damage to any asset and awards of
compensation for any asset taken by condemnation, eminent domain or
similar proceeding) that have a fair market value (as determined in
good faith by the Board of Directors of such person) in excess of $2
million or for net cash proceeds in excess of $2 million); and
(2) the issuance of equity interests in any restricted subsidiaries or the
sale of any equity interests in any restricted subsidiaries, in each
case, in one or a series of related transactions,
provided, that notwithstanding the foregoing, the term "asset sale" shall not
include:
(a) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of our assets, as permitted pursuant to the covenant
described under "-- Covenants -- Merger, Consolidation or Sale of
Assets";
(b) the sale or lease of equipment, inventory, accounts receivable or other
assets in the ordinary course of business and consistent with past
practice, including, without limitation, the sale of any investments
constituting a portion of an investment portfolio in the ordinary
course of business and consistent with past practice;
(c) a transfer of assets by Oxford to a restricted subsidiary or by a
restricted subsidiary to Oxford or to another restricted subsidiary;
(d) an issuance of Equity Interests by a restricted subsidiary to Oxford or
to another restricted subsidiary;
(e) Permitted Investments;
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(f) any cash dividend, distribution, Investment or payment made pursuant to
the first or second paragraph of the "Restricted Payments" covenant;
(g) the sale or transfer of surplus or obsolete equipment in the ordinary
course of business;
(h) a pledge of all or any part of the capital stock of any restricted
subsidiary or a lien on any other property or asset of a restricted
subsidiary permitted by the indenture; or
(i) Excluded Asset Sales.
"ATTRIBUTABLE DEBT," in respect of a sale and leaseback transaction, means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, and determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (any period
for which such lease has been extended or may, at the option of the lessor, be
extended, to the extent the lease payments during such extension period are
required to be capitalized on a balance sheet as a liability in accordance with
GAAP).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would, at such time, be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means
(1) in the case of a corporation, corporate stock;
(2) in the case of a limited liability company or similar entity, any
membership or similar interests therein;
(3) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(4) in the case of a partnership, partnership interests (whether general or
limited); and
(5) any other interest or participation that confers on a person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
"CHANGE OF CONTROL" means such time as:
(1) we become aware that a "person" or "group," within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act, other than TPG
Partners II, L.P. and its Affiliates, has become, directly or
indirectly, the "beneficial owner," by way of merger, consolidation or
otherwise, of 51% or more of the voting power of our voting stock on a
fully-diluted basis after giving effect to the conversion and exercise
of all our outstanding warrants, options and other securities whether
or not such securities are then currently convertible or exercisable;
(2) the sale, lease or transfer of all or substantially all of our assets
to any person or group, other than TPG Partners II, L.P. and its
Affiliates; or
(3) during any period of two consecutive calendar years, individuals who at
the beginning of such period constituted our Board of Directors
(together with any new directors whose election by our Board of
Directors or whose nomination for
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election by our shareholders was approved by a vote of a majority of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved or was approved by TPG Partners II, L.P. and
its Affiliates) cease for any reason to constitute a majority of our
directors then in office.
The definition of "Change of Control" includes a phrase relating to the
sale, lease or transfer of "all or substantially all" of our assets and our
restricted subsidiaries, taken as a whole to a person or group other than TPG
Partners II, L.P. and its Affiliates. With respect to the disposition of
property or assets, the phrase "all or substantially all" as used in the
indenture has no clearly established meaning under New York law, which is the
choice of law under the indenture, but instead is subject to judicial
interpretation and may vary according to the facts and circumstances of the
subject transaction. Accordingly, in certain circumstances, the ability of a
holder of new notes to require us to repurchase such new notes as a result of a
sale, lease or transfer of less than all of our assets and our Restricted
Subsidiaries taken as a whole to another person or group may be uncertain.
"CONSOLIDATED CASHFLOW" means, with respect to Oxford and its restricted
subsidiaries for any period, the sum of, without duplication:
(1) the consolidated net income for such period, plus
(2) to the extent deducted from consolidated net income for such period,
(x) the Fixed Charges for such period, plus (y) non-cash dividends on
Oxford's preferred stock, plus
(3) Consolidated Income Taxes for such period, plus
(4) consolidated depreciation, amortization (including amortization of
goodwill and other intangibles), depletion and other non-cash charges
of Oxford and its restricted subsidiaries required to be reflected as
expenses on the books and records of Oxford, minus
(5) cash payments with respect to any nonrecurring, non-cash charges
previously added back pursuant to clause (4).
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a restricted subsidiary of a person shall be added to consolidated net
income to compute Consolidated Cashflow only to the extent that the Net Income
of such restricted subsidiary was included in calculating the consolidated net
income of such person.
"CONSOLIDATED INCOME TAXES" means, with respect to any person for any
period, taxes imposed upon such person or other payments required to be made by
such person by any governmental authority which taxes or other payments are
calculated by reference to the income or profits of such person or such person
and its subsidiaries (to the extent such income or profits were included in
computing consolidated net income for such period), regardless of whether such
taxes or payments are required to be remitted to any governmental authority.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate of the net income of such person and its restricted subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that
(1) the Net Income, but not loss, of any person that is not a restricted
subsidiary or that is accounted for by the equity method of accounting
shall be included only
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to the extent of the amount of dividends or distributions paid in cash
to the referent person or a restricted subsidiary thereof;
(2) the Net Income of, or any dividends or other distributions from, any
Unrestricted Subsidiary, to the extent otherwise included, shall be
excluded, whether or not distributed to Oxford or one of its restricted
subsidiaries;
(3) without duplication:
(a) losses of any restricted subsidiary shall be excluded with respect
to the calculation under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock";
(b) Net Income of any restricted subsidiary shall be excluded with
respect to the calculation under such covenant to the extent that
such Net Income has not been dividended or distributed in cash to
Oxford; and
(c) intercompany payments by the restricted subsidiaries to Oxford
shall be included in net income of Oxford, and intercompany
payments by Oxford to the restricted subsidiaries shall be deducted
from net income with respect to the calculation under such
covenant;
(4) the net income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(5) the cumulative effect of a change in accounting principles shall be
excluded; and
(6) income or loss attributable to discontinued operations shall be
excluded.
"CONSOLIDATED NET WORTH" of a person at any date means the amount by which
the assets of such person and its consolidated restricted subsidiaries (less any
revaluation or other write-up subsequent to the date of the indenture in any
such assets (other than write-ups of tangible assets of a going concern business
made within twelve months after the acquisition of such business)) exceed the
sum of:
(1) the total liabilities of such person and its consolidated subsidiaries,
plus
(2) any disqualified stock of such person or any consolidated restricted
subsidiaries of such person issued to any person other than such person
or a wholly owned restricted subsidiary of such person, in each case
determined in accordance with GAAP.
"DEPOSITARY" means, with respect to the new notes issuable or issued in
whole or in part in global form, the person specified in the indenture as the
Depositary with respect to the new notes, until a successor shall have been
appointed and become such Depositary pursuant to the applicable provision of the
indenture, and, thereafter, "Depositary" shall mean or include such successor.
"DISQUALIFIED STOCK" means any capital stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is convertible
or exchangeable for indebtedness or disqualified stock or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the date which
is 91 days after the date that the new notes mature.
"EXCLUDED ASSET SALES" means the sale of the capital stock or assets of
American Psych Systems, Inc., Ralin Medical, Inc., Opticare Eye Health Centers,
Inc., Oxford Health Plans (IL), Inc., Oxford Health Plan (FL), Inc., St.
Augustine Health Care, Inc.
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(Florida), the Medicaid businesses of Subsidiaries of Oxford in New Hampshire,
New Jersey, New York, Florida and Pennsylvania, Oxford Specialty Holdings, Inc.,
Oxford Specialty Management, Inc., Specialty Management Company (NY) IPA, Inc.,
Specialty Management Company (PA) IPA, Inc., Specialty Management Company (NJ)
IPA, Inc. and Specialty Management Company (CT) IPA, Inc., Direct Script, Inc.,
Oxford On-Call, Inc., Oxford Health Centers, Inc., Oxford's dental business and
Collegiate Healthcare, Inc. in an aggregate amount of consideration not to
exceed $55 million. To the extent Oxford makes a Permitted Investment as
described in clause (8) of the definition thereof, cash and marketable
securities from Excluded Asset Sales in an amount equal to such Investment shall
be deemed proceeds from asset sales and subject to the covenant described under
"-- Repurchase at the Option of Holders -- Asset Sales." To the extent the
aggregate amount of consideration from Excluded Asset Sales received by Oxford
and its restricted subsidiaries equals or exceeds $55 million, such excess shall
be deemed proceeds from asset sales and subject to the "asset sale" covenant.
"EXISTING INDEBTEDNESS" means the indebtedness of Oxford and its restricted
subsidiaries in existence on the date of the indenture, until such amounts are
repaid. Existing Indebtedness does not include indebtedness under the term loan
agreement.
"FAIR MARKET VALUE" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing
buyer.
"FIXED CHARGES" means, with respect to any person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such person and its restricted
subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations;
(2) the consolidated interest expense of such person and its restricted
subsidiaries that was capitalized during such period;
(3) any interest expense on indebtedness of another person that is
guaranteed by such person or one of its restricted subsidiaries or
secured by a lien on assets of such person or one of its restricted
subsidiaries, whether or not such guarantee or lien is called upon; and
(4) all dividend payments, whether or not in cash, on any series of
preferred stock of any such person payable to a party other than Oxford
or a wholly owned subsidiary, other than dividend payments on Equity
Interest payable solely in Equity Interests of Oxford.
"FIXED CHARGE COVERAGE RATIO" means with respect to any person for any
period, the ratio of the Consolidated Cashflow of such person and its restricted
subsidiaries for such period to the Fixed Charges of such person and its
restricted subsidiaries for such period. In the event that Oxford or any of its
restricted subsidiaries incurs, assumes, guarantees or repays any indebtedness
(other than the incurrence or repayment of revolving credit borrowings used for
working capital, except to the extent that a repayment is accompanied by a
permanent reduction in revolving credit commitments) or issues preferred stock
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subsequent to the commencement of the four-quarter reference period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above:
(1) acquisitions that have been made by Oxford or any of its restricted
subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and shall give pro forma effect to
the Consolidated Cashflow and indebtedness of the person which is the
subject of any such acquisition (as well as any pro forma expense and
cost reductions attributable thereto);
(2) the Consolidated Cashflow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and
Consolidated Cashflow shall reflect any pro forma expense and cost
reductions relating to such discontinuance; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the referent person or any of its restricted
subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles in the United States
which are in effect on the date of the indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner of all or any part of any indebtedness. Guarantee
includes, without limitation, letters of credit and reimbursement agreements in
respect thereof.
"HEDGING OBLIGATIONS" means, with respect to any person, the obligations of
such person under
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such person
against fluctuations in interest rates.
"HOLDER" means a person in whose name a new note is registered on the
Registrar's books.
"INDEBTEDNESS" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit
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and Hedging Obligations) would appear as a liability upon a balance sheet of
such person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a lien on any asset of such person (whether or not such
indebtedness is assumed by such person), the maximum fixed repurchase price of
disqualified stock issued by such person in each case, if held by any person
other than Oxford or a wholly owned subsidiary of Oxford, and, to the extent not
otherwise included, the guarantee by such person of any indebtedness of any
other person. For the purposes of this definition, the "maximum fixed repurchase
price" of disqualified stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such disqualified stock as if such
disqualified stock were purchased on any date on which indebtedness shall be
required to be determined pursuant to the indenture, and if such price is based
upon, or measured by, the Fair Market Value of such disqualified stock, such
Fair Market Value shall be determined in good faith by the board of directors of
the issuer of such Disqualified Stock.
"INVESTMENTS" means, with respect to any person, all investments by such
person in other persons, including Affiliates, in the forms of direct or
indirect loans (including guarantees of indebtedness or other obligations),
advances or capital contributions (excluding commission, travel, relocation and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
Oxford for consideration consisting of common equity securities of Oxford shall
not be deemed to be an Investment.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MARKETABLE SECURITIES" means debt or equity securities that are registered
and, in the case of debt securities, are rated in one of the four highest
ratings by one or more nationally recognized rating agencies.
"MINORITY INVESTMENT" means an Investment in an Equity Interest in a person
which Investment is held by Oxford or a restricted subsidiary such that Oxford
and its restricted subsidiaries do not have more than 50% of the voting control
over all outstanding Equity Interests in such person.
"NAIC" means the National Association of Insurance Commissioners and its
successors.
"NET INCOME" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, and, for purposes of clause
(b)(i) under the covenant entitled "Restricted Payments" and, for purposes of
the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock," before reduction for non-cash preferred stock dividends and for purposes
of clause (b)(ii) under the covenant entitled "Restricted Payments," before
reduction for preferred stock dividends, excluding in each case, however:
(1) any gain (but not loss) together with any related provision for taxes
on such gain (but not loss) realized in connection with (a) any asset
sale (including, without
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limitation, dispositions pursuant to sale and leaseback transactions)
or (b) the disposition of any securities by such person or any of its
restricted subsidiaries or the extinguishment of any indebtedness of
such person or any of its restricted subsidiaries;
(2) any extraordinary or nonrecurring gain (but not loss) together with any
related provision for taxes on such extraordinary or nonrecurring gain
(but not loss); and
(3) for purposes of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock," any capital contributions made or
required to be made by Oxford.
"NET PROCEEDS" means the aggregate cash proceeds received by Oxford or any
of its restricted subsidiaries in respect of any asset sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any asset sale) net of the direct costs relating to
such asset sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions), any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements) any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP and net of any Purchase
Money Obligations relating to the assets comprising such asset sale.
"NON-RECOURSE DEBT" means indebtedness:
(1) as to which neither Oxford nor any of its restricted subsidiaries:
(a) provides any guarantee or credit support of any kind (including any
undertaking, guarantee, indemnity, keepwell, makewell, agreement or
instrument that would constitute indebtedness), or
(b) is directly or indirectly liable (as a guarantor or otherwise);
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other indebtedness of Oxford or any of its restricted
subsidiaries to declare a default under such other indebtedness or
cause the payment thereof to be accelerated or payable prior to its
stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse against any of the assets of Oxford or its
restricted subsidiaries.
"NOTE CUSTODIAN" means the trustee, as custodian with respect to the global
new notes, or any successor entity thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER" means, with respect to any person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such person.
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"PARI PASSU INDEBTEDNESS" means any indebtedness of Oxford that is pari
passu in right of payment to the new notes. Pari passu means equal to, and
without preference, each to the other.
"PERMITTED INVESTMENTS" means
(1) any Investments in Oxford or in any of its restricted subsidiaries;
(2) any Investment in any person that becomes a restricted subsidiary as a
result of such Investment provided that Oxford, after giving pro forma
effect to such Investment, would be permitted to incur at least $1.00
of additional indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described under
"-- Incurrence of Indebtedness and Issuance of Preferred Stock";
(3) Investments in existence, or made pursuant to legally binding written
commitments in existence, on May 15, 1998;
(4) Investments in cash, cash equivalents and investment grade securities;
(5) loans or advances to employees made in the ordinary course of
business;
(6) receivables owing to Oxford or any restricted subsidiary in the
ordinary course of business;
(7) repurchase agreements and reverse repurchase agreements entered into
by a restricted subsidiary with any lender or any primary dealer of
United States government securities relating to investment grade
securities maturing within one year from the date of acquisition
thereof; provided that the terms of any such agreement comply with the
guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy-Repurchase Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985 and, in the case of a
repurchase agreement with a primary dealer, a restricted subsidiary of
Oxford or its duly authorized custodian shall take possession of the
obligations subject to such agreement;
(8) Investments in Hedging Obligations and other similar agreements or
arrangements designed to protect Oxford or any of its restricted
subsidiaries against fluctuations in the value of Investments of
Oxford and its restricted subsidiaries, in each case to the extent
permitted under the indenture;
(9) accounts receivable created or acquired, and prepaid expenses arising,
in the ordinary course of business;
(10) the endorsements of negotiable instruments for collection or deposit
in the ordinary course of business;
(11) Investments made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with
the covenant described under "-- Repurchase at the Option of
Holders -- Asset Sales;"
(12) Investments in securities of trade creditors or customers received in
settlement of obligations or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers;
(13) Investments in St. Augustine Health Care, Inc. made after May 13, 1998
in an amount not to exceed $6,000,000; and
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(14) Investments in an aggregate amount not to exceed $2.5 million at any
one time outstanding which shall be in addition to Investments which
may be made pursuant to clauses (1) through (13) above.
"PERMITTED LIENS" means:
(1) liens securing indebtedness incurred pursuant to any credit agreement
or credit facility that is permitted by the terms of the indenture to
be outstanding, including, without limitation, liens securing
indebtedness incurred under the term loan agreement;
(2) liens in favor of Oxford or any restricted subsidiary;
(3) liens on property of a person existing at the time such person is
merged into or consolidated with Oxford or any restricted subsidiary
of Oxford; provided that such liens were not incurred in connection
with, or in contemplation of, such merger or consolidation and such
liens do not extend to any assets of Oxford or any of its restricted
subsidiaries other than the assets of the person so merged into or
consolidated with Oxford or such restricted subsidiary;
(4) liens on property existing at the time of acquisition thereof by
Oxford or any of its restricted subsidiary; provided that such liens
were not incurred in connection with, or in contemplation of, such
acquisition and do not extend to any assets of Oxford or any of its
restricted subsidiaries other than the property so acquired;
(5) liens to secure the performance of statutory obligations, surety or
appeal bonds or performance bonds, or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's or other like
liens, in any case incurred in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good
faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP, shall have been made
therefor;
(6) liens existing on the date of the indenture;
(7) liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(8) liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Indebtedness (to the extent permitted under the indenture) of
Unrestricted Subsidiaries;
(9) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of Oxford or any
of its restricted subsidiaries;
(10) statutory liens of landlords or of mortgagees of landlords arising by
operation of law, provided that the rental payments secured thereby
are not yet due and payable;
(11) liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security;
(12) Purchase Money Liens (including extensions and renewals thereof);
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(13) interests of lessors in capital or operating leases;
(14) liens on deposits made in connection with hedging arrangements;
(15) liens encumbering deposits made to secure obligations arising from
statutory or regulatory requirements of Oxford or any of its
restricted subsidiaries, including rights of offset and setoff;
(16) prejudgment liens and judgment liens not giving rise to a Default or
Event of Default so long as any appropriate legal proceeding that may
have been duly initiated for the review of such judgment shall not
have been finally terminated, or so long as the period within which
such proceeding may be initiated shall not have expired; and
(17) liens incurred in the ordinary course of business of Oxford or any
subsidiary of Oxford with respect to obligations permitted under the
indenture that do not exceed $1 million in principal amount in the
aggregate at any one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any indebtedness of Oxford or
any of its restricted subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund, other
indebtedness (including the issuance of disqualified stock in exchange for
disqualified stock) of Oxford or any of its restricted subsidiaries (other than
Indebtedness under the term loan agreement); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the outstanding
principal amount, (or then current accreted value, if applicable), and
redemption premium of, plus accrued and unpaid interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date at
least as late as the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the new
notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in
right of payment to, the new notes on terms at least as favorable to
the holders of new notes as those contained in the documentation
governing the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such indebtedness is incurred either by Oxford or by the restricted
subsidiary who is the obligor on the indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"PRINCIPAL SUBSIDIARY" means Oxford Health Plans (NY), Inc., Oxford Health
Plans (NJ), Inc., Oxford Health Plans (CT), Inc. and Oxford Health Insurance,
Inc.
"PURCHASE MONEY LIEN" means a lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under the indenture
and incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or
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property; provided, however, that such lien encumbers only such asset or
property and is granted within 180 days of such acquisition.
"PURCHASE MONEY OBLIGATIONS" of any person means any obligations of such
person to any seller or any other person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such person or any of its restricted
subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 90 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"QUALIFIED INSURANCE PAYMENTS" means payments made by third party insurers
to Oxford and the restricted subsidiaries in respect of claims, investigations,
proceedings and litigation arising out of or relating to federal or state law
relating to the purchase or sale of securities, including, without limitation,
stockholders' derivative actions, less reimbursement payments required from
Oxford or its restricted subsidiaries in connection with such payments.
"REPRESENTATIVE" means the indenture trustee or other trustee, client or
representative for any senior indebtedness.
"RESPONSIBLE OFFICER" when used with respect to the trustee, means any
officer within the Corporate Trust Administration of the trustee (or any
successor group of the trustee) or any other officer of the trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a person means any subsidiary of the referent
person that is not an Unrestricted Subsidiary.
"SIGNIFICANT SUBSIDIARY" means any restricted subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Exchange Act, as such Regulation is in effect on the
date hereof.
"SUBSIDIARY" means, with respect to any person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of capital stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such person or one or
more of the other subsidiaries of that person (or a combination
thereof); and
(2) any partnership:
(a) the sole general partner or the managing general partner of which
is such person or a subsidiary of such person, or
(b) the only general partners of which are such person or one or more
subsidiaries of such person, or any combination thereof.
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"UNRESTRICTED SUBSIDIARY" means
(1) any subsidiary that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the
extent that such subsidiary:
(a) has no indebtedness other than Non-Recourse Debt;
(b) is not party to any agreement, contract, arrangement or
understanding with Oxford or any restricted subsidiary of Oxford
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Oxford or such restricted
subsidiary than those that might be obtained at the time from
persons who are not Affiliates of Oxford;
(c) is a person with respect to which neither Oxford nor any of its
restricted subsidiaries has any direct or indirect obligation (1) to
subscribe for additional equity interests or (2) to maintain or
preserve such person's financial condition or to cause such person
to achieve or maintain any specified levels of profitability; and
(d) has not guaranteed or otherwise directly or indirectly provided
credit support for any indebtedness of Oxford or any of its
restricted subsidiaries.
Any such designation by the Board of Directors of Oxford shall be evidenced
to the trustee by filing with the trustee a resolution of the Board of Directors
of Oxford giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the indenture and any indebtedness of
such subsidiary shall be deemed to be incurred by a restricted subsidiary of
Oxford as of such date. The Board of Directors of Oxford may at any time
designate any Unrestricted Subsidiary to be a restricted subsidiary; provided
that such designation shall be deemed to be an incurrence of indebtedness by a
restricted subsidiary of Oxford of any outstanding indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
indebtedness is permitted under the covenant described under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) no
Default or Event of Default would be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any indebtedness
at any date, the number of years obtained by dividing
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by
(2) the then outstanding principal amount of such indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any person means a restricted subsidiary of
such person all of the outstanding capital stock or other ownership interests of
which (other than directors' qualifying shares or shares required by applicable
law to be held by third parties) shall at the time be owned by such person or by
one or more wholly owned subsidiaries of such person. Unrestricted Subsidiaries
shall not be included in the definition of wholly owned subsidiary for any
purposes of the indenture.
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BOOK-ENTRY; DELIVERY AND FORM
The new notes initially will be represented by one or more permanent global
certificates in definitive, fully registered form. This global note will be
deposited upon issuance with The Depository Trust Company, New York, New York,
which we refer to as DTC, and registered in the name of a nominee of DTC.
THE GLOBAL NOTE
We expect that pursuant to procedures established by DTC:
(1) upon the issuance of the global note, DTC or its custodian will credit,
on its internal system, the principal amount of the individual
beneficial interests represented by the global note to the respective
accounts of persons who have accounts with such depositary, and
(2) ownership of beneficial interests in the global note will be shown on,
and the transfer of ownership will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
participants, and the records of participants, with respect to
interests of persons other than participants.
Ownership of beneficial interests in the global notes will be limited to persons
who have accounts with DTC or persons who hold interests through participants.
So long as DTC or its nominee is the registered owner or holder of the new
notes, DTC or such nominee will be considered the sole owner or holder of the
new notes represented by the global note for all purposes under the indenture.
No beneficial owner of an interest in the global note will be able to transfer
that interest except in accordance with DTC's procedures.
Payments of interest, principal and other amounts due on the global note
will be made to DTC or its nominee as the registered owner. None of Oxford, the
trustee or any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global note or for maintaining, supervising or
reviewing any records relating to this beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of interest,
principal or other amounts due on the global note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the global note as shown on the records of DTC or its nominee. We
also expect that payments by participants to owners of beneficial interests in
the global note held through these participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for those
customers. These payments will be the responsibility of the participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's settlement system in accordance with DTC rules and will be settled
in same day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of new notes, including the presentation of new notes for exchange as
described below, only at the direction of one or more participants to whose
account the DTC interests in the global note are credited. Further, DTC will
take action only as to such portion of the notes as to which the participant or
participants has given such direction. However, if there is an
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Event of Default under the indenture, DTC will exchange the global note for
certificated notes, which it will distribute to its participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global note among participants of DTC, it is under
no obligation to perform those procedures, and those procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the global note and we do not appoint a successor depositary within 90 days, we
will issue certificated notes in exchange for the global note.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following describes the material United States federal income tax
considerations to persons that exchange the old notes for new notes. It is the
opinion of Sullivan & Cromwell, counsel to Oxford Health Plans, Inc., that the
exchange of old notes for new notes will not be treated as a taxable transaction
for United States Federal income tax purposes because the terms of the new notes
will not be considered to differ materially in kind or in extent from the terms
of the old notes. Rather, the new notes received by a holder of old notes will
be treated as a continuation of such holder's investment in the old notes. As a
result, there will be no material United States Federal income tax consequences
to holders exchanging old notes for new notes.
PERSONS CONSIDERING THE EXCHANGE OF THE OLD NOTES FOR NEW NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING UNDER
STATE, LOCAL, OR FOREIGN LAWS OF SUCH AN EXCHANGE.
DESCRIPTION OF TERM LOAN AGREEMENT
The following summarizes the principal terms and conditions of the term
loan agreement. The description below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the term loan agreement.
The term loan agreement provides for a $150 million senior secured term
loan with a final maturity on May 13, 2003, at which time all outstanding
amounts will be due and
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payable. Prior to the final maturity of the term loan, there are no scheduled
principal payments. The term loan agreement provides for mandatory prepayments
of:
(1) all net proceeds from the sale of assets, subject to certain exceptions
and to the receipt of any required regulatory approvals;
(2) all net proceeds from the issuance of debt securities;
(3) 50% of the net proceeds from certain equity issuances; and
(4) the entire aggregate principal amount plus a premium equal to 1.00% of
the aggregate principal amount of the loan prepaid upon a "change of
control."
We may utilize borrowings under the term loan agreement to fund current and
future regulatory reserve requirements, for capital expenditures and other
general corporate purposes.
The term loan bears interest at a rate per annum equal to the
administrative agent's reserve-adjusted LIBO rate plus 4.25%.
The term loan agreement contains a number of covenants, similar to those
specified in the indenture, that, among other things, restrict our ability and
the ability of our subsidiaries to:
- incur additional indebtedness;
- pay dividends;
- make investments, loans or advances;
- make acquisitions;
- create liens on assets;
- enter into sale and leaseback transactions;
- engage in mergers or consolidations;
- change the business conducted by us or our subsidiaries; or
- engage in certain transactions with affiliates and otherwise restrict
certain corporate activities.
The term loan agreement provides that certain events will constitute events
of default under the term loan agreement, which events include, but are not
limited to:
- our failure to pay amounts owed under the term loan agreement;
- a default by us or any of our restricted subsidiaries under the term loan
agreement or any other indebtedness;
- our failure to observe or perform the covenants set forth in the term
loan agreement;
- the inaccuracy of the representations and warranties set forth in the
term loan agreement;
- the imposition of certain judgments against us or our Restricted
Subsidiaries;
- the occurrence of certain bankruptcy or insolvency proceedings or events
with respect to us or our restricted subsidiaries;
- our failure to maintain certain governmental authorizations related to
our business; and
- the invalidity or unenforceability of any lien or security interest
securing our obligations under the term loan agreement.
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DESCRIPTION OF PREFERRED STOCK AND WARRANTS
Pursuant to the investment agreement, dated as of February 23, 1998,
between Oxford and TPG Partners II, L.P. on May 13, 1998, certain investors
purchased $350,000,000 in redeemable preferred stock issued with warrants to
acquire up to 22,530,000 shares of common stock. We issued the preferred stock
and warrants without registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, which provides for an exemption for
transactions not involving any public offering. We may pay dividends on the
preferred stock in kind for the first two years. The warrants have an exercise
price of $17.75, subject to adjustment in certain events.
We originally issued the preferred stock as 245,000 shares of Series A
Cumulative Preferred Stock, which we refer to as "Series A preferred stock," and
105,000 shares of Series B Cumulative Preferred Stock, which we refer to as
"Series B preferred stock." On February 13, 1999, we entered into a share
exchange agreement with TPG Partners II, L.P., its affiliates and other
investors 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 an
aggregate amount of 260,146.909 shares of Series D Cumulative Preferred Stock,
which we refer to as "Series D preferred stock," and
- the 105,000 shares of Series B preferred stock were exchanged for an
aggregate amount of 111,820.831 shares of Series E Cumulative Preferred Stock,
which we refer to as "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
preferred stock through February 13, 1999. As a result of the exchange, the
holders 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, in each case, with respect to the applicable
dividend rates. The exchange was effected for a number of reasons, including to
facilitate the potential sale of the preferred stock by the holders.
Dividends are required to be paid 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 accumulate preferred stock accumulate
dividends at a rate of dividends at a rate of
5.319521% per year. 14.589214% per 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 of cash or by the issuance of
additional shares of Series additional shares of Series
D preferred stock. E preferred stock.
Dividend Payment Dates We are required to pay We are required to pay
dividends on May 13, 2000. dividends on May 13, 2000.
</TABLE>
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<TABLE>
<CAPTION>
SERIES D PREFERRED STOCK SERIES E PREFERRED STOCK
--------------------------- ---------------------------
<S> <C> <C>
ON OR AFTER MAY 13, 2000:
Dividend Rate Shares of Series D Shares of Series E
preferred stock accumulate preferred stock accumulate
dividends at a rate of dividends at a rate of 14%
5.129810% per year. per year.
Form of Payment We are required to make We are required to make
payments of dividends in payments of dividends in
cash after May 13, 2000. cash after May 13, 2000.
Dividend Payment Dates Dividends will be paid in Dividends will be paid in
equal quarterly equal quarterly
installments on the last installments on the last
day of March, June, day of March, June,
September and December of September and December of
each year, commencing in each year, commencing in
June 2000. June 2000.
</TABLE>
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 shares of Series D preferred stock to
the holders of record as of April 28, 1999; and
(b) a dividend in the amount of $36.4730350 per share of Series E preferred
stock in the form of shares of Series E preferred stock to the holders
of record as of April 28, 1999.
All dividends accumulated on the Series D preferred stock and the Series E
preferred stock have been paid on their respective dividend payment dates.
Shares of Series D preferred stock or Series E preferred stock may be used
as consideration for exercise of the Series A warrants and Series B warrants.
However, before May 13, 2000, warrantholders may not use shares of Series D
preferred stock as consideration for exercise of warrants, unless they do so
with respect to 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 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.
The Series D preferred stock and the Series E preferred stock rank equally
with each other with respect to dividend rights and the right to receive
payments upon the liquidation, dissolution or winding up of Oxford. On and after
May 13, 2003, subject to certain conditions, the Series D preferred stock and
Series E preferred stock are each redeemable at our option at a redemption price
of $1,000 per share, plus accrued and unpaid dividends. The Series D preferred
stock and Series E preferred stock are subject to mandatory redemption at the
same price on May 13, 2008.
There are outstanding Series A warrants to purchase up to 15,800,000 shares
of common stock, and Series B warrants to purchase up to 6,730,000 shares of
common stock. The Series A warrants expire on the earlier of May 13, 2008 or the
redemption of
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the Series D preferred stock, and the Series B warrants expire on the earlier of
May 13, 2008 or the redemption of the Series E preferred stock.
Pursuant to a registration rights agreement dated as of February 23, 1998,
between us and TPG Partners II, L.P., we have agreed to use our reasonable best
efforts to keep effective a shelf registration statement with respect to the
preferred stock, the warrants and the common stock issuable upon exercise of the
warrants, which together we refer to as "registrable securities," until:
- 10 years after the date it is declared effective; or
- if earlier, the date that all registrable securities have been disposed
of or the date on which TPG Partners II, L.P. 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 under Rule 144(k) under the Securities Act.
Generally, we intend the shelf registration statement to permit the holders
of the preferred stock, the warrants and the common stock issuable upon exercise
of the warrants to resell from time to time the registrable securities that they
purchased in transactions exempt from the registration requirements of the
Securities Act. We have filed a shelf registration statement with the SEC in
order to meet our obligations under the registration rights agreement.
PLAN OF DISTRIBUTION
Each holder desiring to participate in the exchange offer must represent,
among other things, that:
(1) it is acquiring the new notes issued in the exchange offer in the
ordinary course of its business;
(2) it is not an "affiliate," as defined in Rule 405 under the Securities
Act, of Oxford; and
(3) it is not participating, and does not intend to participate, and has no
arrangement or understanding with any person to participate, in a
distribution of the new notes issued in the exchange offer.
We refer to a holder unable to make the above representations as a
restricted holder. A restricted holder will not be able to participate in the
exchange offer, and may only sell its old notes pursuant to a registration
statement containing the selling securityholder information required by Item 507
of Regulation S-K of the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Any broker-dealer who holds old notes that are Transfer Restricted
Securities and that were acquired for its own account as a result of
market-marking activities or other trading activities, other than Transfer
Restricted Securities acquired directly from us, may exchange such old notes
pursuant to the exchange offer. Such broker-dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act, and, consequently, must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the new notes received by such broker-dealer in
the exchange offer.
77
<PAGE> 82
Each participating broker-dealer is required to acknowledge in the letter
of transmittal that it acquired the old notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such new notes. We have agreed that, for a period
of up to one year after the registration statement relating to the exchange
offer is declared effective, we will use our best efforts to keep the exchange
offer registration statement continuously effective, supplemented and amended as
required by the registration rights agreement to the extent necessary to ensure
that it is available for resale of old notes acquired by broker-dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that such exchange offer registration statement
conforms with the requirements of the registration rights agreement, the
Securities Act and the policies, rules and regulations of the SEC as announced
from time to time and will make this prospectus available to participating
broker-dealers for use in connection with any such resale. During such period of
time, delivery of this prospectus, as it may be amended or supplemented, will
satisfy the prospectus delivery requirements of a participating broker-dealer
engaged in market making or other trading activities.
Based on interpretations by the staff of the SEC, we believe that new notes
issued pursuant to the exchange offer may be offered for resale, resold and
otherwise transferred by their holder, other than a participating broker-dealer,
without compliance with the registration and prospectus delivery requirements of
the Securities Act.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by participating broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the new notes or a combination of methods of
resale, at market prices prevailing at the time of resale, at prices related to
prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any participating
broker-dealer and/or the purchasers of any such new notes. Any participating
broker-dealer that resells new notes received by it for its own account pursuant
to the exchange offer and any broker or dealer that participates in a
distribution of the new notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any resale of new notes and any
commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a participating broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the notes, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act, as set forth in the registration
rights agreement.
VALIDITY OF THE NEW NOTES
The validity of the new notes will be passed upon for us by Sullivan &
Cromwell, New York, New York.
78
<PAGE> 83
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 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.
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.'s quarterly report on Form 10-Q for the
quarter ended June 30, 1999, and incorporated in this prospectus by reference,
state 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-4 to register this exchange offer. 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 new notes 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
79
<PAGE> 84
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 (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); and
- 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).
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
In order to insure timely delivery of the documents, any request should be
made five days before September 28, 1999, which is when the exchange offer
expires.
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<PAGE> 85
- ------------------------------------------------------
- ------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR
THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. NEITHER THE MAKING OF THE EXCHANGE OFFER PURSUANT
TO THIS PROSPECTUS NOR THE ACCEPTANCE OF OLD NOTES FOR TENDER FOR EXCHANGE
PURSUANT THERETO SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF OXFORD HEALTH PLANS, INC. SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
EACH BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WHO RECEIVES NEW NOTES
FOR ITS OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES PURSUANT TO THE EXCHANGE
OFFER MUST DELIVER A COPY OF THIS PROSPECTUS IN CONNECTION WITH ANY RESALE OF
SUCH NEW NOTES.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................. 1
Risk Factors........................ 10
Forward-Looking Statements.......... 21
Use of Proceeds..................... 23
Capitalization...................... 24
Business............................ 25
The Exchange Offer.................. 25
Description of the New Notes........ 38
Book-Entry; Delivery and Form....... 72
Material United States Federal
Income Tax Considerations......... 73
Description of Term Loan
Agreement......................... 73
Description of Preferred Stock and
Warrants.......................... 75
Plan of Distribution................ 77
Validity of the New Notes........... 78
Experts............................. 79
Where You Can Find More
Information....................... 79
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[OXFORD HEALTH PLANS LOGO]
Offer to Exchange
$200,000,000
11% Senior Notes due 2005
for all outstanding unregistered
11% Senior Notes due 2005
August 30, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 86
PART II
ITEM 20. 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 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.
II-1
<PAGE> 87
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
<TABLE>
<C> <S>
1 Purchase Agreement, dated May 7, 1998, between Oxford Health
Plans, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, incorporated by reference to Exhibit 10(a) of
Oxford's Form 10-Q for the quarterly period ended March 31,
1998 (File No. 0-19442)
3.1 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)
3.2 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)
4.1 Form of New Note (included in exhibit 4.2)
4.2 Indenture, dated May 13, 1998, between Oxford Health Plans,
Inc. and the Chase Manhattan Bank, as Trustee, relating to
the 11% Senior Notes due 2005, incorporated by reference to
Exhibit 10(c) of Oxford's Form 10-Q for the quarterly period
ended March 31, 1998 (File No. 0-19442)
4.3 Registration Rights Agreement, dated May 13, 1998, between
Oxford Health Plans, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, incorporated by reference to Exhibit
10(b) of Oxford's Form 10-Q for the quarterly period ended
March 31, 1998 (File No. 0-19442)
4.4 Term Loan Agreement, dated May 13, 1998, among Oxford,
Lenders listed therein, DLJ Capital Funding, Inc. and IBJ
Schroder Bank & Trust Company, including exhibits,
incorporated by reference to Exhibit 10(d) of Oxford's Form
10-Q for the quarterly period ended March 31, 1998 (File No.
0-19442)
5 Opinion of Sullivan & Cromwell re Legality*
8 Opinion of Sullivan & Cromwell re Tax Matters*
12 Computation of Ratios of Earnings to Fixed Charges*
15 Letter of Ernst & Young LLP re Unaudited Condensed
Consolidated Interim Financial Information*
16 Letter from KPMG LLP regarding change in certifying
accountant of Oxford Health Plans, Inc., incorporated by
reference to Exhibit 16 of Oxford's Form 8-K dated June 2,
1998 (File No. 0-19442)
23.1 Consent of Ernst & Young LLP*
23.2 Consent of KPMG LLP*
</TABLE>
II-2
<PAGE> 88
<TABLE>
<C> <S>
23.3 Consent of Sullivan & Cromwell (included in their opinions
filed as Exhibit 5 and Exhibit 8)
25 Statement of Eligibility of The Chase Manhattan Bank, as
trustee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- -------------------------
* Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES:
None.
ITEM 22. 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 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 indemnifications 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 described under Item 20
above, 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 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 connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 89
4. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
5. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and Oxford
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
II-4
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant 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 August 26, 1999.
Oxford Health Plans, Inc.
By: /s/ NORMAN C. PAYSON, M.D.
----------------------------------------
Norman C. Payson, M.D.
Chief Executive Officer
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 August 26, 1999
- ----------------------------------------------------- Officer, and Chairman of
Norman C. Payson, M.D. the Board
/s/ YON Y. JORDEN Principal Financial August 26, 1999
- ----------------------------------------------------- Officer
Yon Y. Jorden
/s/ KURT B. THOMPSON Principal Accounting August 26, 1999
- ----------------------------------------------------- Officer
Kurt B. Thompson
/s/ FRED F. NAZEM Director August 26, 1999
- -----------------------------------------------------
Fred F. Nazem
/s/ DAVID BONDERMAN Director August 26, 1999
- -----------------------------------------------------
David Bonderman
Director
- -----------------------------------------------------
Jonathan J. Coslet
/s/ JAMES G. COULTER Director August 26, 1999
- -----------------------------------------------------
James G. Coulter
/s/ ROBERT B. MILLIGAN, JR. Director August 26, 1999
- -----------------------------------------------------
Robert B. Milligan, Jr.
/s/ MARCIA J. RADOSEVICH, PH.D. Director August 26, 1999
- -----------------------------------------------------
Marcia J. Radosevich, Ph.D.
/s/ BENJAMIN H. SAFIRSTEIN, M.D. Director August 26, 1999
- -----------------------------------------------------
Benjamin H. Safirstein, M.D.
/s/ THOMAS A. SCULLY Director August 26, 1999
- -----------------------------------------------------
Thomas A. Scully
/s/ KENT J. THIRY Director August 26, 1999
- -----------------------------------------------------
Kent J. Thiry
/s/ STEPHEN F. WIGGINS Director August 26, 1999
- -----------------------------------------------------
Stephen F. Wiggins
</TABLE>
II-5
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1 Purchase Agreement, dated May 7, 1998, between Oxford Health
Plans, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, incorporated by reference to Exhibit 10(a) of
Oxford's Form 10-Q for the quarterly period ended March 31,
1998 (File No. 0-19442)
3.1 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)
3.2 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)
4.1 Form of New Note (included in exhibit 4.2)
4.2 Indenture, dated May 13, 1998, between Oxford Health Plans,
Inc. and the Chase Manhattan Bank, as Trustee, relating to
the 11% Senior Notes due 2005, incorporated by reference to
Exhibit 10(c) of Oxford's Form 10-Q for the quarterly period
ended March 31, 1998 (File No. 0-19442)
4.3 Registration Rights Agreement, dated May 13, 1998, between
Oxford Health Plans, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, incorporated by reference to Exhibit
10(b) of Oxford's Form 10-Q for the quarterly period ended
March 31, 1998 (File No. 0-19442)
4.4 Term Loan Agreement, dated May 13, 1998, among Oxford,
Lenders listed therein, DLJ Capital Funding, Inc. and IBJ
Schroder Bank & Trust Company, including exhibits,
incorporated by reference to Exhibit 10(d) of Oxford's Form
10-Q for the quarterly period ended March 31, 1998 (File No.
0-19442)
5 Opinion of Sullivan & Cromwell re Legality*
8 Opinion of Sullivan & Cromwell re Tax Matters*
12 Computation of Ratios of Earnings to Fixed Charges*
15 Letter of Ernst & Young LLP re Unaudited Condensed
Consolidated Interim Financial Information*
16 Letter from KPMG LLP regarding change in certifying
accountant of Oxford Health Plans, Inc., incorporated by
reference to Exhibit 16 of Oxford's Form 8-K dated June 2,
1998 (File No. 0-19442)
23.1 Consent of Ernst & Young LLP*
23.2 Consent of KPMG LLP*
23.3 Consent of Sullivan & Cromwell (included in their opinions
filed as Exhibit 5 and Exhibit 8)
25 Statement on Form T-1 of Eligibility of Trustee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- -------------------------
* Filed herewith.
<PAGE> 1
[Letterhead of Sullivan & Cromwell]
Exhibit 5
August 26, 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 $200,000,000 aggregate principal amount of 11% Senior Notes due 2005
(the "Securities") of Oxford Health Plans, Inc., a Delaware corporation (the
"Company"), to be issued pursuant to the Indenture, dated as of May 13, 1998
(the "Indenture"), between the Company and The Chase Manhattan Bank, as trustee
(the "Trustee"), in exchange for the Company's outstanding 11% Senior Notes due
2005, 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 has become effective under the Act, and the
Securities have been duly executed and authenticated in accordance with the
Indenture and issued and delivered as contemplated by the Registration
Statement, the Securities will constitute valid and legally binding obligations
of the Company, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
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.
In connection with the foregoing, we have assumed that at the time of the
issuance and delivery of the Securities there will not have occurred any change
in law affecting the validity, legally binding character or enforceability of
the Securities and that the issuance and delivery of the Securities, all of the
terms of the Securities and the performance by the Company of its obligations
thereunder will comply with applicable law and with each requirement or
restriction imposed by any court or governmental body having jurisdiction over
the Company and will not result in a default under or a breach of any agreement
or instrument then binding upon the Company.
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, and we have assumed that the Indenture has been duly authorized,
executed and delivered by the Trustee, that the Securities will conform to the
specimens thereof examined by us, that the Trustee's certificates of
authentication of the Securities will be manually signed by one of the Trustee's
authorized officers and that the signatures on all documents examined by us are
genuine, assumptions which we have not independently verified.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Validity
of the New Notes" 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,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
[LETTERHEAD OF SULLIVAN & CROMWELL]
EXHIBIT 8
August 26, 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 $200,000,000 aggregate principal amount of
11% Senior Notes due 2005 of Oxford Health Plans, Inc., a Delaware corporation.
We hereby confirm to you that our opinion is as set forth under the caption
"Material United States Federal Income Tax Considerations" in the prospectus,
dated August 30, 1999 (the "Prospectus"), included in the related Registration
Statement on Form S-4 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 Considerations." 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,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 12
OXFORD HEALTH PLANS, INC. & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(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
======= ========= ========= ========= ======== ======= =======
Ratio of earnings to
fixed charges.......... 1.8 * * * 25.6 19.3 17.6
======= ========= ========= ========= ======== ======= =======
</TABLE>
- -------------------------
* Earnings were insufficient to cover fixed charges by $615.2 million for the
year 1998, $431.6 million for the year 1997 and $571.4 million for the six
months ended June 30, 1998.
For purposes of computing these ratios, we increased our earnings before
income taxes, as reported in our most recent annual report on Form 10-K/A No. 2
and in our quarterly report on Form 10-Q for the quarter ended June 30, 1999, by
the fixed charges. We then divided the amount of earnings by the amount of fixed
charges, resulting in the ratio of earnings to fixed charges. 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-4 No. 333-77525) of Oxford Health Plans, Inc. for the registration of
$200,000,000 of 11% Senior Notes due 2005 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
Ernst & Young LLP
Stamford, Connecticut
August 26, 1999
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-77525) and related Prospectus of Oxford
Health Plans, Inc. for the registration of $200,000,000 of 11% Senior Notes due
2005 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 for
the year ended December 31, 1998, filed with the Securities and Exchange
Commission.
Stamford, Connecticut
August 26, 1999
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Oxford Health Plans, Inc.:
We consent to incorporation by reference in the Registration Statement on
Form S-4 of Oxford Health Plans, Inc. 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 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
August 26, 1999
<PAGE> 1
Exhibit 25
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
OXFORD HEALTH PLANS, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 06-1118515
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(Address of principal executive offices) (Zip Code)
-------------------------------------------------------------------
11% SENIOR NOTES DUE 2005
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-76439, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 26th day of August, 1999.
THE CHASE MANHATTAN BANK
By /s/ Robert S. Peschler
------------------------------------------------
Robert S. Peschler, Assistant Vice President
-3-
<PAGE> 4
Exhibit 7 to Exhibit 25
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1999, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ........................................... $ 15,364
Interest-bearing balances ................................... 3,811
Securities:......................................................
Held to maturity
securities ...................................................... 1,084
Available for sale securities ................................... 49,894
Federal funds sold and securities purchased under
agreements to resell ........................................ 27,638
Loans and lease financing receivables:
Loans and leases, net of unearned income .... $131,839
Less: Allowance for loan and lease losses ... 2,642
Less: Allocated transfer risk reserve ....... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve ...................................... 129,197
Trading Assets .................................................. 45,483
Premises and fixed assets (including capitalized
leases) ..................................................... 3,124
Other real estate owned ......................................... 242
Investments in unconsolidated subsidiaries and
associated companies ........................................ 171
Customers' liability to this bank on acceptances
outstanding ................................................. 974
Intangible assets ............................................... 2,017
Other assets .................................................... 12,477
--------
TOTAL ASSETS .................................................... $291,476
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C>
Deposits
In domestic offices ........................................... $102,273
Noninterest-bearing ................. $ 39,135
Interest-bearing .................... 63,138
--------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's ........................................ 74,586
Noninterest-bearing ................. $ 4,221
Interest-bearing .................... 70,365
Federal funds purchased and securities sold under
agreements to repurchase .......................................... 41,039
Demand notes issued to the U.S. Treasury .......................... 1,000
Trading liabilities ............................................... 32,929
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ................. 4,353
With a remaining maturity of more than one year through
three years ................................................. 14
With a remaining maturity of more than three years ............ 92
Bank's liability on acceptances executed and outstanding .......... 974
Subordinated notes and debentures ................................. 5,427
Other liabilities ................................................. 9,684
TOTAL LIABILITIES ................................................. 272,371
--------
</TABLE>
EQUITY CAPITAL
<TABLE>
<S> <C>
Perpetual preferred stock and related surplus ..................... 0
Common stock ...................................................... 1,211
Surplus (exclude all surplus related to preferred stock) ......... 11,016
Undivided profits and capital reserves ............................ 7,040
Net unrealized holding gains (losses)
on available-for-sale securities .................................. (179)
Accumulated net gains (losses) in cash flow hedges ................ 0
Cumulative foreign currency translation adjustments ............... 17
TOTAL EQUITY CAPITAL .............................................. 19,105
--------
TOTAL LIABILITIES AND EQUITY CAPITAL .............................. $291,476
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
11% SENIOR NOTES DUE 2005
OF
OXFORD HEALTH PLANS, INC.
PURSUANT TO THE
EXCHANGE OFFER
IN RESPECT OF
ALL OF ITS OUTSTANDING 11% SENIOR NOTES DUE 2005
FOR
ITS 11% SENIOR NOTES DUE 2005
-------------------------
PURSUANT TO THE PROSPECTUS DATED AUGUST 30, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
28, 1999 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS
OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
TO: THE CHASE MANHATTAN BANK, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail, Hand or Overnight Courier: By Facsimile (For Eligible Institutions Only):
55 Water Street (212) 638-7380 or (212) 638-7381
Room 234, North Building
New York, NY 10041 Confirm by Telephone:
Attn: Carlos Esteves (212) 638-0828
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated August 30, 1999, of Oxford Health Plans, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal and the
instructions hereto (the "Letter of Transmittal").
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its sole discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by means
<PAGE> 2
of a press release or other public announcement prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
This Letter of Transmittal is to be completed by a holder of Old Notes
either (a) if certificates are to be forwarded herewith or (b) if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus
and instructions are not being transmitted through the DTC Automated Tender
Offer Program ("ATOP"). In the case of certificated securities, delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus. See Instruction 1.
Holders of Old Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will credit and
verify the acceptance and execute a book-entry delivery to the Exchange Anent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message. Delivery of an Agent's
Message will also constitute an acknowledgement from the rendering DTC
participant that the representations contained in the appropriate Letter of
Transmittal and described on pages 33 and 34 of the prospectus are true and
correct. DTC participants may also accept the Exchange Offer by submitting a
Notice of Guaranteed Delivery through ATOP.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
A Holder having Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to accept
the Exchange Offer with respect to the Old Notes so registered.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF OLD NOTES BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING
OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
2
<PAGE> 3
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AGGREGATE
CERTIFICATE PRINCIPAL
NUMBER(S)* AMOUNT
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACH SIGNED TENDERED (IF LESS
(PLEASE FILL IN, IF BLANK) LIST IF NECESSARY) THAN ALL)**
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by holders tendering by book-entry transfer.
** Need not be completed by holders who wish to tender with respect to all
Old Notes listed. See Instruction 2.
3
<PAGE> 4
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
DTC Book-Entry Account No.:
Transaction Code No.:
If holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date or (iii)
the procedures for book-entry transfer cannot be completed prior to the
Expiration Date, such holders may effect a tender of such Old Notes in
accordance with the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures."
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:
Window Ticket No. (if any):
Date of Execution of
Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Name of Tendering Institution:
DTC Book-Entry Account No.:
Transaction Code No.:
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF NEW NOTES
RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES.
Name:
Address:
Aggregate Principal Amount of Old Notes so held: $
4
<PAGE> 5
Ladies and Gentlemen:
The undersigned hereby tenders to Oxford Health Plans, Inc., a Delaware
corporation (the "Company") the aggregate principal amount of Old Notes
indicated in this Letter of Transmittal, upon the terms and subject to the
conditions set forth in the Company's Prospectus dated August 30, 1999 (the
"Prospectus"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 11% Senior Notes due 2005
(the "New Notes"), which have been registered under the Securities Act of 1933,
as amended, for each $1,000 principal amount of its issued and outstanding 11%
Senior Notes due 2005 (the "Old Notes" and together with the New Notes, the
"Notes"), of which $200,000,000 aggregate principal amount was outstanding on
the date of the Prospectus. The capitalized terms not defined herein are used
herein as defined in the Prospectus.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered hereby, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Company all right, title and interest in and to such
Old Notes as are being tendered hereby and hereby irrevocably constitutes and
appoints the Exchange Agent as attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as trustee and
registrar under the Indenture, dated as of May 13, 1998, between the Company and
The Chase Manhattan Bank, as trustee, pursuant to which the Old Notes are
issued, and pursuant to which the New Notes will be issued) of the undersigned
with respect to such Old Notes, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to:
(a) deliver such Old Notes in registered certificated form, or
transfer ownership of such Old Notes through book-entry transfer at the
Book-Entry Transfer Facility, to or upon the order of the Company, upon
receipt by the Exchange Agent, as the undersigned's agent, of the same
aggregate principal amount of New Notes; and
(b) receive, for the account of the Company, all benefits and
otherwise exercise, for the account of the Company, all rights of
beneficial ownership of the Old Notes tendered hereby in accordance with
the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional sale agreements or other
obligations relating to their sale or transfer, and not subject to any adverse
claim when the same are accepted by the Company. The undersigned hereby further
represents that any New Notes acquired in exchange for Old Notes tendered hereby
will have been acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the undersigned, that
neither the holder of such Old Notes nor any such other person is participating,
intends to participate or has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the holder of
such Old Notes nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act of 1933, as amended (the "Securities Act"), of the
Company. The undersigned has read and agrees to all of the terms of the Exchange
Offer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued in exchange for the Old Notes pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the provisions of the Securities
Act), provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such New Notes. However, the Company does not
intend to request the SEC to consider, and the SEC has not considered, the
Exchange Offer in the context of a no-action letter, and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in other circumstances. If the undersigned is
not a broker-dealer, the undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
5
<PAGE> 6
New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. If any holder is an affiliate of the Company, is
participating in or intends to participate in or has any arrangement or
understanding with any person to participate in the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not
rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. If the undersigned is
a broker-dealer that will receive New Notes for its own account in exchange for
Old Notes acquired as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), it represents that the Old Notes to be exchanged
for the New Notes were acquired by it as a result of market-making or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, such Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of New Notes received in exchange for Old Notes which were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities, for a period of up to one year after the registration
statement relating to the Exchange Offer is declared effective by the SEC. In
that regard, each Participating Broker-Dealer, by tendering such Old Notes and
executing this Letter of Transmittal, or in the case book-entry transfer, by
delivery of an "Agent's Message," agrees that, upon receipt of notice from the
Company of the existence of any fact or the happening of any event that makes
any statement of a material fact made in the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, such Participating Broker-Dealer will
discontinue the disposition of New Notes pursuant to the Prospectus until the
Company has amended or supplemented the Prospectus or any document incorporated
therein by reference or file any other document so that, as thereafter delivered
to purchasers of New Notes, the Prospectus will not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Participating Broker-Dealer has received copies of the
amended or supplemented Prospectus or the Company has advised the Participating
Broker-Dealer in writing that the use of the Prospectus may be resumed, as the
case may be. If so directed by the Company, each Participating Broker-Dealer
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Participating Broker-Dealer's possession, of
the Prospectus covering the New Notes that was current at the time of receipt of
such notice. If the Company gives such notice to discontinue the disposition of
the New Notes, it shall extend the one-year period referred to above during
which Participating Broker-Dealers are entitled to use the Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit resales of the New Notes
or to and including the date on which the Company has advised in writing that
the sale of New Notes may be resumed, as the case may be.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer -- Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not
6
<PAGE> 7
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Notes, please credit the account indicated above maintained at
the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the New
Notes (and, if applicable, substitute certificates representing Old Notes for
any Old Notes not exchanged) to the undersigned at the address shown above in
the box entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED
THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
7
<PAGE> 8
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
OLD NOTES REGARDLESS OF WHETHER OLD NOTES ARE BEING PHYSICALLY
DELIVERED HEREWITH)
If a holder is tendering any Old Notes, this Letter of Transmittal must be
signed by the holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or on a securities position listing or by any person(s) authorized to
become (a) holder(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 3.
<TABLE>
<S> <C>
x Date:
- -------------------------------------------------------- ---------------------------------------------------
x Date:
- -------------------------------------------------------- ---------------------------------------------------
Signature(s) of Owner
Name(s): Address:
----------------------------------------------- ------------------------------------------------
----------------------------------------------- ------------------------------------------------
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity: Area Code and
----------------------------------------------- Telephone No.: -----------------------------------------
Social Security No.:
------------------------------------
</TABLE>
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
Certain Signatures Must Be Guaranteed by an Eligible Institution
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including
area code) of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
---------------------------------------
8
<PAGE> 9
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be issued in the name of and sent to someone other
than the person or persons whose signature(s) appear(s) above on this
Letter of Transmittal, or if Old Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an
account maintained at the Book-Entry Transfer Facility other than the
account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s): ---------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------
(PLEASE TYPE OR PRINT)
Address: ---------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------
ZIP CODE
Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
------------------------------------------------------------
(Book Entry Transfer Facility
Account Number, if applicable)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be sent to someone other than the person or
persons whose signature(s) appear(s) above on this Letter of Transmittal
or to such person or persons at an address other than shown above in the
box entitled "Description of Old Notes" on this Letter of Transmittal.
Mail: New Notes and/or Old Notes to:
Name(s): ---------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------
(PLEASE TYPE OR PRINT)
Address: ---------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------
ZIP CODE
------------------------------------------------
9
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER OF OXFORD HEALTH
PLANS, INC. TO EXCHANGE ALL OF ITS OUTSTANDING 11% SENIOR NOTES DUE 2005 FOR ITS
11% SENIOR NOTES DUE 2005
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES OR BOOK-ENTRY
CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES.
This Letter of Transmittal is to be completed by holders of Old Notes
either if certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer -- Procedures for Tendering -- Book-Entry Transfer" section of
the Prospectus. This Letter of Transmittal will be deemed to have been delivered
upon timely receipt by the Exchange Agent of an agent's Message.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent, which states that DTC has received an express
acknowledgement from the participant in DTC tendering the Old Notes stating:
- the aggregate principal amount of Old Notes which have been tendered by
such participant;
- that such participant has received and agrees to be bound by the terms of
this Letter of Transmittal; and
- that we may enforce such agreement against the participant.
Delivery of an Agent's Message will also constitute an acknowledgement from
the tendering DTC participant that the representations contained in the
appropriate Letter of Transmittal and described on pages 33 and 34 of the
Prospectus are true and correct. Certificates for all physically tendered Old
Notes, or Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
hereof), or in the case of a book-entry transfer, an Agent's Message, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in denominations
of principal amount of $1,000 and any integral multiple thereof.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Notes, the certificate
numbers of the Old Notes, if applicable, and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three business days after the Expiration Date, the Letter of Transmittal
(or facsimile thereof), or, in the case of a book-entry transfer, an Agent's
Message, together with the certificates for all physically tendered Old Notes,
or a Book-Entry Confirmation, and any other documents required by this Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) a properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificates for all physically tendered Old Notes in
proper form for transfer or Book-Entry Confirmation, as the case may be, and all
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three business days after the Expiration Date.
10
<PAGE> 11
The Exchange Agent will send a Notice of Guaranteed Delivery upon request
to any holder of Old Notes who wishes to surrender the Old Notes according to
the Guaranteed Delivery Procedures set forth above.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC
AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED THROUGH ATOP, IS AT THE
ELECTION AND SOLE RISK OF THE TENDERING HOLDERS, AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF TRANSMITTAL OR ANY
OLD NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
ON THEIR BEHALF.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER); WITHDRAWAL RIGHTS
Tenders of Old Notes will be accepted only in the principal amount of
$1,000 and integral multiples thereof. If less than all of the Old Notes
evidenced by a submitted certificate are to be tendered, the tendering holder(s)
should fill in the aggregate principal amount of Old Notes to be tendered in the
box above entitled "Description of Old Notes -- Aggregate Principal Amount
Tendered." A reissued certificate representing the balance of nontendered Old
Notes will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal, promptly after the Expiration
Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO
HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to the Expiration Date. In order for a withdrawal to be
effective prior to that time, a letter or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent at one of its addresses
set forth above prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person having deposited the Old Notes to be withdrawn,
identify the Old Notes to be withdrawn by certificate number, if applicable, the
aggregate principal amount of Old Notes to be withdrawn and the name of the
registered holder of the Old Notes as set forth on the certificate for the Old
Notes, if different from that of the person who tendered such Old Note and
otherwise comply with the procedures of the Exchange Agent. The notice of
withdrawal must be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which the Old Notes were tendered,
including any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the trustee under the Indenture governing the Old
Notes register the transfer of the Old Notes into the name of the person
withdrawing the tender. The signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfer" section of the Prospectus, the notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawal of Old Notes, in which case
a notice of withdrawal will be effective if delivered to the Exchange Agent by
written or facsimile transmission prior to the Expiration Date. Withdrawals of
tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not
be deemed to have been validly tendered for purposes of the Exchange Offer, and
no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered
at any
11
<PAGE> 12
subsequent time on or prior to the Expiration Date by following the procedures
described in the Prospectus under "The Exchange Offer -- Procedures for
Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any employees, agents, affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give such notification. Any Old Notes which have been
tendered but which are withdrawn will be returned to the holder thereof without
cost to such holder as promptly as practicable after withdrawal.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
This Letter of Transmittal must be signed by the registered holder of the
Old Notes tendered hereby and, the signature must correspond exactly with the
name as written on the face of the certificates or on a securities position
listing without any change whatsoever.
If this Letter of Transmittal is signed by a participant in one of the
Book-Entry Transfer Facilities whose name is shown as the owner of the Old Notes
tendered hereby, the signature must correspond with the name shown on the
security position listing as the owner of the Old Notes.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates or securities positions listings, it will be necessary to complete,
sign and submit as many separate copies of this Letter of Transmittal as there
are different registrations.
When this Letter of Transmittal is signed by the registered holder or
holders of the Old Notes specified herein and tendered hereby, no endorsements
of certificates or separate bond powers are required. If, however, the New Notes
are to be issued, or any nontendered Old Notes are to be reissued, to a person
other than the holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
In connection with any tender of Old Notes in definitive certificated form,
if this Letter of Transmittal is signed by a person other than the registered
holder or holders of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name or names of the registered holder or holders
appear(s) on the certificate(s), and the signatures on such certificate(s) must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES, OR BY AN
"ELIGIBLE GUARANTOR INSTITUTION" WITHIN THE MEANING OF RULE 17Ad-15 UNDER THE
EXCHANGE ACT WHICH IS A MEMBER OF ONE OF THE RECOGNIZED SIGNATURE GUARANTEE
PROGRAMS IDENTIFIED IN THE LETTER OF TRANSMITTAL (EACH AN "ELIGIBLE
INSTITUTION").
12
<PAGE> 13
SIGNATURES ON THIS LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED
HOLDER OF OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES
ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON
A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. A holder of Old Notes tendering Old Notes by book-entry transfer may
request that Old Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such holder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name or address of the person signing this Letter of Transmittal or credited to
the account listed beneath the box entitled "Description of Old Notes," as the
case may be.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering holder who is an individual, is his or
her Social Security Number. If the Company is not provided with the current TIN
or an adequate basis for an exemption, such tendering holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such tendering holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 3 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
13
<PAGE> 14
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the holder of
the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the transfer of Old Notes
to the Company or its order pursuant to the Exchange Offer, the amount of any
such transfer taxes (whether imposed on the holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER OF
TRANSMITTAL.
7. DETERMINATION OF VALIDITY.
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Old Notes, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for which, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under the caption "The Exchange Offer" or any defects,
irregularities or conditions in any tender of Old Notes of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, any
employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor
any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter of
Transmittal or by delivery to the Exchange Agent of an Agent's Message shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent, at the address and telephone number indicated
above.
14
<PAGE> 15
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: THE CHASE MANHATTAN BANK
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
----------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING OR
AND DATING BELOW ------------------------------
Employer Identification Number
---------------------------------------------------------------------------------------------
Department of the Treasury PART 2--Certification--Under Penalties of Perjury. I certify that: PART 3--
Internal Revenue Service (1) The number shown on this form is my correct Taxpayer Awaiting TIN [ ]
Identification Number (or I am waiting for a number to be
issued to me) and
Payer's Request for Taxpayer (2) I am not subject to backup withholding because; (a) I am exempt
Identification Number (TIN) from backup withholding, (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
---------------------------------------------------------------------------------------------
Certificate instructions - You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out item (2).
SIGNATURE ------------------------------ DATE ------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
15
<PAGE> 16
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- ------------------------------------- -------------------------------------
Signature Date
16
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
11% SENIOR NOTES DUE 2005
OF
OXFORD HEALTH PLANS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Oxford Health Plans, Inc., a Delaware corporation (the
"Company"), made pursuant to the Prospectus, dated August 30, 1999 (the
"Prospectus"), if certificates for the outstanding 11% Senior Notes due 2005 of
the Company (the "Old Notes") are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach The Chase Manhattan Bank (the "Exchange
Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date of
the Exchange Offer. This Notice of Guaranteed Delivery may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery to
the Exchange Agent as set forth below. See "The Exchange Offer -- Procedures for
Tendering" in the Prospectus. Capitalized terms used herein but not defined
herein have the respective meanings given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
28, 1999 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent:
THE CHASE MANHATTAN BANK
<TABLE>
<S> <C>
By Mail, Hand or Overnight Courier: By Facsimile (For Eligible Institutions Only):
55 Water Street (212) 638-7380 or (212) 638-7381
Room 234, North Building Confirm by Telephone:
New York, NY 10041 (212) 638-0828
Attn: Carlos Esteves
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM,
TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE> 2
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Signature(s) of Owner(s) or Authorized Signatory: Name(s) of Holder(s):
- -------------------------------------------------------- --------------------------------------------------------
- -------------------------------------------------------- --------------------------------------------------------
--------------------------------------------------------
*Principal Amount of Old Notes Tendered: Address:
- -------------------------------------------------------- --------------------------------------------------------
- -------------------------------------------------------- --------------------------------------------------------
Certificate No(s). of Old Notes (if available): Area Code and Telephone No.: -----------------------
- --------------------------------------------------------
- -------------------------------------------------------- If Old Notes will be delivered by book-entry transfer at
- -------------------------------------------------------- The Depository Trust Company, insert Depository Account
No.:
Date: --------------------------------------------------------
- ---------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old Notes
exactly as its (their) name(s) appear on certificates for Old Notes or on a
security position listing as the owner of Old Notes, or by person(s) authorized
to become holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Do not send Old Notes with this form. Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
- -------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s)" the Old Notes covered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that
such tender of Old Notes complies with such Rule 14e-4, and (c) guarantees that,
within three business days after the Expiration Date, a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old Notes covered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company, pursuant to the
procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in financial loss to the
undersigned.
<TABLE>
<S> <C>
Name of Firm:
------------------------------------------- --------------------------------------------------------
AUTHORIZED SIGNATURE
Address: Name:
------------------------------------------------ --------------------------------------------------
- -------------------------------------------------------- Title:
--------------------------------------------------
Area Code and
Telephone Number: Date:
--------------------------------------- --------------------------------------------------
</TABLE>
3
<PAGE> 1
Exhibit 99.3
August 26, 1999
EXCHANGE AGENT AGREEMENT
The Chase Manhattan Bank
Global Trust Services
450 West 33rd Street
15th Floor
New York, New York 10001-2697
Attention: Robert S. Peschler
Dear Mr. Peschler:
Oxford Health Plans, Inc. a Delaware corporation (the "Company"),
proposes to make an offer (the "Exchange Offer") to exchange up to $200,000,000
aggregate principal amount of its 11% Senior Notes due 2005 (the "New Notes"),
for a like principal amount of its outstanding 11% Senior Notes due 2005 (the
"Old Notes"). The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus (the "Prospectus") included in the
Company's registration statement on Form S-4 (File No. 333-77525), as amended
(the "Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC"), and proposed to be distributed to all record holders of
the Old Notes. The Old Notes and the New Notes are collectively referred to
herein as the "Notes." Capitalized terms used herein and not defined shall have
the respective meanings ascribed to them in the Prospectus or accompanying
Letter of Transmittal.
The Company hereby appoints The Chase Manhattan Bank to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Chase Manhattan Bank.
The Exchange Offer is expected to be commenced by the Company on
or about August 31, 1999. The Letter of Transmittal accompanying the Prospectus
(or in the case of book entry securities, an Agent's message sent through the
ATOP system) is to be used by the holders of the Old Notes to accept the
Exchange Offer and contains instructions with respect to the delivery of
certificates for Old Notes tendered in connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City time,
on the twentieth business day following its commencement or on such later date
or time to which the Company may extend the Exchange Offer (the "Expiration
Date"). Subject to the terms and conditions set forth in the Prospectus, the
Company expressly reserves the right to extend the Exchange Offer from time to
time and may extend the Exchange Offer by (1) giving oral (confirmed in writing)
or written notice to you and (2) issuing a press release
<PAGE> 2
or other public announcement of the extension, which will include disclosure of
the approximate number of Old Notes deposited to date, each before 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company expressly reserves the right, in its sole discretion,
to amend or terminate the Exchange Offer, and not to accept for exchange any Old
Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable and will promptly announce any
such event by making a timely release to PR Newswire.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer", in the Letter of Transmittal accompanying the Prospectus or as
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith and without gross negligence or willful
misconduct be limited by the foregoing.
2. You will establish an account with respect to the Old Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into your account in
accordance with the Book-Entry Transfer Facility's procedures for such transfer.
3. You are to examine each of the Letters of Transmittal, if any,
and certificates for Old Notes (and confirmation of book-entry transfers of Old
Notes into your account at the Book-Entry Transfer Facility) and any other
documents delivered or mailed to you by or for holders of the Old Notes, to
ascertain whether: (i) the Letters of Transmittal, certificates and any such
other documents are duly executed and properly completed in accordance with
instructions set forth therein and that such book-entry confirmations are in due
and proper form and contain the information required to be set forth therein,
and (ii) the Old Notes have otherwise been properly tendered. In each case where
the Letter of Transmittal or any other document has been improperly completed or
executed, or where book-entry confirmations are not in due and proper form or
omit certain information, or any of the certificates for Old Notes are not in
proper form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any other
action as may be necessary or advisable to cause such irregularity to be
corrected.
2
<PAGE> 3
4. With the approval of Jeffery H. Boyd, Executive Vice
President, General Counsel and Secretary, or the Chairman of the Board, the
President, Chief Executive Officer, any Executive Vice President or any other
person designated by such an officer in writing (such approval, if given orally,
to be confirmed in writing), you are authorized to waive any irregularities in
connection with any tender of Old Notes pursuant to the Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer--Procedures for Tendering", and Old Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein. Notwithstanding the provisions of this paragraph 5, Old Notes
that the Chairman of the Board, the President, Chief Executive Officer, any
Executive Vice President or any other person designated by such an officer in
writing, shall approve as having been properly tendered shall be considered to
be properly tendered (such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Company with respect to any Old Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Old Notes.
7. You shall accept tenders:
(a) in cases where the Old Notes are registered in two or
more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Notes provided that customary transfer requirements, including those regarding
any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Notes when so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Old Notes or a book-entry delivery, as applicable, to the transfer agent for
split-up and return any untendered Old Notes or cause book-entry credit for the
untendered portion to be made to the holder (or such other person as may be
designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing)
3
<PAGE> 4
of its acceptance, promptly after the Expiration Date, of all Old Notes properly
tendered and you, on behalf of the Company, will exchange such Old Notes for New
Notes and cause such Old Notes to be canceled. Delivery of New Notes will be
made on behalf of the Company by you at the rate of $1,000 principal amount of
New Notes for each $1,000 principal amount of the Old Notes tendered promptly
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said Old Notes by the Company; provided, however, that in all
cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such Old Notes (or confirmation
of book-entry transfer into your account at the Book-Entry Transfer Facility), a
properly completed and, except as described in the section of the Prospectus
captioned "The Exchange Offer--Procedures for Tendering", duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents. Unless otherwise instructed by the Company, you
shall issue New Notes only in denominations of $1,000 or any integral multiple
thereof.
9. Tenders, pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time on or prior to the Expiration Date
in accordance with the terms of the Exchange Offer.
10. The Company shall not be required to exchange any Old Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Notes tendered
shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Old Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus or
otherwise, you shall, as soon as practicable after the expiration or termination
of the Exchange Offer, return those certificates for unaccepted Old Notes (or
effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them (or effected such book-entry
transfer).
12. All certificates for reissued Old Notes, unaccepted Old Notes
or for New Notes (other than those effected by book-entry transfer) shall be
forwarded (a) by messenger or (b) by guaranteed overnight courier.
13. You are not authorized to pay or offer to pay any
concessions, commissions or other solicitation fees to any broker, dealer,
commercial bank, trust company or other nominee or to engage or use any person
to solicit tenders.
4
<PAGE> 5
14. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus, the Letter of Transmittal or herein or
as may be subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and
having no responsibilities as to the validity, sufficiency, value or genuineness
of any of the certificates for the Old Notes deposited with you pursuant to the
Exchange Offer, and will not be required to and will make no representation as
to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity
satisfactory to you;
(d) may reasonably rely on and shall be protected in
acting in reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to you and reasonably believed
by you to be genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement,
request, comment, agreement or other instrument whatsoever not only as to its
due execution and validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which you shall in
good faith believe to be genuine or to have been signed or represented by a
proper person or persons;
(f) may rely on and shall be protected in acting upon
written or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities, and the written opinion
of such counsel or, if appropriate, counsel to the Company shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by you hereunder in good faith and in accordance with the
written opinion of such counsel or, if appropriate, counsel to the Company; and
(h) shall not advise any person tendering Old Notes
pursuant to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of Old Notes or as to the market value, decline or
appreciation in market value of any Old Notes that may or may not occur as a
result of the Exchange Offer or as to the market value of the New Notes;
5
<PAGE> 6
provided, however, that in no way will your general duty to act in good faith
and without gross negligence or willful misconduct be limited by the foregoing.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company will furnish you with copies of such
documents at your request.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Jeffery H. Boyd, Esq. of the Company,
(telephone number (203) 852-1442) and such other person or persons as the
Company may request, as reasonably required by the Company, up to and including
the Expiration Date, as to the aggregate principal amount of Old Notes which
have been duly tendered pursuant to the Exchange Offer and the items received by
you pursuant to the Exchange Offer and this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
registered holders or in the case of book-entry delivery DTC participants whose
tenders were accepted, the aggregate principal amount of Old Notes tendered, the
aggregate principal amount of Old Notes accepted and the identity of any
Participating Broker-Dealers and the aggregate principal amount of New Notes
delivered to each, and deliver said list to the Company.
17. Letters of Transmittal, book-entry confirmations and Notices
of Guaranteed Delivery received by you shall be preserved by you for a period of
time at least equal to the period of time you preserve other records pertaining
to the transfer of securities, or one year, whichever is longer, and thereafter
shall be delivered by you to the Company. You shall dispose of unused Letters of
Transmittal and other surplus materials as instructed by the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the
6
<PAGE> 7
payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder, except any lien,
encumbrance or right of set-off that you have with respect to the Indenture,
dated as of May 13, 1998 between the Company and you, as trustee.
19. For services rendered as Exchange Agent hereunder, you shall
be entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify you against any
and all losses, liabilities, costs or expenses (including reasonable attorneys'
fees and expenses) incurred by you arising out of or in connection with any act,
omission, delay or refusal made by you in reliance upon any signature,
endorsement, assignment, certificate, order, request, notice, instruction or
other instrument or document reasonably believed by you to be valid, genuine and
sufficient and in accepting any tender or effecting any transfer of Old Notes
reasonably believed by you in good faith to be authorized, and in delaying or
refusing in good faith to accept any tenders or effect any transfer of Old
Notes; provided, however, that anything in this Agreement to the contrary
notwithstanding, the Company shall not be liable for indemnification or
otherwise for any loss, liability or expense to the extent arising out of your
negligence or bad faith. In no case shall the Company be liable under this
indemnity with respect to any claim against you unless the Company shall be
notified by you, by letter or cable or by facsimile which is confirmed by
letter, of the written assertion of a claim against you or of any other action
commenced against you, promptly after you shall have received any such written
assertion or notice of commencement of action. The Company shall be entitled to
participate, at its own expense, in the defense of any such claim or other
action, and, if the Company so elects, the Company may assume the defense of any
pending or threatened action against you in respect of which indemnification may
be sought hereunder, in which case the Company shall not thereafter be
responsible for the subsequently incurred fees and disbursements of legal
counsel for you under this paragraph so long as the Company shall retain counsel
reasonably satisfactory to you to defend such suit; provided, that the Company
shall not be entitled to assume the defense of any such action if the named
parties to such action include both you and the Company and representation of
both parties by the same legal counsel would, in the written opinion of your
counsel, be inappropriate due to actual or potential conflicting interests
between you and the Company. You understand and agree
7
<PAGE> 8
that the Company shall not be liable under this paragraph for the fees and
expenses of more than one legal counsel for you.
22. You shall arrange to comply with all requirements under the
tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required, in certain
instances, to deduct thirty-one percent (31%) with respect to interest paid on
the New Notes and proceeds from the sale, exchange, redemption or retirement of
the New Notes from holders who have not supplied their correct Taxpayer
Identification Numbers or required certification. Such funds will be turned over
to the Internal Revenue Service in accordance with applicable regulations.
23. You shall notify the Company of the amount of any transfer
taxes payable in respect of the exchange of Old Notes and, upon receipt of a
written approval from the Company, shall deliver or cause to be delivered, in a
timely manner to each governmental authority to which any transfer taxes are
payable in respect of the exchange of Old Notes, your check in the amount of all
transfer taxes so payable, and the Company shall reimburse you for the amount of
any and all transfer taxes payable in respect of the exchange of Old Notes;
provided, however, that you shall reimburse the Company for amounts refunded to
you in respect of your payment of any such transfer taxes, at such time as such
refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
28. Unless otherwise provided herein, all notices, requests and
other communications to any party hereunder shall be in writing (including
facsimile or similar
8
<PAGE> 9
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth below:
If to the Company, to:
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
Telephone: (203)852-1442
Facsimile: (203)852-2465
Attention: Jeffery H. Boyd, Esq.
Executive Vice President,
General Counsel and Secretary
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-3644
Facsimile: (212) 558-3588
Attention: Daniel Dunson, Esq.
9
<PAGE> 10
If to the Exchange Agent, to:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001-2697
Telephone: (212) 946-3084
Facsimile: (212) 946-8161/8162
Attention: Robert S. Peschler
Assistant Vice President
30. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Notwithstanding
the foregoing, paragraphs 17, 19, 21 and 23 shall survive the termination of
this Agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Company any certificates for Notes, funds or property then held
by you as Exchange Agent under this Agreement.
31. This Agreement shall be binding and effective as of the date
hereof.
10
<PAGE> 11
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
OXFORD HEALTH PLANS, INC.
By: /s/ Jeffery H. Boyd
_______________________________
Name: Jeffery H. Boyd
Title: Executive Vice
President,
General Counsel and
Secretary
Accepted as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Exchange Agent
By: /s/ Robert S. Peschler
______________________________
Name: Robert S. Peschler
Title: Assistant Vice President
11
<PAGE> 12
SCHEDULE I
FEE SCHEDULE FOR
EXCHANGE AGENT SERVICES
THE CHASE MANHATTAN BANK
SCHEDULE OF CORPORATE TRUST FEES FOR
OXFORD HEALTH PLANS, INC.
11% SENIOR NOTES DUE 2005
I. EXCHANGE AGENT FEE:
$5,000
This fee covers the administrative duties as exchange agent for the
securities under the Indenture including the dissemination of exchange
offer materials and coordination with The Depository Trust Company to close
the offer.
II. TRANSACTION FEES: BILLED AT COST
This fee covers the expenses charged by The Depository Trust Company in
connection with participant holders list used in the mailing of the
materials.
III. OUT-OF-POCKET EXPENSES: BILLED AT COST*
*All reasonable "out-of-pocket" expenses including, but not limited to,
legal fees, telecommunications, postage, travel, etc. incurred with the
performance of our duties under the indenture.
12
