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As filed with the Securities and Exchange Commission on April 30, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OXFORD HEALTH PLANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1118515
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
(203) 852-1442
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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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)
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COPY TO:
DANIEL DUNSON, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE 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 pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered
this form are to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check following
box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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TITLE OF SHARES AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TO BE TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock.......................... 22,530,000(1) $17.96875(2) $404,835,937.5(2) $112,544.39
Series D Cumulative Preferred Stock... 277,629.156 $525(3) 145,755,306.90(3) 40,519.98
Series E Cumulative Preferred Stock... 132,808.070 $1,000(3) 132,808,070(3) 36,920.64
Series A Warrants..................... 15,800,000 -- -- 0(4)
Series B Warrants..................... 6,730,000 -- -- 0(4)
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</TABLE>
(1) In accordance with Rule 416 under the Securities Act of 1933, this
Registration Statement also covers an indeterminable number of shares of
common stock, $.01 par value, as may become issuable upon exercise of the
Series A Warrants or the Series B Warrants to prevent dilution resulting
from stock splits, stock dividends, and similar transactions in accordance
with the terms of the Series A Warrants and the Series B Warrants.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act based on the average high
and low price of Oxford Health Plans, Inc. common stock $.01 par value, on
April 23, 1999, as reported on the Nasdaq National Market.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act.
(4) Pursuant to Rule 457(g), no registration fee is required for the Series A
Warrants and the Series B Warrants since the shares of Common Stock
underlying such warrants are being registered hereby.
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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.
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SUBJECT TO COMPLETION, PROSPECTUS DATED APRIL 30, 1999
[OXFORD HEALTH PLANS LOGO]
22,530,000 shares of Common Stock
277,629.156 shares of Series D Cumulative Preferred Stock
132,808.070 shares of Series E Cumulative Preferred Stock
15,800,000 Series A Warrants
6,730,000 Series B Warrants
The shares of preferred stock, the warrants and the shares of common stock
issuable upon exercise of the warrants are being offered under this prospectus
by certain selling securityholders. The preferred stock and the warrants
originally were issued in a private placement in May 1998. The shares of
preferred stock listed above include 17,482.247 additional shares of Series D
preferred stock and 20,987.239 additional shares of Series E preferred stock
that we expect to issue as dividends on existing shares through May 13, 2000.
We will not receive any of the proceeds from the sale of the preferred stock or
the warrants by the selling securityholders. However, we will receive proceeds
from any exercise of the warrants.
You should read this prospectus and the prospectus supplement relating to the
specific issue of preferred stock, warrants and shares of common stock issuable
upon exercise of the warrants carefully before you invest.
Our common stock is listed on the Nasdaq National Market under the symbol
"OXHP." On April 29, 1999, the last reported sale price of our common stock was
$19 5/8 per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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TABLE OF CONTENTS
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Summary.......................... 1
Ratio of Earnings to Combined
Fixed Charges and Preference
Dividends...................... 8
Business......................... 9
Description of Offered Preferred
Stock.......................... 9
Description of Warrants.......... 23
Registration Rights Agreement.... 25
Use of Proceeds.................. 26
Material Federal Income Tax
Consequences................... 28
Selling Securityholders.......... 41
Plan of Distribution............. 46
Validity of Securities........... 47
Experts.......................... 47
Where You Can Find More
Information.................... 48
Forward-looking Statements....... 49
</TABLE>
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REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about Oxford 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 THESE DOCUMENTS THAT YOU REQUEST.
See "Where You Can Find More Information" on page 47.
ii
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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 such 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 benefit plans primarily in New York, New Jersey and Connecticut. Our
product line includes point-of-service plans, the Freedom Plan and the Liberty
Plan, traditional health maintenance organizations, preferred provider
organizations, Medicare plans, health care benefit plans for individuals and
third-party administration of self-funded health plans.
We offer our products primarily through our health maintenance organization
subsidiaries, Oxford Health Plans (NY), Inc., Oxford Health Plans (NJ), Inc. and
Oxford Health Plans (CT), Inc. and through Oxford Health Insurance, Inc., our
health insurance subsidiary.
Our principal executive offices are located at 800 Connecticut Avenue,
Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442.
SECURITIES BEING OFFERED
This prospectus covers the offer and sale of the following:
- 277,629.156 shares of Series D Cumulative Preferred Stock, which we refer
to as the "Series D preferred stock," and 132,808.070 shares of Series E
Cumulative Preferred Stock, which we refer to as the "Series E preferred
stock." We sometimes refer to the Series D preferred stock and the Series
E preferred stock together as the "offered preferred stock." The terms of
the Series D preferred stock and the Series E preferred stock are
substantially similar except for their dividend rates.
- 15,800,000 Series A Warrants, which we refer to as the "Series A
warrants," and 6,730,000 Series B Warrants, which we refer to as the
"Series B warrants." We sometimes refer to the Series A warrants and the
Series B warrants together as the "warrants."
- 22,530,000 shares of common stock, $.01 par value per share, issuable
upon exercise of the Series A warrants and the Series B warrants.
The offered preferred stock and the warrants were issued in May 1998 to the
selling securityholders named on page 43 in a private placement. The private
placement was made under an investment agreement, dated as of February 23, 1998,
between Oxford and TPG Partners II, L.P., one of the selling securityholders.
The investment agreement has been filed as an exhibit to the registration
statement of which this prospectus is a part.
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TERMS OF THE OFFERED PREFERRED STOCK
Stated Value.................... The stated value of each share of offered
preferred stock is $1,000.
Mandatory Redemption............ We will be required to redeem all
outstanding shares of Series D preferred
stock and Series E preferred stock on May
13, 2008, at a redemption price for each
share equal to all unpaid dividends
accumulated to the date of payment of the
redemption price, plus the stated value of
the share, which is $1,000.
Series D Dividends.............. Holders of the Series D preferred stock are
entitled to receive dividends in the
following amounts and form:
BEFORE MAY 13, 2000:
- shares of Series D preferred stock
accumulate dividends at a rate of
5.319521% per year;
- we may choose to make payments of
dividends in cash or by the issuance
of additional shares of Series D
preferred stock; and
- dividends will be paid annually on
May 13, 1999 and May 13, 2000.
ON OR AFTER MAY 13, 2000:
- shares of Series D preferred stock
accumulate dividends at a rate of
5.129810% per year;
- we are required to make payments of
dividends in cash after May 13, 2000;
and
- dividends will be paid in equal
quarterly installments on the last
day of March, June, September and
December of each year commencing June
2000.
Series E Dividends.............. Holders of the Series E preferred stock are
entitled to receive dividends in the
following amounts and form:
BEFORE MAY 13, 2000:
- shares of Series E preferred stock
accumulate dividends at a rate of
14.589214% per year;
- we may choose to make payments of
dividends in cash or by the issuance
of
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additional shares of Series E of preferred stock; and
- dividends will be paid annually on
May 13, 1999 and May 13, 2000.
ON OR AFTER MAY 13, 2000:
- shares of Series E preferred stock
accumulate dividends at a rate of 14%
per year;
- we are required to make payments of
dividends in cash after May 13, 2000;
and
- dividends will be paid in equal
quarterly installments on the last
day of March, June, September and
December of each year commencing June
2000.
Ranking......................... With respect to the right to receive
dividends and payments upon the liquidation,
dissolution or winding up of Oxford, the
offered preferred stock ranks:
- senior to our common stock and,
except as specified below, all other
classes and series of capital stock
that we issue in the future;
- equal to each other class of
preferred stock which provides that
it ranks equal to the offered
preferred stock; and
- junior to each other class of
preferred stock which provides that
it ranks senior to the offered
preferred stock.
Currently, there are no classes of preferred
stock issued or outstanding that rank senior
to the Series D preferred stock or the
Series E preferred stock. The Series D
preferred stock and the Series E preferred
stock have the same ranking, and currently,
there are no other classes of preferred
stock that have the same ranking as the
Series D preferred stock and Series E
preferred stock. The consent of holders of a
series of offered preferred stock is
required for Oxford to create a class of
preferred stock that has the same ranking or
that is senior to that class of offered
preferred stock.
Liquidation Preference.......... Upon liquidation, dissolution or winding up
of Oxford, a holder of a share of offered
preferred stock is entitled to receive the
following amount
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before any payment is made to securities
that rank junior to the offered preferred
stock:
- dividends, if any, accumulated or
deemed to have accumulated on the
share of offered preferred stock to
the date of final distribution to the
holders, whether or not declared, and
- the stated value of the share of
offered preferred stock, which is
$1,000.
If the assets or proceeds from a
liquidation, dissolution or winding up of
Oxford are insufficient to make these
payments, then the assets and proceeds will
be distributed ratably among holders of
offered preferred stock and any securities
that have the same ranking as the offered
preferred stock.
Optional Redemption............. We have the right to redeem all outstanding
shares of a series of offered preferred
stock on or after May 13, 2003, at a
redemption price for each share of that
series equal to all unpaid dividends
accumulated to the date of payment of the
redemption price, plus the stated value of
the share, which is $1,000.
Change of Control Redemption.... If a "change of control" occurs with respect
to Oxford, holders of offered preferred
stock may require us to redeem any or all of
the shares of offered preferred stock they
hold, at a redemption price for each share
equal to all unpaid dividends accumulated to
the date of payment of the redemption price,
plus the stated value of the share, which is
$1,000.
Generally, a change of control may occur
upon events such as:
- a merger or consolidation of Oxford;
- acquisition of majority control of
Oxford by a person;
- a sale, lease or other transfer of
substantially all of our assets;
- a substantial change in our board of
directors; and
- adoption of a plan of liquidation or
dissolution.
For a more complete definition of a change
of control, please see the section of this
prospectus
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entitled "Description of Offered Preferred
Stock -- Redemption."
Exchange........................ We have the right to exchange a series of
offered preferred stock on any dividend
payment date for junior subordinated
debentures issued pursuant to an indenture.
We may effect an exchange only if:
- full cumulative dividends have been
paid or set aside for payment on all
outstanding shares of the series of
offered preferred stock to be
exchanged;
- we have amended our certificate of
incorporation to give holders of the
debentures the same power to vote
that they had as holders of offered
preferred stock; and
- the exchange would not result in any
materially adverse tax consequences
to TPG Partners II, one of the
selling securityholders, or any of
its affiliates.
The indenture that will govern the junior
subordinated debentures will have terms
comparable to the terms of the series of
offered preferred stock that is exchanged,
including an interest rate that is the same
as the dividend rate on the series of
offered preferred stock that is exchanged.
Limited Voting Rights........... Holders of preferred stock, other than TPG
Partners II and its affiliates, generally
will not have the right to vote, unless:
- dividends are in arrears and we have
not paid dividends in full on May 13,
1999 or May 13, 2000;
- dividends are in arrears and we have
not paid dividends in full for four
consecutive quarters; or
- we fail to redeem shares of offered
preferred stock when required to do
so.
Generally, if any of the above events occur,
then the number of directors on our board of
directors will be increased by two, and the
holders of a majority of the outstanding
shares of offered preferred stock will have
the right to vote, voting together as a
single class, to elect the two new
directors.
We cannot take certain actions without the
consent of holders of a majority of shares
of each series of
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offered preferred stock, including the
creation of any class of capital stock with
a ranking equal or senior to the offered
preferred stock or that is redeemable on or
before May 13, 2008.
For detailed information regarding the offered preferred stock, you should
refer to the section of this prospectus entitled, "Description of Offered
Preferred Stock" beginning on page 9.
TERMS OF THE WARRANTS
Exercise........................ Each Series A warrant and Series B warrant
entitles the holder to purchase one share of
our common stock at an exercise price of
$17.75 per share at any time until the
expiration date.
Expiration Date................. The expiration date for the Series A
warrants is the earlier of May 13, 2008 and
the date of redemption of the Series D
preferred stock.
The expiration date for the Series B
warrants is the earlier of May 13, 2008 and
the date of redemption of the Series E
preferred stock.
Adjustments..................... The warrants provide for adjustments to the
exercise price and the number of shares of
common stock that may be purchased upon
exercise in certain events to protect
against dilution. The warrants also provide
for adjustments to the exercise price and
number of shares that may be purchased upon
exercise in the event of a merger,
consolidation, recapitalization or other
transaction that results in the conversion
of our common stock into the right to
receive other securities, property or cash.
Warrant Agent................... ChaseMellon Shareholder Services, L.L.C.
For detailed information regarding the warrants, you should refer to the
section of this prospectus entitled, "Description of the Warrants" beginning on
page 23.
OTHER
Use of Proceeds................. We will not receive any proceeds from the
sale of the offered preferred stock or
warrants covered by this prospectus; all
proceeds will be received by the selling
securityholders. However, we will receive
proceeds from any exercise of the warrants,
and we intend to use those proceeds for
future capital contributions to our
regulated subsidiaries, as necessary, and
general corporate purposes, or as otherwise
described in a prospectus supplement.
Shelf Registration Statement.... Under the registration rights agreement,
dated as of February 23, 1998, between us
and TPG
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Partners II, we have agreed to use our
reasonable best efforts to keep effective a
shelf registration statement under which the
offered preferred stock, the warrants and
the common stock issuable upon exercise of
the warrants, which together we refer to as
"registrable securities," may be sold.
Generally, we are required to keep the shelf
registration statement effective until:
- 10 years after the date it is first
declared effective; or
- if earlier, the date that all
registrable securities have been sold
under the shelf registration
statement or on which TPG Partners II
and its assigns are no longer
entitled to appoint directors to our
board of directors under the
investment agreement and are
permitted to sell their registrable
securities without registration under
Rule 144(k) under the Securities Act.
The shelf registration statement generally
is intended to permit the selling
securityholders named in this document and
certain transferees to resell the
registrable securities from time to time.
Purchasers of the registrable securities
offered by means of this prospectus will not
have any rights under the registration
rights agreement, although once sold under
this registration statement the registrable
securities should be freely tradeable except
by purchasers who are our "affiliates" or
are "underwriters" of the registrable
securities for purposes of the Securities
Act. We have filed the registration
statement of which this prospectus is a part
with the Securities and Exchange Commission
in order to meet our obligations under the
registration rights agreement.
Trading......................... Our common stock currently trades on the
Nasdaq National Market under the symbol
"OXHP."
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERENCE DIVIDENDS
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YEAR ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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Ratio of Earnings to Combined Fixed Charges
and Preference Dividends................. * * 25.6 19.3 17.6
== == ==== ==== ====
</TABLE>
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* Earnings were insufficient to cover fixed charges and preference dividends by
$642.9 million for 1998 and $431.6 million for 1997.
For purposes of computing these ratios, our combined earnings before income
taxes, as reported in our most recent Annual Report on Form 10-K/A, have been
increased by the amount of our fixed charges plus preference dividends. The
amount of earnings was then divided by the amount of fixed charges and
preference dividends, the result being the ratio of earnings to combined fixed
charges and preference dividends. Fixed charges represent interest expense (no
interest has been capitalized) plus the estimated interest factor in rental
expense.
For current information on these ratios, please see our most recent Annual
Report on Form 10-K/A. See "Where You Can Find Information" for a description of
how to obtain that document.
8
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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 our point-of-service plans, the Freedom Plan and the Liberty Plan,
traditional health maintenance organizations, preferred provider organizations,
Medicare plans, health care benefit plans for individuals and third-party
administration of self-funded health 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.
On the date of this prospectus, we had a network of more than 47,000
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 full description of our business, including the risks involved in our
business, refer to our most recently filed Annual Report on Form 10-K/A which is
incorporated into this prospectus by reference.
DESCRIPTION OF OFFERED PREFERRED STOCK
The following summarizes certain terms and provisions of the Series D
preferred stock and the Series E preferred stock. This summary is not complete
and is subject to, and qualified in its entirety by reference to, applicable
Delaware law and to the provisions of our certificate of incorporation, by-laws
and the Certificates of Designations, designating the Series D preferred stock
and the Series E preferred stock. These documents are filed as exhibits to the
registration statement of which this prospectus is a part.
AUTHORITY TO ISSUE PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors to
issue, without the approval of the stockholders, up to 2,000,000 shares of
preferred stock, $.01 par value. As of April 30, 1999, we had designated 300,000
shares of Series D preferred stock and had issued 260,146.909 shares of Series D
preferred stock and had designated 300,000 shares of Series E preferred stock
and had issued 111,820.831 shares of Series E preferred stock. We expect to
issue an additional 17,482.247 shares of Series D preferred stock and 20,987.239
shares of Series E preferred stock as dividends on the existing shares of
offered preferred stock through May 13, 2000.
Our Board of Directors has the right to designate, for each series of
preferred stock:
- the serial designations;
- dividend rates;
- the offering price or prices;
- provisions for redemption or purchase;
- provisions for conversion;
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- voting rights;
- special or relative rights in the event of a liquidation, distribution or
sale of assets or dissolution or winding up;
- provisions for a sinking fund; and
- any other rights, obligations or provisions which may be so determined to
the fullest extent permitted by Delaware law.
As described below, our board of directors cannot create any class of
capital stock with a ranking equal or senior to the offered preferred stock or
that is redeemable on or before May 13, 2008, without the consent of holders of
a majority of the shares of each series of offered preferred stock.
GENERAL
The stated value of the offered preferred stock is $1,000 per share. The
offered preferred stock does not provide holders with preemptive rights. The
terms of the Series D preferred stock and Series E preferred stock are
substantially similar except for their dividend rates and as noted specifically
below.
Under the investment agreement, the selling securityholders purchased
245,000 shares of our Series A Cumulative Preferred Stock, which we refer to as
the "Series A preferred stock," 105,000 shares of our Series B Cumulative
Preferred Stock, which we refer to as the "Series B preferred stock," and the
warrants for a total sum of $350 million. On February 13, 1999, we entered into
a share exchange agreement with the selling securityholders to make an
adjustment to the dividends payable among the shares of Series A preferred stock
and Series B preferred stock. Under the share exchange agreement, the 245,000
shares of Series A preferred stock were exchanged for 260,146.909 shares of
Series D preferred stock, and the 105,000 shares of Series B preferred stock
were exchanged for 111,820.831 shares of Series E preferred stock. The
additional amount is attributable to dividends accrued on the offered preferred
stock through February 13, 1999. As a result of the exchange, the selling
securityholders hold only Series D preferred stock and Series E preferred stock,
and following the exchange all shares of the Series A preferred stock and Series
B preferred stock were canceled. The terms of the Series D preferred stock are
substantially similar to the terms of the Series A preferred stock and the terms
of the Series E preferred stock are 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 offered preferred stock by the selling
securityholders.
Our operations are conducted primarily through subsidiaries. Our ability to
make required dividend payments, therefore, depends in part on the earnings of
our subsidiaries and on our ability to receive funds from our subsidiaries
through dividends or other payments. Because payments due on the offered
preferred stock are exclusive obligations of Oxford, our subsidiaries are not
obligated to pay any amount due under the offered preferred stock or to make
funds available for dividends on the offered preferred stock in the form of
dividends or advances to us. The ability of our subsidiaries to pay dividends to
us is also restricted by various insurance and health regulations. If operating
losses are incurred, we may be required to make additional capital contributions
to some of our subsidiaries in order to comply with statutory capital
requirements and payment of dividends by those subsidiaries would likely not be
permitted.
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In addition, the offered preferred stock effectively is subordinated to all
outstanding indebtedness and other liabilities and commitments, including
accounts payable and other accrued liabilities, of our subsidiaries. Any right
we have to receive assets of any of our subsidiaries upon their liquidation or
reorganization, and the resulting right of holders of the offered preferred
stock to participate in those assets, will be subordinated to the claims of that
subsidiary's creditors. This is not true to the extent we are recognized as a
creditor of the liquidating or reorganizing subsidiary, though our claims would
still be subordinated to any senior security interest in the assets of the
subsidiary and any senior indebtedness of the subsidiary.
ChaseMellon Shareholder Services, L.L.C. will be the transfer agent,
dividend disbursing agent and registrar for the offered preferred stock unless
otherwise specified in a prospectus supplement.
RANKING
With respect to the right to receive dividends and payments upon the
liquidation, dissolution or winding up of Oxford, the offered preferred stock
ranks:
- senior to our common stock, $.01 par value per share, and except as
specified below, all other classes and series of our capital stock issued
hereafter;
- equally with each other class or series of preferred stock which by its
terms ranks equally with the offered preferred stock; and
- junior to each other class of preferred stock which by its terms ranks
senior to the offered preferred stock.
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DIVIDENDS
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 will preferred stock will
accumulate dividends at a accumulate dividends at a
rate of 5.319521% per rate of 14.589214% per
year. year.
Form of Payment We may choose to make We may choose to make
payments of dividends in payments of dividends in
cash or by the issuance cash or by the issuance
of additional shares of of additional shares of
Series D preferred stock. Series E preferred stock.
Dividend Payment Dates Dividends will be paid Dividends will be paid
annually on May 13, 1999 annually on May 13, 1999
and May 13, 2000. and May 13, 2000.
ON OR AFTER MAY 13, 2000:
Dividend Rate Shares of Series D Shares of Series E
preferred stock will preferred stock will
accumulate dividends at a accumulate dividends at a
rate of 5.129810% per rate of 14% per year.
year.
Form of Payment We are required to make We are required to make
payments of such payments of such
dividends in cash after dividends in cash after
May 13, 2000. 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>
If any date specified as a dividend payment date is not a business day, we
will pay the dividends due on the next business day, without interest. We will
pay dividends to holders of record as they appear on our stock record books 15
days prior to the relevant dividend payment date. We will pay dividends only
when, as and if declared by our board of directors, out of funds at the time
legally available for the payment of dividends.
ACCUMULATION OF DIVIDENDS
Dividends began to accumulate on outstanding shares of offered preferred
stock from February 13, 1999, the date of issuance, and accumulate from day to
day whether or not earned or declared until the dividends are paid. Dividends
accumulate on the basis of a 360-day year consisting of twelve 30-day months and
the actual number of days elapsed in the period for which payable. Dividends
payable at more than one annual rate for any dividend period or partial dividend
period will be pro rated based on the number of days in
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the dividend period or partial dividend period, and the actual number of days
elapsed for which dividends are payable at each annual rate.
ADDITIONAL DIVIDENDS
Whenever any dividend that has accumulated through any dividend payment
date has not been paid in full, or whenever any redemption payment has not been
paid in full on any payment date set for a redemption, additional dividends will
accumulate on the amount of the unpaid dividends or the unpaid redemption
payment. An unpaid amount is referred to as an "arrearage." Additional dividends
accumulate on an arrearage at the annual dividend rate then in effect or such
lesser rate as may be the maximum rate that is then permitted by applicable law.
Additional dividends in respect of any arrearage:
- will accumulate from day to day whether or not earned or declared until
the arrearage is paid; and
- will be calculated as of each successive dividend payment date and will
constitute an additional arrearage from and after any dividend payment
date to the extent not paid on that dividend payment date.
Additional dividends in respect of any arrearage may be declared and paid
at any time, in whole or in part, without reference to any regular dividend
payment date, to registered holders as they appear on our stock record books on
the record date fixed by our board of directors. The record date must be at
least 10 days before the corresponding payment date. Dividends in respect of any
arrearage must be paid in cash.
METHOD OF PAYMENT
If less than the total amount of accumulated dividends payable on all
outstanding shares of a series of offered preferred stock is paid, then
dividends will be allocated pro rata on a share-by-share basis among all
outstanding shares of that series. Once dividends are payable in cash, dividends
that are declared and paid in an amount less than the full amount of dividends
accumulated on a series of offered preferred stock and on any arrearage will be
applied first to the earliest dividend that has not yet been paid. All cash
payments of dividends on the offered preferred stock will be made in United
States dollars.
LIQUIDATION PREFERENCES
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Oxford, a holder of offered preferred stock will be entitled to
receive out of the assets of Oxford, before any payment is made or any assets
are distributed to the holders of any securities that rank junior to the offered
preferred stock, an amount per share equal to the sum of:
(1) the dividends, if any, accumulated on the offered preferred stock to
the date of final distribution to holders, whether or not dividends
have been declared; and
(2) the stated value of the offered preferred stock, which is $1,000.
If these assets or proceeds are insufficient to satisfy all claims with the
same priority of payment as the offered preferred stock, then the available
assets and proceeds will be distributed ratably among the holders of offered
preferred stock. After holders are paid the full amount of the liquidation
preference to which they are entitled, they will not be entitled to participate
in any further distribution of our assets. Neither a consolidation or
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<PAGE> 18
merger of Oxford nor a sale, conveyance, lease, exchange or transfer of all or
part of Oxford's assets will be a liquidation, dissolution or winding up of
Oxford.
REDEMPTION
The offered preferred stock may be redeemed in the following ways:
- MANDATORY REDEMPTION -- On May 13, 2008, we are required to redeem all
outstanding shares of offered preferred stock.
- OPTIONAL REDEMPTION -- On and after May 13, 2003, we have the right to
redeem all the outstanding shares of a series of offered preferred stock,
in whole but not in part, at any time, in accordance with the procedures
described below.
- CHANGE OF CONTROL REDEMPTION -- If a "change of control" occurs, then
holders of offered preferred stock may require us to redeem any or all of
their shares of offered preferred stock.
A "change of control" means the time that any of the following occurs:
(1) any person or group other than TPG Partners II, its affiliates,
Oxford or any of our subsidiaries, or any group comprised of those
persons, becomes, directly or indirectly, the beneficial owner, by
way of merger, consolidation or otherwise, of a majority of the
then-outstanding securities of Oxford entitled to vote in an election
of directors. This determination will be made after giving effect to
the conversion and exercise of all outstanding warrants, options and
other securities of Oxford convertible into or exercisable for
securities of Oxford entitled to vote in an election of directors,
whether or not the securities are then convertible or exercisable; or
(2) the sale, lease, transfer or other disposition of all or
substantially all of the assets of Oxford and our subsidiaries to any
person or group;
(3) during any period of two consecutive calender years, the following
individuals cease to constitute a majority of our directors then in
office:
(a) directors who constituted our board of directors at the
beginning of the two-year period; together with
(b) new directors whose election by our board of directors or whose
nomination by stockholders was approved by at least a majority
of the directors then still in office:
- who were directors at the beginning of the two-year period; or
- whose election or nomination was previously approved; or
- who were approved under the provisions of the investment
agreement or the applicable certificate of designations;
(4) Oxford consolidates or merges with or into another person, or any
person consolidates or merges with or into Oxford, and immediately
after the consolidation or merger, the persons who owned the
outstanding voting securities of Oxford immediately before the
consolidation or merger do not own a majority of the outstanding
voting securities of Oxford or the surviving corporation; or
(5) the adoption of a plan relating to the liquidation or dissolution of
Oxford.
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The procedures for redemption are described below.
REDEMPTION PRICE
The redemption price of the offered preferred stock to be redeemed will be
paid in cash out of funds legally available for the payment of the redemption
price and will be in an amount per share equal to the sum of:
(1) the amount, if any, of all unpaid dividends accumulated on the offered
preferred stock to be redeemed to the date of actual payment of the
redemption price, whether or not dividends have been declared; and
(2) the stated value of the offered preferred stock to be redeemed, which
is $1,000.
OPTIONAL REDEMPTION AND MANDATORY REDEMPTION PROCEDURES
If we redeem offered preferred stock, we will send notice of the
redemption, including the redemption date, to the holders of record of the
offered preferred stock to be redeemed by first class mail, postage prepaid, at
each holder's address as it appears on our stock record books. We will send the
notice not more than 120 nor fewer than 90 days before the date fixed for
redemption. If we irrevocably deposit funds sufficient to pay the aggregate
redemption price for the preferred stock to be redeemed, as described in "--
Redemption -- Deposit of Funds," at the same time or prior to the delivery of a
notice of redemption, then we will send the notice of redemption not more than
120 days nor fewer than 30 days before the fixed redemption date. However, TPG
Partners II or any of its affiliates has the option to request us to delay the
fixed redemption date for a period of no more than 30 days, if:
- the notice of redemption is delivered less than 60 days before the
redemption date; and
- TPG Partners II or any of its affiliates has used its reasonable best
efforts to complete a sale of some or all of its shares of the series of
preferred stock to be redeemed prior to the stated redemption date but
has not completed the sale.
We will notify the holders of the offered preferred stock to be redeemed about
this delay within five days of receiving the request from TPG Partners II or its
affiliates. We will not delay the redemption date as described above more than
once.
Our board of directors may fix a record date to determine the holders of
offered preferred stock to be redeemed. This record date will not be more than
30 days before the date that we mail the notice of redemption. On or after the
redemption date, each holder of the shares called for redemption will be
required to surrender the certificate evidencing shares to us at the place
designated in the notice, and will be entitled to receive payment of the
redemption price when they surrender their certificate. No dividends will
accumulate after the redemption date, and after that date all rights of the
holders of offered preferred stock that is redeemed will cease and terminate,
except to the extent we default in payment on the redemption date.
Prior to any redemption date, other than in a mandatory redemption, we will
take all measures reasonably requested by TPG Partners II or its affiliates to
facilitate their sale or other disposition of the offered preferred stock to be
redeemed before the redemption date, including, without limitation:
- participation in due diligence sessions and provision of information
about our management, business and financial condition;
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<PAGE> 20
- preparation of offering memoranda, private placement memoranda and other
similar documents; and
- preparation and delivery of other certificates or documents reasonably
requested by TPG Partners II or its affiliates.
As long as TPG Partners II or its affiliates hold any shares of a series of
offered preferred stock, we may not deliver a notice of redemption with respect
to that series unless:
- our offered preferred stock is rated Baa or better by Moody's Investors
Service, or BBB or better by Standard & Poor's Ratings Group or, if our
offered preferred stock is not rated by Moody's and Standard & Poor's,
our unsecured debt is rated Baa or better by Moody's or BBB or better by
Standard & Poor's; or
- we have sufficient funds reasonably available under committed lines of
credit or other similar sources of financing established with financially
sound financing providers to pay, on the redemption date, the aggregate
redemption price and have reserved funds or availability for payment of
the total redemption price.
We may deliver a notice of redemption without complying with the above
conditions if we irrevocably deposit funds sufficient to pay the total
redemption price for the offered preferred stock to be redeemed, as described
below under "-- Redemption -- Deposit of Funds," before or at the same time we
deliver the notice of redemption.
CHANGE OF CONTROL REDEMPTION PROCEDURES
We are required to send notice of any change of control to the holders of
record of the outstanding offered preferred stock not more than five days
following a change of control. This notice will describe the transaction
constituting such change of control and will set forth:
- each holder's right to require us to redeem any or all shares of offered
preferred stock held by him or her out of legally available funds;
- the redemption date, which will not be more than 30 days from the date of
the change of control notice; and
- the procedures to be followed by holders in exercising their right to
have their shares of offered preferred stock redeemed.
If shares of a series of offered preferred stock are owned by more than 50
holders or groups of affiliated holders and if the series of offered preferred
stock is listed on any national securities exchange or quoted on any national
quotation system, we also are required to give notice of a change of control by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City of New York, within 30 days following the change of control. Our
failure to give a notice of a change of control, or the formal insufficiency of
any notice, will not prejudice the rights of holders of offered preferred stock
to have us redeem their shares.
If a holder of offered preferred stock elects to require us to redeem his
or her shares of offered preferred stock following a change of control, the
holder must deliver a written notice to us, in the form specified by us if we
did in fact give notice of a change of control as required, stating that the
holder wants us to redeem his or her shares, and specifying the number of shares
to be redeemed. This notice must be delivered prior to the redemption date set
forth in the notice of a change of control, or, if the notice of a change of
control is not given, at any time following the last day we were required to
give the notice of a
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<PAGE> 21
change of control. If we do not give the required notice, the redemption date
for any holder that elects to redeem shares of offered preferred stock will be
the date that is the later of (x) 30 days following the last day we were
required to give the notice of change of control and (y) 15 days following the
delivery of a notice of election by that holder. If all of the shares of a
series of the offered preferred stock are owned by 50 or fewer holders or groups
of affiliated holders, the holders or groups of holders of that series may
deliver a notice or an election to redeem at any time within 90 days following
the occurrence of a change of control without awaiting receipt of a notice of a
change of control or the expiration of the time allowed for the delivery of a
notice of a change of control.
We are required to comply with the requirements of Rules 13e-4 and 14e-1
under the Securities Exchange Act of 1934 and any other securities laws and
regulations to the extent such laws and regulations are applicable in connection
with the repurchase of the shares of preferred stock as a result of a change of
control. To the extent that the provisions of any securities laws or regulations
conflict with the redemption procedures described above, we will comply with the
applicable securities laws and regulations and will not be deemed to have
breached our obligations.
DEPOSIT OF FUNDS
On or prior to any redemption date, we are required to deposit with our
transfer agent or other redemption agent, as a trust fund for the benefit of the
holders of the shares of offered preferred stock to be redeemed, an amount of
cash that is sufficient to complete the redemption. We will also provide
irrevocable instructions and authority to the transfer agent or other redemption
agent to pay the redemption price to those holders whose shares are to be
redeemed. This deposit will constitute full payment to the holders, and from and
after the date of this deposit, all rights of the holders with respect to the
shares of the offered preferred stock that are to be redeemed, except the right
to receive the redemption price upon the surrender of their respective
certificates, will cease and terminate.
Dividends will not accumulate on any shares of offered preferred stock
after the redemption date for those shares unless we fail to deposit cash
sufficient to redeem those shares. If the holders of any shares of offered
preferred stock called for redemption do not claim the cash deposited for
redemption within two years after the deposit, the transfer agent or other
redemption agent will pay the balance to us. Upon this payment, the transfer
agent or other redemption agent will be relieved of all responsibility to
holders and the sole right of holders, with respect to shares to be redeemed,
will be to receive the redemption price as our general creditors. Any interest
accrued on the deposited funds will belong to us and will be paid to us from
time to time on demand.
EXCHANGE
We may exchange either or both series of offered preferred stock at any
time, to the extent permitted by applicable law, in whole but not in part, for
junior subordinated debentures issued pursuant to an indenture that will be
prepared in accordance with the investment agreement. A debenture in principal
amount of $1,000 would be issued in exchange for each share of the series of
offered preferred stock to be exchanged. The debentures will have terms
comparable to the terms of the offered preferred stock to be exchanged,
including interest rates that are the same as the dividend rates on the offered
preferred stock to be exchanged. The exchange may take place on any dividend
payment date.
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The exchange may take place at our offices and at any other place that our
board of directors designates. Unless we receive the prior written consent of
the holders of all outstanding shares of the series of offered preferred stock
to be exchanged, we may not exchange any shares if:
(a) full cumulative dividends, to the extent payable or deemed payable
through the date of exchange, have not been paid or set aside for
payment on all outstanding shares of that series;
(b) we have failed to amend our certificate of incorporation pursuant to
Delaware law to give holders of the debentures the same power to vote
that they had as holders of offered preferred stock; or
(c) the exchange could result in any materially adverse tax consequence to
TPG Partners II or any of its affiliates.
In order to prevent an exchange of shares of offered preferred stock
because it could result in a material adverse tax consequence to TPG Partners II
or any of its affiliates, TPG Partners II or one of its affiliates must deliver
a written notice to us specifying in reasonable detail the nature of the tax
consequence, which must be a tax consequence other than the difference between
the tax treatment of distributions on the offered preferred stock and interest
payments on the debentures. TPG Partners II or one of its affiliates must
deliver that notice by the fifteenth day after it received the notice of
exchange. TPG Partners II and its affiliates have agreed not to deliver this
notice unless at the time, TPG Partners II and its affiliates beneficially own a
total of at least 1,000 shares of the series of offered preferred stock to be
exchanged. If we receive an objection notice, then we will not exchange the
shares of offered preferred stock held by TPG Partners II and its affiliates,
and we will mail, within 15 days after receipt of the notice, written notice
that we are canceling the proposed exchange of shares of offered preferred stock
to each holder of record of shares of offered preferred stock to which we mailed
the notice of exchange.
Before giving notice of our intention to exchange, we will execute and
deliver the indenture to a bank or trust company selected by our board of
directors and, if required by applicable law, will qualify the indenture under
the Trust Indenture Act of 1939.
We will mail written notice of our intention to exchange offered preferred
stock for debentures to each holder of record of shares of the series of offered
preferred stock to be exchanged not less than 90 nor more than 120 days prior to
the date fixed for exchange.
Prior to effecting any exchange, we are required to deliver to each holder
of shares of the series of offered preferred stock to be exchanged an opinion of
nationally recognized legal counsel which states that:
(1) each of the indenture and the debentures have been duly authorized and
executed by Oxford and, when delivered by us in exchange for shares of
offered preferred stock, will constitute valid and legally binding
obligations of Oxford enforceable against Oxford in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of
equity;
(2) the exchange of debentures for the shares of offered preferred stock
will not violate the provisions of the applicable certificate of
designations or of the Delaware General Corporation Law; and
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(3) the exchange of the debentures for the shares of offered preferred
stock is exempt from the registration requirements of the Securities
Act or, if no such exemption is available, that the debentures have
been duly registered for exchange under the Securities Act.
Upon the exchange of a series of offered preferred stock for debentures,
the rights of the holders of that series of offered preferred stock as our
stockholders will terminate, and the offered preferred stock will no longer be
outstanding.
Before any holder of offered preferred stock will be entitled to receive
debentures, a holder must surrender his or her certificates at our office or at
any other place that our board of directors may designate, and must state in
writing the name or names with addresses in which he or she wishes the
certificates for the debentures to be issued. After the surrender of
certificates, we will issue and deliver certificates for the debentures to the
holder, or to his or her nominee, at our office or other designated place.
Shares of offered preferred stock will be exchanged as of the close of business
on the date fixed for exchange as provided above, and the person entitled to
receive the debentures issuable upon exchange will be treated for all purposes,
including the accrual and payment of interest, as the record holder or holders
of debentures as of the close of business on that date.
VOTING RIGHTS
Under the terms of the offered preferred stock, TPG Partners II and its
affiliates have a right to vote their shares of offered preferred stock on all
matters voted on by holders of common stock. In those circumstances, TPG
Partners II and its affiliates vote together with the holders of common stock as
a single class. However, no other holder of offered preferred stock has those
voting rights and they are not transferable by TPG Partners II or its affiliates
to any subsequent holder of offered preferred stock. Holders of offered
preferred stock, other than TPG Partners II and its affiliates, have only those
voting rights described below.
If on any date:
(1) dividends payable on either series of offered preferred stock have been
in arrears and not paid in full for four consecutive quarterly periods
or if dividends on either series of offered preferred stock have been
in arrears and not paid in full on May 13, 1999 or May 13, 2000; or
(2) we fail to satisfy our obligation to redeem shares of either series of
offered preferred stock under the relevant certificate of designations,
then the number of directors constituting our board of directors will
automatically be increased by two, and the holders of a majority of the
outstanding shares of preferred stock will have the exclusive right, voting
together as a single class, to elect the two additional directors.
Under the investment agreement, TPG Partners II and its affiliates are
permitted to designate directors to our board of directors. However, TPG
Partners II and its affiliates are not permitted to elect and/or designate a
total of more than four directors to our board of directors. If at the time
holders of offered preferred stock have the right to elect additional directors,
(1) TPG Partners II and its affiliates together beneficially own a majority
of the outstanding shares of offered preferred stock; and
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(2) TPG Partners II and its affiliates are not permitted to elect one or
both of the additional directors because of the restrictions described
above,
then the holders of offered preferred stock, other than TPG Partners II and its
affiliates, will have the right to elect, voting together as a single class, one
additional director.
These additional directors will continue as directors, and these additional
voting rights will continue until:
(a) all dividends accumulated on the offered preferred stock are paid in
full; and
(b) any redemption obligation with respect to the offered preferred stock
that has become due is satisfied, or all necessary funds are set aside
for the redemption payment.
Upon the occurrence of these events, the additional directors will cease to be
directors and the additional voting rights of the holders of offered preferred
stock will terminate subject to revesting if any subsequent event of the
character indicated above occurs and subject to any rights as to the election of
directors provided for the holders of any other series of our preferred stock.
The rights of holders of offered preferred stock to take this action may be
exercised at any annual meeting of stockholders, at a special meeting of
stockholders held for this purpose or by the written consent of the holders of
the minimum number of shares required to take action. As long as this right to
vote continues, and unless this right has been exercised by written consent of
the minimum number of shares required to take action, the Chairman of the Board
of Directors may call, and upon the written request of holders of record of 20%
of the outstanding shares of either the Series D preferred stock or the Series E
preferred stock, addressed to our Secretary at our principal office, will call a
special meeting of the holders of shares entitled to vote as described above.
This meeting will be held within 60 days after delivery of a request to the
Secretary, at the place and upon the notice provided by law and in the By-laws
for meetings of stockholders.
Each director elected as described above will serve until the next annual
meeting or until his or her successor is elected and qualified, unless the
director's term of office has terminated as described above. If any vacancy
occurs among the directors elected as described above, the vacancy may be filled
for the unexpired portion of the term by the remaining director or directors
elected by such holders, or their successor in office, if any. If the vacancy is
not filled within 20 days after the creation thereof or if all of the directors
elected cease to serve as directors before their term expires, the holders of
the shares then outstanding and entitled to vote for the director as described
above may elect successors to hold office for the unexpired terms of any vacant
directorships. The holders of a majority of the shares entitled to vote for
directors as described above will have the right to remove with or without cause
at any time and replace any directors that they have elected, by written consent
or at a special meeting of holders.
Without the consent or affirmative vote of the holders of at least a
majority of the outstanding shares of a series of offered preferred stock,
voting separately as a class, we may not authorize, create or issue, or increase
the authorized amount of:
(1) any securities that rank senior or equal to the offered preferred stock
for the purpose of receiving dividends or distributions upon the
liquidation, dissolution or winding-up of Oxford; or
(2) any class or series of capital stock or any security convertible into
or exercisable for any class or series of capital stock, redeemable
mandatorily or redeemable at
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the option of the holder at any time on or prior to May 13, 2008,
whether or not redemption may occur only upon the occurrence of a
specified event.
However, no consent or vote of the holders of the outstanding shares of the
offered preferred stock is required:
- for the creation or issuance by a trust formed at our direction of any
series of preferred securities of such trust for financing purposes in an
aggregate amount not to exceed $250,000,000; or
- to authorize, create or issue, or increase the authorized amount of, any
class or series of securities that rank junior to the offered preferred
stock, or any security convertible into a stock of any class or series of
securities that rank junior to the offered preferred stock, except to the
extent such action would violate the relevant certificate of
designations.
We may not take the following actions, without the consent or affirmative
vote of the holders of at least a majority of the outstanding shares of a series
of offered preferred stock, voting separately as a class:
- amend, alter or repeal any provision of our certificate of incorporation
or our by-laws, if the amendment, alteration or repeal alters or changes
the powers, preferences or special rights of the applicable series of
offered preferred stock so as to affect them materially and adversely; or
- authorize or take any other action if such action alters or changes any
of the rights of the applicable series of offered preferred stock in any
respect or otherwise would be inconsistent with the provisions of the
applicable certificate of designations and the holders of any class or
series of our capital stock are entitled to vote on that action.
RESTRICTION ON DIVIDENDS
As long as any shares of the offered preferred stock are outstanding, our
board of directors:
- will not declare, and we will not pay or set apart for payment any
dividend on any securities that rank junior to the offered preferred
stock;
- will not make any payment on account of, or set apart for payment money
for a sinking or other similar fund for, the repurchase, redemption or
other retirement of, any securities that rank junior or equal to the
offered preferred stock or any warrants, rights or options exercisable
for or convertible into any securities that rank junior or equal to the
offered preferred stock, other than the repurchase, redemption or other
retirement of debentures or other debt securities that are convertible
into or exchangeable for any securities that rank junior or equal to the
offered preferred stock;
- will not make any distribution in respect of the securities that rank
junior to the offered preferred stock, either directly or indirectly, and
whether in cash, obligations, shares or other property (other than
distributions or dividends in securities that rank junior to the offered
preferred stock to the holders of securities that rank junior to the
offered preferred stock); and
- will not permit any corporation or other entities directly or indirectly
controlled by us to purchase or redeem any securities that rank junior or
equal to the offered
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preferred stock or any warrants, rights, calls or options exercisable for
or convertible into any securities that rank junior or equal to the
offered preferred stock (other than the repurchase, redemption or other
retirement of debentures or other debt securities that are convertible
into or exchangeable for any securities that rank junior or equal to the
offered preferred stock)
unless before or at the same time we take action, all accumulated and unpaid
dividends on shares of the offered preferred stock not paid on the applicable
dates, including arrearages and accumulated dividends, have been paid.
When dividends are not paid in full upon the offered preferred stock, all
dividends declared on the offered preferred stock and any series of securities
that ranks equally with the offered preferred stock with respect to dividends
will be declared and paid pro rata so that the amount of dividends declared and
paid will bear to each other the same ratio that accumulated dividends,
including interest accrued in respect of such accumulated dividends, on the
shares of offered preferred stock and those other securities bear to each other.
The following actions are not prohibited by the restrictions described
above:
(1) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of offered preferred stock or any
security that ranks equal to the offered preferred stock with respect
to dividends or of any shares of preferred securities of a trust as
referred to above; or
(2) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value by us of any securities that rank junior to the
offered preferred stock with respect to dividends in accordance with
any obligation in existence at the time of original issuance of the
offered preferred stock.
NO INCONSISTENT OBLIGATIONS
We are required not to enter into any agreement or issue any security that
prohibits, conflicts or is inconsistent with, or would be breached by, our
performance of our obligations with respect to the offered preferred stock.
USE OF OFFERED PREFERRED STOCK FOR EXERCISE OF WARRANTS
Shares of Series D preferred stock may be used as consideration for
exercise of the Series A warrants and shares of Series E preferred stock may be
used as consideration for exercise of the Series B warrants.
However, before May 13, 2000, TPG Partners II, its affiliates and certain
assignees 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 as a result of a change of control or otherwise;
- used as consideration in connection with the exercise of the warrants; or
- otherwise retired by us.
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DESCRIPTION OF WARRANTS
The following summarizes certain terms and provisions of the Series A
warrants and the Series B warrants. This summary is not complete and is subject
to, and qualified in its entirety by reference to, the warrant certificates,
applicable Delaware law, the provisions of our certificate of incorporation,
by-laws and the form of warrant agreement, pursuant to which the warrants will
be issued. These documents are filed as exhibits to the registration statement
of which this prospectus is a part.
If warrants are offered, a prospectus supplement will describe the offering
price and the currency, currencies or currency units for which warrants may be
purchased.
GENERAL
The Series A warrants and the Series B warrants were initially purchased by
the selling securityholders in a private placement on May 13, 1998. At the date
of this prospectus, there were 15,800,000 Series A warrants outstanding and
6,730,000 Series B warrants outstanding. The warrant agent for the Series A
warrants and the Series B warrants is ChaseMellon Shareholder Services, L.L.C.
Any warrants sold by selling securityholders under this prospectus will be
covered by a warrant agreement that will be entered into between Oxford and
ChaseMellon Shareholder Services, L.L.C., as warrant agent. The warrant agent
will act solely as an agent of Oxford in connection with the warrants and will
not assume any obligation or relationship of agency or trust for or with any
holder of warrants or beneficial owners of warrants. A copy of the form of
warrant agreement has been filed as an exhibit to the registration statement of
which this prospectus is a part.
EXERCISE
Each warrant entitles its holder to purchase one share of common stock at
an exercise price of $17.75 per share at any time until the expiration of the
warrants.
The exercise price of the warrants was determined by negotiation between us
and TPG Partners II and its affiliates and should not be construed as an
estimate of the value of our common stock or to imply that the price of our
common stock will increase.
We have reserved from our authorized but unissued shares a sufficient
number of shares of common stock for issuance upon the exercise of warrants.
EXPIRATION OF WARRANTS
The Series A warrants expire on the earlier of:
- May 13, 2008; and
- the redemption of all of the Series D preferred stock, which we can do
only after May 13, 2003.
The Series B warrants expire until the earlier of:
- May 13, 2008; and
- the redemption of all of the Series E preferred stock, which we can do
only after May 13, 2003.
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<PAGE> 28
PROCEDURES FOR EXERCISE
A warrant may be exercised by surrendering the warrant certificate on or
before its expiration date, with the form of "Election to Exercise" on the
reverse side of the warrant certificate completed and executed, accompanied by
payment of the full exercise price for the number of shares for which the
warrant is being exercised.
Payment of the exercise price may be made:
- in cash;
- by certified or official bank check;
- by an exchange with us of a number of shares of preferred stock having a
total stated value plus accumulated and unpaid dividends equal to the
total exercise price;
- by an exchange with us of outstanding warrants, other than the warrants
being exercised, the value of each of which will be determined by
subtracting the exercise price from the average closing price of our
common stock for the 10 trading days ending on the trading day before the
day the exercise occurs; or
- by any combination of the above.
Upon the surrender of the warrant certificate and payment of the exercise
price, we will promptly deliver the appropriate number of shares of common stock
to the holder, or to the persons designated by the holder in writing. If fewer
than all of the warrants represented by a certificate are exercised, a new
certificate will be issued for the remaining number of warrants.
ADJUSTMENTS
The warrants provide for adjustment of their exercise price and for a
change in the number of shares that may be purchased upon exercise to protect
holders against dilution in the event of a stock dividend, stock split or
reverse split, upon issuance of shares of common stock at prices lower than the
market price of the common stock, upon distribution of a special dividend, or
upon a tender or exchange offer. The warrants also provide for adjustments to
the exercise price and number of shares that may be purchased upon exercise in
the event of a merger, consolidation, recapitalization or other transaction that
results in the conversion of our common stock into the right to receive other
securities, property or cash.
NO FRACTIONAL SHARES
We are not required to issue fractional shares of common stock. If any
fractional share would be issuable on the exercise of a warrant, instead of
issuing the fractional share we will pay the holder an amount in cash equal to
the market value of the fractional share.
NO RIGHTS AS A STOCKHOLDER
Holders of warrants do not have rights as stockholders of Oxford. For
instance, they do not have the right to vote, to receive dividends or to receive
notices of stockholder meetings.
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<PAGE> 29
OTHER
The holders of warrants have the opportunity to profit from a rise in the
market value of the common stock, with a resulting dilution in the interest of
all other stockholders. As a result, so long as the warrants are outstanding,
the terms on which we can obtain additional capital may be adversely affected.
The holders of the warrants are expected to exercise them at a time when we
would, in all likelihood, be able to obtain any needed capital by a new offering
of securities on terms more favorable than those provided for by the warrants.
REGISTRATION RIGHTS AGREEMENT
The summary of certain provisions of the registration rights agreement set
out below is subject to, and is qualified in its entirety by reference to, all
of the provisions of the registration rights agreement, a copy of which has been
filed as an exhibit to the registration statement of which this prospectus is a
part.
We are a party to a registration rights agreement with TPG Partners II,
under which we agreed to use our reasonable best efforts to keep effective a
shelf registration statement at our expense, under which the registrable
securities may be sold. We filed the registration statement of which this
prospectus is a part with the SEC to comply with our obligations under the
registration rights agreement. Under the registration rights agreement, we are
required:
(1) to use our best efforts to file the shelf registration statement
with the SEC;
(2) to use our reasonable best efforts to cause the shelf registration
statement to become effective under the Securities Act; and
(3) to keep the shelf registration statement effective until 10 years
after the date it is declared effective or, if earlier, the date that all
registrable securities have been sold under the shelf registration
statement or on which TPG Partners II and its affiliates are no longer
entitled to board representation under the investment agreement and are
permitted to sell their registrable securities without registration
pursuant to Rule 144(k) under the Securities Act.
We will provide each holder of the registrable securities with copies of
this prospectus, notify each holder when the shelf registration statement has
been effective and take other actions described in the registration rights
agreement as are required to permit unrestricted sales of the registrable
securities. A holder that sells registrable securities under the shelf
registration statement is required to be named as a selling securityholder in
this prospectus and to deliver this prospectus to purchasers. Those holders also
will be subject to certain civil liability provisions under the Securities Act
in connection with these sales and are bound by the provisions of the
registration rights agreement, including certain indemnification obligations.
We also have agreed in the registration rights agreement to use our
reasonable best efforts to cause the offered preferred stock and warrants to be
listed on each securities exchange on which our securities are listed or quoted
and on each inter-dealer quotation system on which any of our securities are
quoted, in each case, at the time the registrable securities are sold.
If Oxford files a registration statement under the Securities Act for
certain offerings of its securities for its own account or for the account of
holders, or if Oxford offers securities
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<PAGE> 30
convertible into or exchangeable for any of its equity securities, the holders
of registrable securities have agreed, if requested, not to publicly sell or
distribute any securities that are the same as or similar to those being
registered by Oxford in connection with its sale, or any securities convertible
or exchangeable or exercisable for any such securities during the period
beginning 7 days before and ending no more than 90 days after the effective date
of the registration statement filed by Oxford.
We have agreed, in the case of an underwritten offering of registrable
securities, if requested, not to effect any public sale or distribution of any
securities the same as or similar to those being sold in the underwritten
offering, or any securities convertible into or exchangeable or exercisable for
securities that are the same as or similar to those being sold, during the
period 7 days before and ending no more than 90 days after the date of the
related underwriting agreement.
Purchasers of the registrable securities offered by means of this
prospectus will not have any rights under the registration rights agreement,
although once sold under this registration statement, the registrable securities
should be freely tradeable except by purchasers that are our "affiliates" or are
"underwriters" of the registrable securities for purposes of the Securities Act.
USE OF PROCEEDS
We will not receive any of the proceeds from any sale of the offered
preferred stock or warrants, all of which will be received by the selling
securityholders. The proceeds from the original sale of the offered preferred
stock and warrants on May 13, 1998 were utilized, in part, to retire outstanding
bridge notes, make capital contributions to certain regulated subsidiaries and
pay fees and expenses approximating $39 million related to the sale of the
preferred stock and warrants. The balance has been and will continue to be used
for subsidiary capital contributions, as necessary, and for general corporate
purposes, or as otherwise described in a prospectus supplement.
We will receive proceeds upon exercise of the Series A warrants and the
Series B warrants. In the event that all of the 15,800,000 outstanding Series A
warrants and 6,730,000 outstanding Series B warrants are exercised, we would
receive net proceeds of approximately $399,907,500, excluding the expenses
related to the resale of the warrants under this prospectus. The exercise price
of the Series A warrants and the Series B warrants was determined by negotiation
between us and TPG Partners II and its affiliates based on the trading range of
our common stock during the negotiations.
<TABLE>
<CAPTION>
WARRANT
EXERCISE PROCEEDS TO
PRICE COMPANY(1)
-------- ------------
<S> <C> <C>
Per Series A Warrant........................... $17.75 $280,450,000
Per Series B Warrant........................... $17.75 $119,457,500
------------
Total.......................................... $399,907,500
============
</TABLE>
- -------------------------
(1) Assumes the exercise of all outstanding Series A warrants and Series B
warrants. As of the date of this prospectus, none of the warrants had been
exercised.
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<PAGE> 31
Selling securityholders holding warrants are not obligated to exercise
their warrants. We cannot be certain that holders of the warrants will choose to
exercise all or any of their warrants.
We intend to use the net proceeds received upon exercise of the warrants,
if any, for future capital contributions to our regulated subsidiaries, as
necessary, and for general corporate purposes, or as otherwise described in a
prospectus supplement.
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<PAGE> 32
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of the ownership of shares of the offered preferred stock, the
warrants, the common stock issuable upon exercise of the warrants, which we
refer to as the "warrant stock" and the junior subordinated debentures that you
would receive if we elected to exchange the offered preferred stock for
debentures. This summary deals only with the offered preferred stock, the
warrants and the debentures held as capital assets by investors who purchase the
offered preferred stock, warrants or the warrant stock in the offering at the
offering price, and not with special classes of holders, such as dealers in
securities or currencies, traders in securities that elect to mark to market,
banks, tax-exempt organizations, life insurance companies, persons that hold the
offered preferred stock, the warrants, the warrant stock or the debentures as a
hedge, or hedged against, currency or interest rate risks or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. This summary is based on the Internal Revenue Code of 1986, its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all of which are subject to change, or changes in
interpretation, possibly with retroactive effect.
A "United States holder" means a holder of offered preferred stock,
warrants, warrant stock or debentures that is:
(1) a citizen or resident of the United States;
(2) a corporation organized under the laws of the United States or any
State;
(3) an estate the income of which is subject to United States federal
income taxation regardless of its source; or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions
of the trust.
PROSPECTIVE PURCHASERS OF OFFERED PREFERRED STOCK, WARRANTS, WARRANT STOCK OR
DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE CONSEQUENCES, IN
THEIR PARTICULAR CIRCUMSTANCES, UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF
ANY OTHER TAXING JURISDICTION, OF THE OWNERSHIP OF OFFERED PREFERRED STOCK,
WARRANTS, WARRANT STOCK AND DEBENTURES.
TAXATION OF UNITED STATES HOLDERS
OFFERED PREFERRED STOCK
Distributions on Offered Preferred Stock -- General
We do not have any accumulated earnings and profits as determined for
United States federal tax purposes, and there can be no assurance that we will
have earnings and profits in this or future tax years.
If we do not have any current or accumulated earnings and profits, as
determined for United States federal income tax purposes, in a given tax year,
distributions paid on the offered preferred stock, including any distributions
of additional shares of offered preferred stock, generally would not be subject
to United States federal income taxation if the United States holder's tax basis
in the offered preferred stock is greater than or equal to the amount of the
distribution. However, the distribution would reduce a United States holder's
tax basis in the offered preferred stock, but not below zero. If any portion of
the
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<PAGE> 33
distribution exceeds the United States holder's tax basis in the offered
preferred stock, such portion would be subject to United States federal income
taxation as capital gain that is recognized in the taxable year in which the
distribution is received. Further, any such distribution would not be eligible
for the 70% dividends-received deduction allowable to corporations, as discussed
below.
If we have current or accumulated earnings and profits in a given tax year,
distributions on the offered preferred stock, including any distributions of
additional shares of offered preferred stock, would be taxable to a United
States holder as ordinary dividend income to the extent paid out of our current
or accumulated earnings and profits. Any portion of such distribution not paid
out of current or accumulated earnings and profits would be taxed as described
in the previous paragraph. Dividends would be eligible for the 70%
dividends-received deduction allowable to corporations, subject to the
limitations described below.
Distributions on Offered Preferred Stock -- Offered Preferred Stock "Paid in
Kind"
Until May 13, 2000, we may, at our option, pay dividends on the offered
preferred stock "in kind" through the issuance of additional offered preferred
stock. Dividends "paid in kind" will be treated as a distribution of an amount
equal to the fair market value of such additional offered preferred stock as of
the date of distribution, and will be taxed as described in "-- Distributions on
Offered Preferred Stock -- General." Such amount will also be the initial issue
price and tax basis of the newly distributed offered preferred stock for United
States federal income tax purposes.
If the redemption price of the offered preferred stock exceeds its offering
price, or the redemption price of the offered preferred stock issued as an
"in-kind" distribution exceeds its fair market value at the time the dividend is
"paid in kind," which we refer to, in either case, as a "Redemption Premium," by
one-fourth of one per cent of the offered preferred stock's mandatory redemption
price multiplied by the number of complete years to its mandatory redemption,
the entire amount of such excess would be considered to be a constructive
distribution to the United States holders over the period between issuance and
redemption under a constant yield method. If the offered preferred stock is
purchased as a unit together with the warrants, purchasers must allocate their
purchase price between the offered preferred stock and the warrants based on
their relative fair market values to determine the offering price of the offered
preferred stock. The constant yield method would result in increasing accruals
of income over the term of the offered preferred stock under rules similar to
those for accruing original issue discount on the debentures, as described under
"Debentures -- Original Issue Discount." The constructive distribution would be
a dividend in the year such distribution is considered to be received to the
extent of our current and accumulated earnings and profits. A United States
holder's tax basis in the offered preferred stock would be increased by the
amount of any Redemption Premium included in income. In addition, each issuance
of offered preferred stock with more than a de minimis Redemption Premium might
not be fungible with the other offered preferred stock, which might adversely
affect the liquidity of the preferred stock.
Distributions on Offered Preferred Stock -- Dividends-Received Deduction
If we have current or accumulated earnings and profits, amounts treated as
dividends would be eligible for the 70% dividends-received deduction allowable
to corporations, subject to the limitations described below.
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<PAGE> 34
Prospective corporate investors in the offered preferred stock should
consider the effect of:
(1) Section 246A of the Internal Revenue Code, which reduces the dividends-
received deduction allowed to a corporate shareholder that has incurred
indebtedness that is "directly attributable" to an investment in
portfolio stock such as the offered preferred stock;
(2) Section 246(c) of the Internal Revenue Code, which, among other things,
disallows the dividends-received deduction in respect of any dividend
on a share of stock that is held for less than the minimum holding
period (generally at least 46 days during the 90-day period beginning
on the date which is 45 days before the date on which such share
becomes ex-dividend with respect to such dividend); and
(3) Section 1059 of the Internal Revenue Code, which, under certain
circumstances, reduces the basis of stock for purposes of calculating
gain or loss in a subsequent disposition by the portion of any
"extraordinary dividend" (as defined below) that is eligible for the
dividends-received deduction.
THE PRESIDENT OF THE UNITED STATES HAS CURRENTLY PROPOSED LEGISLATION THAT
WOULD ELIMINATE THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR DIVIDENDS ON THE
PREFERRED STOCK. THERE CAN BE NO CERTAINTY WHETHER, OR IN WHAT FORM, SUCH
LEGISLATION WILL BE ENACTED OR WHAT ITS EFFECTIVE DATE WOULD BE.
Distributions on Offered Preferred Stock -- Extraordinary Dividends
A corporate United States holder is required to reduce its tax basis, but
not below zero, in the offered preferred stock by the nontaxed portion of any
"extraordinary dividend" if such stock has not been held for more than two years
before the earliest of the date such dividend is declared, announced or agreed.
Generally, the nontaxed portion of an extraordinary dividend is the amount
excluded from income by operation of the dividends-received deduction.
An extraordinary dividend on the offered preferred stock generally would be
a dividend that:
(1) equals or exceeds 5% of the corporate United States holder's adjusted
tax basis in the offered preferred stock, treating all dividends having
ex-dividend dates within an 85-day period as one dividend; or
(ii) exceeds 20% of the corporate United States holder's adjusted tax basis
in the offered preferred stock, treating all dividends having
ex-dividend dates within a 365-day period as one dividend.
In determining whether a dividend paid on the offered preferred stock is an
extraordinary dividend, a corporate United States holder may elect to substitute
the fair market value of the stock for such United States holder's tax basis for
purposes of applying these tests, provided that such fair market value as of the
day before the ex-dividend date is established to the satisfaction of the
Secretary of the Treasury of the United States. An extraordinary dividend also
includes any amount treated as a dividend in the case of a redemption that is
either non-pro rata as to all stockholders or in partial liquidation, regardless
of the stockholder's holding period and regardless of the size of the dividend.
If any part of the nontaxed portion of an extraordinary dividend is not applied
to reduce the United States holder's tax basis as a result of the limitation on
reducing such basis below
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<PAGE> 35
zero, such part would be treated as capital gain and would be recognized in the
taxable year in which the extraordinary dividend is received. CORPORATE UNITED
STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP OR DISPOSITION OF THE
OFFERED PREFERRED STOCK.
Sale or Exchange of Offered Preferred Stock Other Than by Redemption
Upon the sale or other disposition of offered preferred stock (other than
by redemption), a United States holder will generally recognize capital gain or
loss equal to the difference between the amount realized upon the disposition
and its adjusted tax basis of the offered preferred stock. Such gain or loss
would be long-term capital gain or loss if at the time of sale, exchange or
other disposition the offered preferred stock has been held for more than one
year. Long-term capital gain of a non-corporate United States holder is
generally subject to a maximum tax rate of 20%. The deductibility of capital
losses is subject to limitations.
Redemption of Offered Preferred Stock
A redemption of the offered preferred stock generally would be a taxable
event and would be treated as a sale of such offered preferred stock by the
United States holder if the redemption:
(1) results in a "complete termination" of the United States holder's stock
interest;
(2) is "substantially disproportionate" with respect to the United States
holder; or
(3) is "not essentially equivalent to a dividend" with respect to the
United States holder.
In determining whether any of these tests has been met, shares of stock
considered to be owned by the United States holder by reason of certain
constructive ownership rules set forth in Section 318 of the Internal Revenue
Code, as well as shares actually owned, must be taken into account.
A United States holder of offered preferred stock that is redeemed in a
redemption that meets one of the tests described above generally would recognize
taxable gain or loss equal to the difference between the amount of cash and the
fair market value of property, other than our stock or stock of our successor,
received by the United States holder and the United States holder's tax basis in
the offered preferred stock redeemed. See "-- Special Rules Regarding the
Redemption of Offered Preferred Stock For Debentures" for a description of the
rules applicable to a redemption in which a United States holder receives
debentures. Such gain or loss would be long-term capital gain or capital loss if
the United States holder has held the offered preferred stock for more than one
year.
If a redemption does not meet any of the tests described above, the cash
and the fair market value of property received by the United States holder
generally would be taxed as a dividend to the extent paid out of our current or
accumulated earnings and profits. Any amount in excess of our current or
accumulated earnings and profits would first reduce the United States holder's
tax basis in the offered preferred stock and thereafter would be treated as
capital gain. If a redemption of the offered preferred stock is treated as a
distribution that is taxable as a dividend, the United States holder's basis in
the redeemed offered preferred stock would be transferred to the United States
holder's remaining shares of stock (if any).
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<PAGE> 36
Special Rules Regarding the Redemption of Offered Preferred Stock For
Debentures
Pursuant to the rules discussed in "-- Redemption of Offered Preferred
Stock," a redemption of the offered preferred stock for debentures by us will be
treated either as an exchange giving rise to capital gain or loss or as a
dividend. In the case of an exchange of offered preferred stock for debentures
that would be treated as a redemption giving rise to capital gain or loss, the
amount realized on the exchange would be equal to the "issue price" of the
debentures plus any cash received on the exchange. The issue price of a
debenture will be:
(1) its fair market value as of the exchange date if the debentures are
traded on an established securities market at any time during the
60-day period ending 30 days after the exchange date; or
(2) If the debentures are not traded on an established securities market,
the fair market value of the offered preferred stock as of the exchange
date if such offered preferred stock is traded on an established
securities market at any time during the 60-day period ending 30 days
after the exchange date.
If neither the offered preferred stock nor the debentures are traded, the issue
price of the debentures will be determined under Section 1274 of the Internal
Revenue Code, in which case the issue price will be the stated principal amount
of the debentures, provided that the yield on the debentures is equal to or
greater than the "applicable federal rate" in effect at the time the debentures
are issued. If the yield on the debentures is less than the applicable federal
rate, its issue price under Section 1274 of the Internal Revenue Code will be
equal to the present value as of the issue date of all payments to be made on
the debentures, discounted at the applicable federal rate. It cannot be
determined at the present time whether the offered preferred stock or the
debentures will, at the relevant time, be traded on an established securities
market within the meaning of the Treasury Regulations or whether the yield on
the debentures will equal or exceed the applicable federal rate, as discussed
above.
If the offered preferred stock is either redeemed for cash or exchanged for
debentures and is treated as a dividend with respect to a particular exchanging
United States holder, The holder:
(1) would not recognize any loss on the exchange;
(2) (A) would recognize dividend income (rather than capital gain) in an
amount equal to the fair market value of the debentures received
without regard to the United States holder's basis in the shares of
offered preferred stock surrendered in the exchange, but only to the
extent of its proportionate share of our current or accumulated
earnings and profits and (B) would first reduce its tax basis in the
offered preferred stock and thereafter would recognize capital gain, to
the extent that the distribution is not made out of our current or
accumulated earnings or profits; and
(3) the holding period for the debentures would begin on the day after the
day on which the debentures are acquired by the exchanging United
States holder.
EACH UNITED STATES HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO WHETHER IN
LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES, THE EXCHANGE WOULD BE TREATED AS A
DIVIDEND OR AS A SALE OR EXCHANGE. ADDITIONALLY, CORPORATE UNITED STATES HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE AVAILABILITY OF THE
CORPORATE DIVIDENDS-RECEIVED DEDUCTION AND THE
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<PAGE> 37
POSSIBLE APPLICATION OF THE EXTRAORDINARY DIVIDEND RULES OF SECTION 1059 OF THE
INTERNAL REVENUE CODE TO AN EXCHANGE IF THE DISTRIBUTION IS TAXABLE AS A
DIVIDEND.
Depending upon a United States holder's particular circumstances, the tax
consequences of holding debentures may be less advantageous than the tax
consequences of holding offered preferred stock because, for example, payments
of interest on the debentures would be taxable to a United States holder as
ordinary income, regardless of whether we have current or accumulated earnings
and profits, while distributions on offered preferred stock would not be
immediately subject to United States federal taxation if we do not have current
or accumulated earnings and profits in a given year and such distribution does
not reduce the United States holder's basis in the offered preferred stock below
zero, and because, as discussed at "Debentures -- Original Issue Discount,"
debentures may be issued with greater amounts of OID than the Redemption Premium
with respect to the offered preferred stock.
DEBENTURES
Original Issue Discount
Unless the debentures have a term of one year or less, the debentures would
be treated as issued at an original issue discount if the excess of the
debentures' "stated redemption price at maturity" over their issue price is more
than a "de minimis amount" (as defined below). The manner in which the issue
price of the debentures would be determined is discussed under "Offered
Preferred Stock -- Special Rules Regarding the Redemption of Offered Preferred
Stock For Debentures." The stated redemption price at maturity of the debentures
is the total of all payments provided by the debenture other than the stated
interest payments.
In general, if the excess of the debenture's stated redemption price at
maturity over its issue price is less than one-fourth of one percent of the
debenture's stated redemption price at maturity multiplied by the number of
complete years to its maturity (the "de minimis amount"), then such excess, if
any, constitutes "de minimis original issue discount" and the debenture is not
issued with original issue discount ("OID"). In general, the debentures would
have OID if:
(1) the debentures are traded on an established securities market at any
time during the 60-day period ending 30 days after the exchange date,
and the fair market value of the securities is less than the stated
redemption price at maturity by more than the applicable de minimis
amount;
(2) the offered preferred stock is traded on an established securities
market at any time during the 60-day period ending 30 days after the
exchange date, and the debentures are not, and the fair market value of
the offered preferred stock is less than the debentures' stated
redemption price at maturity by more than the applicable de minimis
amount; or
(3) neither the debentures nor the offered preferred stock are traded on an
established securities market at any time during the 60-day period
ending 30 days after the exchange date, the yield on the debentures is
less than the applicable federal rate by more than the applicable de
minimis amount, and the present value as of the issue date of all
payments to be made on the debentures, discounted at the applicable
federal rate, is less than the debentures' stated redemption price at
maturity by more than the applicable de minimis amount.
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<PAGE> 38
Unless the election described below under "-- Election to Treat All Interest as
Original Issue Discount" is made, a United States holder of an debenture with de
minimis OID must include such de minimis OID in income as stated principal
payments on the debenture are made.
United States holders of debentures issued with OID that have a maturity of
more than one year from their date of issue must, generally, include OID in
income calculated on a constant-yield method without regard to the receipt of
cash attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the debenture. The amount
of OID includible in income by a United States holder of a debenture is the sum
of the daily portions of OID with respect to the debenture for each day during
the taxable year or portion of the taxable year on which the United States
holder holds the debenture, which we refer to as "accrued OID." The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. Accrual periods with
respect to a debenture may be of any length selected by the United States holder
and may vary in length over the term of the debenture as long as:
(1) no accrual period is longer than one year; and
(2) each scheduled payment of interest or principal on the debenture occurs
on either the final or first day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of:
(a) the product of the Debenture's adjusted issue price at the beginning of
the accrual period and such Debenture's yield to maturity (determined
on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period); over
(b) the sum of the payments of qualified stated interest on the debenture
allocable to the accrual period.
The "adjusted issue price" of a debenture at the beginning of any accrual
period is the issue price of the debenture increased by:
(x) the amount of accrued OID for each prior accrual period, and decreased
by
(y) the amount of any payments previously made on the debenture that were
not qualified stated interest payments.
For purposes of determining the amount of OID allocable to an accrual period, if
an interval between payments of qualified stated interest on the debenture
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest that
is payable on the first day of the accrual period immediately following the
interval) is allocated pro rata on the basis of relative lengths to each accrual
period in the interval, and the adjusted issue price at the beginning of each
accrual period in the interval must be increased by the amount of any qualified
stated interest that has accrued prior to the first day of the accrual period
but that is not payable until the end of the interval. The amount of OID
allocable to an initial short accrual period may be computed using any
reasonable method if all other accrual periods other than a final short accrual
period are of equal length. The amount of OID allocable to the final accrual
period is the difference between:
(x) the amount payable at the maturity of the debenture (other than any
payment of qualified stated interest); and
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<PAGE> 39
(y) the debenture's adjusted issue price as of the beginning of the final
accrual period.
Election to Treat All Interest as Original Issue Discount
A United States holder may elect to include in gross income all interest
that accrues on a debenture using the constant-yield method described above
under the heading "Original Issue Discount," with the modifications described
below. For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount and unstated interest.
In applying the constant-yield method to a debenture with respect to which
this election has been made, the issue price of the debenture would equal the
issue price as determined under "Offered Preferred Stock -- Special Rules
Regarding the Redemption of Offered Preferred Stock For Debentures," the issue
date of the debenture would be the exchange date, and no payments on the
debenture would be treated as payments of qualified stated interest. This
election would generally apply only to the debenture with respect to which it is
made and may not be revoked without the consent of the Internal Revenue Service.
Pursuant to section 163 of the Internal Revenue Code, the "disqualified
portion" of the OID accruing on certain debt instruments may be treated as a
dividend eligible for the dividend-received deduction. The corporation issuing
such debt instruments is not allowed to deduct the "disqualified portion" of the
OID accruing on the debt instrument and is allowed to deduct the remainder of
the OID only when paid.
This treatment will apply to "applicable high yield discount obligations"
or "AHYDOs", which, generally, are debt instruments that have a term of more
than five years, have a yield to maturity that equals or exceeds five percentage
points above the "applicable federal rate" and have "significant" OID. A debt
instrument is treated as having "significant" OID if the aggregate amount that
would be includible in gross income with respect to such debt instrument for
periods before the close of any accrual period ending five years or more after
the date of issue exceeds the sum of:
(1) the aggregate amount of interest to be paid in cash under the debt
instrument before the close of such accrual period; and
(2) the product of the initial issue price of such debt instrument and its
yield to maturity.
For purposes of determining whether a debenture is an AHYDO, holders are bound
by the issuer's determination of the appropriate accrual period. It is
impossible to determine at the present time whether a debenture will be treated
as an AHYDO.
If a debenture is treated as an AHYDO, a corporate United States holder
would be treated as receiving dividend income (to the extent of our current and
accumulated earnings and profits), solely for purposes of the dividend-received
deduction, in an amount equal to the "dividend equivalent portion" of the
"disqualified portion" of the OID. The "disqualified portion" of the OID is
equal to the lesser of:
(1) the amount of OID; or
(2) the portion of the "total return" (i.e. the excess of all payments to
be made with respect to such obligation over its issue price) on such
obligation that bears the same ratio to the obligation's total return
as the "disqualified yield" (i.e. the
35
<PAGE> 40
extent to which the yield exceeds the applicable federal rate plus 6%)
bears to the obligation's yield to maturity.
The dividend equivalent portion of the disqualified portion is the amount that
would have been treated as a dividend if we had distributed it with respect to
our stock. Our deduction for OID will be substantially deferred with respect to
a debenture that is treated as an AHYDO. In addition, such deduction will be
disallowed if and to the extent that the yield on such AHYDO exceeds the
applicable federal rate by more than 6%.
Purchase, Sale, Retirement and Other Disposition of the Debentures
The adjusted tax basis of a United States holder who receives debentures in
exchange for offered preferred stock will, in general, be equal to the initial
tax basis of such debentures (i.e. the issue price of the debentures, if the
exchange is treated as a redemption giving rise to capital gain or the fair
market value of the debentures on the exchange date, if the exchange is treated
as a dividend), increased by OID previously included in income by the United
States holder. Upon the sale, exchange or retirement of a debenture, a United
States holder will generally recognize capital gain or loss equal to the
difference between the amount realized (not including any amounts attributable
to accrued and unpaid interest) and the United States holder's tax basis in the
debenture.
WARRANTS
Ownership and Disposition of Warrants
The warrants may be sold individually or as a unit. Each unit is comprised
of one or more shares of offered preferred stock and one or more warrants.
Purchasers of a unit must allocate their purchase price between the offered
preferred stock and the warrants based on their relative fair market values to
determine their tax basis in the offered preferred stock and the warrants and
the amount of Redemption Premium, if any, on the offered preferred stock. If the
warrant is sold individually, a United States holder's tax basis of a warrant
will be its purchase price.
Sale of a Warrant
Generally, a United States holder of a warrant will recognize gain or loss
upon the sale of a warrant in an amount equal to the difference between the
amount realized on the sale and the United States holder's adjusted tax basis of
the warrant. The adjusted tax basis of a warrant for United States holders
participating in the offering purchased as a unit will be the portion of the
initial offering price allocable to a warrant, adjusted as described below under
"Adjustments Under the Warrants." Gain or loss attributable to the sale of the
warrants will constitute capital gain or loss if the stock would be a capital
asset in the hands of the warrant holder and will be long-term capital gain or
loss if the warrants have been held for more than one year.
Exercise of a Warrant, Disposition of Common Shares, and Dividends
In general, no gain or loss will be recognized by a United States holder
upon the exercise of a warrant, except with respect to cash, if any, paid in
lieu of the issuance of fractional shares. Upon exercise of a warrant with cash,
the holder's tax basis in the shares so acquired will be the sum of:
(a) the holders' adjusted tax basis in the warrant, and
(b) the cash paid upon exercise of the warrant.
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<PAGE> 41
If any cash is received in lieu of fractional shares of warrant stock, the
holder will recognize gain or loss, and the character and amount of gain or loss
will be determined as if the holder had received such fractional shares and then
immediately sold them for cash. The holding period of the stock acquired upon
exercise of a warrant begins on the day following the day of exercise.
Expiration of the Warrants
Upon the expiration of an unexercised warrant, the holder will recognize a
loss equal to the adjusted tax basis of the warrant in the hands of the holder.
A loss realized upon expiration of the warrant will be capital loss if the stock
would have been a capital asset in the hands of the warrant holder and will be
long-term capital loss if the warrant was held for more than one year.
Adjustments Under the Warrants
Pursuant to the terms of the warrants, the number of shares of warrant
stock that may be purchased upon exercise of the warrants is subject to
adjustment from time to time upon the occurrence of certain events. In certain
circumstances, a change in conversion ratio or any transaction having a similar
effect on the interest of a warrant holder may be treated as a distribution with
respect to any warrant holder whose proportionate interest in the earnings and
profits of the issuer is increased by such change or transaction. Thus, under
certain future circumstances which may or may not occur, such an adjustment
pursuant to the terms of the warrants may be treated as a taxable distribution
to the warrantholders to the extent of our current or accumulated earnings and
profits, without regard to whether the warrant holders receive any cash or other
property. If the warrant holders receive such a taxable distribution, their tax
bases in the warrants will be increased by an amount equal to the taxable
distribution.
WARRANT STOCK
Distributions on the warrant stock will be taxable to United States holders
as ordinary income to the extent of our current and accumulated earnings and
profits. If we do not have current or accumulated earnings or profits, the
payment will first offset the holder's basis in the warrant stock and any amount
that exceeds the holder's basis will be treated as a capital gain. Any gain or
loss upon the sale or exchange of the warrant stock will be capital gain or
loss, and will be long-term capital gain or loss if the holder has owned the
warrant stock for more than one year.
TAXATION OF NON-UNITED STATES HOLDERS
INTEREST PAYMENTS
Under present United States federal income tax law, and subject to the
discussion of backup withholding below, payments of principal, premium (if any)
and interest, including OID, by us or any of our paying agents to any holder of
a debenture that is a non-United States holder will not be subject to United
States federal withholding tax if, in the case of interest or OID:
(a) the beneficial owner of the debenture does not actually or
constructively own 10% or more of the total combined voting power of
all classes of our stock entitled to vote;
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<PAGE> 42
(b) the beneficial owner of the debenture is not a controlled foreign
corporation that is related to us through stock ownership; and
(c) either:
(1) the beneficial owner of the debentures certifies to us or our
agent, under penalties of perjury, that it is not a United States
holder and provides its name and address; or
(2) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course
of its trade or business (a "financial institution") and holds the
debenture certifies to us or our agent under penalties of perjury
that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial
owner and furnishes the payor with a copy thereof.
Recently finalized United States Treasury Regulations, which we refer to as the
"Final Withholding Regulations," would provide for alternative methods for
satisfying the certification requirement. The Final Withholding Regulations also
would require, in the case of debentures held by a foreign partnership, that:
(1) the certification be provided by the partners rather than by the
partnership; and
(2) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships. The Final
Regulations are effective for payments made after December 31, 1999.
DIVIDEND INCOME
Dividends paid to a non-United States holder will be subject to withholding
of United States federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are
"effectively connected" with the conduct of a trade or business within the
United States (and they are attributable to a United States permanent
establishment of such holder, if an applicable income tax treaty so requires as
a condition for subjecting the non-United States holder to United States income
tax on a net income basis). Such "effectively connected" dividends, generally,
are not subject to withholding tax if certain certification requirements are
satisfied. Instead, "effectively connected" dividends are taxed at rates
applicable to United States citizens, resident aliens and domestic United States
corporations. In addition, a non-United States corporation may, under certain
circumstances, be subject to an additional "branch profits tax" on "effectively
connected" dividends at a 30% rate or at a lower rate if it is eligible for the
benefits of an applicable income tax treaty.
Under current United States Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the 30%
withholding discussed above. Under current interpretations of United States
Treasury Regulations, this presumption also applies for purposes of determining
whether a lower withholding rate applies under an income tax treaty.
Under the Final Withholding Regulations, a non-United States holder must
satisfy certain certification requirements in order to claim the benefit of a
lower treaty rate. See "Taxation of Non-United States holders -- Interest
Payments."
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<PAGE> 43
A non-United States holder eligible for a reduced rate of United States
withholding tax under a tax treaty may obtain a refund of any amount withheld in
excess of that rate by filing a refund claim with the United States Internal
Revenue Service.
SALE OR DISPOSITION
A non-United States holder will not be subject to United States federal
income tax in respect of a sale or disposition of offered preferred stock or
warrant stock (or, to the extent of the holder's basis in the offered preferred
stock or warrant stock, on distributions paid on the offered preferred stock or
warrant stock if we do not have current or accumulated earnings and profits),
warrants or debentures unless:
(1) the gain is effectively connected with a trade or business of the
non-United States holder in the United States (and is attributable to a
permanent establishment maintained in the United States by such
non-United States holder, if an applicable income tax treaty so
requires as a condition for such non-United States holder to be subject
to United States taxation on a net income basis in respect of capital
gain);
(2) in the case of a non-United States holder who is an individual, such
holder is present in the United States for 183 or more days in the
taxable year of the sale and certain other conditions apply; or
(3) we are or have been a "United States real property holding corporation"
for federal income tax purposes.
We have not been, are not and do not anticipate becoming a "United States real
property holding corporation" for federal tax purposes. Effectively connected
gains realized by a corporate non-United States holder may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
ESTATE TAXES
A debenture held by an individual who at death is not a citizen or resident
of the United States will not be includible in the individual's gross estate for
purposes of the United States federal estate tax as a result of the individual's
death if:
(a) the individual did not actually or constructively own 10% or more of
the total combined voting power of all classes of our stock entitled to
vote; and
(b) the income on the debenture would not have been effectively connected
with a United States trade or business of the individual at the
individual's death.
Offered preferred stock, warrants or warrant stock held by a non-United
States holder at the time of death will be included in such holder's gross
estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to dividends paid
in respect of offered preferred stock and warrant stock, including the accrual
of the Redemption Premium, to principal and interest paid in respect of
debentures, and to the proceeds received on the sale, exchange or redemption of
offered preferred stock, debentures,
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<PAGE> 44
warrants or warrant stock to United States holders other than certain exempt
recipients (such as corporations), and "backup withholding" at a rate of 31%
will apply to such payments if the United States holder fails to provide an
accurate taxpayer identification number or is notified by the Internal Revenue
Service that it has failed to report all interest and dividends required to be
shown on its federal income tax returns. United States holders should consult
their tax advisors concerning the application of information reporting and
backup withholding to the preferred stock, debentures, warrants or warrant
stock.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such United States holder's United States federal
income tax liability provided the required information is furnished to the IRS.
Non-United States Holders
Under current law, information reporting on IRS Form 1099 and backup
withholding will not apply to payments of principal, premium, if any, and
interest, including OID, made by us or a paying agent to a non-United States
holder on a debenture. The beneficial owner of the debenture must certify to us
or our agent, under penalties of perjury, that it is not a United States holder
and must provide its name and address, or a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business, a "financial institution", that holds
the debenture, certifies to us or our agent, under penalties of perjury, that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner, and must furnish the
payor with a copy thereof. The payor must not have actual knowledge that the
holder is a United States person. However, we or a paying agent may report (on
IRS Form 1042S) payments of interest, including OID, on the debentures. See
above, "Taxation of Non-United States Holders -- Interest Payments" with respect
to the rules under the Final Withholding Regulations.
In general, dividends paid to non-United States holders will not be subject
to United States information reporting requirements and backup withholding tax
if the non-United States holder is either subject to the 30% withholding tax
discussed above, or is not subject to the 30% withholding tax because the
non-United States holder is eligible for the benefits of an income tax treaty.
However, dividend payments will be reported for purposes of the 30% withholding
tax discussed above. If a non-United States holder does not meet any of the
requirements listed above for exemption from backup withholding tax and fails to
provide certain information, including a United States taxpayer identification
number, or otherwise establish a status as an "exempt recipient", the non-United
States holder may be subject to backup withholding of United States federal
income tax at a rate of 31% on dividends paid.
Under current law, dividends paid to an address in a foreign country are
generally treated as exempt from backup withholding and information reporting
unless the person making the payment has definite knowledge that the recipient
is a United States person. However, under the Final Withholding Regulations
discussed above, dividends payments generally will be subject to information
reporting and backup withholding unless certain certification requirements are
met.
In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States of
the proceeds of a sale of offered preferred stock or warrant stock through an
office outside the United States of a non-United States broker. However, United
States information reporting, but not backup
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<PAGE> 45
withholding, requirements will apply to a payment made outside the United States
of the proceeds of a sale of offered preferred stock or warrant stock through an
office outside the United States of a broker:
(1) that is a United States person;
(2) that derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States;
(3) that is a "controlled foreign corporation" as to the United States; or
(4) with respect to payments made after December 31, 1999, that is a
foreign partnership, if at any time during its tax year, one or more of
its partners are U.S. persons (as defined in U.S. Treasury regulations)
who in the aggregate hold more than 50% of the income or capital
interest in the partnership or if, at any time during its tax year,
such foreign partnership is engaged in a United States trade or
business, unless the broker has documentary evidence in its records
that the holder or beneficial owner is a non-United States person or
the holder or beneficial owner otherwise establishes an exemption.
Payment of the proceeds of the sale of offered preferred stock and warrant stock
to or through a United States office of a broker is currently subject to both
United States backup withholding and information reporting unless the holder
certifies its non-United States status under penalties of perjury or otherwise
establishes an exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the IRS.
SELLING SECURITYHOLDERS
This section sets forth information with respect to each selling
securityholder for whom we are registering securities for resale to the public
under the registration statement of which this prospectus is a part. The
securities offered hereby are comprised of:
- 277,629.156 shares of Series D preferred stock;
- 132,808.070 shares of Series E preferred stock;
- 15,800,000 Series A warrants;
- 6,730,000 Series B warrants;
- 15,800,000 shares of common stock issuable upon exercise of the Series A
warrants; and
- 6,730,000 shares of common stock issuable upon exercise of the Series B
warrants.
In addition to the information included in this section, if offered
preferred stock, warrants or common stock are offered by the selling
securityholders under this prospectus, if required a prospectus supplement will
include the following information:
- the amount of offered preferred stock, warrants or common stock to be
offered for the selling securityholder's account;
- the amount of offered preferred stock, warrants or common stock to be
owned by the selling securityholder after completion of the offering; and
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<PAGE> 46
- the percentage of the series of offered preferred stock, warrants or
common stock, if one percent or more, to be owned by the selling
securityholder after completion of the offering.
Under the investment agreement, the selling securityholders purchased
245,000 shares of our Series A preferred stock, 105,000 shares of our Series B
preferred stock and the warrants for a total sum of $350 million. On February
13, 1999, we entered into a share exchange agreement with the selling
securityholders to make an adjustment to the dividends payable among the shares
of Series A preferred stock and Series B preferred stock. Under the share
exchange agreement, the 245,000 shares of Series A preferred stock were
exchanged for 260,146.909 shares of Series D preferred stock, and the 105,000
shares of Series B preferred stock were exchanged for 111,820.831 shares of
Series E preferred stock. As a result of the exchange, the selling
securityholders hold only Series D preferred stock and Series E preferred stock,
and following the exchange all shares of the Series A preferred stock and Series
B preferred stock were cancelled. The terms of the Series D preferred stock are
substantially similar to the terms of the Series A preferred stock and the terms
of the Series E preferred stock are substantially similar to the terms of the
Series B preferred stock, except with respect to the applicable dividend rates.
The exchange was effected for a number of reasons, including to facilitate the
potential sale of the offered preferred stock by the selling securityholders.
As of the date of this prospectus, the selling securityholders held a total
of 260,146.909 shares of Series D preferred stock and 111,820.831 shares of
Series E preferred stock. Through May 13, 2000, we expect to issue an additional
17,482.247 shares of Series D preferred stock and 20,987.239 shares of Series E
preferred stock to satisfy our obligation to pay dividends on the outstanding
offered preferred stock.
Under the investment agreement, we agreed to increase the number of our
directors to a minimum of 11 directors and a maximum of 13 directors and to
appoint Norman C. Payson, M.D., as our chief executive officer and as a
director. We also agreed that TPG Partners and its affiliates would be entitled
to nominate four directors to our board of directors. Dr. Payson was elected
chief executive officer and joined the board of directors in May 1998. David
Bonderman, Jonathan J. Coslet and James G. Coulter were nominated by TPG
Partners and its affiliates pursuant to the investment agreement and joined the
board of directors in May 1998. Kent J. Thiry was also nominated by TPG Partners
and its affiliates pursuant to the investment agreement and joined the board of
directors in August 1998.
Mr. Bonderman is a director and President, Mr. Coulter is a director and
vice president, and Mr. Coslet is an executive of TPG Advisors II, Inc. TPG
Advisors II, Inc. is the general partner of TPG GenPar II, L.P., which is the
general partner of selling securityholders TPG Partners II, L.P., TPG Parallel
II, L.P. and TPG Investors II, L.P.
The investment agreement also contains covenants which restrict our ability
to take significant actions without the consent of TPG Partners II and its
affiliates, including mergers, consolidations and certain issuances of equity
securities. In connection with the investment agreement, we also entered into a
registration rights agreement in which we agreed to register the offered
preferred stock, the warrants and the common stock issuable upon exercise of the
warrants under the Securities Act for offer and sale by the selling
securityholders and certain holders to whom they may transfer those securities.
See "Registration Rights Agreement."
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<PAGE> 47
We have filed with the SEC under the Securities Act a Registration
Statement on Form S-3, of which this prospectus forms a part, with respect to
the offer and sale of the securities described in this prospectus. We have
agreed, among other things, to bear certain expenses in connection with the
registration and sale of the securities being offered by the selling
securityholders. See "Plan of Distribution."
The following table provides the name of each selling securityholder, the
number of shares of offered preferred stock and warrants held by each selling
securityholder and the number of shares of common stock into which those
warrants are exercisable as of the date hereof. All these securities have been
registered for offer and sale under the registration statement of which this
prospectus is a part. As noted in the table, we expect to issue additional
shares of offered preferred stock as dividends on existing shares of offered
preferred stock through May 13, 2000. Those additional shares have been
registered for offer and sale by the selling securityholders under the
registration statement of which this prospectus is a part.
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<PAGE> 48
<TABLE>
<CAPTION>
# OF SHARES OFFERED PREFERRED STOCK HELD
-----------------------------------------
NAME OF BENEFICIAL OWNER SERIES D(1) SERIES E(2)
- ------------------------ ------------------- ------------------
<S> <C> <C>
TPG Partners II, L.P. ................................... 177,490.95189725 76,292.22200803
TPG Parallel II, L.P. ................................... 12,112.44008304 5,206.37789136
TPG Investors II, L.P. .................................. 18,514.13521971 7,958.06490061
Chase Equity Associates, L.P. ........................... 11,149.15324286 4,792.32132857
Oxford Acquisition Corp. ................................ 3,716.38441429 1,597.44044286
DLJ Merchant Banking Partners II, L.P. .................. 18,728.45379976 8,050.03487170
DLJ Merchant Banking Partners II-A, L.P. ................ 745.40053109 320.55304887
DLJ Offshore Partners II, C.V. .......................... 920.60151062 396.16522983
DLJ Diversified Partners, L.P. .......................... 1,094.74066604 470.71245050
DLJ Diversified Partners-A, L.P. ........................ 406.67863733 174.65348842
DLJMB Funding II, Inc. .................................. 3,325.63313873 1,429.17671621
DLJ Millennium Partners, L.P. ........................... 302.61987373 129.92515602
DLJ Millennium Partners-A, L.P. ......................... 59.46215063 25.55904709
DLJ EAB Partners, L.P. .................................. 83.88410535 36.20865004
UK Investment Plan 1997 Partners......................... 495.8716328 212.99205905
DLJ ESC II L.P. ......................................... 4,069.9718457 1,749.72976507
DLJ First ESC, L.P. ..................................... 36.10202002 15.97440443
DLJ Capital Corporation.................................. 98.74964301 42.59841181
Sprout Growth II, L.P. .................................. 4,557.34911603 1,959.52694324
The Sprout CEO Fund, L.P. ............................... 75.38951240 33.01376915
Sprout Capital VIII, L.P. ............................... 2,039.76413138 875.39736269
Sprout Venture Capital, L.P. ............................ 123.17159773 52.18305447
</TABLE>
- ---------------
(1) We expect to issue in the aggregate 17,482.247 additional shares of Series D
preferred stock as dividends on these existing shares through May 13, 2000.
(2) We expect to issue in the aggregate 20,987.239 additional shares of Series E
preferred stock as dividends on these existing shares through May 13, 2000.
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<TABLE>
<CAPTION>
# OF WARRANTS HELD
--------------------------------------
NAME OF BENEFICIAL OWNER SERIES A WARRANTS SERIES B WARRANTS
- ------------------------ ----------------- -----------------
<S> <C> <C>
TPG Partners II, L.P. ...................................... 10,779,898 4,591,691
TPG Parallel II, L.P. ...................................... 735,648 313,349
TPG Investors II, L.P. ..................................... 1,124,455 478,961
Chase Equity Associates, L.P. .............................. 677,142 288,428
Oxford Acquisition Corp. ................................... 225,714 96,142
DLJ Merchant Banking Partners II, L.P. ..................... 1,137,465 484,503
DLJ Merchant Banking Partners II-A, L.P. ................... 45,299 19,295
DLJ Offshore Partners II, C.V. ............................. 55,935 23,825
DLJ Diversified Partners, L.P. ............................. 66,501 28,326
DLJ Diversified Partners-A, L.P. ........................... 24,696 10,519
DLJMB Funding II, Inc. ..................................... 201,951 86,022
DLJ Millennium Partners, L.P. .............................. 18,392 7,834
DLJ Millennium Partners-A, L.P. ............................ 3,587 1,528
DLJ EAB Partners, L.P. ..................................... 5,107 2,175
UK Investment Plan 1997 Partners............................ 30,095 12,819
DLJ ESC II L.P. ............................................ 247,193 105,292
DLJ First ESC, L.P. ........................................ 2,189 932
DLJ Capital Corporation..................................... 5,998 2,555
Sprout Growth II, L.P. ..................................... 276,790 117,899
The Sprout CEO Fund, L.P. .................................. 4,579 1,950
Sprout Capital VIII, L.P. .................................. 123,885 52,769
Sprout Venture Capital, L.P. ............................... 7,481 3,186
</TABLE>
45
<PAGE> 50
PLAN OF DISTRIBUTION
The shares of offered preferred stock and the warrants covered by this
prospectus are now held by the selling securityholders. As used in the rest of
this section of the prospectus, the term "selling securityholders" includes the
selling securityholders named in the table under "Selling Securityholders" in
this prospectus and certain of their pledgees, donees, transferees or other
successors in interest selling securities received from a named selling
securityholder after the date of this prospectus. The shares of offered
preferred stock, warrants and common stock covered by this prospectus are
referred to in this section as the "securities." The selling securityholders may
offer and sell, from time to time, some or all of the securities under this
prospectus. We have registered the securities for offer and sale by the selling
securityholders so that the securities will be freely tradeable by them.
Registration of the securities does not mean, however, that the securities
necessarily will be offered or sold. We will not receive any proceeds from any
sale by the selling securityholders of the securities. See "Use of Proceeds." We
will pay all costs, expenses and fees in connection with the registration of the
securities, including fees of our counsel and accountants, fees payable to the
SEC, listing fees, and the reasonable fees and disbursements of one law firm
selected as counsel for the selling securityholders in connection with the
registration. The selling securityholders will pay all underwriting discounts
and commissions and similar selling expenses, if any, attributable to the sale
of the securities.
The selling securityholders may sell the securities from time to time, at
market prices prevailing at the time of sale, at prices related to market
prices, at a fixed price or prices subject to change or at negotiated prices, by
a variety of methods including the following:
- on markets where our securities are traded or on an exchange in
accordance with the rules of the exchange;
- in privately negotiated transactions;
- through broker-dealers, which may act as agents or principals;
- in a block trade in which a broker-dealer will attempt to sell a block of
securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- through one or more underwriters on a firm commitment or best-efforts
basis;
- directly to one or more purchasers;
- through agents;
- through option transactions, forward contracts, equity swaps or other
derivative transactions relating to the securities;
- through short sales of the securities;
- in any combination of the above; or
- by any other legally available means.
In effecting sales, brokers or dealers engaged by the selling
securityholders may arrange for other brokers or dealers to participate.
Broker-dealer transactions may include:
- purchases of the securities by a broker-dealer as principal and resales
of the securities by the broker-dealer for its account pursuant to this
prospectus;
- ordinary brokerage transactions; or
- transactions in which the broker-dealer solicits purchasers.
46
<PAGE> 51
If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any securities through a secondary
distribution or a purchase by a broker or dealer, or if other material changes
are made in the plan of distribution of the securities, a prospectus supplement
will be filed, if necessary, under the Securities Act disclosing the material
terms and conditions of such arrangement. If an underwriter or underwriters are
used in the sale of securities, we and the selling securityholders expect to
execute an underwriting agreement with such underwriter or underwriters at the
time an agreement for the sale is reached. The underwriter or underwriters with
respect to an underwritten offering of securities and the other material terms
and conditions of the underwriting will be set forth in a prospectus supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of the
prospectus supplement. In connection with the sale of securities, underwriters
will receive compensation in the form of underwriting discounts or commissions
and may also receive commissions from purchasers of securities for whom they may
act as agent. Underwriters may sell to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agent.
The selling securityholders and any underwriters, broker-dealers or agents
participating in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the securities by the selling securityholders and any commissions
received by any such underwriters, broker-dealers or agents may be deemed to be
underwriting commissions under the Securities Act. We have agreed to indemnify
the selling securityholders and each person or entity which participates as or
may be deemed to be an underwriter in the offering or sale of the selling
securityholders' securities against certain liabilities (and to contribute to
payments in respect those liabilities), including liabilities arising under the
Securities Act. The selling securityholders may agree to indemnify any agent or
broker-dealer that participates in transactions involving offers or sales of the
securities against certain liabilities, including liabilities arising under the
Securities Act.
VALIDITY OF SECURITIES
The validity of the shares of offered preferred stock, the warrants, and
the shares of common stock offered hereby will be passed upon for us by Sullivan
& Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of Oxford Health Plans, Inc. at
December 31, 1998, and for the year then ended, included in Oxford Health Plans,
Inc.'s Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998,
which is incorporated herein 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 herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such reports given on the
authority of such firms as experts in accounting and auditing.
47
<PAGE> 52
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a registration
statement on Form S-3 to register these securities. This prospectus, which forms
part of the registration statement, does not contain all of the information
included in that registration statement. For further information about Oxford
and the securities offered in this prospectus, you should refer to the
registration statement and its exhibits.
You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. We file our SEC materials electronically with the SEC, so you
can also review our filings by accessing the web site maintained by the SEC at
http://www.sec.gov. This site contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
Our principal executive offices are located at 800 Connecticut Avenue,
Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442.
The SEC allows us to "incorporate by reference" the information we file
with them, which means we can disclose important information to you by referring
you to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and are incorporating them by reference into this
prospectus:
- Our Annual Report on Form 10-K/A for the fiscal year ended December 31,
1998, initially filed on March 19, 1999 and amended on March 26, 1999;
- Our Current Reports on Form 8-K filed on January 8, 1999, January 29,
1999, February 25, 1999, March 19, 1999 and April 29, 1999; and
- The description of our Common Stock contained in the Registration
Statement on Form 8-A dated August 1, 1991, filed pursuant to Section 12
of the Exchange Act (Commission 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.
48
<PAGE> 53
We will provide without charge to each person, including any person having
a control relationship with that person, to whom a prospectus is delivered, a
copy of any or all of the information that has been incorporated by reference in
this prospectus but not delivered with this prospectus. If you would like to
obtain this information from us, please direct your request, either in writing
or by telephone, to:
Investor Relations
Oxford Health Plans, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
(203) 852-1442
FORWARD-LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are "forward-looking statements," as such term is defined
in the Private Securities Litigation Reform Act of 1995. We wish to caution you
that these forward-looking statements are only predictions, and actual events or
results may differ materially as a result of risks that we face. These
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "plans," "may," "will," "would,"
"could," "should," or "anticipates" or the negative of these words or other
variations of these words or other comparable words, or by discussions of
strategy that involve risks and uncertainties. Such forward-looking statements
include, but are not limited to statements concerning:
- future results of operations or financial position;
- future ability to make required payments on the preferred stock; and
- future tax treatment of the offered preferred stock, warrants and
debentures.
49
<PAGE> 54
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING, COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY US OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, COMMON STOCK, PREFERRED
STOCK, AND/OR WARRANTS IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................. 1
Ratio of Earnings to Combined Fixed
Charges and Preference
Dividends......................... 8
Business............................ 9
Description of Offered Preferred
Stock............................. 9
Description of Warrants............. 23
Registration Rights Agreement....... 25
Use of Proceeds..................... 26
Material Federal Income Tax
Consequences...................... 28
Selling Securityholders............. 41
Plan of Distribution................ 46
Validity of Securities.............. 47
Experts............................. 47
Where You Can Find More
Information....................... 48
Forward-Looking Statements.......... 49
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[OXFORD HEALTH PLANS LOGO]
22,530,000 shares of
Common Stock
277,629.156 shares of Series D
Cumulative Preferred Stock
132,808.070 shares of Series E Cumulative Preferred Stock
15,800,000 Series A Warrants
6,730,000 Series B Warrants
-------------
Prospectus
-------------
-- , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered are:
<TABLE>
<S> <C>
Registration Fee.......................................... $189,985.01
Fees and Expenses of Accountants.......................... --
Fees and Expenses of Counsel.............................. --
Blue Sky Fees and Expenses................................ --
Printing and Engraving Expenses........................... --
Rating Agency Fees........................................ --
Agent's Fees.............................................. --
Miscellaneous............................................. --
-----------
Total........................................... $ --
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
against expenses, fines, judgments and settlements incurred by any director,
officer or employee of Oxford in the event of pending or threatened civil,
criminal, administrative or investigative proceedings, if such person was, or
was threatened to be made, a party by reason of the fact that he is or was a
director, officer or employee of Oxford. Section 145 also provides that the
indemnification provided for therein shall not be deemed exclusive of any other
rights to which those seeking indemnification may otherwise be entitled.
Article Eighth of the Second Amended and Restated Certificate of
Incorporation, as amended, of Oxford provides that Oxford shall indemnify its
officers and directors to the fullest extent permitted by law. Article Ninth of
the Second Amended and Restated Certification of Incorporation, as amended, of
Oxford provides that to the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
Oxford shall not be liable to Oxford or its stockholders for monetary damages
for breach of fiduciary duty as a director.
Section 6.4 of the Amended and Restated By-laws of Oxford states:
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The
Corporation shall indemnify to the fullest extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, including any action
instituted by or on behalf of the Corporation, by reason of the fact that such
person or such person's testator or intestate is or was a director or officer of
the Corporation or serves or served at the request of the Corporation any other
enterprise as a director or officer. Expenses incurred by any such person in
defending any such actions, suit or proceeding shall be paid or reimbursed by
the Corporation promptly upon receipt by it of an undertaking of such person to
repay such expense if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any person
by this by-law shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing to serve as a
director or officer as provided above. No amendment of this
II-1
<PAGE> 56
by-law shall impair the rights of any person arising at any time with respect to
events occurring prior to such amendment. To the extent permitted by Delaware
law, the Board may cause the Corporation to indemnify and reimburse other
employees of the Corporation as it deems appropriate. For purposes of this
by-law, the term "Corporation" shall include any predecessor of the Corporation
and any constituent corporation (including any constituent of a constituent)
absorbed by the Corporation in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint venture, trust or
employee benefit plan; service "at the request of the Corporation" shall include
service as a director or officer of the Corporation, which imposes duties on, or
involves services by, such director or officer with respect to any other
enterprise or any employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on a person with respect to an employee benefit plan,
shall be deemed to be indemnifiable expenses; and action by a person with
respect to any employee benefit plan which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan shall be
deemed to be action not opposed to the best interests of the Corporation.
Section 145 of the Delaware General Corporation Law permits the
indemnification provided for by the above by-law provision. The statute further
permits Oxford to insure itself for such indemnification.
Oxford maintains insurance coverage for its directors and officers with
respect to certain liabilities incurred in their capacities as such and for
Oxford with respect to any payments which it becomes obligated to make to such
persons under the foregoing by-law and statutory provisions.
II-2
<PAGE> 57
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2 Investment Agreement, dated February 23, 1998, between
Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated
by reference to Exhibit 10(r) of Oxford's Annual Report on
Form 10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.1 Second Amended and Restated Certificate of Incorporation, as
amended, of Oxford Health Plans, Inc., incorporated by
reference to Exhibit 3(a) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.1(a) Certificate of Designations for the Series D Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.1(b) Certificate of Designations for the Series E Preferred Stock
of Oxford Health Plans, Inc., incorporated by reference to
Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for
the period ended December 31, 1998 (File No. 0-19442)
4.2 Form of Series A Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.3 Form of Series B Warrant Certificate, incorporated by
reference to Exhibit 10(r) of Oxford's Annual Report on Form
10-K/A for the period ended December 31, 1998 (File No.
0-19442)
4.4 Amended and Restated By-laws of Oxford Health Plans, Inc.,
incorporated by reference to Exhibit 3(b) of Oxford's Annual
Report on Form 10-K/A for the period ended December 31, 1998
(File No. 0-19442)
4.5 Form of Warrant Agreement*
5 Opinion of Sullivan & Cromwell as to Legality*
8 Opinion of Sullivan & Cromwell as to Tax Matters*
10 Registration Rights Agreement, dated February 23, 1998,
between Oxford Health Plans, Inc. and TPG Oxford LLC,
incorporated by reference to Exhibit 10(s) of Oxford's
Annual Report on Form 10-K/A for the period ended December
31, 1998 (File No. 0-19442)
12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preference Dividends**
23.1 Consent of Ernst & Young LLP**
23.2 Consent of KPMG LLP**
23.3 Consent of Sullivan & Cromwell (included in their opinion
filed as Exhibit 5.1)
</TABLE>
- -------------------------
* To be filed by amendment
** Filed herewith
II-3
<PAGE> 58
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high and of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification by the
registrant against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
II-4
<PAGE> 59
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
4. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-5
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norwalk, State of Connecticut, on April 30, 1999.
Oxford Health Plans, Inc.
By: /s/ NORMAN C. PAYSON, M.D.
-----------------------------------
Norman C. Payson, M.D.
Chief Executive Officer
II-6
<PAGE> 61
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 April 30, 1999
- ------------------------------------------------ Officer, and Director
Norman C. Payson, M.D.
/s/ YON Y. JORDEN Principal Financial April 30, 1999
- ------------------------------------------------ Officer
Yon Y. Jorden
/s/ KURT B. THOMPSON Principal Accounting April 30, 1999
- ------------------------------------------------ Officer
Kurt B. Thompson
/s/ FRED F. NAZEM Chairman of the Board April 30, 1999
- ------------------------------------------------
Fred F. Nazem
/s/ DAVID BONDERMAN Director April 30, 1999
- ------------------------------------------------
David Bonderman
Director
- ------------------------------------------------
Jonathan J. Coslet
/s/ JAMES G. COULTER Director April 30, 1999
- ------------------------------------------------
James G. Coulter
/s/ ROBERT B. MILLIGAN, JR. Director April 30, 1999
- ------------------------------------------------
Robert B. Milligan, Jr.
/s/ MARCIA J. RADOSEVICH, PH.D. Director April 30, 1999
- ------------------------------------------------
Marcia J. Radosevich, Ph.D.
/s/ BENJAMIN H. SAFIRSTEIN, M.D. Director April 30, 1999
- ------------------------------------------------
Benjamin H. Safirstein, M.D.
Director
- ------------------------------------------------
Thomas A. Scully
/s/ KENT J. THIRY Director April 30, 1999
- ------------------------------------------------
Kent J. Thiry
/s/ STEPHEN F. WIGGINS Director April 30, 1999
- ------------------------------------------------
Stephen F. Wiggins
</TABLE>
II-7
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
4 Form of Warrant Agreement*.............................
5 Opinion of Sullivan & Cromwell as to Legality*.........
8 Opinion of Sullivan & Cromwell as to Tax Matters*......
12 Computation of Ratio of Earnings to Combined Fixed
Charges and Preference Dividends**
23.1 Consent of Ernst & Young LLP**.........................
23.2 Consent of KPMG LLP**..................................
23.3 Consent of Sullivan & Cromwell (included in their
opinion filed as exhibit 5.1)*.......................
</TABLE>
- -------------------------
* To be filed by amendment
** Filed herewith
<PAGE> 1
EXHIBIT 12
OXFORD HEALTH PLANS, INC. & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes......... $(615,229) $(431,611) $172,049 $91,501 $49,926
Add back fixed
charges.............. 59,030 8,000 7,000 5,000 3,000
--------- --------- -------- ------- -------
Total earnings
(loss)............... $(556,199) $(423,611) $179,049 $96,501 $52,926
========= ========= ======== ======= =======
Fixed charges:
Interest (none
capitalized)...... $ 43,030 $ -- $ -- $ -- $ --
Interest component of
rental payments... 16,000 8,000 7,000 5,000 3,000
--------- --------- -------- ------- -------
Total fixed
charges......... $ 59,030 $ 8,000 $ 7,000 $ 5,000 $ 3,000
--------- --------- -------- ------- -------
Preferred dividends and
amortization......... $ 27,668 -- -- -- --
--------- --------- -------- ------- -------
Total fixed
charges and
preference
dividends....... $ 86,698 $ 8,000 $ 7,000 $ 5,000 $ 3,000
========= ========= ======== ======= =======
Ratio of earnings to
fixed charges and
preference
dividends............ * * 25.6 19.3 17.6
========= ========= ======== ======= =======
</TABLE>
- -------------------------
* Earnings were insufficient to cover fixed charges and preference dividends by
$642.9 million for 1998 and $431.6 million for 1997.
For purposes of computing these ratios, our combined earnings before income
taxes, as reported in our most recent Annual Report on Form 10-K/A, have been
increased by the amount of our fixed charges plus preference dividends. The
amount of earnings was then divided by the amount of fixed charges and
preference dividends, the result being the ratio of earnings to combined fixed
charges and preference dividends. Fixed charges represent interest expense (no
interest has been capitalized) plus the estimated interest factor in rental
expense.
<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 on Form S-3 and the related Prospectus of Oxford Health
Plans, Inc. for the registration of 22,530,000 shares of its common stock,
277,629.156 shares of Series D Cumulative Preferred Stock, 132,808.070 shares
of Series E Cumulative Preferred Stock, 15,800,000 Series A Warrants and
6,730,000 Series B Warrants and to the incorporation by reference therein of
our report dated March 9, 1999, with respect to the consolidated financial
statements and schedules of Oxford Health Plans, Inc. included in its Annual
Report on Form 10-K/A for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
April 30, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Oxford Health Plans, Inc.:
We consent to incorporation by reference in the Registration Statement on Form
S-3 of Oxford Health Plans, Inc. 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 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
April 30, 1999
