<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant (X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For use of the Commission Only (as permitted by Rule
14a-6(e) (2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OXFORD HEALTH PLANS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed: March 29, 2000
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<PAGE> 2
March 29, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Meeting") of Oxford Health Plans, Inc. (the "Company") to be held on May
11, 2000 at 10:00 a.m., local time, at the Trumbull Marriott, 180 Hawley Lane,
Trumbull, Connecticut 06611.
This year, three directors are nominated for election to the Board. At the
Meeting you will be asked to: (i) elect three Class III Directors to serve until
the 2003 Annual Meeting; (ii) amend the Company's Second Amended and Restated
Certificate of Incorporation, as amended, to confer the power to vote upon
future holders (if any) of the Company's Series D Junior Subordinated Debentures
due May 13, 2008 and Series E Junior Subordinated Debentures due May 13, 2008
and to clarify the voting rights of the Company's Series D Cumulative Preferred
Stock and Series E Cumulative Preferred Stock; (iii) amend the Oxford Health
Plans, Inc. 1991 Stock Option Plan, as amended, to increase the number of shares
of Common Stock issuable thereunder from 25,580,000 shares to 30,380,000 shares;
(iv) amend the Oxford Health Plans, Inc. 1991 Stock Option Plan, as amended, to
extend the term thereof from ten years to fifteen years; and (v) act on a
shareholder proposal to request that the Company establish a nominating
committee comprised solely of independent directors.
The accompanying Proxy Statement provides a detailed description of these
proposals. You are urged to read the accompanying materials so that you may be
informed about the business to come before the Meeting.
It is important that your shares be represented at the Meeting.
Accordingly, we urge you, whether or not you plan to attend the Meeting, to
complete, sign and date your proxy and return it to us promptly in the enclosed
envelope or to otherwise vote in accordance with the instructions on your proxy
card. If you attend the Meeting, you may vote in person, even if you have
previously mailed in your proxy. However, if you hold your shares in brokerage
accounts ("street name"), you will need to provide a broker's statement
reflecting stock ownership as of the Record Date to be able to vote by ballot at
the Meeting.
We look forward to seeing you at the Meeting.
IF YOU PLAN TO ATTEND THE MEETING:
Please note that space limitations make it necessary to limit attendance to
stockholders and one guest. Admission to the meeting will be on a first-come,
first-served basis. Registration and seating will begin at 9:00 a.m.
Stockholders may be asked to present valid picture identification. Stockholders
holding stock in street name will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date.
Sincerely,
Norman C. Payson, M.D.
Chief Executive Officer and
Chairman of the Board
<PAGE> 3
OXFORD HEALTH PLANS, INC.
48 MONROE TURNPIKE
TRUMBULL, CONNECTICUT 06611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2000
To the Stockholders of Oxford Health Plans, Inc.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Oxford Health Plans, Inc. (the "Company") will be held on May 11,
2000 at 10:00 a.m., local time, at the Trumbull Marriott, 180 Hawley Lane,
Trumbull, Connecticut 06611, for the following purposes:
1. To elect three directors to serve as Class III Directors of
the Company for a term ending at the 2003 Annual Meeting;
2. To amend the Company's Second Amended and Restated Certificate
of Incorporation, as amended, to confer the power to vote upon
future holders (if any) of the Company's Series D Junior
Subordinated Debentures due May 13, 2008 and Series E Junior
Subordinated Debentures due May 13, 2008 and to clarify the
voting rights of the Series D Cumulative Preferred Stock, par
value $.01 per share (the "Series D Preferred Stock"), and the
Series E Preferred Stock, par value $.01 per share (the
"Series E Preferred Stock");
3. To amend the Oxford Health Plans, Inc. 1991 Stock Option Plan,
as amended, to increase the number of shares of Common Stock
issuable thereunder from 25,580,000 shares to 30,380,000
shares;
4. To amend the Oxford Health Plans, Inc. 1991 Stock Option Plan,
as amended, to extend the term thereof from ten years to
fifteen years;
5. To act on a shareholder proposal to request that the Company
establish a nominating committee comprised solely of
independent directors; and
6. To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of outstanding shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), Series D Preferred Stock and
Series E Preferred Stock at the close of business on March 16, 2000 will be
entitled to notice of, and to vote at, the Meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
JON S. RICHARDSON
Secretary
Trumbull, Connecticut
March 29, 2000
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE REFER TO THE INSTRUCTIONS
INCLUDED ON THE ENCLOSED PROXY CARD. THE PROXY CARD WILL INDICATE IF YOU MAY
VOTE BY RETURNING THE PROXY CARD IN THE ENVELOPE PROVIDED, BY INTERNET OR BY
TELEPHONE.
<PAGE> 4
OXFORD HEALTH PLANS, INC.
48 MONROE TURNPIKE
TRUMBULL, CONNECTICUT 06611
PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD MAY 11, 2000
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Oxford Health
Plans, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the Annual Meeting of Stockholders to be held on May 11,
2000, at 10:00 a.m., local time, at the Trumbull Marriott, 180 Hawley Lane,
Trumbull, Connecticut, and any adjournment or postponement thereof (the
"Meeting").
At the Meeting, stockholders will be asked to consider and vote upon five
proposals: (1) to elect three directors to serve as Class III Directors of the
Company until the 2003 Annual Meeting ("Proposal Number One"); (2) to amend the
Company's Second Amended and Restated Certificate of Incorporation, as amended,
to confer the power to vote upon future holders (if any) of the Company's Series
D Junior Subordinated Debentures due May 13, 2008 and Series E Junior
Subordinated Debentures due May 13, 2008, and to amend the Certificates of
Designations for each of the Series D Cumulative Preferred Stock, par value $.01
per share (the "Series D Preferred Stock"), and the Series E Cumulative
Preferred Stock, par value $.01 per share (the "Series E Preferred Stock"), to
clarify their voting rights ("Proposal Number Two"); (3) to amend the Oxford
Health Plans, Inc. 1991 Stock Option Plan, as amended, to increase the number of
shares of Common Stock issuable thereunder from 25,580,000 shares to 30,380,000
shares; ("Proposal Number Three"); (4) to amend the Oxford Health Plans, Inc.
1991 Stock Option Plan, as amended, to extend the term thereof from ten years to
fifteen years ("Proposal Number Four"); and (5) a shareholder proposal to
request the Company to establish a nominating committee comprised solely of
independent directors ("Proposal Number Five").
This Proxy Statement is dated March 29, 2000 and is first being mailed to
stockholders along with the related form of proxy on or about March 29, 2000.
If a proxy in the accompanying form is properly executed and returned to
the Company in time for the Meeting or the proxy is otherwise voted in
accordance with the instructions on the proxy card, and such proxy is not
revoked prior to the time it is exercised, the shares represented by the proxy
will be voted in accordance with the directions specified therein for the
matters listed on the proxy card. You will save the Company expense when voting
your shares by following the instructions on your proxy card and voting through
the Internet or telephone. Unless the proxy specifies otherwise, proxies will be
voted (a) FOR Proposal Number One, Proposal Number Two, Proposal Number Three
and Proposal Number Four; (b) AGAINST Proposal Number Five and (c) otherwise in
the discretion of the proxy holders as to any other matter that may come before
the Meeting.
Votes are counted by tellers of the Company's transfer agent. These tellers
will canvas the stockholders present at the Meeting, count their votes and count
the votes represented by proxies presented. Abstentions and broker nonvotes are
counted for purposes of determining the number of shares represented at the
Meeting, but are deemed not to have voted on the proposal. Broker nonvotes occur
when a broker nominee, holding shares in street name for the beneficial owner
thereof, has not received voting instructions from the beneficial owner and does
not have discretionary authority to vote.
REVOCABILITY OF PROXY
Any stockholder of the Company who has given a proxy has the power to
revoke such proxy at any time before it is voted either (i) by filing a written
revocation or a duly executed proxy bearing a later date with Jon S. Richardson,
Secretary of the Company, at Oxford Health Plans, Inc., 48 Monroe Turnpike,
Trumbull, Connecticut 06611, (ii) by appearing at the
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Meeting and voting in person or (iii) by casting another vote in the same manner
as the original vote was cast. Attendance at the Meeting will not in and of
itself constitute the revocation of a proxy. Voting by those present during the
conduct of the Meeting will be by ballot. Stockholders whose shares are held by
a broker in street name and who wish to vote by ballot at the Meeting, must
attach a broker's statement reflecting ownership as of the Record Date to such
ballot to evidence ownership and voting rights.
RECORD DATE, OUTSTANDING SECURITIES AND VOTES REQUIRED
The Board of Directors of the Company has fixed the close of business on
March 16, 2000 as the record date (the "Record Date") for determining holders of
outstanding shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), Series D Cumulative Preferred Stock, par value $.01 per share
("Series D Preferred Stock"), and Series E Cumulative Preferred Stock, par value
$.01 per share ("Series E Preferred Stock"), who are entitled to notice of and
to vote at the Meeting. As of the Record Date, there were 1,528 holders of
record of Common Stock and 82,072,595 shares of Common Stock issued and
outstanding, 22 holders of record of Series D Preferred Stock and 234,826.5513
shares of Series D Preferred Stock issued and outstanding, and 22 holders of
record of Series E Preferred Stock and 26,283.2761 shares of Series E Preferred
Stock issued and outstanding. As of the Record Date, each share of Common Stock
is entitled to one vote, the shares of Series D Preferred Stock, in the
aggregate, are entitled to 14,262,170 votes, and the shares of Series E
Preferred Stock, in the aggregate, are entitled to 1,581,874 votes.
The approval of Proposal Number One requires the affirmative vote of a
plurality of the votes attributable to shares of Common Stock, Series D
Preferred Stock and Series E Preferred Stock which are present in person or by
proxy at the Meeting. The approval of Proposal Number Two requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, the holders of a majority of the outstanding shares of Series D
Preferred Stock and the holders of a majority of the outstanding shares of
Series E Preferred Stock. The approval of Proposal Number Three, Proposal Number
Four and Proposal Number Five requires the affirmative vote of a majority of the
votes cast by the shares of Common Stock, Series D Preferred Stock and Series E
Preferred Stock which are present in person or by proxy at the Meeting.
The Company expects that the officers and directors of the Company will
vote the shares of Common Stock held by them (representing approximately 4.35%
of the shares of Common Stock issued and outstanding as of March 1, 2000) in
favor of Proposal Number One, Proposal Number Two, Proposal Number Three and
Proposal Number Four and against Proposal Number Five.
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PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Company's Second Amended and Restated Certificate of Incorporation, as
amended (the "Certificate"), provides for a Board of Directors divided into
three classes, as nearly equal in number as the then total number of directors
constituting the entire Board permits, with the term of office of one class
expiring each year at the Annual Meeting. Each class of directors is elected for
a term of three years except in the case of elections to fill vacancies or newly
created directorships.
The Board of Directors presently consists of eleven persons: Norman C.
Payson, M.D., Fred N. Nazem, David Bonderman, Jonathan J. Coslet, James G.
Coulter, Robert B. Milligan, Jr., Marcia J. Radosevich, Ph.D., Benjamin H.
Safirstein, M.D., Thomas A. Scully, Kent J. Thiry and Stephen F. Wiggins. Mr.
Wiggins and Dr. Radosevich have informed the Company that they will not be
standing for re-election to the Board of Directors. The proxies cannot be voted
for a greater number of persons than the three nominees named.
Three individuals are to be elected to serve as Class III Directors for a
term of three years and until the election and qualification of their successor.
Unless a stockholder WITHHOLDS AUTHORITY, the holders of proxies representing
shares of Common Stock, Series D Preferred Stock and Series E Preferred Stock
will vote FOR the election of Dr. Payson, Mr. Milligan and Joseph W. Brown, Jr.
The Board of Directors has no reason to believe that any nominee will decline or
be unable to serve as a Director of the Company. However, if a nominee shall be
unavailable for any reason, then the proxies may be voted for the election of
such person as may be recommended by the Board of Directors. Messrs. Thiry,
Bonderman and Coslet and Dr. Safirstein serve as Class I Directors whose terms
expire in 2001, and Messrs, Nazem, Coulter and Scully serve as Class II
Directors whose terms expire in 2002. These directors are not standing for
reelection because their terms as directors extend past the Meeting.
Pursuant to the terms of the Investment Agreement, dated as of February 23,
1998, as amended (the "Investment Agreement"), by and between the Company and
TPG Partners II, L.P. ("TPG Partners"), an affiliate of Texas Pacific Group
("TPG"), certain affiliates of TPG Partners and certain assignees of TPG
Partners purchased $350 million in shares of senior preferred stock and warrants
to purchase Common Stock. In the Investment Agreement, the Company agreed to
appoint Dr. Payson as its Chief Executive Officer and as a Director and agreed
that TPG would be entitled to nominate four additional directors. Dr. Payson was
elected Chief Executive Officer and joined the Board of Directors in May 1998
and became Chairman of the Board in May 1999. Messrs. Bonderman, Coslet and
Coulter were nominated by TPG pursuant to the Investment Agreement and joined
the Board of Directors in May 1998. Mr. Thiry was also nominated by TPG pursuant
to the Investment Agreement and joined the Board of Directors in August 1998.
Since the October 27, 1997 decline in the price per share of the Company's
Common Stock, numerous purported shareholder derivative actions were commenced
on behalf of the Company in Connecticut Superior Court and in the United States
District Courts for the Southern District of New York and the District of
Connecticut against the Company's directors and certain of its officers (and the
Company itself as a nominal defendant). These derivative complaints generally
alleged that the defendants breached their fiduciary obligations to the Company,
mismanaged the Company and wasted its assets in planning and implementing
certain changes to the Company's computer system, by making misrepresentations
concerning the status of those changes in the Company's computer system, by
failing to design and to implement adequate financial controls and information
systems for the Company, and by making misrepresentations concerning the
Company's membership enrollment, revenues, profits and medical costs in the
Company's financial statements and other public representations. The complaints
further allege that certain of the defendants breached their fiduciary
obligations to the Company by disposing of the Company's Common Stock while the
price of that Common Stock was artificially inflated by their alleged
misstatements and omissions. The complaints seek unspecified damages, attorneys'
and experts' fees and costs and such other relief as the court deems proper. The
Company's motion to dismiss certain of the actions for failure to make a demand
on the Company's Board of Directors that the Company pursue the causes of action
alleged in the complaint was recently denied.
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The following table sets forth the age and title of each nominee director,
each director whose term expires and is not standing for re-election, each
director continuing in office and each executive officer of the Company who is
not a director, followed by descriptions of such person's additional business
experience during the past five years.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Norman C. Payson, M.D. 52 Chief Executive Officer, Chairman of the Board of Directors
Robert B. Milligan, Jr. 50 Director
Joseph W. Brown, Jr. 51 Director
</TABLE>
DIRECTOR WHOSE TERMS EXPIRE AND ARE NOT STANDING FOR RE-ELECTION
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Marcia J. Radosevich, Ph.D. 47 Director
Stephen F. Wiggins 43 Director
</TABLE>
DIRECTORS WHOSE TERMS HAVE NOT EXPIRED
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David Bonderman 57 Director
Jonathan J. Coslet 35 Director
James G. Coulter 40 Director
Fred F. Nazem 59 Director
Benjamin H. Safirstein, M.D. 61 Director
Thomas A. Scully 42 Director
Kent J. Thiry 44 Director
</TABLE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Charles M. Schneider 54 President and Chief Operating Officer
Kurt B. Thompson 39 Executive Vice President, Chief Financial Officer
Alan M. Muney, M.D., M.H.A. 46 Executive Vice President, Chief Medical Officer
Jon S. Richardson 56 Executive Vice President, General Counsel and Secretary
</TABLE>
Norman C. Payson, M.D. became the Chief Executive Officer and a Director of
the Company in May 1998 and assumed the role of Chairman of the Board of
Directors in May 1999. Dr. Payson co-founded Healthsource, Inc. in 1985, a
health maintenance organization in Hooksett, New Hampshire, and served as
President and Chief Executive Officer of Healthsource until its sale to Cigna
Corporation in August of 1997. From 1980 until 1984, Dr. Payson was the Chief
Executive Officer of the Hawthorne Community Medical Group, Inc., a
multi-specialty physician group with a primary HMO practice of approximately
100,000 members. From 1975 to 1980, Dr. Payson was a family practitioner and
involved in HMOs.
David Bonderman joined the Board of Directors in May 1998. Mr. Bonderman is
a principal of TPG, a partnership he co-founded in 1992. Mr. Bonderman serves on
the Boards of Directors of J. Crew Group, Inc., Continental Airlines, Inc., Bell
& Howell Company, Virgin Entertainment, Beringer Wine Estates, Inc., Denbury
Resources, Inc., Ducati Motor Holdings, S.p.A. and Washington Mutual, Inc. and
is Chairman of the Board of Ryanair, PLC. Mr. Bonderman also serves in general
partner advisory board roles for Newbridge Investment Partners, L.P., Newbridge
Latin America, L.P. and Aqua International, L.P.
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Joseph W. Brown, Jr. is being nominated to the Board of Directors of the
Company. Mr. Brown has been the Chairman and Chief Executive Officer from
January 1999 through the present of MBIA Inc., a financial services company. Mr.
Brown was the Chairman, President and Chief Executive Officer of Talegen
Holdings, Inc. (formerly the insurance holdings operations of Xerox Corporation)
from January 1992 until August 1998. From November 1974 through November 1991,
Mr. Brown served in various positions, including as the President and Chief
Executive Officer, of the Fireman's Fund Corporation. Mr. Brown currently serves
on the board of directors of MBIA Inc.
Jonathan J. Coslet joined the Board of Directors in May 1998. Mr. Coslet
has been an executive of TPG since 1993. Prior to joining TPG, Mr. Coslet was in
the Investment Banking Department of Donaldson, Lufkin & Jenrette, specializing
in leveraged acquisitions and high yield finance from September 1991 to February
1993. Mr. Coslet serves on the Board of Directors of Magellan Health Services,
Genesis ElderCare Corp. and Brite! Now.
James G. Coulter joined the Board of Directors in May 1998. Mr. Coulter is
a principal of TPG, a partnership he co-founded in 1992. Mr. Coulter serves on
the Boards of Directors of J. Crew Group, Inc., America West Airlines, Inc.,
Virgin Entertainment, Beringer Wine Estates, Inc., Genesis ElderCare Corp. and
Paradyne Partners, L.P. and was formerly on the Board of Directors of Allied
Waste Industries, Inc. and Continental Airlines, Inc. Mr. Coulter also serves in
general partner advisory board roles for Newbridge Investment Partners, L.P.,
Newbridge Latin America, L.P. and Aqua International, L.P.
Robert B. Milligan, Jr. has been a Director of the Company since July 1992.
Mr. Milligan was Chairman of Wyndam Capital, L.P., a registered broker-dealer,
from 1995 through 1998 and, through December 1997, was Director, President and
Chief Executive Officer of Verigen Inc., a biopharmaceutical company. From 1989
through 1995, Mr. Milligan was the managing general partner of Madison Group,
L.P., a private equity fund. Mr. Milligan currently engages in business and
financial consulting as President and Chief Executive Officer of Fairchester,
Inc. and, as such, Mr. Milligan was recently one of the founders of BenefitPort,
LLC, a national distributor of employee benefit products and technology. Mr.
Milligan has been an officer and has served on the boards of several private and
public companies.
Fred F. Nazem has served as a Director of the Company since June 1990. He
also served as non-executive Chairman of the Board of Directors from February
1998 to May 1999. Since 1981, Mr. Nazem has been President of Nazem, Inc. and
Managing General Partner of the general partner of several Nazem & Company
limited partnerships that are affiliated venture capital funds. Mr. Nazem is a
director of three public companies, Tegal Corporation, MediConsult.Com, Inc. and
Spatial Technologies, Inc., as well as a number of privately held firms.
Marcia J. Radosevich, Ph.D. has been a Director since July 1994. Dr.
Radosevich has informed the Company that she will not be standing for
re-election to the Board of Directors. Dr. Radosevich has been acting as a
consultant to Boston University's Health Policy Institute since March 1998. From
April 1992 until December 1997, Dr. Radosevich was the Chairman, President and
Chief Executive Officer of HPR Inc. (formerly, Health Payment Review, Inc.), a
software company headquartered in Cambridge, Massachusetts, which develops and
markets cost management, provider profiling and information systems for the
health care industry. From December 1997 until March 1998, Dr. Radosevich worked
as a consultant to HPR Inc.
Benjamin H. Safirstein, M.D. has been a Director since 1985. Dr. Safirstein
was the Company's New York Regional Vice President and Medical Director from
January 1996 until July 1998. Dr. Safirstein served as the Senior Medical
Director of the Company from 1985 to September 1992. Dr. Safirstein is a
Clinical Associate Professor of Medicine at the Mount Sinai School of Medicine.
He is board certified in internal medicine and pulmonary medicine. Dr.
Safirstein also is in private practice with the Montclair Medical Group,
Montclair, New Jersey. Dr. Safirstein is a graduate of the Chicago Medical
School and the Mount Sinai Hospital residency program, where he was Chief
Resident of Medicine.
Thomas A. Scully has been a Director since September 1993. Since January
1995, he has been President of the Federation of American Health Systems in
Washington, D.C. From 1992 until the end of 1994, he was a partner in the
Washington D.C. law firm of Patton, Boggs & Blow. Prior to that, Mr. Scully
served for four years on the White House staff. During 1992, he was Deputy
Assistant for Domestic Policy to President Bush.
Kent J. Thiry has been a Director of the Company since August 1998. Mr.
Thiry has been Chairman and Chief
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<PAGE> 9
Executive Officer of Total Renal Care Holdings, Inc., a company which operates a
chain of dialysis centers, since October 1999. Mr. Thiry was President and Chief
Executive Officer of Vivra Holdings, Inc., a specialty healthcare services
company, from June 1997 until October 1998. Prior thereto, Mr. Thiry was Chief
Executive Officer of Vivra Incorporated from November 1992 and President and
Chief Operating Officer of Vivra Incorporated from September 1991.
Stephen F. Wiggins, the founder of the Company, served as Chairman of the
Board of Directors and Chief Executive Officer of the Company since its
formation in 1984 until August 1997. He retained the title of Chairman of the
Board until February 1998 and has served as a Director since such time. Mr.
Wiggins has informed the Company that he will not be standing for re-election to
the Board of Directors. Mr. Wiggins is currently the Chairman and Chief
Executive Officer of HealthMarket, Inc. and the non-executive Chairman of
BenefitPort, LLC and IntelliClaim, Inc.
Charles M. Schneider joined the Company as President and Chief Operating
Officer in December 1999. Prior to joining the Company, Mr. Schneider was
president and founder of the Concordant Group, LLC, a management consulting firm
for managed care companies and other healthcare providers, from August 1997 to
December 1999. Mr. Schneider served in several capacities, including executive
vice president and chief operating officer of Healthsource, Inc. from April 1990
until August 1997.
Kurt B. Thompson has served as the Company's Vice President, Finance since
August 1998. In March 2000, Mr. Thompson was appointed to the position of
Executive Vice President and Chief Financial Officer. From July 1995 through
July 1998, Mr. Thompson was a financial executive with Kmart Corporation in
Troy, Michigan. While at Kmart he served in areas of increasing responsibility
from Assistant Controller to Divisional Vice President Finance and Vice
President Merchandise Controller. From October 1991 to July 1995 he served as
Vice President Controller and Treasurer of F&M Distributors, Inc., a deep
discount drug store chain located in Warren, Michigan. From December 1984 to
June 1991 he was employed by Arthur Andersen & Co.
Alan M. Muney, M.D., M.H.A. joined the Company as Executive Vice
President/Chief Medical Officer in April 1998. Prior thereto, Dr. Muney was the
Senior Vice President of Medical Affairs/Chief Medical Officer of Avanti Health
Systems and NYLCare Health Plans from December 1995 until April 1998. From 1988
until 1995, Dr. Muney held a number of positions with Mullikin Medical Center,
his most recent position being the Greater Los Angeles Regional Medical
Director.
Jon S. Richardson joined the Company in April 1998 as Special Counsel to
the Chief Executive Officer. In December 1999, Mr. Richardson was appointed to
the position of General Counsel and Executive Vice President. From January 1996
to July 1997, Mr. Richardson served as Special Counsel to the President at
Healthsource, Inc. Prior thereto, Mr. Richardson was a shareholder with the law
firm Sheehan, Phinney, Bass & Green, P.C. where he worked since 1970.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee, currently
comprised of Messrs. Nazem (Chairman), Coslet and Scully, a Compensation
Committee currently comprised of Messrs. Milligan (Chairman), Coulter, Scully
and Thiry, a Nominating Committee currently comprised of Messrs. Bonderman
(Chairman), Milligan and Nazem and Dr. Payson, an Ethics and Business Practices
Committee, currently comprised of Messrs. Coslet (Chairman), Nazem and Scully
and Dr. Radosevich, and a Special Litigation Committee, currently comprised of
Messrs. Bonderman (Chairman) and Coslet and Dr. Payson.
The functions of the Audit Committee are to recommend annually to the Board
of Directors the appointment of the independent auditors for the Company,
discuss and review the scope and the fees of the prospective annual audit and
review the results thereof with the independent auditors, review and approve
nonaudit services of the independent certified public accountants, review
compliance with existing major accounting and financial policies of the Company,
review the adequacy of the financial organization of the Company, and review
management's procedures and policies relative to the adequacy of the Company's
internal accounting controls and compliance with federal and state laws relating
to accounting practices.
The Compensation Committee consists entirely of independent directors and
administers the Oxford Health Plans, Inc. 1991 Stock Option Plan (the "1991
Stock Option Plans"), the Oxford Health Plans, Inc. 1997 Independent Contractor
Plan
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(the "Independent Contractor Plan") and the 1996 Management Incentive
Compensation Plan of Oxford Health Plans, Inc. (the "Incentive Compensation
Plan") and oversees administration of the Company's 401(k) Plan. The Committee
also reviews and recommends from time to time amendments to compensation plans
and new compensation plans. The Compensation Committee also considers and makes
recommendations with respect to the compensation of the Company's Chief
Executive Officer and other members of senior management and makes
recommendations to the Board of Directors generally on organization, succession,
salary and incentive compensation, and other grants and awards under the
Company's compensation and benefit plans.
The Nominating Committee consists of a majority of independent directors
and was established in 1995 to consider and make recommendations on nominations
for membership in the Company's Board of Directors. The Committee will consider
nominees recommended by stockholders upon submission in writing to the Secretary
of the Company of the names of such nominees, together with their qualifications
for service as a director of the Company.
The Ethics and Business Practices Committee was established in 1997 to
supervise the development of comprehensive programs to promote and monitor the
Company's compliance with applicable legal and regulatory requirements and the
development of value-based business practice guidelines for the Company. The
Committee works directly with the Company's Vice President - Compliance and also
oversees the Company's responses to regulatory examinations and inquiries.
In May 1998, the Board of Directors established a Special Litigation
Committee to oversee and direct the Company's position and responses with
respect to pending class action and derivative litigation and related regulatory
investigations and proceedings. All of the members of the Special Litigation
Committee were appointed to the Board of Directors after the events that gave
rise to the litigation.
During 1999, the Board of Directors held eight meetings, the Audit
Committee held four meetings, the Compensation Committee held eight meetings,
and the Ethics and Business Practices Committee held two meetings. The
Nominating and Special Litigation Committees did not hold any meetings in 1999.
During 1999, each Director of the Company attended at least 75% of the meetings
of the Board of Directors and 75% of the meetings of any committees upon which
he or she served which occurred while each Director was a member of the Board
and such committees, with the following exceptions: (i) Mr. Coulter attended
three out of eight meetings of the Board of Directors and five out of eight
meetings of the Compensation Committee; (ii) Dr. Radosevich attended three out
of eight meetings of the Board of Directors and one out of two meetings of the
Ethics and Business Practices Committee; (iii) Mr. Wiggins attended four out of
eight meetings of the Board of Directors; (iv) Mr. Thiry attended five out of
eight meetings of the Compensation Committee; and (v) each of Mr. Nazem and Mr.
Scully attended one out of two meetings of the Ethics and Business Practices
Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of its Common
Stock, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission (the "Commission") and the National Association of
Securities Dealers, Inc. Officers, directors and greater than ten percent
stockholders are required by the Commission to furnish the Company with copies
of all Section 16(a) forms that they file.
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no reports on Form 5 or Form
4 were required for those persons, the Company believes all filing requirements
applicable to its officers, directors and greater than ten percent stockholders
were complied with in 1999.
9
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation of Norman C. Payson, M.D. who
served as Chief Executive Officer of the Company during 1999, the four most
highly compensated executive officers of the Company who were serving as
executive officers at the end of 1999 and two individuals who would have been
among the four most highly compensated executive officers of the Company for
1999 but for the fact that they were not serving as executive officers at the
end of 1999.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPEN- ALL OTHER
NAME AND PRINCIPAL ---------------------------------------- SATION AWARDS- COMPENSA-
POSITION YEAR SALARY(1) BONUS OTHER(2) OPTIONS(#) (3) TION(4)
-------- ---- --------- ----- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
NORMAN C. PAYSON, M.D 1999 $ 350,000 $ 350,000 $ 64,058 400,000 $ --
CHAIRMAN AND CHIEF EXECUTIVE 1998 350,000 350,000 2,571,784 3,000,000 --
OFFICER (5) 1997 -- -- -- -- --
YON Y. JORDEN 1999 401,455 400,000 14,050 112,500 3,154
EXECUTIVE VICE PRESIDENT 1998 215,385 300,000 142,271 300,000 --
AND CHIEF FINANCIAL 1997 -- -- -- -- --
OFFICER(6)
ALAN M. MUNEY, M.D., M.H.A 1999 351,454 150,000 4,050 56,250 1,615
EXECUTIVE VICE PRESIDENT AND 1998 266,538 60,000 4,500 100,000 2,019
CHIEF MEDICAL OFFICER (7) 1997 -- -- -- -- --
MARVIN P. RICH 1999 601,455 600,000 4,050 150,000 2,077
EXECUTIVE VICE PRESIDENT AND 1998 450,000 300,000 213,037 800,000 2,077
CHIEF ADMINISTRATIVE OFFICER (8) 1997 -- -- -- -- --
JON S. RICHARDSON 1999 276,455 92,000 62,189 120,000 4,800
EXECUTIVE VICE PRESIDENT AND 1998 -- -- -- -- --
GENERAL COUNSEL (9) 1997 -- -- -- -- --
JEFFERY H. BOYD 1999 347,788 500,000 4,823 93,750 1,231,035
EXECUTIVE VICE PRESIDENT 1998 325,000 250,000 6,600 275,000 30,610
AND GENERAL COUNSEL(10) 1997 320,567 250,000 6,854 70,000 29,944
WILLIAM M. SULLIVAN 1999 648,032 600,000 4,275 150,000 2,429,389
PRESIDENT (11) 1998 600,000 500,000 29,112 400,000 28,004
1997 492,692 -- 6,075 100,000 27,888
</TABLE>
(1) Includes amounts of compensation deferred by the named officers
pursuant to the Company's qualified defined contribution plan (the
"Savings Plan").
(2) The amounts paid to Mr. Richardson and Dr. Payson include payment by
the Company of certain commuting, travel and related expenses.
Payments made to Dr. Payson in 1999 include $50,000 toward financial
planning services and in 1998 include the value of a below market
purchase of 644,330 shares of Common Stock of $2,065,464 which was
based on the difference between the purchase price of $15.52 per share
and the average market price of the Company's Common Stock on May 13,
1998, when Dr. Payson actually purchased the shares, of $18.73. Dr.
Payson became obligated to purchase these shares on February 23, 1998
when he entered into his employment agreement and the purchase price
was determined based on the trading value of the Company's Common
Stock during the time the agreement was being negotiated. The amounts
paid by the Company to Ms. Jorden include $10,000 toward financial
planning services and the balance represents payment of an automobile
allowance. The
10
<PAGE> 12
amounts paid by the Company to Dr. Muney, Mr. Rich, Mr. Sullivan and
Mr. Boyd represent payment of automobile allowances.
(3) Includes grants of options to purchase the Company's Common Stock.
(4) Includes matching contributions made by the Company pursuant to the
Savings Plan and premiums paid by the Company for certain life
insurance policies. The amounts paid to Mr. Sullivan and Mr. Boyd
include severance payments of $2,400,000 and $1,200,000, respectively.
(5) Dr. Payson became Chairman of the Board in May 1999 in addition to his
position as Chief Executive Officer.
(6) Ms. Jorden's employment with the Company commenced in June 1998 and
was terminated in March 2000.
(7) Dr. Muney commenced employment with the Company in April 1998.
(8) Mr. Rich commenced employment with the Company in March 1998 and
terminated his relationship with the Company in January 2000.
(9) Mr. Richardson became an executive officer in December 1999.
(10) Mr. Boyd resigned from his position as General Counsel and Executive
Vice President in December 1999.
(11) Mr. Sullivan resigned from his position as President of the Company in
October 1999.
11
<PAGE> 13
OPTIONS GRANTED IN 1999
The following table sets forth certain information regarding stock options
granted in 1999 to the seven individuals named in the Summary Compensation
Table. In addition, in accordance with the Commission's rules, the table also
shows the present value of such grants at the date of grant under the
Black-Scholes option pricing model using the assumptions specified in the
footnotes to the table. It should be noted that this model is only one method of
valuing options, and the Company's use of the model should not be interpreted as
an endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the Common Stock over the exercise price
at the time of exercise.
<TABLE>
<CAPTION>
# of Securities % of Total Options Exercise Price Grant Date
Underlying Option Granted to Employees in Per Share Expiration Percent Value
Name Granted (1) Fiscal Year ($/share)(2) Date ($)(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NORMAN C. PAYSON, M.D 400,000 11.0% $18.0625 03/03/06 2,539,704
YON Y. JORDEN 112,500 3.1% $18.0625 03/03/06 714,292
ALAN M. MUNEY, M.D., M.H.A 56,250 1.5% $18.0625 03/03/06 357,146
MARVIN P. RICH 150,000 4.1% $18.0625 03/03/06 952,389
JON S. RICHARDSON 20,000 0.6% $18.6875 04/26/06 131,379
100,000 2.8% $ 11.50 12/22/06 447,918
JEFFERY H. BOYD 93,750 2.6% $18.0625 03/03/06 595,243
WILLIAM M. SULLIVAN 150,000 4.1% $18.0625 03/03/06 952,389
</TABLE>
(1) All options granted and reported in this table were made pursuant to the
Oxford Health Plans, Inc. 1991 Stock Option Plan, as amended (the "1991
Stock Option Plan"). All of the options granted under the 1991 Stock Option
Plan and reported in this table have the following material terms: options
may be either (i) "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986 or (ii) nonqualified stock options; all
options expire upon the earlier to occur of seven years from the date of
grant or 90 days following termination of employment; and the aggregate
fair market value (determined at the time of grant) of shares issuable
pursuant to incentive stock options which become exercisable in any
calendar year by an employee may not exceed $100,000. 25% of the above
listed options vest on each of the first four anniversaries following the
date of grant except for the December 1999 grant to Mr. Richardson which
vests over a two year period on a pro rata basis each quarter. The
Committee may provide for accelerated exercisability of options upon the
optionee's death, retirement, disability (or other events), upon a Change
in Control (as defined in the 1991 Stock Option Plan) or the reasonable
possibility of a Change in Control during the succeeding six-month period.
The Committee has determined that, with the exception of Mr. Sullivan's
options, all of the above named officers' options shall vest upon a Change
in Control. The vesting of Mr. Sullivan's options upon the occurrence of a
Change in Control or the determination by the Compensation Committee that
there is a reasonable possibility of a Change in Control during the
succeeding six-month period is within the discretion of the Chief Executive
Officer and Compensation Committee, respectively. Each of Mr. Sullivan's
and Mr. Boyd's options continue to use and remain exercisable for a one
year consulting period following their employment termination dates of
November 1, 1999 and December 14, 1999, respectively.
(2) Exercise price is the fair market value of the Common Stock at the date of
grant.
(3) The amounts shown are based on the Black-Scholes option pricing model which
uses certain assumptions to estimate the value of employee stock options.
The material assumptions used include the following: expected volatility of
41.5%; expected term of four years from the date of grant; no expected
dividends; and risk-free interest rates of 5.4% for options granted in
March and April of 1999 and 5.9% for options granted December 1999. The
Black-Scholes valuation was discounted 3% per year of vesting to account
for risk of forfeiture and lack of transferability. The application of a
different assumption for expected volatility would result in different
values for options granted. The expected future volatility applied in
determining grant date present value is less than the Company's historical
volatility because the Company believes that its historical volatility was
unusually high. An increase in the volatility assumption
12
<PAGE> 14
would result in an increase in the grant date present value. The Company
believes that no option pricing model can accurately predict the future
value of employee stock options. Such options' value, if any, will depend
on the market price of the Company's Common Stock on the date of exercise.
AGGREGATED OPTION EXERCISES IN 1999
AND OPTION VALUES AT DECEMBER 31, 1999
The following table sets forth certain information concerning stock option
exercises during 1999 by the seven individuals named in the Summary Compensation
Table, including the aggregate value of gains on the date of exercise. The
following table indicates the number of shares covered by both exercisable and
nonexercisable stock options as of December 31, 1999 and the values for
"in-the-money" options which represent the excess of the closing market price of
the Common Stock at December 31, 1999 over the exercise price of any such
existing stock options. All values have been adjusted for the Company's
two-for-one stock splits effected in 1993, 1995 and 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options (1) In-The-Money Options
Shares Acquired on Value at December 31, 1999 at December 31, 1999
Name Exercise (#) Realized($) (#)Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORMAN C. PAYSON, M.D. - - 1,383,340 / 2,016,660 1,656,250 / 4,968,750
YON Y. JORDEN - - 75,000 / 337,500 165,625 / 496,875
ALAN M. MUNEY, M.D., M.H.A. - - 25,000 / 201,250 0 / 0
MARVIN P. RICH - - 200,000 / 750,000 0 / 0
JON S. RICHARDSON - - 25,000 / 195,000 0 / 118,750
JEFFERY H. BOYD - - 280,147 / 343,751 124,219 / 372,656
WILLIAM M. SULLIVAN 193,336 3,486,471 280,148 / 343,750 1,382,740 / 993,737
</TABLE>
(1) The above listed options vest in accordance with their terms. In addition,
these options, with the exception of Mr. Sullivan's options, vest upon the
occurrence of a Change in Control. The vesting of Mr. Sullivan's options upon
the occurrence of a Change in Control or the determination by the Compensation
Committee that there is a reasonable possibility of a Change in Control during
the succeeding six-month period is within the discretion of the Chief Executive
Officer and the Compensation Committee, respectively.
DIRECTORS' COMPENSATION
Each member of the Company's Board of Directors who is not a current
employee of the Company ("Non-Employee Director") receives an annual retainer of
$38,000. In addition, each Non-Employee Director is entitled to receive $1,000
plus expenses for each meeting of the Board of Directors and for each committee
meeting attended in person and $500 for each meeting attended by telephone
conference. Non-Employee Directors who are not former employees of the Company
may participate in the Non-Employee Directors Stock Option Plan, as amended (the
"Directors' Plan"), and be awarded nonqualified stock options. The Directors'
Plan currently provides that each year, on the first Friday following the
Company's annual meeting of stockholders, each individual elected, reelected or
continuing as a Non-Employee Director and who are not former employees of the
Company will automatically receive a nonqualified stock option for 5,000 shares
of the Company's Common Stock. The exercise price for such options is either the
average of the high and low prices at which the Common Stock traded on the
Nasdaq National Market on the date of grant or the last sale price of Common
Stock on the Nasdaq National Market on the date of grant, whichever is higher.
The Directors' Plan provides that one-fourth of the options granted under the
Directors' Plan vest on each of the date of grant and the Friday prior to the
first, second and third Annual Meeting of Stockholders following the date of
grant and that the options expire ten years from the date of grant. Pursuant to
the Directors' Plan, on May 14, 1999, Dr. Radosevich and Messrs. Bonderman,
Coulter, Coslet, Milligan, Scully and Thiry were each granted options to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$19.50 per share under the Directors' Plan. On May 14, 1999, Dr. Safirstein was
granted an option to purchase 5,000
13
<PAGE> 15
shares of the Company's Common Stock at an exercise price of $19.50 under the
1991 Stock Option Plan. These options granted to Dr. Safirstein are
nonqualified, vest 25% a year beginning on the first anniversary of the date of
grant and expire seven years from the date of grant.
Effective February 23, 1998, Mr. Nazem agreed to serve as non-executive
Chairman of the Board of Directors. As compensation for his service as such, the
Board of Directors approved payment of an annual retainer of $250,000 and a
grant of options to acquire 250,000 shares of the Company's Common Stock. These
options, all of which are currently vested, were granted in two tranches of
125,000 with exercise prices of $15.375 and $6.0625. In addition, on September
28, 1998, the Company entered into a consulting agreement with Mr. Nazem
pursuant to which the Company agreed to retain Mr. Nazem (for no additional
compensation) as a consultant until the earlier to occur of Mr. Nazem ceasing to
have any unexercised stock options or August 28, 2005.
In October 1999 the Company amended a consulting agreement, dated as of
July 24, 1998, with Dr. Safirstein pursuant to which the Company agreed to
retain Dr. Safirstein as a consultant for a period of one year for a per diem
fee. During this consulting period, Dr. Safirstein's stock options continue to
vest.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In February 1998, Dr. Payson entered into an employment agreement with the
Company (the "Payson Agreement") for an initial four-year term, with an
automatic one year renewal on the fourth anniversary of the effective date and
on each anniversary thereafter, unless one year's prior notice not to renew is
given. Pursuant to the Payson Agreement, Dr. Payson served the Company initially
in a consulting capacity and, as of May 13, 1998, the closing date (the
"Financing Effective Date") of the financings pursuant to the Investment
Agreement (the "TPG Financing"), he became Chief Executive Officer (and was also
appointed a director) of the Company. In May 1999, Dr. Payson assumed the role
of Chairman of the Board. Dr. Payson receives a base salary of $350,000 and is
eligible to receive an annual incentive award under the Company's incentive
compensation plans. Dr. Payson's base salary may be increased at the discretion
of the Compensation Committee.
In addition, Dr. Payson was granted a nonqualified stock option (the
"Option") to purchase 2,000,000 shares of Common Stock at an exercise price of
$15.52 per share, and a nonqualified stock option (the "Additional Option") to
purchase an additional 1,000,000 shares of Company Common Stock under the 1991
Stock Option Plan. The Option generally provides that 800,000 shares will vest
on February 23, 1999, and that the remaining 1,200,000 shares will vest ratably
on a monthly basis over the 36-month period ending February 23, 2002, provided
in each case that Dr. Payson is employed by the Company on the applicable
vesting date. The Option also provides for acceleration of vesting and extended
exercisability periods in certain circumstances, including certain terminations
of employment and a Change in Control (as defined in the 1991 Stock Option Plan)
of the Company. The Additional Option was granted on August 28, 1998, has an
exercise price of $6.0625, will generally vest ratably over the four years
commencing February 23, 1999, and will otherwise be subject to the terms and
conditions of the 1991 Stock Option Plan. The Additional Option also provides
for accelerated vesting following a Change in Control.
Pursuant to the Payson Agreement, upon the Financing Effective Date, Dr.
Payson purchased 644,330 shares of Common Stock (the "Purchased Shares") at a
cost of $10 million based on a purchase price of $15.52 per share. The Purchased
Shares and the shares acquired pursuant to exercise of the Option and the
Additional Option are subject to material restrictions on transfer and
disposition during the term of the Payson Agreement, which restrictions lapse
upon a Change in Control.
Pursuant to the Payson Agreement, if Dr. Payson is terminated by the
Company for Cause (as defined in the Payson Agreement) or if he voluntarily
terminates other than for Good Reason (as defined in the Payson Agreement), he
has agreed (i) not to compete with the Company for a period of six months
following such termination, if such termination occurs before the first
anniversary of the Payson Agreement, or for a period of one year following such
termination, if such termination occurs after the first anniversary of the
Payson Agreement, and (ii) not to solicit the Company's employees, customers and
providers for a period of six months following such termination. The
noncompetition and nonsolicitation covenants cease to apply following a Change
in Control of the Company.
14
<PAGE> 16
In June 1998, Ms. Jorden entered into an employment agreement with the
Company to serve as Chief Financial Officer. Ms. Jorden's agreement provided for
an initial four-year term. Under the terms of her agreement, Ms. Jorden received
an annual base salary of $400,000 and a minimum annual performance bonus (in an
amount no greater than 100% of her base salary) consistent with the Company's
management incentive program, provided, however, that for the years 1998, 1999,
2000 and 2001 such bonus was guaranteed in an amount equal to 100% of her base
salary. Pursuant to the agreement, in 1998 Ms. Jorden also received a sign-on
bonus of $300,000 and options to acquire 300,000 shares of Common Stock under
the 1991 Stock Option Plan. In addition, the Company agreed to provide Ms.
Jorden with a $400,000 secured loan (the "Jorden Loan") upon the following
terms: (i) interest at the lowest rate to avoid imputed income (currently 5.8%);
(ii) repayable in four equal installments of principal, together with accrued
interest (or earlier at Ms. Jorden's option); and (iii) the Jorden Loan will be
forgiven if Ms. Jorden is terminated without Cause following a Change of Control
(as both terms are defined in her agreement). As of March 1, 2000, the total
amount of principal and interest outstanding on the Jorden Loan was $305,800.
The largest aggregate amount outstanding to date on the Jorden Loan was
$429,000. The agreement provided that Ms. Jorden's base salary was subject to
annual review by the Company's Compensation Committee. If prior to (or more than
two years following) a Change of Control, Ms. Jorden's employment with the
Company is terminated by the Company without Cause, by Ms. Jorden for Good
Reason (each as defined in her agreement) or by notice by the Company of
non-renewal, then Ms. Jorden would receive a payment (payable in 24 equal
monthly installments) equal to two times the sum of her base salary during the
twelve-month period immediately preceding the date of termination plus her
annual bonus during the fiscal year prior to the date of termination, provided
that such amount shall not be less than $1.6 million. The agreement also
provided that if any payments made to Ms. Jorden pursuant to the agreement or
otherwise would be subject to any excise tax under Section 4999 of the Internal
Revenue Code, the Company will provide her with an additional payment such that
she retains a net amount equal to the payments she would have retained if such
excise tax had not applied
Effective March 15, 2000, the Company terminated Ms. Jorden's relationship
with the Company without Cause pursuant to the terms of her agreement and agreed
to pay her an amount equal to $1,621,600, to be paid in equal installments over
the next two years and to continue to provide her with welfare benefits for a
period of one-year following her date of termination.
In April 1998, the Company entered into an employment agreement with Dr.
Muney for Dr. Muney to serve as Executive Vice President and Chief Medical
Officer. The agreement provides for an initial two-year term and automatically
renews for an additional two years upon each second anniversary of its effective
date, unless prior notice to not renew is given by either party. Under the terms
of Dr. Muney's agreement, Dr. Muney receives an annual base salary of $350,000
and is eligible for an annual performance bonus of a minimum of 50 percent of
his annual base salary. Pursuant to the agreement, in 1998, Dr. Muney was
granted options to acquire 100,000 shares of Company Common Stock under the 1991
Stock Option Plan and received a sign-on bonus of $60,000. Under the agreement,
Dr. Muney's base salary is subject to annual review by the Company's
Compensation Committee and may be increased at the discretion of the
Compensation Committee. Upon a Change in Control (as defined in the agreement),
the agreement automatically extends to a two-year term. If prior to (or more
than two years following) a Change in Control, Dr. Muney's employment with the
Company is terminated by the Company without Cause, by Dr. Muney for "Good
Reason" (as such terms are defined in the agreement), or by notice by the
Company of non-renewal, he would receive a payment equal to the sum of his
annual bonus during the fiscal year prior to the date of termination and his
base salary during the prior twelve months to be paid over twelve months. The
agreement further provides that if, during the two-year period following a
Change in Control, Dr. Muney's employment is terminated by the Company without
Cause, or by Dr. Muney for Good Reason, he would receive a lump sum payment
equal to two times the sum of his highest annual rate of base salary during the
thirty-six month period immediately prior to the date of termination and his
highest annual bonus earned during the three fiscal years immediately preceding
the date of termination, and continued welfare benefits for two years. The
agreement also provides that if any payments made to Dr. Muney pursuant to the
agreement or otherwise would be subject to any excise tax under Section 4999 of
the Internal Revenue Code, the Company will provide him with an additional
payment such that he retains a net amount equal to the payments he would have
retained if such excise tax had not applied. The agreement further provides that
Dr. Muney agrees not to compete with the Company for a period of one year if he
voluntarily terminates employment prior to the end of the employment term,
unless such termination is for Good Reason, is approved by the Company's Board
of Directors or is within the two-year period following a Change in Control.
15
<PAGE> 17
In March 1998, the Company entered into an employment agreement with Mr.
Rich for Mr. Rich to serve as the Company's Chief Administrative Officer. The
agreement provided for an initial four-year term. Under the terms of the
agreement, Mr. Rich received an annual base salary of $600,000 and a minimum
annual performance bonus of $600,000. Pursuant to the Agreement, in 1998 Mr.
Rich was granted an option to acquire 800,000 shares of Company Common Stock and
received a sign-on bonus of $300,000. In addition, the Company agreed to loan
Mr. Rich $600,000 (the "Rich Loan") upon the following terms: (i) interest at
the lowest rate to avoid imputed income (currently 5.7%); (ii) four-year term;
(iii) interest only annually; and (iv) principal only at the end of the term or
earlier at Mr. Rich's option or upon termination of Mr. Rich's employment with
the Company. The largest aggregate amount outstanding to date on the Rich Loan
was $654,150. On January 7, 2000, Mr. Rich terminated his relationship with the
Company pursuant to a letter agreement under which he agreed not to (and not to
permit any company of which he is an executive officer) to solicit for
employment or employ, directly or indirectly, any present or future employee of
the Company for a period of one year. In consideration thereof, the Company
agreed to (i) forgive the Rich Loan plus any accrued interest in a total amount
of $619,950 as of his termination date and (ii) pay him his accrued bonus of
$600,000.
In April 1998, the Company entered into an employment agreement with Mr.
Richardson to serve as Special Counsel to the Chief Executive Officer. In
December 1999, the Company amended the employment agreement to provide for Mr.
Richardson to serve as the Company's Executive Vice President and General
Counsel. The agreement will expire on December 31, 2001. Under the terms of the
agreement, with respect to the year 2000, Mr. Richardson will receive a base
salary of $350,000 and an annual performance bonus payable on December 14, 2000
in an amount not less than 50% of his base salary and as otherwise measured by
the Company's management incentive plan and as recommended by the Chief
Executive Officer. In the year 2001, Mr. Richardson will be employed part-time
and will receive a salary in the minimum amount of $200,000 and will not be
eligible for a performance bonus. In April 1998, Mr. Richardson received a
non-qualified option to acquire 100,000 shares of the Company's Common Stock at
an exercise price equal to the fair market value of the stock on the effective
date of grant, vesting in four equal annual installments over the four years
from the date of grant. Mr. Richardson received an additional grant of
non-qualified stock options in connection with his appointment as General
Counsel in December 1999, covering 100,000 shares of Company Common Stock with
an exercise price of $11.50 per share vesting quarterly over a two-year period
on a pro rata basis.
If, prior to (or more than two years following) a Change in Control (as
such term is defined in the agreement), Mr. Richardson terminates his employment
for Good Reason or his employment is terminated by the Company without Cause
(other than for Retirement or Disability) (as such terms as defined in the
agreement), then he will be paid, in twelve equal monthly installments, an
amount equal to (i) the sum of his base salary during the twelve-month period
immediately preceding his date of termination, plus his annual bonus in respect
of the fiscal year immediately preceding his date of termination, divided by
(ii) twelve. If during the two-year period following a Change in Control, Mr.
Richardson is terminated by the Company without Cause or Mr. Richardson
terminates his employment for Good Reason he would receive a lump sum payment
equal to two times the sum of his highest annual rate of base salary during the
three-year period immediately prior to the date of termination and his highest
annual bonus earned during the three fiscal years immediately proceeding the
date of termination and continued welfare benefits for two years. The amended
agreement further provides that Mr. Richardson agrees not to compete with the
Company nor recruit employees of the Company to leave for a period of one year
if he voluntarily terminates employment prior to the end of the employment term,
unless such termination is for Good Reason (as defined in the agreement),
approved by the board or is within the two-year period following a Change in
Control (as defined in the agreement). The agreement also provides that if any
payments made to Mr. Richardson pursuant to the agreement or otherwise would be
subject to any excise tax under Section 4999 of the Internal Revenue Code, the
Company will provide him with an additional payment such that he retains a net
amount equal to the payments he would have retained if such excise tax had not
applied.
In 1996, the Company entered into an employment agreement with Mr.
Sullivan. The agreement, as amended, was for an initial two-year term and
automatically renewed for an additional two years upon each second anniversary
of its effective date, unless prior notice to not renew was given by either
party Mr. Sullivan's annual base salary was $600,000. In addition, Mr. Sullivan
was eligible to receive an annual bonus which was set at a target level equal to
100% of his base salary and as recommended by the Chief Executive Officer and
approved by the Compensation Committee. In addition, Mr. Sullivan received a
loan of $750,000 which accrued interest at 7% per annum, the principal and
interest thereon was waived on March 1, 1999. The total amount of principal and
interest as of March 1, 1999 was $775,304. In addition, Mr. Sullivan
16
<PAGE> 18
received a payment of $46,474.71 representing the amount of interest and income
tax on the interest which Mr. Sullivan incurred as the result of the forgiveness
of the interest on the loan.
On November 4, 1999 Mr. Sullivan terminated his relationship with the
Company in accordance with the terms of a letter agreement date as of the date
thereof. Pursuant to the letter agreement, Mr. Sullivan received a lump sum
payment of $2,400,000 plus his 1999 year-end bonus in the amount of $600,000 and
agreed not to compete with and to act as a consultant to the Company for a
period of one year and not to solicit the Company's employees for a period two
years. Mr. Sullivan's stock options will continue to vest and remain exercisable
during the one year consulting period
In 1996, the Company entered into an employment agreement with Mr. Boyd.
The agreement, as amended, was for an initial two-year term and automatically
renewed for an additional two years upon each second anniversary of its
effective date, unless prior notice to not renew was given. Mr. Boyd's base
salary was subject to annual review by the Company's Compensation Committee. Mr.
Boyd's agreement provided that in the event that his employment with the Company
terminated as a result of (i) a termination for Good Reason or (ii) a
termination by the Company without Cause (other than for Retirement or
Disability), he would continue to act as a consultant to the Company until the
first anniversary of his date of termination and receive compensation at a per
diem rate and service as a consultant will be treated as service with the
Company for purposes of determining the vested percentage of stock options and
other equity awards granted as of such termination of employment. In addition,
while a consultant to the Company, Mr. Boyd will continue to participate in the
Company's group health plan (or if such participation is not permitted, the
Company will provide such benefit on the same after-tax basis as if continued
participation had been permitted). The agreement further provides that Mr. Boyd
will receive no less favorable director and officer indemnification and
insurance coverage than such coverage in effect from time to time for the
directors and officers of the Company. Mr. Boyd is subject to a one-year
non-compete provision as the result of his termination of employment.
In December 1999, Mr. Boyd terminated his relationship with the Company
under certain circumstances which fall within the definition of Good Reason in
his employment agreement and which obligated the Company to pay him a lump sum
amount of $1,200,000.
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<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 23, 1998, Mr. Wiggins and the Company entered into a three year
Retirement, Consulting and Non-Competition Agreement (the "Retirement
Agreement") pursuant to which Mr. Wiggins retired from his position as Chairman
of the Board and agreed to continue to act as a consultant to the Company for a
period of three years. Under the terms of the Retirement Agreement, the Company
agreed to pay Mr. Wiggins a lump sum cash payment of $3,600,000 and, during the
term of the Retirement Agreement, an annual amount of $1,800,000, payable
monthly. In addition, the Retirement Agreement provides that all of Mr. Wiggins'
options vested immediately upon the effective date of the Retirement Agreement
and that the expiration dates of the options are extended and shall continue to
be exercisable until February 2002. The Retirement Agreement also provides that
Mr. Wiggins will be provided certain fringe benefits and reimbursements of
expenses, and that Mr. Wiggins and his dependents will be entitled to continue
to participate in the Company's group health plan (or equivalent arrangements).
The Retirement Agreement provides that during the term, Mr. Wiggins will not be
employed by, or have a significant ownership interest in, any business which is
principally and directly engaged in the operation of health maintenance
organizations or the health insurance business in the United States, and will
not solicit for employment any person who is at such time (or was within the
one-month period prior to such solicitation) employed by the Company or any of
its affiliates.
Following disclosure of the terms of the Retirement Agreement, certain
regulators, including the New York State Insurance Department, expressed concern
that the cost of the Retirement Agreement would raise costs for the Company's
policyholders. The Company has confirmed that the cost of the Retirement
Agreement will be paid by the Company and will not be allocated directly or
indirectly to its regulated subsidiaries and will have no impact on premiums for
employer groups and members. The Company has suspended payments under the
Retirement Agreement pending further discussions with these officials.
The above notwithstanding, the Board of Directors carefully considered the
need for a smooth management transition (including Mr. Wiggins' standing with
employees as founder of the Company), Mr. Wiggins' pre-existing contractual
rights and the value of an ongoing non-competition and non-solicitation
agreement with Mr. Wiggins. The Board's assessment, with the advice of outside
experts, was that the aforementioned agreements were reasonable. These
agreements were structured so as not to affect the regulated subsidiaries and
individual consumers and were in the best interests of the Company, its
policyholders and its shareholders.
In December 1999, the Company entered into an employment agreement with Mr.
Schneider for Mr. Schneider to serve as the Company's President and Chief
Operating Officer. The agreement provides for an initial two-year term and
automatic renewal for an additional two years upon each second anniversary
(initially, on the second anniversary) of its effective date, unless prior
notice to not renew is given. Under the terms of the agreement, Mr. Schneider
receives an annual base salary of no less than $600,000 and a target bonus
opportunity of $600,000 or such higher amount as may be determined by the
Compensation Committee. In December 1999, Mr. Schneider was also granted an
option to acquire 800,000 shares of Company Common Stock at a purchase price per
share of $12.8125. The options will vest and become exercisable ratably on a
quarterly basis over a twenty-four month period. Mr. Schneider's base salary is
subject to annual review by the Company's Compensation Committee, and may be
increased at the discretion of the Compensation Committee.
If prior to (or more than two years following) a Change in Control of the
Company (as defined in the agreement), Mr. Schneider is terminated without
Cause (other than for Disability) or terminates employment for Good Reason
(as such terms are defined in the agreement), or if Mr. Schneider's agreement is
not renewed by the Company, he would receive a payment equal to two times the
sum of his base salary during the prior twelve months plus two times the greater
of (x) the target bonus amount for the year in which his date of termination
occurs or (y) his annual bonus earned in the fiscal year immediately preceding
his date of termination. Such amounts would be paid in twenty-four equal monthly
installments. In addition, for a period of two years following the date of
termination, Mr. Schneider would be provided the same level of medical and
dental insurance benefits he received prior to his date of termination. Under
the agreement Mr. Schneider has agreed that during the twelve-month period
following his date of termination, other than following a Change in Control,
that he will not compete with the Company nor solicit any actual or prospective
customers of the Company nor hire any employees of the Company.
18
<PAGE> 20
Upon a Change in Control, the agreement automatically extends to two years
from the date of such Change in Control unless notice to terminate the term has
been properly provided prior to the date of the Change in Control. In the event
that during the two-year period following a Change in Control, Mr. Schneider is
terminated without Cause (other than Disability) or terminates employment for
Good Reason, he would receive (i) a lump sum cash payment equal to two times the
sum of (x) his highest annual rate of base salary during the three-year period
immediately prior to the date of termination and (y) the greater of the target
bonus amount for the year in which the date of termination occurs or the highest
annual bonus earned by him during the three fiscal years immediately preceding
the date of termination and (ii) continued welfare benefits coverage for two
years following his date of termination. In the event of a Change in Control,
Mr. Schneider's options will become fully vested and exercisable not later than
immediately prior to the occurrence of the Change in Control.
The agreement also provides that if any payments made to Mr. Schneider
pursuant to the agreement or otherwise would be subject to any excise tax under
Section 4999 of the Internal Revenue Code, the Company will provide him with an
additional payment such that he retains a net amount equal to the payments he
would have retained if such excise tax had not applied.
In July 1998, the Company entered into an employment agreement with Mr.
Thompson for Mr. Thompson to serve as Vice President of Finance. In March 2000,
the Company amended Mr. Thompson's agreement to provide for Mr. Thompson to
serve as the Company's Executive Vice President and Chief Financial Officer. The
agreement, as amended, provides for an initial two-year term and for automatic
renewals for an additional two years upon each second anniversary of the
effective date of the agreement unless prior notice not to renew is given by
either party. Upon a Change in Control of the Company, the term of the agreement
shall be extended automatically to two years from the date of such Change of
Control. The agreement further provides that Mr. Thompson shall receive an
annual base salary of $325,000 and an annual discretionary performance bonus
provided, however, that (i) for each year Mr. Thompson's target bonus
opportunity shall be 60% of base salary up to a maximum of 75% of base salary
and (ii) Mr. Thompson's year 2000 bonus payments are guaranteed to be 75% of his
base salary. Mr. Thompson's base salary is subject to annual review by the
Company's Compensation Committee. In addition, in July 1998 the Company provided
Mr. Thompson with a $160,000 secured loan (the "Thompson Loan") upon the
following terms: (i) interest at the lowest rate to avoid imputed income
(currently 6.1%); (ii) repayable in three designated annual installments,
together with accrued interest; and (iii) the Thompson Loan will be forgiven if
Mr. Thompson is terminated without Cause following a Change of Control. The
current amount of interest and principal outstanding under the Thompson Loan is
$70,474 and the largest amount of interest and principal ever outstanding under
the Thompson Loan was $165,459.40.
Under the agreement, if Mr. Thompson is terminated without Cause, the
Company shall (i) pay him an amount equal to his base salary plus his bonus
earned during the preceding twelve months, provided, however, his bonus for
purposes of calculating this payment shall not be less than 75% of his base pay
earned during the preceding twelve months; and (ii) continue to provide him with
medical and dental benefits for one year following his date of termination. If
within two years following a Change of Control the Company terminates Mr.
Thompson's employment without Cause or does not renew Mr. Thompson's agreement
or Mr. Thompson terminates his employment for Good Reason, then the Company
shall: (i) pay Mr. Thompson an amount equal to two times the sum of his highest
annual base salary earned during the preceding three year period plus the
greater of (A) the maximum bonus amount earned during the preceding fiscal year
or (B) the highest bonus amount earned by Mr. Thompson in respect of the
preceding three years; (ii) cause Mr. Thompson's stock options to immediately
vest and become fully exercisable; and (iii) provide him with medical and dental
benefits for two years thereafter. The agreement further provides that Mr.
Thompson forfeits all rights to payment under the agreement if he competes with
the Company either during his employment with the Company or during the one-year
period following his termination of employment. The agreement also provides that
if any payments made to Mr. Thompson pursuant to the agreement or otherwise
would be subject to any excise tax under Section 4999 of the Internal Revenue
Code, the Company will provide him with an additional payment such that he
retains a net amount equal to the payments he would have retained if such excise
tax had not applied.
Pursuant to the terms of the Investment Agreement dated as of February 23,
1998 (the "Investment Agreement") by and between the Company and TPG Partners
II, L.P. ("TPG Partners"), certain affiliates of TPG Partners and certain
assignees of TPG Partners (together, the "Investors") purchased $350 million in
245,000 shares of Series A Cumulative Preferred Stock (the "Series A Preferred
Stock") and 105,000 shares of Series B Cumulative Preferred Stock (the "Series B
Preferred Stock") and warrants to purchase Common Stock which enables TPG to
acquire up to approximately 21.8% of the then outstanding Common Stock. In the
Investment Agreement, the Company agreed to appoint Norman C. Payson, M.D. as
its Chief Executive Officer and as a director and agreed that TPG would be
entitled to nominate four additional directors. Messrs. Bonderman, Coslet,
Coulter and Thiry were nominated by TPG pursuant to the Investment Agreement. In
19
<PAGE> 21
November 1998, the Company entered into an amendment to the Investment Agreement
to permit certain individual affiliates of TPG Partners, including Messrs.
Bonderman, Coslet and Coulter, to purchase up to 2,000,000 shares of Common
Stock of the Company. On February 13, 1999, the Investors exchanged (1) each
share of Series A Preferred Stock for one share of Series D Cumulative Preferred
Stock, par value $0.01 per share (the "Series D Preferred Stock"), plus
0.061824118367 share of Series D Preferred Stock representing dividends on the
Series A Preferred Stock accrued and unpaid through the date of the exchange and
(2) each share of Series B Preferred Stock for one share of Series E Cumulative
Preferred Stock, par value $0.01 per share (the "Series E Preferred Stock"),
plus 0.064960295238 share of Series E Preferred Stock representing dividends on
the Series B Preferred Stock accrued and unpaid through the date of the
exchange. The terms of the shares of Series D Preferred Stock are identical to
the terms of the Series A Preferred Stock except that the Series D Preferred
Stock accumulates cash dividends at the rate of 5.12981% per annum, payable
quarterly, provided that prior to May 13, 2000, the Series D Preferred Stock
accumulates dividends at a rate of 5.319521% per annum, payable annually in cash
or additional shares of Series D Preferred Stock, at the option of the Company.
The terms of the shares of the Series E Preferred Stock are identical to the
terms of the Series B Preferred Stock except that the Series E Preferred Stock
accumulates cash dividends at the rate of 14% per annum, payable quarterly,
provided that prior to May 13, 2000, the Series E Preferred Stock accumulates
dividends at a rate of 14.589214% per annum, payable annually in cash or
additional shares of Series E Preferred Stock, at the option of the Company. In
addition, prior to May 13, 2001, the holders of the Series D Preferred Stock may
only use to pay the exercise price of the warrants a percentage of the total
amount of Series D Preferred Stock issued on February 13, 1999 that does not
exceed the percentage of the total number of shares of Series E Preferred Stock
issued on February 13, 1999 that have been redeemed, repurchased or retired by
the Company, or used as consideration for the exercise of warrants by the
holders thereof.
Pursuant to the provisions of the Series D Preferred Stock and Series E
Preferred Stock, on May 13, 1999, the Company issued (a) a dividend in the
amount of $13.29880250 per share of Series D Preferred Stock in the form of
shares of such Series D Preferred Stock to the holders of record as of April 28,
1999 and (b) a dividend in the amount of $36.4730350 per share of Series E
Preferred Stock in the form of shares of such Series E Preferred Stock to the
holders of record as of April 28, 1999. On February 29, 2000, the Company
repurchased 28,780 shares of the Series D Preferred Stock and 89,616 shares of
the Series E Preferred Stock from the Investors on a pro rata basis for an
aggregate purchase price of $130 million.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Messrs. Coulter, Milligan, Scully and Thiry served as members
of the Company's Compensation Committee.
Mr. Coulter is a principal of TPG. In the Investment Agreement (described
above), pursuant to which certain affiliates of TPG Partners, an affiliate of
TPG, and certain assignees of TPG Partners purchased $350 million in shares of
senior preferred stock and warrants to purchase Common Stock, the Company agreed
to appoint Dr. Payson as its Chief Executive Officer and as a director and
agreed that TPG would be entitled to nominate four additional directors. Messrs.
Bonderman, Coslet, Coulter and Thiry were nominated to serve as directors by TPG
pursuant to the Investment Agreement. In November 1998, the Company entered into
an amendment to the Investment Agreement to permit certain individual affiliates
of TPG, including Messrs. Bonderman, Coslet and Coulter, to purchase up to
2,000,000 shares of Common Stock of the Company.
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<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with regard to the
beneficial ownership of the Company's Common Stock, Series D Preferred Stock and
Series E Preferred Stock as of March 1, 2000, unless otherwise indicated, by (i)
each stockholder who is known by the Company to beneficially own in excess of 5%
of the outstanding shares of Common Stock, Series D Preferred Stock or Series E
Preferred Stock, (ii) each director and the nominees for director, (iii) each of
the executive officers named in the Summary Compensation Table and (iv) the
directors and all executive officers as a group.
<TABLE>
<CAPTION>
OWNERSHIP(1)
------------
COMMON SERIES D SERIES E
NAME STOCK PERCENT PREFERRED STOCK PERCENT PREFERRED STOCK PERCENT
- ---- ------ ------- --------------- ------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
TPG Partners II, L.P., et. al.(2) 18,024,002 22.0% 187,861.2411 80% 21,026.6209 80%
201 Main Street
Fort Worth, TX 76102
Donaldson, Lufkin & Jenrette (3) 3,218,572 3.9% 33,546.6506 14.29% 3,754.4536 14.29%
277 Park Avenue
New York, NY 10172
Norman C. Payson, M.D. (4) 4,511,006 5.5% -- -- -- --
Yon Y. Jorden (5) 103,125 * -- -- -- --
Alan M. Muney, M.D., M.H.A. (6) 77,812 * -- -- -- --
Marvin P. Rich (7) 226 * -- -- -- --
Jon S. Richardson (8) 67,500 * -- -- -- --
Jeffery H. Boyd (9) 361,389 * -- -- -- --
William M. Sullivan (10) 624,164 * -- -- -- --
David Bonderman (11) 18,027,752 22.0% 187,861.2411 80% 21,026.6209 80%
Jonathan J. Coslet (12) 7,150 * -- -- -- --
James G. Coulter (13) 18,027,752 22.0% 187,861.2411 80% 21,026.6209 80%
Robert B. Milligan, Jr. (14) 14,375 * -- -- -- --
Fred F. Nazem (15) 470,750 * -- -- -- --
Marcia J. Radosevich, Ph.D. (16) 43,750 * -- -- -- --
Benjamin H. Safirstein, M.D. (17) 128,311 * -- -- -- --
Thomas A. Scully (18) 62,750 * -- -- -- --
Kent J. Thiry (19) 11,750 * -- -- -- --
Stephen F. Wiggins (20) 2,213,500 2.7% -- -- -- --
All Executive Officers and 7,801,436 9.5% -- -- -- --
Directors as a Group
(15 persons) (21)
</TABLE>
- ----------
*Less than one percent.
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<PAGE> 23
(1) For purposes of this table "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
pursuant to which a person or group of persons is deemed to have
"beneficial ownership" of any Common Stock that such person or group
has the right to acquire within 60 days after March 1, 2000. For
purposes of computing the percentage of outstanding Common Stock held
by each person or group of persons named above, any shares that such
person or group has the right to acquire within 60 days after March 1,
2000 are deemed outstanding but are not deemed to be outstanding for
purposes of computing the percentage ownership of any other person or
group.
(2) On May 13, 1998, TPG Partners II, L.P. ("TPG Partners"), TPG Parallel
II, L.P. ("TPG Parallel") and TPG Investors II, L.P. ("TPG Investors,"
together with TPG Partners and TPG Parallel, the "TPG Entities")
acquired, in the aggregate, 196,000 shares of Series A Preferred Stock
and 84,000 shares of Series B Preferred Stock with warrants to acquire,
in the aggregate, 18,024,002 shares of Common Stock. On February 13,
1999, the shares of Series A Preferred Stock owned by the TPG Entities
were exchanged for 208,117.5272 shares of a new Series D Preferred
Stock, and the shares of Series B Preferred Stock owned by the TPG
Entities were exchanged for 89,456.6648 shares of a new Series E
Preferred Stock. On May 13, 1999, the Company issued (a) a dividend in
the amount of $13.2988 per share of Series D Preferred Stock in the
form of shares of such Series D Preferred Stock to the holders of
record as of April 28, 1999 and (b) a dividend in the amount of
$36.4730 per share of Series E Preferred Stock in the form of shares of
such Series E Preferred Stock to the holders of record as of April 28,
1999. On February 29, 2000 Company repurchased 23,024 shares of Series
D Preferred Stock and 71, 693 shares of Series E Preferred Stock from
the TPG Entities for $23,997,008.96 and $80,002,224.94, respectively.
(3) On May 13, 1998, certain affiliates of Donaldson, Lufkin & Jenrette
Securities Corporation (the "DLJ Entities") acquired, in the aggregate,
35,000 shares of Series A Preferred Stock and 15,000 shares of Series B
Preferred Stock with warrants to acquire, in the aggregate, 3,218,571
shares of Common Stock. On February 13, 1999, the Series A Preferred
Stock owned by the DLJ Entities was exchanged for 37,163.8441 shares of
a new Series D Preferred Stock, and the shares of Series B Preferred
Stock owned by the DLJ Entities were exchanged for 15,974.4044 shares
of a new Series E Preferred Stock. On May 13, 1999, the Company issued
(a) a dividend in the amount of $13.29880 per share of Series D
Preferred Stock in the form of shares of such Series D Preferred Stock
to the holders of record as of April 28, 1999 and (b) a dividend in the
amount of $36.4730 per share of Series E Preferred Stock in the form of
shares of such Series E Preferred Stock to the holders of record as of
April 28, 1999. On February 29, 2000, the Company purchased 4,111.4281
shares of Series D Preferred Stock and 12,802.2858 shares of Series E
Preferred Stock from the DLJ Entities for $4,285,180.18 and
$14,286,111.61, respectively.
(4) Includes 1,866,676 shares of Common Stock issuable upon exercise of
stock options and 644,330 shares of Common Stock held in a limited
liability company, in which trusts for the benefit of his two children
each hold a 7.5% interest. Dr. Payson disclaims beneficial ownership of
the shares of common stock held in these trusts. Dr. Payson currently
holds unvested options to purchase 1,533,324 additional shares of
Common Stock.
(5) Includes 103,125 shares of Common Stock issuable upon exercise of stock
options. Ms. Jorden currently holds unvested options to purchase
309,375 additional shares of Common Stock.
(6) Includes 72,812 shares of Common Stock issuable upon exercise of stock
options. Dr. Muney currently holds unvested options to purchase 153,438
additional shares of Common Stock.
(7) Represents 226 shares of Common Stock held in the Savings Plan. As of
April 13, 2000, Mr. Rich will have no outstanding options.
(8) Includes 67,500 shares of Common Stock issuable upon exercise of stock
options. Mr. Richardson currently holds unvested options to purchase
152,500 additional shares of Common Stock.
(9) Includes 353,584 shares of Common Stock issuable upon exercise of stock
options and 714.673 shares held in the Savings Plan. Mr. Boyd currently
holds unvested options to purchase 270,314 additional shares of Common
Stock.
(10) Includes 464,047 shares of Common Stock issuable upon exercise of stock
options. Mr. Sullivan currently holds unvested options to purchase
421,249 additional shares of Common Stock.
(11) Includes 3,750 shares of Common Stock issuable upon exercise of
options, 18,024,002 shares Common Stock issuable upon the exercise of
warrants currently owned by the TPG Entities, 187,861.2411 shares of
Series D Preferred Stock currently owned by the TPG Entities and
21,026.6209 shares of Series E Preferred Stock currently owned by the
TPG Entities. Mr. Bonderman, a director of the Company, is a director,
executive officer and stockholder of TPG Advisors II, Inc. ("TPG
Advisors"). TPG Advisors is the general partner of TPG GenPar II, L.P.,
which is, in turn, the general partner of each of TPG Partners, TPG
Parallel and TPG Investors. Mr. Bonderman disclaims beneficial
ownership of the securities held by the TPG Entities. Mr. Bonderman
currently holds unvested options to purchase 6,250 additional shares of
Common Stock.
(12) Includes 3,750 shares of Common Stock issuable upon exercise of
options. Mr. Coslet currently holds unvested options to purchase 6,250
additional shares of Common Stock.
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<PAGE> 24
(13) Includes 3,750 shares of Common Stock issuable upon exercise of
options, 18,024,002 shares Common Stock issuable upon the exercise of
warrants currently owned by the TPG Entities, 187,861.2411 shares of
Series D Preferred Stock currently owned by the TPG Entities and
21,026.6209 shares of Series E Preferred Stock currently owned by the
TPG Entities. Mr. Coulter, a director of the Company, is a director,
executive officer and stockholder of TPG Advisors II, Inc. ("TPG
Advisors"). TPG Advisors is the general partner of TPG GenPar II, L.P.,
which is, in turn, the general partner of each of TPG Partners, TPG
Parallel and TPG Investors. Mr. Coulter disclaims beneficial ownership
of the securities owned by the TPG Entities. Mr. Coulter currently
holds unvested options to purchase 6,250 additional shares of Common
Stock
(14) Includes 14,375 shares of Common Stock issuable upon exercise of
options. Mr. Milligan currently holds unvested options to purchase
6,250 additional shares of Common Stock.
(15) Includes 448,750 shares of Common Stock issuable upon exercise of stock
options. Mr. Nazem currently holds unvested options to purchase 6,250
additional shares of Common Stock.
(16) Includes 22,500 shares of Common Stock issuable upon exercise of
options. Dr. Radosevich currently holds unvested options to purchase
6,250 additional shares of Common Stock.
(17) Includes 106,250 shares of Common Stock issuable upon exercise of
options and 2,000 shares of Common Stock held by Dr. Safirstein's
spouse. Dr. Safirstein disclaims beneficial ownership of the shares of
Common Stock held by his spouse. Dr. Safirstein currently holds
unvested options to purchase 25,000 additional shares of Common Stock.
(18) Includes 62,750 shares of Common Stock issuable upon exercise of
options. Mr. Scully currently holds unvested options to purchase 6,250
additional shares of Common Stock.
(19) Includes 3,750 shares of Common Stock issuable upon exercise of
options. Mr. Thiry currently holds unvested options to purchase 6,250
additional shares of Common Stock.
(20) Includes 1,356,040 shares of Common Stock issuable upon exercise of
options.
(21) These numbers include 4,196,716 shares of Common Stock issuable upon
exercise of options but do not include shares of Common Stock, Series D
Preferred Stock or Series E Preferred Stock owned by the TPG Entities
as described above.
23
<PAGE> 25
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE
Compensation Philosophy
The Compensation Committee of the Board is responsible for reviewing the
Company's executive compensation program and policies each year and determining
the compensation of the Company's executive officers. The Company's compensation
programs and policies are designed to provide incentives that account for value
delivered to the Company's stockholders and that attract and retain individuals
of outstanding ability in key positions. The Committee recognizes (i) individual
performance and the performance of the Company in addressing immediate financial
and operational challenges, (ii) the Company's performance relative to the
performance of other companies of comparable size, complexity and quality, and
(iii) performance that supports both the short-term and long-term goals of the
Company. In 1999, the Compensation Committee sought to establish compensation
programs which would aid in the recruitment of experienced managers and
retention of key managers to help develop and implement plans to improve the
Company's financial and operating performance ("turnaround plan"). This required
providing incentives tied to enhancing shareholder value and mitigating the
risks associated with the Company's ongoing financial losses. In addition to
exercising its business judgment, the Committee has also sought the advice of
nationally recognized consultants in developing its executive compensation
policies and agreements. The Committee believes that the executive compensation
program includes elements which, taken together, constitute an appropriate
method of establishing total compensation for senior management given the
circumstances applicable to the Company.
The compensation of the Company's executive officers, including the
executives named herein and the Chief Executive Officer, consists of four key
components: (i) base salary; (ii) annual incentive bonus; (iii) amounts deferred
and matching contributions by the Company under a long-term deferred
compensation plan; and (iv) stock options. The compensation packages are
designed to set total compensation at levels comparable to total compensation
paid to similarly positioned executives at peer companies selected and reviewed
by the Committee and its consultants. An executive's total compensation relative
to the range paid by the peer companies depends upon the executive's experience,
level and scope of responsibility within the Company and individual performance.
The majority of the Company's executive officers have employment agreements that
establish base salary and bonus opportunities and that were entered into
following arm's length negotiations with the respective executive officers.
Compensation of Chief Executive Officer
During 1999, Dr. Payson served as the Company's Chief Executive Officer.
Compensation for Dr. Payson was principally determined with reference to Dr.
Payson's Employment Agreement (the "Payson Agreement"), which was the subject of
arm's length negotiations between representatives of the Committee and Dr.
Payson. In arriving at the terms of the Payson Agreement, the Committee
considered the need to provide incentives which would encourage an executive
with Dr. Payson's experience and background to join the Company as Chief
Executive Officer and align his personal interests with those of the Company's
shareholders. Accordingly, Dr. Payson's compensation principally consists of
stock options, which provide value to Dr. Payson only if there is appreciation
in the price of the Company's Common Stock. The options vest over a four-year
period. In addition, the Payson Agreement required that Dr. Payson personally
invest $10 million through purchase of the Company's Common Stock and provides
substantial transfer restrictions on both the purchased and option shares. In
the Committee's view, these provisions should provide significant incentives for
Dr. Payson to work to enhance shareholder value given the extent of his personal
investment in the Company's Common Stock. The Payson Agreement also provided for
salary and bonus payments aggregating $700,000 in 1999.
Compensation of Executive Officers
Compensation paid to the Company's executive officers for 1999 consisted
primarily of base salary, bonus compensation and grants of stock options. In
determining the compensation for each of the Company's executive officers, the
Compensation Committee considered such factors as existing contractual
commitments, compensation opportunities perceived to be necessary to retain
executive officers and the criticality of the executives to the Company's
current and
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<PAGE> 26
future success. Certain of the employment agreements for executive officers
provide for guaranteed bonuses as an inducement to join the Company, to mitigate
the risks associated with the Company's financial losses and to compensate for
lost bonus opportunities at previous employers. Several of the executives were
also given loans or cash payments, in part, to assist in relocation and
commutation costs or in lieu of compensation foregone from a previous employer.
Stock option grants were determined by the Committee based on grants to
similarly positioned executives at peer companies, the ability of the officer to
contribute to enhancement of the value of the Company's Common Stock and a
determination of the level of grant needed to provide adequate incentives to
join or remain with the Company and promote enhancement of shareholder value.
Upon termination of their employment, in 1999 Mr. Boyd and Mr. Sullivan
were paid lump sum amounts of $1,200,000 and $2,400,000, respectively, in part
as consideration of their observance of certain provisions of their employment
agreements which survive termination of their employment with the Company. The
payment to Mr. Boyd was also made pursuant to a provision in his employment
agreement which was intended to compensate him for his delayed exercise of his
right to terminate his employment for Good Reason.
In connection with the ongoing compensation plans, the Committee intends to
continue to promote compensation structures which, in the Committee's opinion,
provide features which properly align the Company's executive compensation with
corporate performance and the interest of its shareholders and which offer
competitive compensation relevant to comparable opportunities in the
marketplace.
The Compensation Committee
Robert B. Milligan, Jr.
James G. Coulter
Thomas A. Scully
Kent J. Thiry
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<PAGE> 27
PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative total
return on its Common Stock to (a) the change in the cumulative total return on
the stocks included in the NASDAQ Composite Index for U.S. Companies and (b) the
change in the cumulative total return on the stocks included in NASDAQ Health
Services Index assuming an investment of $100 made on December 31, 1993 and
comparing relative values on December 31, 1994, 1995, 1996, 1997, 1998 and 1999.
All of these cumulative total returns are computed assuming the reinvestment of
dividends at the frequency with which dividends were paid during the period.
Note that the Common Stock price performance shown below should not be viewed as
being indicative of future performance.
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C>
OXFORD HEALTH PLANS, INC. 100.00 149.53 278.78 441.99 117.46 112.26 95.76
NASDAQ STOCK MARKET INDEX 100.00 97.80 138.23 170.07 208.39 293.65 530.52
NASDAQ HEALTH SERVICES STOCK INDEX 100.00 107.29 136.01 135.80 138.39 117.25 96.91
</TABLE>
26
<PAGE> 28
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENTS TO SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED
SUMMARY OF PROPOSAL
Stockholders are being asked to consider and approve amendments to the
Company's Second Amended and Restated Certificate of Incorporation, as amended
(the "Certificate"), including the Certificate of Designations of the Series D
Preferred Stock (the "Series D COD"), and the Certificate of Designations of the
Series E Preferred Stock (the "Series E COD"), which are part of the
Certificate:
(1) to confer the power to vote upon holders of the Company's Series D
Junior Subordinated Debentures due May 13, 2008 (the "Series D
Debentures") that may be issued in exchange for shares of Series D
Preferred Stock, and upon holders of the Company's Series E Junior
Subordinated Debentures due May 13, 2008 (the "Series E
Debentures") that may be issued in exchange for shares of Series E
Preferred Stock (the Series D Debentures and the Series E
Debentures are hereinafter sometimes collectively called the
"Debentures"), and
(2) to clarify the voting rights of holders of the Series D Preferred
Stock and Series E Preferred Stock in connection with the voting
rights of holders of Debentures (or, in certain cases, other
securities of the Company) where only one series of preferred stock
is exchanged for Debentures (or such other securities).
The voting rights of holders of Series D Debentures would be substantially the
same voting rights that holders of Series D Preferred Stock have, and the voting
rights of holders of Series E Debentures would be substantially the same voting
rights that holders of Series E Preferred Stock have.
BACKGROUND INFORMATION
Pursuant to the Investment Agreement, on May 13, 1998, TPG Partners and
certain assignee purchasers (collectively with TPG Partners, the "Investors")
purchased from the Company (i) 245,000 shares of the Company's Series A
Cumulative Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), together with detachable Series A Warrants (the "Series A Warrants") to
purchase, subject to adjustment, 15,800,000 shares of Common Stock at an
exercise price, subject to adjustment, of $17.75 per share, and (ii) 105,000
shares of the Company's Series B Cumulative Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), together with detachable Series B
Warrants (the "Series B Warrants," and together with the Series A Warrants, the
"Warrants") to purchase, subject to adjustment, 6,730,000 shares of Common Stock
at an exercise price, subject to adjustment, of $17.75 per share.
On February 13, 1999, the Company entered into a share exchange agreement
with the Investors to redistribute the total amount of dividends payable on 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 shares issued in the exchange were
attributable to dividends accrued on the shares through February 13, 1999. 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 applicable dividend rates and their use as
consideration for the exercise of the Warrants. The exchange was effected
primarily to facilitate the potential sale of the preferred stock by the
Investors. On February 29, 2000, the Company repurchased a total of 28,780
shares of the Series D Preferred Stock from the Investors for an aggregate
amount of $29,996,261.19 and a total of 89,616 shares of the Series E Preferred
Stock from the Investors for an aggregate amount of $100,002,781.18. As of March
1, 2000, there were 234,826.5513 shares of Series D Preferred Stock outstanding
and there were 26,283.2761 shares of Series E Preferred Stock outstanding.
Pursuant to the Series D COD, on any dividend payment date the Company may
exchange all (but not less than all) the shares of Series D Preferred Stock for
Series D Debentures if the conditions specified in the Series D COD are
satisfied. Pursuant to the Series E COD, on any dividend payment date the
Company may exchange all (but not less than all) the shares of Series E
Preferred Stock for Series E Debentures if the conditions specified in the
Series E COD are satisfied. In each case, one condition to effecting this
exchange is that the Company must amend the Certificate to confer upon holders
of Debentures the same power to vote that they had as holders of shares of
preferred stock. Another condition to effecting the exchange is that the
exchange must not result in any tax consequence to TPG Partners or any of its
Affiliates which is materially adverse. The exchange of one series of preferred
stock is not conditioned upon the exchange of the other series of preferred
stock. Accordingly, the Company may exchange only one series of preferred stock
if it so chooses (and it satisfies the conditions in the relevant Certificate of
Designations).
No Series D Debentures or Series E Debentures have been issued. If the
Series D Debentures are issued, they will only be issued in exchange for the
Series D Preferred Stock. If the Series E Debentures are issued, they will only
be issued in exchange for the Series E Preferred Stock.
On March 15, 2000, the Board of Directors unanimously adopted resolutions,
subject to stockholder approval, proposing and declaring the advisability of
amendments to the Certificate which would confer the voting rights described
below upon holders of Series D Debentures and Series E Debentures and would
clarify the voting rights and procedures in the situation where only one series
of preferred stock is exchanged for Debentures (or, in certain cases, other
securities of the Company) and the other series of preferred stock remains
outstanding. The resolutions of the Board of Directors, including the full text
of the proposed amendments to the Certificate, are set forth in Appendix A to
this Proxy Statement.
REASONS FOR THE PROPOSAL
The Board of Directors considers the grant of voting rights to the holders
of the Series D Debentures and the holders of the Series E Debentures desirable
because it may allow the Company to exchange the shares of preferred stock for
Debentures and to benefit from a tax deduction for interest paid on the
Debentures. For the period from May 13, 2000 through May 13, 2008, when the
Series D Preferred Stock and Series E Preferred Stock are mandatorily
redeemable, the Company is obligated to pay dividends in an aggregate amount of
approximately $135.3 million. If the Company exchanged the Series D Preferred
Stock for Series D Debentures and the Series E Preferred Stock for Series E
Debentures, the Company would be obligated to pay the same amount in interest.
However, unlike the dividend payments, the Company would be able to deduct the
interest payments on the Debentures from its taxable income.
Adoption of the proposed amendments is, however, only one of the conditions
that must be satisfied before the Company may exchange either or both series of
preferred stock for Debentures, and it is uncertain whether and when all
conditions specified in the Series D COD and Series E COD could be satisfied.
Moreover, the Company's ability to effect an exchange is limited by certain
financial covenants contained in the Company's Term Loan Agreement and the
indenture for the Company's 11% Senior Notes due 2005. The Company has no
present plans, arrangements or understandings to effect an exchange or issue the
Series D Debentures or the Series E Debentures. Nevertheless, the Board of
Directors deems it advisable to amend the Certificate so that the Company would
be in a position to effect an exchange of preferred stock for Debentures if and
when (i) all other conditions could be satisfied, (ii) such exchange would be
permitted under the Company's then-existing financial covenants, and (iii) the
Board of Directors deemed such exchange to be in the best interest of the
Company.
In addition, the Board of Directors believes that it is advisable to amend
the Certificate to clarify the voting rights and procedures upon the exchange of
only one series of preferred stock. If it satisfies the conditions contained in
the relevant Certificate of Designations, the Company may exchange only one
series of preferred stock if it so chooses. Pursuant to the Series D COD and the
Series E COD, both series of preferred stock vote together as a single class to
elect additional directors if dividends are in arrears or if the Company fails
to redeem shares of preferred stock when required to do so. However, neither
Certificate of Designations currently provides for the situation where only one
series of preferred stock is exchanged and the other series of preferred stock
remains outstanding.
If the Series D Debentures are issued, they will only be issued in exchange
for the Series D Preferred Stock. If the Series E Debentures are issued, they
will only be issued in exchange for the Series E Preferred Stock.
If the requisite number of stockholders approve the following amendments to
the Certificate and if the Company satisfies the other conditions set forth in
the relevant Certificate of Designations, the Company may elect to exchange
either series of preferred stock for the corresponding series of Debentures on
any dividend payment date. However, the Company may also choose not to exchange
either series of preferred stock for Debentures and may choose to retire and
cancel shares of either or both series of preferred stock in some other manner,
for example, by repurchasing such shares or exchanging such shares for other
securities of the Company, which might or might not include non-voting debt
securities, a new series of voting preferred stock, or both. Any such repurchase
or exchange would, of course, require the agreement of the holders of the
preferred stock being retired, but would not require any action by the
stockholders generally. Under Delaware law and the Company's Certificate, the
issuance of non-voting debt securities does not require any action by the
stockholders, and the Board of Directors is authorized to designate series of
Preferred Stock and to establish the rights, powers, preferences and other terms
of such series, without any action by the stockholders. The Certificate
authorizes the issuance of 2,000,000 shares of Preferred Stock, of which
1,702,496 shares are currently unissued and undesignated as to series (271,220
shares are currently designated as Series D Preferred Stock, and 26,284 shares
are currently designated as Series E Preferred Stock).
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<PAGE> 29
AMENDMENT TO CONFER VOTING RIGHTS UPON HOLDERS OF DEBENTURES
In order to effect an exchange of a series of preferred stock for
Debentures, the Certificate must be amended, in the case of an exchange of
Series D Preferred Stock, to confer voting rights upon holders of the Series D
Debentures and, in the case of an exchange of Series E Preferred Stock, to
confer voting rights upon holders of the Series E Debentures. Under the terms of
both the Series D Preferred Stock and the Series E Preferred Stock, all holders
of preferred stock have limited voting rights, and TPG Partners and its
affiliates have different voting rights from all other holders of preferred
stock. The voting rights conferred on the holders of Series D Debentures would
be substantially identical to the current voting rights of the holders of shares
of Series D Preferred Stock, and the voting rights conferred on the holders of
Series E Debentures would be substantially identical to the current voting
rights of the holders of shares of Series E Preferred Stock. The holders of the
Debentures would have no rights as stockholders of the Company, and the voting
rights of holders of Debentures would be only those described below.
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<PAGE> 30
Voting Rights of TPG Partners and its Affiliates
The Certificate will be amended to add a new Article Fifteenth to confer
upon TPG Partners and its affiliates certain voting rights as holders of a
series of Debentures, which voting rights will not apply to other holders. In
particular, only TPG Partners and its affiliates will have the right to vote
their Debentures on all matters voted on by holders of common stock. In those
circumstances, TPG Partners and its affiliates will vote together with the
holders of common stock (and any series of preferred stock entitled to vote) as
a single class. These voting rights (1) will apply to Debentures issued to TPG
Partners or any of its affiliates in exchange for shares of a series of
preferred stock that had similar voting rights and (2) will not be transferable
to any subsequent holder of Debentures. If Debentures are transferred to a
person other than TPG Partners or its affiliates, and TPG Partners or its
affiliates subsequently reacquire those Debentures, TPG Partners or its
affiliates would not reacquire the right to vote those Debentures on all matters
voted on by holders of common stock.
RIGHTS OF ALL HOLDERS
New Article Fifteenth of the Certificate will confer upon all holders of
Debentures, including TPG Partners and its affiliates, the voting rights
described below.
If:
(a) interest due and payable on either series of Debentures has
not been paid in full (or, if one series of preferred stock
has not been exchanged for Debentures, the dividends payable
on that series of preferred stock have been in arrears and not
paid in full) for four consecutive quarterly periods, or
(b) the Company fails to satisfy its obligations to redeem or
repay the principal of either series of Debentures under the
applicable indenture (or, if one series of preferred stock has
not been exchanged for Debentures, the Company fails to
satisfy its obligation to redeem shares of that series of
preferred stock pursuant to its certificate of designations),
then holders representing at least a majority of the aggregate principal amount
of outstanding Debentures will have the exclusive right, voting together as a
single class, to elect the two additional directors to the Board of Directors,
except under the circumstances described below. If the shares of one series of
preferred stock have not been exchanged for Debentures, then the holders of the
shares of that series of preferred stock will vote together with the holders of
Debentures as a single class, and, for the purposes of determining a majority of
the aggregate principal amount of Debentures and the series of preferred stock
that was not exchanged, one share of the series of preferred stock will be
deemed to be equal to a principal amount of $1,000.
Under the Investment Agreement, TPG Partners and its affiliates are
permitted to designate directors to the Company's Board of Directors. However,
TPG Partners and its affiliates are not permitted to elect and/or designate a
total of more than four directors to the Company's Board of Directors. If, at
the time holders of Debentures or, if applicable, the holders of shares of a
series of preferred stock that has not been exchanged for Debentures, have the
right to elect additional directors:
(1) TPG Partners and its affiliates together beneficially own
Debentures representing a majority of the aggregate principal
amount of outstanding Debentures of both series (or, if the
shares of one series of preferred stock have not been
exchanged for Debentures, TPG Partners and its affiliates
together
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<PAGE> 31
beneficially own a majority of the aggregate principal amount
of the Debentures and that series of preferred stock), taken
together as a single class, and
(2) TPG Partners 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 Debentures (and, if applicable, holders of shares of a
series of preferred stock that has not been exchanged for Debentures), other
than TPG Partners and its affiliates, will be entitled to elect, voting together
as a single class, only one additional director. For the purposes of determining
a majority of the aggregate principal amount of Debentures and a series of
preferred stock that has not been exchanged, one share of the series of
preferred stock will be deemed to be equal to a principal amount of $1,000.
Any additional director elected as described above will continue as a
director, and these additional voting rights will continue, until (1) the
Company pays all interest due and payable on the Debentures of each series and
the Company pays in full all dividends accumulated on the series of preferred
stock that has not been exchanged, and (2) the Company satisfies any obligation
to redeem the Debentures or the series of preferred stock that has not been
exchanged or any obligation to repay the principal that has become due, or the
Company sets aside all necessary funds for the redemption payment. Upon the
occurrence of these events, any additional director will cease to be a director
and the additional voting rights of the holders of Debentures will terminate
subject to revesting if any subsequent failure to pay interest or dividends or
to redeem Debentures or shares as described above occurs and subject to any
rights to elect directors of holders of any other series of preferred stock.
The holders of Debentures will be able to exercise their right to elect
additional directors at any annual meeting of stockholders, at a special meeting
held for this purpose, or by the written consent of the holders of the minimum
principal amount of Debentures 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 principal amount of Debentures required to take action, the Chairman
of the Board of Directors may call, and upon the written request of holders of
record of Debentures representing 20% of the aggregate principal amount of the
outstanding Debentures, addressed to the Company's Secretary at its principal
office, will call, a special meeting of the holders entitled to vote as
described above. This meeting will be held within 60 days after delivery of a
request to the Secretary, at the place and upon the notice provided by law and
in the by-laws for meetings of stockholders.
Each director elected as described above will serve until the next annual
meeting or until his or her successor is elected and qualified, unless the
director's term of office has terminated as described above. If any vacancy
occurs among the directors elected as described above, the vacancy may be filled
for the unexpired portion of the term by the remaining director or directors
elected by the holders of Debentures (and, if applicable, holders of shares of a
series of preferred stock that has not been exchanged for Debentures) entitled
to vote for the director or directors as described above, or their successor or
successors in office, if any. If the vacancy is not filled within 20 days or if
all of the remaining directors elected as described in this section cease to
serve as directors before their term expires, the holders of Debentures (and, if
applicable, holders of shares of a series of preferred stock that has not been
exchanged for Debentures) entitled to vote for the director as described above
may elect successors to hold office for the unexpired terms of any vacant
directorships by written consent or at a special meeting. The holders of a
majority of Debentures (and, if applicable, holders of shares of a series of
preferred stock that has not been exchanged for Debentures) 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.
The Company may not take the following actions without the consent or vote
of the holders of at least a majority of the aggregate principal amount of
outstanding Debentures of a series, voting separately as a class:
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<PAGE> 32
- authorize, create or issue, or increase the authorized amount
of any class or series of capital stock or any security
convertible into or exercisable for any class or series of
capital stock, redeemable mandatorily or redeemable at the
option of the holder thereof at any time on or prior to
May 13, 2008, whether or not only upon the occurrence of a
specified event;
- amend, alter or repeal any provision of the Company's
Certificate or the Company's by-laws if the amendment,
alteration or repeal alters or changes the rights of the
holders of Debentures of that series 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 holders of Debentures of that
series in any respect or otherwise would be inconsistent with
the provisions of the applicable indenture and the holders of
any class or series of capital stock of the Company are
entitled to vote on that action.
No consent or vote of the holders of Debentures is required for the creation or
issuance by a trust formed at the Company's direction of any series of preferred
securities of such trust for financing purposes in an aggregate amount not to
exceed $250,000,000.
AMENDMENT TO CLARIFY VOTING RIGHTS OF PREFERRED STOCK
Currently, under the terms of each series of preferred stock, if dividends
are in arrears or if the Company fails to redeem shares of preferred stock when
required to do so, the holders of each series of preferred stock vote together
as a single class to elect additional directors to the Board of Directors. If
the Certificate is amended as described above, a similar voting right will exist
for holders of Debentures of both series if interest payments have not been made
when due and if the Company does not redeem the Debentures when required to. If
one series of preferred stock is exchanged for Debentures and the other series
remains outstanding, the series of preferred stock outstanding should vote as a
single class with the series of Debentures exchanged. Currently, both the Series
D COD and the Series E COD do not provide for this situation.
The Company proposes to amend the voting provisions of the Series D COD and
the Series E COD to provide that if one series of preferred stock has been
exchanged for Debentures, and if dividends are in arrears on the series of
preferred stock or if interest is due and payable on the series of Debentures
issued, or if the Company fails to redeem, when required to do so, the preferred
stock or the series of Debentures, then holders of the preferred stock and the
Debentures will have the right to elect two additional directors to the Board of
Directors. The vote required to elect the two additional directors will be the
vote of holders representing a majority of the aggregate principal amount of
outstanding Debentures and preferred stock. For the purposes of determining a
majority of the aggregate principal amount of Debentures and preferred stock,
one share of preferred stock will be deemed to be equal to a principal amount of
$1,000. In addition, the Certificate will be amended to provide that the
preferred stock and the Debentures will vote together as a single class to elect
only one additional director if TPG Partners and its affiliates own a majority
of aggregate principal amount of outstanding Debentures and preferred stock and
are not permitted to elect one or both of the additional directors because under
the Investment Agreement they are restricted from appointing more than four
directors to the Board of Directors. The Certificate will also be amended to
provide for the voting procedures when filling a vacancy on the Board of
Directors where the preferred stock and the Debentures are entitled to vote as a
single class.
The amendments also provide that if the Series D Preferred Stock is
voluntarily exchanged for consideration that includes another series of
Preferred Stock and the Certificate of Designations of such series expressly
provides that such series will vote together with the Series E Preferred Stock,
then the Series E Preferred Stock will vote together with such new series.
Similarly, the amendments provide that if the Series E Preferred Stock is
voluntarily exchanged for consideration that includes another series of
Preferred Stock and the Certificate of Designations of such series expressly
provides that such series will vote together with the Series D Preferred Stock,
then the Series D Preferred Stock will vote together with such new series.
The amendments to Article Fourth of the Certificate also clarify that the
voting rights of the holders of Common Stock and Preferred Stock are subject to
the voting rights of holders of Debentures, if any.
NO ANTI-TAKEOVER EFFECTS OF THE PROPOSED AMENDMENTS
The voting rights conferred on the holders of Series D Debentures would be
substantially identical to the current voting rights of the holders of shares of
Series D Preferred Stock, and the voting rights conferred on the holders of
Series E Debentures would be substantially identical to the current voting
rights of the holders of shares of Series E Preferred Stock. No additional
voting rights will
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<PAGE> 33
be conferred upon holders of Debentures. In addition, the purpose of the
amendment of the Series D COD and the Series E COD is only to clarify the voting
rights when only one series of preferred stock is exchanged for Debentures or,
in certain cases, other securities of the Company. No additional voting rights
will be conferred upon the holders of preferred stock. The amendments are not
expected to have any anti-takeover effects.
VOTE REQUIRED
To become effective the amendments to the Certificate must be adopted by
the Board of Directors and the stockholders and filed with the Secretary of
State of the State of Delaware. The Board of Directors already has adopted the
amendments. Under Delaware law and the Company's Certificate, the amendments
must be approved by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock, the holders of a majority of the outstanding
shares of Series D Preferred Stock and the holders of a majority of the
outstanding shares of Series E Preferred Stock.
MISCELLANEOUS
In addition to the changes described above, the proposed amendments also
would eliminate from the Series D COD and the Series E COD certain
restrictions that by their terms currently expire on May 13, 2000.
Accordingly, in no event will the Company file the amendments with the
Secretary of State of the State of Delaware before May 14, 2000.
The resolutions of the Board of Directors authorizing the proposed
amendments provide that at any time prior to the effectiveness of the filing of
the amendments with the Secretary of State of the State of Delaware,
notwithstanding authorization of the proposed amendments by the stockholders,
the Board of Directors may abandon such proposed amendments without further
action by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENTS TO THE COMPANY'S SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, TO CONFER VOTING RIGHTS UPON HOLDERS OF DEBENTURES
AND TO CLARIFY VOTING RIGHTS WHERE ONLY ONE SERIES OF PREFERRED STOCK IS
EXCHANGED.
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PROPOSAL NUMBER THREE
AMENDMENT TO 1991 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES AVAILABLE UNDER THE 1991 STOCK OPTION PLAN
On March 15, 2000, the Board of Directors adopted a resolution, subject to
stockholder approval, to amend the 1991 Stock Option Plan to increase the number
of shares issuable thereunder from 25,580,000 shares to 30,380,000 shares.
The Board of Directors believes that stock options are valuable tools for
the recruitment, retention and motivation of qualified employees, including
officers, and other persons who can contribute materially to the Company's
success. As of March 16, 2000, the Record Date, options to purchase 13,597,659
shares were outstanding under the 1991 Stock Option Plan and only 1,021,683
shares of the 25,580,000 shares originally available for grant under the 1991
Stock Option Plan remained available for issuance pursuant to new option grants.
The Board of Directors believes that equity ownership by management and
other employees has contributed substantially to the Company's successful
turnaround. The Board believes that it is important to have additional shares
available under the 1991 Stock Option Plan to provide adequate incentives to
management and to continue to align the interests of management with those of
the Company's stockholders. Further, the Company's overall compensation
philosophy involves rewarding performance that supports both the long and short
term goals of the Company. The Company's compensation strategy consists of four
key elements including: (i) base salary; (ii) annual incentive bonus; (iii)
amounts deferred and matching contributions by the Company under a long-term
deferred compensation plan; and (iv) stock options. In the event the Company
does not have adequate shares to continue to grant options to both existing and
new management, the Company would have to adjust its compensation strategy.
The material features of the 1991 Stock Option Plan, including the
amendments proposed in Proposal Number Three and Proposal Number Four, are
outlined below.
PURPOSE
The purpose of the 1991 Stock Option Plan is to provide an incentive to key
employees, directors and consultants who are in a position to contribute
materially to the long term success of the Company, to increase such person's
interest in the Company's welfare and to aid in attracting and retaining
individuals with outstanding ability.
ADMINISTRATION
The 1991 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors.
ELIGIBILITY
The 1991 Stock Option Plan provides for grants to key employees (including
officers) of the Company and its subsidiaries of "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and for grants of nonqualified options to key employees,
directors (other than members of the Compensation Committee), and consultants of
the Company and its subsidiaries. The Compensation Committee has the authority
to determine the employees to whom options will be granted, the number of shares
to be subject to each option, whether options will be incentive or nonqualified,
and the manner of exercise. The aggregate fair market value (determined at the
time of grant) of shares issuable pursuant to incentive stock options which
first become exercisable in any calendar year by an employee may not exceed
$100,000. No individual optionee may be granted in any calendar year options to
purchase more than 2,000,000 shares.
TERMS OF OPTIONS
Each option issued pursuant to the 1991 Stock Option Plan is evidenced by a
written stock option agreement between the Company and the optionee and is
generally subject to the terms and conditions listed below (prior to giving
effect to the amendments to the Plan proposed hereunder), but specific terms may
vary:
(i) Exercise of Options. The Compensation Committee determines when
options granted under the 1991 Stock
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<PAGE> 35
Option Plan may be exercised. An option is exercised by giving written notice to
the Company specifying the number of shares to be purchased and tendering
payment of the purchase price. Payment for shares issued upon exercise of an
option may consist of cash, check, exchange of shares (which, if acquired
pursuant to the prior exercise of stock option, must be held for more than six
months) or any combination thereof. An option may not be exercised for a
fraction of a share. Additionally, the Company will not permit payment of the
exercise price by a promissory note or a Company loan.
(ii) Exercise Price. The exercise price of incentive stock options may not
be less than the fair market value of the Common Stock on the date of grant (or
110% of fair market value in the case of employees or officers holding 10% or
more of the voting stock of the Company). The exercise price of nonqualified
stock options may not be less than the fair market value of the Common Stock on
the date of grant.
(iii) Termination of Employment. Except as otherwise provided by the
Committee, if the optionee's employment with the Company or with a subsidiary of
the Company is terminated, the term of any then outstanding option held by such
optionee shall extend for a period ending on the earlier of the date on which
such option would otherwise expire or three months after such termination of
employment. Such option will only be exercisable to the extent it was
exercisable as of the last date of such optionee's employment. The
representative of a deceased optionee's estate or beneficiaries thereof to whom
the option has been transferred shall have the right during the three month
period following the death or, if less, the remaining term of the option, to
exercise any then outstanding option in whole or in part.
(iv) Termination of Options. All options expire not more than seven years
from the date of grant or not more than five years from the date of grant in the
case of incentive stock options granted to an employee holding 10% or more of
the voting stock of the Company.
(v) Nontransferability of Options. An option granted under the 1991 Stock
Option Plan is exercisable, during the optionee's lifetime, only by the optionee
and is not transferable except by will or by the laws of descent and
distribution.
(vi) Vesting. The Compensation Committee determines any vesting conditions
applicable to options granted under the 1991 Stock Option Plan. Vesting may be
accelerated in the event of the employee's death, disability or retirement, in
the event of a change in control with respect to the Company or upon other
events. Moreover, the Compensation Committee may determine that outstanding
options will become fully vested if it has concluded that there is a reasonable
possibility that a change in control will occur within six months thereafter. In
May 1998, the Board of Directors determined that all outstanding stock options
shall vest and become immediately exercisable upon the occurrence of a change on
control.
For purposes of the 1991 Stock Option Plan, the term "change in control" is
defined as (1) the acquisition, directly or indirectly, of at least 30% of the
outstanding voting securities of the Company by a person other than the Company
or an employee benefit plan of the Company, (2) a greater than one-third change
in the composition of the Board over a period of 24 months (if such change was
not approved by a majority of the existing directors), (3) certain mergers and
consolidations involving the Company, (4) a liquidation of the Company or (5) a
sale of all or substantially all of the Company's assets.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of change in the Company's capitalization by reason of
split-up, merger, consolidation, reorganization, reclassification,
recapitalization, or any other capital adjustment, the Compensation Committee
shall make an adjustment to options outstanding under the 1991 Stock Option Plan
in an equitable manner.
AMENDMENT AND TERMINATION
The Board of Directors may, at any time, alter, amend, suspend, discontinue
or terminate the plan; provided, however, that such action does not adversely
affect the right of the optionees to options previously granted, and no
amendment, without the approval of the stockholders, shall increase the maximum
number of shares which may be awarded under the plan, materially increase
benefits, change the class of employees eligible or materially modify
eligibility requirements. In any event, the 1991 Stock Option Plan will
terminate in 2011 (subject to stockholder approval of Proposal Number Four
herein).
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<PAGE> 36
FEDERAL INCOME TAX INFORMATION
Options granted under the 1991 Stock Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonqualified options.
If an option granted under the 1991 Stock Option Plan is an incentive stock
option, the optionee will recognize no income upon grant of the incentive stock
option and incur no tax liability due to the exercise unless the optionee is
subject to the alternative minimum tax. The Company will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after transfer of the shares to the optionee by
the Company, any gain will be treated as long-term capital gain. If these
holding periods are not satisfied, the optionee will recognize ordinary income
equal to the excess of the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock over the exercise
price. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized as capital gain.
All other options which do not qualify as incentive stock options are
referred to as nonqualified options. An optionee will not recognize any taxable
income at the time he or she is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the exercise
price. The income recognized by an optionee who is also an employee of the
Company will be subject to tax withholding by the Company by payment in cash or
out of the current earnings paid to the optionee. Upon resale of such shares by
the optionee, the excess of the sale price over the optionee's basis in the
shares will be treated as capital gain or loss. The Company will be entitled to
a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a nonqualified option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1991 Stock Option Plan and does not purport to be complete,
and reference should be made by the optionee to the applicable provisions of the
Code. In addition, this summary does not discuss the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
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<PAGE> 37
NEW PLAN BENEFITS
The following table reflects the number of shares of Common Stock underlying
options that would have been granted for the year ended December 31, 1999 under
the 1991 Stock Option Plan as proposed to be amended.
NEW PLAN BENEFITS
1991 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Number of Shares
Underlying Options
Name and Position Dollar Value (1) Granted (2)
----------------- ---------------- ------------------
<S> <C> <C>
Norman C. Payson, M.D.
Chairman and Chief -- 400,000
Executive Officer
Yon Y. Jorden
Executive Vice President, Chief -- 112,500
Financial Officer (3)
Alan M. Muney, M.D., M.H.A.
Executive Vice President, -- 56,250
Chief Medical Officer
Marvin P. Rich
Executive Vice President -- 150,000
Chief Administrative Officer
Jon S. Richardson
Executive Vice President and -- 120,000
General Counsel (4)
Jeffery H. Boyd
Executive Vice President and -- 93,750
General Counsel (5)
William M. Sullivan
President (6) -- 150,000
All Executive Officers as --
a Group (7 persons) 1,082,500
All Non-Executive Directors as a Group (10 --
person) (7) 5,000
All Employees and Officers
who are not Executive --
Officers as a Group (255 persons) 1,683,900
</TABLE>
(1) The exercise prices of all options granted are the fair market value
of the Common Stock on the date of grant.
(2) Represents the number of shares underlying options actually granted
under the 1991 Stock Option Plan for the year ended December 31, 1999.
(3) Ms. Jorden's employment with the Company was terminated in March 2000.
(4) Mr. Richardson became an executive officer in December 1999.
(5) Mr. Boyd resigned from his position with the Company in December 1999.
(6) Mr. Sullivan resigned from his position with the Company in November
1999.
(7) Non-executive directors receive stock options under the Company's
Nonemployee Director Plan. Dr. Safirstein, however, receives stock
options under the 1991 Stock Option Plan.
36
<PAGE> 38
The Company's Board of Directors believes that the amendments proposed in
Proposal Number Three and Proposal Number Four to the 1991 Stock Option Plan are
an integral part of its efforts to recruit new and retain existing members of
senior management and other key employees. The success of the Company's future
will be substantially impacted by the efforts of these individuals. Accordingly,
the Board of Directors believes that these amendments are in the best interest
of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE 1991 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES AVAILABLE UNDER THE PLAN.
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<PAGE> 39
PROPOSAL NUMBER FOUR
AMENDMENT TO 1991 STOCK OPTION PLAN
TO EXTEND THE TERM
On March 15, 2000, the Board of Directors adopted a resolution, subject to
stockholder approval, to amend the 1991 Stock Option Plan to extend the term of
the 1991 Plan from ten years to fifteen years. The 1991 Stock Option Plan is
currently set to expire on June 6, 2001 which is ten years from its effective
date. In the event the 1991 Stock Option Plan expires in 2001, (i) the Company
will not be permitted to continue to grant options under the plan, although
options existing and outstanding will not be affected, (ii) shares previously
approved by the stockholders for issuance under the 1991 Stock Option Plan and
not yet subject to outstanding options will not be available to the Company for
granting stock options, and (iii) the Company will not be able to offer stock
options to existing and new members of management or other key employees.
For a full description of the 1991 Stock Option Plan and the Board of
Directors' statements in support of the amendments proposed in this Proposal
Number Four, see "Proposal Number Three" above.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDMENT TO THE 1991 STOCK OPTION PLAN TO EXTEND THE TERM.
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<PAGE> 40
PROPOSAL NUMBER FIVE
STOCKHOLDER PROPOSAL RELATING TO THE ESTABLISHMENT OF AN
INDEPENDENT NOMINATING COMMITTEE
The New York City Employees' Retirement System of 1 Centre Street, New
York, New York is the holder of 154,200 shares of Common Stock and has caused
the following proposal to be included in this Proxy Statement. The Company is
not responsible for any of the contents of the language of the proposal by the
stockholder, which is set out below in italics and between quotation marks. The
Board of Directors unanimously opposes this proposal by the stockholder for the
reasons set forth in the Board of Directors' Statement in Opposition to Proposal
Number Five which follows the proposal by the stockholder.
"SHAREHOLDER PROPOSAL
CREATION OF AN INDEPENDENT NOMINATING COMMITTEE
Submitted on behalf of the New York City Employees' Retirement System ("NYCERS")
by Alan G. Hevesi, Comptroller of the City of New York.
WHEREAS, the board of directors is meant to be an independent body elected by
shareholders and charged by law and shareholders with the duty, authority and
responsibility to formulate and direct corporate policies, and
WHEREAS, this company has provided that the board may designate from among its
members one or more committees, each of which, to the extent allowed, shall have
certain designated authority, and
WHEREAS, we believe that directors independent of management are best qualified
to act in the interest of shareholders and can take steps necessary to seek,
nominate and present new directors to shareholders, and
WHEREAS, we believe the selection of new directors is an area in which inside
directors may have a conflict of interest with shareholders, and
WHEREAS, we believe that an increased role for the independent directors would
help our company improve its long-term financial condition, stock performance
and ability to compete,
NOW THEREFORE BE IT RESOLVED THAT: the shareholders request the company
establish a Nominating Committee to recommend candidates to stand for election
to the board of directors. The Committee shall be composed solely of independent
directors. For these purposes, an independent director is one who: (1) has not
been employed by the company, or an affiliate in an executive capacity within
the last five years; (2) is not a member of a company that is one of this
company's paid advisors or consultants; (3) is not employed by a significant
customer or supplier; (4) is not remunerated by the company for personal
services (consisting of legal, accounting, investment banking, and management
consulting services, whether or not as an employee for a corporation, division,
or similar organization that actually provides the personal services, nor an
entity from which the company derives more than 50 percent of its gross
revenues; (5) is not employed by a tax-exempt organization that receives
significant contributions from the company; (6) is not a relative of the
management of the company; and (7) is not part of an interlocking directorate in
which the CEO or other executive officers of the corporation serves on the board
of another corporation that employs the director.
STATEMENT OF SUPPORT
As long-term shareholders we are concerned about our company's prospects for
profitable growth. This proposal is intended to strengthen the process by which
nominees are selected. We believe that this will strengthen the board of
directors in its role of advising, overseeing and evaluating management.
We urge you to vote FOR this proposal."
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<PAGE> 41
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO PROPOSAL NUMBER FIVE
The Board of Directors opposes the proposal to establish an "independent"
(as defined in Proposal Number Five) Nominating Committee. The Board of
Directors believes that there is no tenable link between the composition of the
Nominating Committee and the profitability or growth of the Company and that the
current composition of the Nominating Committee is a healthy and productive
combination of an individual with extensive knowledge of the Company as a
current executive officer and independent directors.
The Company's existing Nominating Committee, which was established by
resolution of the Board of Directors on July 28, 1995, considers and makes
recommendations on nominations for membership on the Company's Board of
Directors. Currently, the Nominating Committee is composed of four members:
Messrs. Bonderman, Milligan and Nazem and Dr. Payson. All but one member of the
Company's existing Nominating Committee are independent within the meaning of
that word in the stockholder's proposal.
Under the stockholder's mechanical and arbitrary standard, the Company's
Chief Executive Officer would be excluded from membership on the Nominating
Committee, thereby depriving the nominating committee, the Board of Directors
and the Company, as a whole, of the Chief Executive Officer's broad knowledge
and experience. The exclusion from the nomination process of directors who do
not fit within the stockholder's mechanical and arbitrary definition of
independent would diminish the meaningful contribution they could give with
respect to selecting candidates with the requisite experience and qualifications
for filling vacancies or additions to the Board of Directors. The effect of the
proposal would be to arbitrarily deny certain valuable board members the ability
to serve on the Nominating Committee. The Board of Directors believes this
result to be inappropriate and unlikely to result in any benefit to the
stockholders of the Company generally.
Approval of this proposal would not in itself establish an independent
nominating committee. Approval of the proposal would only serve as a request
that the Board of Directors take the necessary steps to establish an independent
nominating committee. Establishment of an independent nominating committee would
require that the Board of Directors exercise its collective business judgment to
determine that establishing the qualifications of the members of the nominating
committee in accordance with this proposal is in the best interest of the
Company and to pass a resolution to such effect.
The affirmative vote of a majority of the votes attributable to outstanding
shares of Common Stock, Series D Preferred Stock and Series E Preferred Stock
which are present in person or represented by proxy at the Meeting and entitled
to vote is necessary for approval of the stockholder's proposal regarding the
establishment of an independent Nominating Committee. Proxies will be voted
against the stockholder proposal unless otherwise specified.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE
STOCKHOLDER PROPOSAL RELATING TO THE ESTABLISHMENT OF AN INDEPENDENT NOMINATING
COMMITTEE.
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<PAGE> 42
INDEPENDENT AUDITORS
KPMG LLP was the Company's independent auditors for the year ended
December 31, 1997. On June 9, 1998, the Company appointed Ernst & Young LLP as
the Company's independent auditors. Representatives of Ernst & Young LLP are
expected to be present at the Meeting. They will be given an opportunity to make
a statement and will be available to respond to appropriate questions.
The Company dismissed KPMG LLP as the independent auditors of the Company,
effective June 2, 1998. The Company selected the firm of Ernst & Young LLP to
serve as the independent auditors of the Company, commencing June 9, 1998. The
reports of KPMG LLP on the financial statements of the Company for the year
ended December 31, 1997 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. This change in accountants was approved by the Audit Committee of
the Board of Directors of the Company. During the Company's two most recent
fiscal years there were no disagreements with KPMG LLP concerning accounting
principles or practices, financial statement disclosures or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of KPMG LLP
would have caused KPMG LLP to make reference thereto in their report on the
financial statements for such years, and there were no reportable events as that
term is defined in Item 304(a)(1)(v) of Regulation S-K. The Company provided
KPMG LLP with a copy of the disclosure contained herein and requested that KPMG
LLP furnish it with a letter addressed to the Securities and Exchange Commission
stating whether or not it agrees with the above statements. A copy of such
letter, dated June 9, 1998, is filed as an exhibit to the Company's Form 8-K
filed on June 9, 1998 with the Securities and Exchange Commission.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy statement
and form of proxy relating to the 2001 annual meeting of stockholders, any
proposal by a record holder of Common Stock must be received by the Company at
its principal offices in Trumbull, Connecticut, on or before December 1, 2000.
In addition, under the Company's bylaws, any proposal for consideration at the
2001 annual meeting of stockholders submitted by a stockholder outside of the
processes of Rule 14a-8 under the Securities Exchange Act of 1934 will be
considered untimely unless it is received by the Company on or before February
25, 2001 and is otherwise in compliance with the requirements set forth in the
Company's bylaws.
SOLICITATION
All costs and expenses associated with soliciting proxies will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
the directors, officers and employees of the Company by personal interview,
telephone or telegram. Such directors, officers and employees will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Arrangements will also
be made with custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Common Stock held of record by
such persons, and the Company will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
therewith. In addition, the Company has retained Georgeson Shareholder
Communications, Inc., a proxy soliciting firm, to assist in the solicitation of
proxies and will pay such firm a fee, estimated not to exceed $10,000 plus
reimbursement for out-of-pocket expenses. The total amount of such expenses will
be borne by the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other business or matters to be presented for consideration at the
Meeting other than as set forth in the Notice of Meeting attached to this Proxy
Statement. However, if any other business shall come before the Meeting or any
adjournment or postponement thereof and be voted upon, the enclosed proxy shall
be deemed to confer discretionary authority on the individuals named to vote the
shares represented by such proxy as to any such matters.
INFORMATION INCORPORATED BY REFERENCE
The following information is incorporated by reference to the Company's
Annual Report on form 10-K for the fiscal year ended December 31, 1999 (the
"Form 10-K"), as filed with the Securities and Exchange Commission:
- Consolidated financial statements of the Company and subsidiaries for
the three years ended December 31, 1999, on pages 52 to 79 of the Form
10-K;
- Item 6, "Selected Consolidated Financial Data", on page 28 of the Form
10-K;
- Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations", on pages 29 to 45 of the Form 10-K; and
- Item 7A, "Quantitative and Qualitative Disclosures about Market Risk",
on page 46 of the Form 10-K.
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<PAGE> 43
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL HOLDER OF ITS
COMMON STOCK, SERIES D PREFERRED STOCK AND SERIES E PREFERRED STOCK ON THE
RECORD DATE, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST
SHOULD BE MADE IN WRITING TO INVESTOR RELATIONS DEPARTMENT, OXFORD HEALTH PLANS,
INC., 48 MONROE TURNPIKE, TRUMBULL, CONNECTICUT 06611.
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<PAGE> 44
APPENDIX A
RESOLUTIONS AUTHORIZING THE AMENDMENT
OF THE CORPORATION'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED
RESOLVED, that the Board of Directors hereby approves and declares advisable the
following amendments to the Corporation's Second Amended and Restated
Certificate of Incorporation, as amended (the "Certificate"), including the
Certificate of Designations of Series D Cumulative Preferred Stock, par value
$.01 per share, of the Corporation ("Series D COD") and the Certificate of
Designations of Series E Cumulative Preferred Stock, par value $.01 per share,
of the Corporation ("Series E COD"), to confer the power to vote upon holders of
the Corporation's Series D Junior Subordinated Debentures due May 13, 2008 and
holders of the Corporation's Series E Junior Subordinated Debentures due May 13,
2008, and to clarify the voting rights of the stockholders of the Corporation in
certain situations.
RESOLVED, that Article FOURTH of the Certificate be amended to read in its
entirety as follows:
ARTICLE FOURTH
Capital Stock
The total authorized capital stock of the Corporation consists
of 402,000,000 shares, of which 2,000,000 are shares of Preferred
Stock, par value $.01 per share ("Preferred Stock"), and 400,000,000
are shares of Common Stock, par value $.01 per share ("Common Stock").
The designations and the powers, preferences and relative,
participating, option or other special rights, and the qualifications,
limitations or restrictions thereof, of the Preferred Stock and the
Common Stock shall be as follows:
1. The Preferred Stock may be issued, from time to time, in
one or more series, with such designations, voting powers, if any,
preferences and relative, participating, option or other special
rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions
providing for the issue of such series adopted by the Board of
Directors. The Board of Directors, in such resolution or resolutions (a
copy of which shall be filed and recorded as required by law), is also
expressly authorized to fix:
(i) the distinctive serial designations and the division of
such shares into series and the number of shares of a particular
series, which may be increased or decreased, but not below the number
of shares thereof then outstanding, by a certificate made, signed,
filed and recorded as required by law;
<PAGE> 45
(ii) the annual dividend rate (or method of determining such
rate) for the particular series, the date or dates upon which such
dividends shall be payable, and the date or dates or method of
determining the date or dates from and after which dividends on all
shares of such series shall be cumulative, if dividends on stock of the
particular series shall be cumulative;
(iii) the price or prices at which, the period or periods
within which and the terms and conditions upon which the shares of such
series may be redeemed, in whole or in part, at the option of the
Corporation;
(iv) the right, if any, of the holders of a particular series
or the Corporation to convert such stock into other classes or series
of stock or to exchange such stock for shares of any other class of
stock or series thereof, and the terms and conditions, if any,
including the price or prices or the rate or rates of conversion and
the terms and conditions of any adjustments thereof, of such
conversion;
(v) the obligation, if any, of the Corporation to purchase and
retire and redeem, in whole or in part, shares of a particular series
as a sinking fund or redemption or purchase account, the terms thereof
and the redemption price or prices per share for such series redeemed
pursuant to the sinking fund or redemption account;
(vi) the voting rights, if any, of shares of such series in
addition to those required by law, including the number of votes per
share and any requirement for the approval by the holders of up to 66
2/3% of all Preferred Stock, or of the shares of one or more series, or
of both, as a condition to specified corporate action or amendments to
this Certificate of Incorporation;
(vii) the ranking of the shares of the series as compared with
shares of other series of the Preferred Stock in respect of the right
to receive payments out of the assets of the Corporation upon voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation; and
(viii) any other rights, obligations, or provisions which may
be so determined to the fullest extent permitted by Delaware law.
All shares of any one series of Preferred Stock shall be alike
in every particular and all series shall rank equally and be identical
in all respects except insofar as they may vary with respect to the
matters which the Board of Directors is hereby expressly authorized to
determine in the resolution or resolutions providing for the issue of
any series of the Preferred Stock.
-2-
<PAGE> 46
2. All shares of Preferred Stock shall rank senior to the
Common Stock in respect of the right to receive dividends and the right
to receive payments out of the assets of the Corporation upon voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, and the shares of any one series of Preferred Stock shall
be identical with each other in all such respects except as to the
dates (if any) from and after which dividends thereon shall be
cumulative. All shares of Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation (including shares surrendered for
conversion) shall be canceled and thereupon restored to the status of
authorized but unissued Preferred Stock undesignated as to series.
3. Holders of shares of Common Stock shall be entitled to one
vote for each share of such stock upon all questions presented to
stockholders of the Corporation. The rights of holders of Common Stock
shall be subject to the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the Preferred
Stock.
4. The voting rights of holders of Common Stock and holders of
Preferred Stock shall be subject to the voting rights set forth in
Article FIFTEENTH hereof of holders of the Corporation's Series D Junior
Subordinated Debentures due May 13, 2008 and holders of the
Corporation's Series E Junior Subordinated Debentures due May 13, 2008,
if any; provided, however, that nothing in Article FIFTEENTH hereof
divests or shall be deemed to divest the holders of capital stock of the
Corporation of any right to vote which they have or may have by reason
of the General Corporation Law of the State of Delaware or this
Certificate of Incorporation.
RESOLVED, that the Certificate be amended to include therein a new Article
FIFTEENTH which shall read in its entirety as follows:
ARTICLE FIFTEENTH
Voting Debentures
The holders of the Corporation's Series D Junior Subordinated
Debentures due May 13, 2008 (the "Series D Debentures") and the holders
of the Corporation's Series E Junior Subordinated Debentures due May
13, 2008 (the "Series E Debentures") shall have no voting rights,
except as expressly set forth below.
1. Voting Rights of Series D Debentures. (a) The Investor and
its Affiliates, in their capacity as Holders (as hereinafter defined)
of Series D Debentures, shall be entitled to vote on all matters voted
on by holders of Common Stock, and shall vote together with shares of
Common Stock (and any Series E Securities (as hereinafter defined)
entitled to vote) as a single class; provided, however, that (i) such
voting rights shall apply only to such Series D Debentures issued to
the Investor or any Affiliate of the Investor in exchange for shares of
Series D Preferred that had similar
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voting rights and (ii) upon transfer of a Series D Debenture or any
portion thereof to any Person other than the Investor or an Affiliate
of the Investor, such Person, and any subsequent transferee, shall not
be entitled to such voting rights with respect to such Series D
Debenture or the transferred portion thereof, regardless of whether any
such Series D Debentures are subsequently acquired by the Investor or
its Affiliates. The term "Series E Securities" means the Series E
Debentures or, if the Series E Preferred has not been exchanged for
Series E Debentures, the Series E Preferred or, if the Series E
Preferred has been exchanged for consideration that includes shares of
another series of Preferred Stock and the Certificate of Designations
of such series expressly provides that such series shall be deemed
"Series E Securities" for purposes of this Section 1, such series of
Preferred Stock.
(b) With respect to any such vote provided for in subsection
(a) above, the Investor (together with its Affiliates) shall be
entitled with respect to its Series D Debentures to an aggregate number
of votes equal to the Series D Investor Aggregate Vote Number (as
hereinafter defined).
The "Series D Investor Aggregate Vote Number" shall equal the
number of shares of Common Stock that would be issuable upon the
exercise of the Original Series A Warrants (as hereinafter defined) by
the holders thereof (assuming all conditions precedent to such exercise
have been satisfied and that such exercise occurs as of the record date
for such vote), multiplied by the lesser of (x) the quotient of the
number of Original Series A Warrants that are Beneficially Owned by
members of the Investor Group, in the aggregate, as of the record date
for such vote (excluding, however, any Original Series A Warrants that
have been transferred on the books of the Corporation by any member of
the Investor Group to any Person other than a member of the Investor
Group, regardless of whether any such Original Series A Warrants are
subsequently acquired by any member of the Investor Group), divided by
the number of Original Series A Warrants, and (y) the quotient of the
aggregate principal amount of Original Series D Debentures (as
hereinafter defined) that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such vote
(excluding, however, (i) any Original Series D Debentures issued in
respect of shares of Series D Preferred that were transferred on the
stock records of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless of
whether any such shares of Series D Preferred were subsequently
acquired by any member of the Investor Group, and (ii) any Original
Series D Debentures transferred by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless of
whether any such Original Series D Debentures are subsequently acquired
by any member of the
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Investor Group), divided by the aggregate principal amount of the
Original Series D Debentures. The term "Series A Warrants" means the
Series A Warrants issued by the Corporation pursuant to the Investment
Agreement or the Warrant Agreement. The term "Original Series A
Warrants" means those Series A Warrants Beneficially Owned by members
of the Investor Group, in the aggregate, as of May 13, 1998. The term
"Original Series D Debentures" means the aggregate of those Series D
Debentures Beneficially Owned by members of the Investor Group as of
the original issue date of the Series D Debentures and, without
duplication, those Series D Debentures issued in respect of shares of
Series D Preferred that were Beneficially Owned by members of the
Investor Group on February 13, 1999 and subsequently transferred on the
stock records of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group; provided,
however, that "Original Series D Debentures" shall not include any
Series D Debentures issued in respect of Series D Preferred previously
issued as a dividend on Series D Preferred.
(c) If on any date (i) interest due and payable on the Series
D Debentures shall not have been paid in full for four consecutive
quarterly periods or interest due and payable on, or dividends payable
on, the Series E Securities shall not have been paid in full, or shall
have been in arrears and not paid in full, as the case may be, for four
consecutive quarterly periods, or (ii) the Corporation shall have
failed to satisfy its obligation to redeem or repay the principal of
either Series D Debentures in accordance with the indenture relating to
the Series D Debentures (the "Series D Indenture") or Series E
Securities in accordance with the applicable indenture or certificate
of designations, as the case may be, then the number of directors
constituting the Board of Directors shall, without further action, be
increased by two, and the holders of Series D Debentures and Series E
Securities representing at least a majority of the aggregate principal
amount of Outstanding Series D Debentures and Series E Securities shall
have, in addition to the other voting rights set forth herein, the
exclusive right, voting together as a single class without regard to
series, to elect the two directors (the "Additional Directors") of the
Corporation to fill such newly-created directorships. Notwithstanding
the foregoing, the Investor and its Affiliates shall not be permitted
to elect, pursuant to the preceding sentence, more than the number of
directors that would result in four directors designated for nomination
or elected by the Investor and its Affiliates then being on the Board
of Directors (including directors that the Investor has a right to
designate for nomination to the Board of Directors pursuant to the
Investment Agreement); provided, that, if at the
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time Holders of Series D Debentures and holders of Series E Securities
have the right to elect Additional Directors and (i) the Investor and
its Affiliates Beneficially Own, in the aggregate, Series D Debentures
and Series E Securities representing a majority of the aggregate
principal amount of Outstanding Series D Debentures and Series E
Securities, taken together as a single class, and (ii) the Investor and
its Affiliates are not permitted to elect one or both of the Additional
Directors as aforesaid, then the Holders of Series D Debentures and
holders of Series E Securities (other than the Investor and its
Affiliates) shall have the right to elect, voting together as a single
class, one Additional Director pursuant to this subsection (c). For the
purposes of the two preceding sentences, if the Series E Securities
constitute Preferred Stock, one share of such Preferred Stock shall be
deemed to be equal to a principal amount of $1,000. Additional
Directors shall continue as directors and such additional voting right
shall continue until such time as (a) all interest due and payable on
the Series D Debentures and, if applicable, all interest due and
payable on, or dividends accumulated on, the Series E Securities, as
the case may be, shall have been paid in full and (b) any redemption
obligation with respect to, or any obligation to repay the principal
of, the Series D Debentures and the Series E Securities, as the case
may be, that has become due shall have been satisfied or all necessary
funds shall have been set aside for payment, as the case may be, at
which time such Additional Directors shall cease to be directors and
such additional voting right of the Holders shall terminate subject to
revesting in the event of each and every subsequent event of the
character indicated above and subject to any rights as to the election
of directors provided for the holders of any series of preferred stock
of the Corporation.
(d) In the event that one or more of the Investor Nominees
required to be designated for election to the Board of Directors
pursuant to the Investment Agreement are not so designated or are not
elected to the Board of Directors and the Investor or any of its
Affiliates Beneficially Owns Series D Debentures, then the number of
directors constituting the Board of Directors shall, without further
action, be increased by the number of such Investor Nominees not
elected to the Board of Directors pursuant to the Investment Agreement,
and such Holder or Holders shall have, in addition to the other voting
rights set forth herein, the exclusive right, voting separately as a
single class, to elect a number of directors to the Board of Directors
equal to the number of such Investor Nominees not elected to the Board
of Directors. Directors elected pursuant to this subsection shall
continue as directors and such additional voting right shall continue
until such time as the requisite number of Investor Nominees are
elected to the Board of Directors pursuant to the Investment Agreement,
at which time the directors elected by the Investor and its Affiliates
pursuant
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to this subsection shall cease to be directors (unless elected as
Investor Nominees), and such additional voting rights shall terminate
subject to revesting in the event of each and every subsequent event of
the character indicated above.
(e) (i) The foregoing rights of Holders to take any action as
provided in this Section 1 may be exercised at any annual meeting of
stockholders or at a special meeting of Holders held for such purpose
as hereinafter provided or at any adjournment thereof, or by the
written consent, delivered to the Secretary of the Corporation, of the
Holders of Series D Debentures representing the minimum principal
amount of Outstanding Series D Debentures required to take such action.
So long as such right to vote continues (and unless such right has been
exercised by written consent of the Holders of Series D Debentures
representing the minimum principal amount of Outstanding Series D
Debentures required to take such action), the Chairman of the Board of
Directors may call, and upon the written request of Holders of Series D
Debentures representing 20% of the aggregate principal amount of the
Outstanding Series D Debentures, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a
special meeting of the Holders entitled to vote as provided herein.
Such meeting shall be held within 60 days after delivery of such
request to the Secretary, at the place and upon the notice provided by
law and in the By-laws of the Corporation for the holding of meetings
of stockholders.
(ii) Each director elected pursuant to subsection (c) of this
Section 1 shall serve until the next annual meeting or until his or her
successor shall be elected and shall qualify, unless the director's
term of office shall have terminated pursuant to the provisions of
subsection (c) of this Section 1. In case any vacancy shall occur among
the directors elected pursuant to subsection (c) or (d) of this Section
1, such vacancy may be filled for the unexpired portion of the term by
vote of the remaining director or directors theretofore elected by such
Holders (and, if applicable, holders of the Series E Securities) (or
such director's or directors' successor in office), if any. If any such
vacancy is not so filled within 20 days after the creation thereof or
if all of the directors so elected shall cease to serve as directors
before their term shall expire, the Holders (and, if applicable,
holders of the Series E Securities) entitled to vote for such director
pursuant to the provisions of subsection (c) or (d) of this Section 1,
as the case may be, may elect successors to hold office for the
unexpired terms of any vacant directorships, by written consent as
herein provided, or at a special meeting of such Holders (and, if
applicable, holders of the Series E Securities) called as provided
herein. The Holders of Series D Debentures (and, if applicable, holders
of the Series E Securities) representing a majority of the aggregate
principal amount of Series D Debentures (and, if applicable Series E
Securities)
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entitled to vote for directors pursuant to subsection (c) or (d) of
this Section 1, as the case may be, shall have the right to remove with
or without cause at any time and replace any directors such Holders
(and, if applicable, holders of the Series E Securities) have elected
pursuant to such section, by written consent as herein provided, or at
a special meeting of such Holders (and, if applicable, holders of the
Series E Securities) called as provided herein. For the purposes of the
two preceding sentences, if the Series E Securities constitute
Preferred Stock, one share of such Preferred Stock shall be deemed to
be equal to a principal amount of $1,000.
(f) Without the consent or affirmative vote of the Holders of
Series D Debentures, voting separately as a class, representing at
least a majority of the aggregate principal amount of Outstanding
Series D Debentures, the Corporation shall not authorize, create or
issue, or increase the authorized amount of any class or series of
capital stock or any security convertible into or exercisable for any
class or series of capital stock, redeemable mandatorily or redeemable
at the option of the holder thereof at any time on or prior to May 13,
2008 (whether or not only upon the occurrence of a specified event);
provided, however, that no consent or vote of the Holders shall be
required for the creation or issuance by a trust formed at the
direction of the Corporation of any series of preferred securities of
such trust for financing purposes in an aggregate amount not to exceed
$250,000,000 ("Trust Preferred Stock").
(g) Without the consent or affirmative vote of the Holders of
Series D Debentures, voting separately as a class, representing at
least a majority of the aggregate principal amount of Outstanding
Series D Debentures, the Corporation shall not (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the By-laws
of the Corporation, if the amendment, alteration or repeal alters or
changes the rights of the Holders of the Series D Debentures so as to
affect them materially and adversely, or (ii) authorize or take any
other action if such action alters or changes any of the rights of
Holders of the Series D Debentures in any respect or otherwise would be
inconsistent with the provisions of the Series D Indenture and the
holders of any class or series of the capital stock of the Corporation
are entitled to vote thereon.
(h) For the purposes of this Section 1, the term "Holder"
means the person in whose name a Series D Debenture is registered in
the Corporation's debenture register.
2. Voting Rights of Series E Debentures. (a) The Investor and
its Affiliates, in their capacity as Holders (as hereinafter defined)
of Series E Debentures, shall be entitled to vote on all matters voted
on by holders of Common Stock, and shall vote together with shares of
Common Stock (and any Series D Securities (as hereinafter defined)
entitled to vote) as a single class; provided, however, that (i) such
voting rights shall
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apply only to such Series E Debentures issued to the Investor or any
Affiliate of the Investor in exchange for shares of Series E Preferred
that had similar voting rights and (ii) upon transfer of a Series E
Debenture or any portion thereof to any Person other than the Investor
or an Affiliate of the Investor, such Person, and any subsequent
transferee, shall not be entitled to such voting rights with respect to
such Series E Debenture or the transferred portion thereof, regardless
of whether any such Series E Debentures are subsequently acquired by
the Investor or its Affiliates. The term "Series D Securities" means
the Series D Debentures or, if the Series D Preferred has not been
exchanged for Series D Debentures, the Series D Preferred or, if the
Series D Preferred has been exchanged for consideration that includes
shares of another series of Preferred Stock and the Certificate of
Designations of such series expressly provides that such series shall
be deemed "Series D Securities" for purposes of this Section 2, such
series of Preferred Stock.
(b) With respect to any such vote provided for in subsection
(a), the Investor (together with its Affiliates) shall be entitled with
respect to its Series E Debentures to an aggregate number of votes
equal to the Series E Investor Aggregate Vote Number (as hereinafter
defined).
The "Series E Investor Aggregate Vote Number" shall equal the
number of shares of Common Stock that would be issuable upon the
exercise of the Original Series B Warrants (as hereinafter defined) by
the holders thereof (assuming all conditions precedent to such exercise
have been satisfied and that such exercise occurs as of the record date
for such vote), multiplied by the lesser of (x) the quotient of the
number of Original Series B Warrants that are Beneficially Owned by
members of the Investor Group, in the aggregate, as of the record date
for such vote (excluding, however, any Original Series B Warrants that
have been transferred on the books of the Corporation by any member of
the Investor Group to any Person other than a member of the Investor
Group, regardless of whether any such Original Series B Warrants are
subsequently acquired by any member of the Investor Group), divided by
the number of Original Series B Warrants, and (y) the quotient of the
aggregate principal amount of Original Series E Debentures (as
hereinafter defined) that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such vote
(excluding, however, (i) any Original Series E Debentures issued in
respect of shares of Series E Preferred that were transferred on the
stock records of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless of
whether any such shares of Series E Preferred were subsequently
acquired by any member of the Investor Group, and (ii) any Original
Series E Debentures transferred by any member of the Investor Group to
any Person other than a member of the
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Investor Group, regardless of whether any such Original Series E
Debentures are subsequently acquired by any member of the Investor
Group), divided by the aggregate principal amount of the Original
Series E Debentures. The term "Series B Warrants" means the Series B
Warrants issued by the Corporation pursuant to the Investment Agreement
or the Warrant Agreement. The term "Original Series B Warrants" means
those Series B Warrants Beneficially Owned by members of the Investor
Group, in the aggregate, as of May 13, 1998. The term "Original Series
E Debentures" means the aggregate of those Series E Debentures
Beneficially Owned by members of the Investor Group as of the original
issue date of the Series E Debentures and, without duplication, those
Series E Debentures issued in respect of shares of Series E Preferred
that were Beneficially Owned by members of the Investor Group on
February 13, 1999 and subsequently transferred on the stock records of
the Corporation by any member of the Investor Group to any Person other
than a member of the Investor Group; provided, however, that "Original
Series E Debentures" shall not include any Series E Debentures issued
in respect of Series E Preferred previously issued as a dividend on
Series E Preferred.
(c) If on any date (i) interest due and payable on the Series
E Debentures shall not have been paid in full for four consecutive
quarterly periods or, if applicable, interest due and payable on, or
dividends payable on, the Series D Securities shall not have been paid
in full, or shall have been in arrears and not paid in full, as the
case may be, for four consecutive quarterly periods or (ii) the
Corporation shall have failed to satisfy its obligation to redeem or
repay the principal of either Series E Debentures in accordance with
the indenture relating to the Series E Debentures (the "Series E
Indenture") or Series D Securities in accordance with the applicable
indenture or certificate of designations, as the case may be, then the
number of directors constituting the Board of Directors shall, without
further action, be increased by two, and the holders of Series E
Debentures and Series D Securities representing at least a majority of
the aggregate principal amount of Outstanding Series E Debentures and
Series D Securities shall have, in addition to the other voting rights
set forth herein, the exclusive right, voting together as a single
class without regard to series, to elect the two Additional Directors
of the Corporation to fill such newly-created directorships.
Notwithstanding the foregoing, the Investor and its Affiliates shall
not be permitted to elect, pursuant to the preceding sentence, more
than the number of directors that would result in four directors
designated for nomination or elected by the Investor and its Affiliates
then being on the Board of Directors (including directors that the
Investor has a right to designate for nomination to the Board of
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Directors pursuant to the Investment Agreement); provided, that, if at
the time Holders of Series E Debentures and holders of Series D
Securities have the right to elect Additional Directors and (i) the
Investor and its Affiliates Beneficially Own, in the aggregate, Series
E Debentures and Series D Debentures representing a majority of the
aggregate principal amount of Outstanding Series E Debentures and
Series D Securities, taken together as a single class, and (ii) the
Investor and its Affiliates are not permitted to elect one or both of
the Additional Directors as aforesaid, then the Holders of Series E
Debentures and holders of Series D Securities (other than the Investor
and its Affiliates) shall have the right to elect, voting together as a
single class, one Additional Director pursuant to this subsection (c).
For the purposes of the two preceding sentences, if the Series D
Securities constitute Preferred Stock, one share of such Preferred
Stock shall be deemed to be equal to a principal amount of $1,000.
Additional Directors shall continue as directors and such additional
voting right shall continue until such time as (a) all interest due and
payable on the Series E Debentures and, if applicable, all interest due
and payable on, or dividends accumulated on, the Series D Securities,
as the case may be, shall have been paid in full and (b) any redemption
obligation with respect to, or any obligation to repay the principal
of, the Series E Debentures and the Series D Securities, as the case
may be, that has become due shall have been satisfied or all necessary
funds shall have been set aside for payment, as the case may be, at
which time such Additional Directors shall cease to be directors and
such additional voting right of the Holders shall terminate subject to
revesting in the event of each and every subsequent event of the
character indicated above and subject to any rights as to the election
of directors provided for the holders of any series of preferred stock
of the Corporation.
(d) (i) The foregoing rights of Holders to take any action as
provided in this Section 2 may be exercised at any annual meeting of
stockholders or at a special meeting of Holders held for such purpose
as hereinafter provided or at any adjournment thereof, or by the
written consent, delivered to the Secretary of the Corporation, of the
Holders of Series E Debentures representing the minimum principal
amount of Outstanding Series E Debentures required to take such action.
So long as such right to vote continues (and unless such right has been
exercised by written consent of the Holders of Series E Debentures
representing the minimum principal amount of Outstanding Series E
Debentures required to take such action), the Chairman of the Board of
Directors may call, and upon the written request of Holders of Series E
Debentures representing 20% of the aggregate principal amount of the
Outstanding Series E Debentures, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a
special meeting of the Holders
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entitled to vote as provided herein. Such meeting shall be held within
60 days after delivery of such request to the Secretary, at the place
and upon the notice provided by law and in the By-laws of the
Corporation for the holding of meetings of stockholders.
(ii) Each director elected pursuant to subsection (c) of this
Section 2 shall serve until the next annual meeting or until his or her
successor shall be elected and shall qualify, unless the director's
term of office shall have terminated pursuant to the provisions of
subsection (c) of this Section 2. In case any vacancy shall occur among
the directors elected pursuant to subsection (c) of this Section 2,
such vacancy may be filled for the unexpired portion of the term by
vote of the remaining director or directors theretofore elected by such
Holders (and, if applicable, holders of the Series D Securities) (or
such director's or directors' successor in office), if any. If any such
vacancy is not so filled within 20 days after the creation thereof or
if all of the directors so elected shall cease to serve as directors
before their term shall expire, the Holders (and, if applicable,
holders of the Series D Securities) entitled to vote for such director
pursuant to the provisions of subsection (c) of this Section 2, as the
case may be, may elect successors to hold office for the unexpired
terms of any vacant directorships, by written consent as herein
provided, or at a special meeting of such Holders (and, if applicable,
holders of the Series D Securities) called as provided herein. The
Holders of Series E Debentures (and, if applicable, holders of the
Series D Securities) representing a majority of the aggregate principal
amount of Series E Debentures (and, if applicable, Series D Securities)
entitled to vote for directors pursuant to subsection (c) of this
Section 2 shall have the right to remove with or without cause at any
time and replace any directors such Holders (and, if applicable,
holders of the Series D Securities) have elected pursuant to such
section, by written consent as herein provided, or at a special meeting
of such Holders (and, if applicable, holders of the Series D
Securities) called as provided herein. For the purposes of the two
preceding sentences, if the Series D Securities constitute Preferred
Stock, one share of such Preferred Stock shall be deemed to be equal to
a principal amount of $1,000.
(e) Without the consent or affirmative vote of the Holders of
Series E Debentures, voting separately as a class, representing at
least a majority of the aggregate principal amount of Outstanding
Series E Debentures, the Corporation shall not authorize, create or
issue, or increase the authorized amount of any class or series of
capital stock or any security convertible into or exercisable for any
class or series of capital stock, redeemable mandatorily or redeemable
at the option of the holder thereof at any time on or prior to May 13,
2008 (whether or not only upon the occurrence of a specified event);
provided, however, that no consent or vote of the Holders shall be
required for the creation or issuance by a trust formed at the
direction of the Corporation of any series of Trust Preferred Stock.
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(f) Without the consent or affirmative vote of the Holders of
Series E Debentures, voting separately as a class, representing at
least a majority of the aggregate principal amount of Outstanding
Series E Debentures, the Corporation shall not (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the By-laws
of the Corporation, if the amendment, alteration or repeal alters or
changes the rights of the Holders of the Series E Debentures so as to
affect them materially and adversely, or (ii) authorize or take any
other action if such action alters or changes any of the rights of
Holders of the Series E Debentures in any respect or otherwise would be
inconsistent with the provisions of the Series E Indenture and the
holders of any class or series of the capital stock of the Corporation
are entitled to vote thereon.
(g) For the purposes of this Section 2, the term "Holder"
means the person in whose name a Series E Debenture is registered in
the Corporation's debenture register.
3. Definitions. For the purposes of this Article FIFTEENTH,
the following terms shall have the meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act. The term "Affiliated" has a correlative meaning.
Notwithstanding the foregoing, for all purposes hereof, the Investor,
and each Person controlled by, controlling or under common control with
the Investor (each, a "TPG Person"), shall not be deemed an "Affiliate"
of any Designated Purchaser Person (as defined below), and no
Designated Purchaser, and no Person controlled by, controlling or under
common control with such Designated Purchaser (each, a "Designated
Purchaser Person"), shall be deemed an "Affiliate" of any TPG Person or
any other Designated Purchaser Person, in any such case solely as a
consequence of the Investment Agreement and the transactions
contemplated thereby.
"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (a determined pursuant to
Rule 13d-3 under the Exchange Act as in effect on the date hereof,
except that a Person shall be deemed to Beneficially Own all such
securities that such Person has the right to acquire whether such right
is exercisable immediately or after the passage of time). The terms
"Beneficial Ownership" and "Beneficial Owner" have correlative
meanings. Notwithstanding the foregoing, for all purposes hereof, no
TPG Person shall be deemed to Beneficially Own any securities that are
held by any Designated Purchaser Person, and no Designated Purchaser
Person shall be deemed to Beneficially Own any securities that are held
by any TPG Person or other Designated Purchaser Person, in any such
case solely as a
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consequence of the Investment Agreement or the transactions
contemplated thereby.
"Designated Purchaser" has the meaning assigned to such term
in the Investment Agreement.
"Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, from
time to time.
"Investment Agreement" means the Investment Agreement, dated
as of February 23, 1998, by and between the Investor and the
Corporation, as amended, supplemented or otherwise modified from time
to time.
"Investor" means TPG Partners II, L.P., a Delaware limited
partnership.
"Investor Group" means, collectively, the Investor, the
Designated Purchasers, if any, and the respective Affiliates of such
persons.
"Investor Nominee" means a person designated for election to
the Board of Directors by the Investor pursuant to the Investment
Agreement.
"Outstanding" means, with respect to the Series D Debentures
or the Series E Debentures, as the case may be, as of the date of
determination, all debentures theretofore authenticated and delivered
under the indenture relating to such debentures, except:
(i) debentures theretofore canceled by the indenture
trustee or delivered to the indenture trustee for
cancellation;
(ii) debentures, or portions thereof, for whose
payment or redemption money in the necessary amount has been
theretofore deposited with the indenture trustee or any paying
agent in trust or set aside and segregated in trust by the
Corporation for the Holders of such debentures in accordance
with the applicable indenture; provided, that, if the
debentures are to be redeemed, notice of such redemption has
been duly given pursuant to the applicable indenture or
provision therefor satisfactory to the indenture trustee has
been made; and
(iii) debentures which have been paid in full
pursuant to the terms hereof or in exchange for or in lieu of
which other debentures have been authenticated and delivered
pursuant to the applicable indenture, other than any such
debentures in respect of which there shall have been presented
to the indenture trustee proof
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satisfactory to it that such debentures are held by a bona
fide purchaser in whose hands such debentures are valid
obligations of the Corporation.
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding debentures have given any
request, demand, authorization, direction, notice, consent or waiver
under this Article FIFTEENTH or the applicable indenture, debentures
owned by the Corporation or any other obligor upon the debentures or
any Affiliate of the Corporation or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the indenture trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice,
consent or waiver, only debentures which a trust officer of the
indenture trustee knows to be so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction
of the indenture trustee the pledgee's right so to act with respect to
such debentures and that the pledgee is not the Corporation or any
other obligor upon the debentures or any Affiliate of the Corporation
or of such other obligor.
"Series D Preferred" means the Corporation's Series D
Cumulative Preferred Stock, par value $.01 per share.
"Series E Preferred" means the Corporation's Series E
Cumulative Preferred Stock, par value $.01 per share.
"Warrant Agreement" means the Warrant Agreement, dated as of
January 31, 2000, between the Corporation and ChaseMellon Shareholder
Services, L.L.C., a New Jersey limited liability company, as Warrant
Agent, as amended, supplemented or otherwise modified from time to
time.
4. No Rights of Stockholders. Holders of the Series D
Debentures and holders of the Series E Debentures shall not be deemed
to be stockholders of the Corporation, and nothing in this Article
FIFTEENTH confers or shall be deemed to confer upon holders of the
Series D Debentures or holders of the Series E Debentures any rights
which the stockholders of the Corporation have or may have by reason of
the General Corporation Law of the State of Delaware or this
Certificate of Incorporation.
5. Stockholders' Voting Rights Not Divested. Nothing in this
Article FIFTEENTH divests or shall be deemed to divest the holders of
capital stock of the Corporation of any right to vote which they have
or may have by reason of the General Corporation Law of the State of
Delaware or this Certificate of Incorporation.
RESOLVED, that Article VIII of the Series D COD be amended to read in its
entirety as follows:
VIII. Voting Rights and Certain Restrictions
A. The holders of shares of Series D Preferred Stock shall
have no voting rights except as set forth below or as otherwise from
time to time required by law.
B. So long as any shares of Series D Preferred Stock are
outstanding, each share of Series D Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common
Stock, and the shares of Series D Preferred Stock shall vote together
with shares of Common Stock (and any Series E Securities (as defined
below) entitled to
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vote) as a single class; provided, however, that upon register or
transfer on the stock records of the Corporation of a share of Series D
Preferred Stock to any Person other than the Investor or an Affiliate
of the Investor, such Person, and any subsequent transferee, shall not
be entitled to such voting rights with respect to such shares of Series
D Preferred Stock, regardless of whether it is subsequently acquired by
the Investor or its Affiliates. The term "Series E Securities" means
the Series E Debentures or, if the Series E Preferred has not been
exchanged for Series E Debentures, the Series E Preferred or, if the
Series E Preferred has been exchanged for consideration that includes
shares of another series of Preferred Stock and the Certificate of
Designations of such series expressly provides that such series shall
be deemed "Series E Securities" for purposes of this Article VIII, such
series of Preferred Stock. With respect to any such vote, the Investor
(together with its Affiliates) shall be entitled to a number of votes
per share of Series D Preferred Stock equal to the quotient of the
Investor Aggregate Vote Number, divided by the number of shares of
Series D Preferred Stock held by such Investor and its Affiliates as of
the record date for such vote. The "Investor Aggregate Vote Number"
shall equal the number of Warrant Shares that would be issuable upon
the exercise of Original Warrants (as defined below) by the holders
thereof (assuming all conditions precedent to such exercise have been
satisfied and that such exercise occurs as of the record date for such
vote), multiplied by the lesser of (x) the quotient of the number of
Original Warrants that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such vote
(excluding, however, any Original Warrants that have been transferred
on the books of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless of
whether any such Original Warrants are subsequently acquired by any
member of the Investor Group), divided by the number of Original
Warrants, and (y) the quotient of the number of Original Series D
Preferred Shares (as defined below) that are Beneficially Owned by
members of the Investor Group, in the aggregate, as of the record date
for such vote (excluding, however, any Original Series D Preferred
Shares transferred on the stock records of the Corporation by any
member of the Investor Group to any Person other than a member of the
Investor Group, regardless of whether any such Original Series D
Preferred Shares are subsequently acquired by any member of the
Investor Group), divided by the number of Original Series D Preferred
Shares. The term "Original Warrants" means those Warrants Beneficially
Owned by members of the Investor Group, in the aggregate, as of May 13,
1998. The term "Original Series D Preferred Shares" means those shares
of Series D Preferred Stock Beneficially Owned by members of the
Investor Group, in the aggregate, on February 13, 1999.
C. If on any date (i) dividends payable on the Series D
Preferred Stock shall have been in arrears and not
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paid in full for four consecutive quarterly periods or interest due and
payable on, or dividends payable on, the Series E Securities shall not
have been paid in full, or shall have been in arrears and not paid in
full, as the case may be, for four consecutive quarterly periods, or
(ii) the Corporation shall have failed to satisfy its obligations to
redeem or repay either shares of Series D Preferred Stock or Series E
Securities pursuant to the applicable certificate of designations or,
if applicable, the indenture relating to the Series E Securities, then
the number of directors constituting the Board of Directors shall,
without further action, be increased by two, and the holders of a
majority of the outstanding shares of Series D Preferred Stock and
Series E Securities shall have, in addition to the other voting rights
set forth herein, the exclusive right, voting together as a single
class without regard to series, to elect the two directors (the
"Additional Directors") of the Corporation to fill such newly-created
directorships (provided, that, if the shares of Series E Preferred
Stock have been exchanged for Series E Debentures, then the holders of
the Series E Debentures shall vote together with the holders of Series
D Preferred Stock as a single class, and the holders of Series D
Preferred Stock and Series E Debentures representing at least a
majority of the aggregate principal amount of Outstanding Series E
Debentures and Series D Preferred Stock shall have the exclusive right,
voting together as a single class without regard to series, to elect
the two Additional Directors, and, for this purpose, one share of
Series D Preferred Stock shall be deemed to be equal to a principal
amount of $1,000). Notwithstanding the foregoing, the Investor and its
Affiliates shall not be permitted to elect, pursuant to the preceding
sentence, more than the number of directors that would result in four
directors designated for nomination or elected by the Investor and its
Affiliates then being on the Board of Directors (including directors
that the Investor has a right to designate for nomination to the Board
of Directors pursuant to the Investment Agreement); provided, that if
at the time holders of Series D Preferred Stock and Series E Securities
have the right to elect Additional Directors and (i) the Investor and
its Affiliates Beneficially Own, in the aggregate, a majority of the
outstanding shares of Series D Preferred Stock and Series E Securities
(or, if the shares of Series E Preferred Stock have been exchanged for
Series E Debentures, a majority of the aggregate principal amount of
the Series D Preferred Stock and Series E Debentures), taken together
as a single class, and (ii) the Investor and its Affiliates are not
permitted to elect one or both of the Additional Directors as
aforesaid, then the holders of Series D Preferred Stock and Series E
Securities (other than the Investor and its Affiliates) shall have the
right to elect, voting together as a single class, one Additional
Director pursuant to this Section C. For the purposes of the
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preceding sentence, if the shares of Series E Preferred Stock have been
exchanged for Series E Debentures, one share of Series D Preferred
Stock shall be deemed to be equal to a principal amount of $1,000.
Additional Directors shall continue as directors and such additional
voting right shall continue until such time as (a) all dividends
accumulated on the Series D Preferred Stock and, if applicable, all
interest due and payable on, or dividends accumulated on, the Series E
Securities, as the case may be, shall have been paid in full and (b)
any redemption obligation with respect to the Series D Preferred Stock
and any redemption obligation with respect to, or any obligation to
repay the principal of, the Series E Securities, as the case may be,
that has become due shall have been satisfied or all necessary funds
shall have been set aside for payment, as the case may be, at which
time such Additional Directors shall cease to be directors and such
additional voting right of the holders of shares of Series D Preferred
Stock shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above and subject to
any rights as to the election of directors provided for the holders of
any other series of Preferred Stock of the Corporation.
D. In the event that one or more of the Investor Nominees
required to be designated for election to the Board of Directors
pursuant to the Investment Agreement are not so designated or are not
elected to the Board of Directors and the Investor or any of its
Affiliates Beneficially Owns shares of Series D Preferred Stock, then
the number of directors constituting the Board of Directors shall,
without further action, be increased by the number of such Investor
Nominees not elected to the Board of Directors pursuant to the
Investment Agreement, and such holder or holders shall have, in
addition to the other voting rights set forth herein, the exclusive
right, voting separately as a single class, to elect a number of
directors to the Board of Directors equal to the number of such
Investor Nominees not elected to the Board of Directors. Directors
elected pursuant to this Section D shall continue as directors and such
additional voting right shall continue until such time as the requisite
number of Investor Nominees are elected to the Board of Directors
pursuant to the Investment Agreement, at which time the directors
elected by the Investor and its Affiliates pursuant to this Section D
shall cease to be directors (unless elected as Investor Nominees), and
such additional voting rights shall terminate subject to revesting in
the event of each and every subsequent event of the character indicated
above.
E. (a) The foregoing rights of holders of shares of Series D
Preferred Stock to take any action as provided in this Article VIII may
be exercised at any annual meeting of stockholders or at a special
meeting of stockholders held for such purpose as hereinafter provided
or at any adjournment thereof, or by the written consent, delivered to
the Secretary of the Corporation, of the holders of the minimum number
of shares required to take such action. So long as such right to vote
continues (and
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unless such right has been exercised by written consent of the minimum
number of shares required to take such 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 Series D Preferred Stock,
addressed to the Secretary of the Corporation at the principal office
of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held
within 60 days after delivery of such request to the Secretary, at the
place upon the notice provided by law and in the By-laws for the
holding of meetings of stockholders.
(b) Each director elected pursuant to Section C of this
Article VIII shall serve until the next annual meeting or until his or
her successor shall be elected and shall qualify, unless the director's
term of office shall have terminated pursuant to the provisions of
Section C of this Article VIII. In case any vacancy shall occur among
the directors elected pursuant to Section C or D of this Article VIII,
such vacancy may be filled for the unexpired portion of the term by
vote of the remaining director or directors theretofore elected by such
holders (and, if applicable, holders of Series E Securities) (or such
director's or directors' successor in office), if any. If such vacancy
is not filled within 20 days after the creation thereof or if all of
the directors so elected shall cease to serve as directors before their
term shall expire, the holders of the shares then outstanding (and, if
applicable, holders of Series E Securities) and entitled to vote for
such director pursuant to the provisions of Section C or D of this
Article VIII, as the case may be, may elect successors to hold office
for the unexpired terms of any vacant directorships, by written consent
as herein provided, or at a special meeting of such holders (and, if
applicable, holders of the Series E Securities) called as provided
herein. The holders of a majority of the shares entitled to vote for
directors pursuant to Section C or D of this Article VIII (or, if the
Series E Preferred Stock has been exchanged for Series E Debentures,
the holders representing a majority of the aggregate principal amount
of Series D Preferred Stock and Series E Debentures entitled to vote
for directors pursuant to Section C or D of this Article VIII), as the
case may be, shall have the right to remove with or without cause at
any time and replace any directors such holders (and, if applicable,
holders of Series E Securities) have elected pursuant to such section,
by written consent as herein provided, or at a special meeting of such
holders (and, if applicable, holders of Series E Securities) called as
provided herein. For the purposes of the two preceding sentences, if
the shares of Series E Preferred Stock have been exchanged for Series E
Debentures, one share of Series D Preferred Stock shall be deemed to be
equal to a principal amount of $1,000.
F. Without the consent of affirmative vote of the holders of
at least a majority of the outstanding shares of Series D Preferred
Stock, voting separately as a class, the Corporation shall not
authorize, create or issue, or increase the authorized amount of, (i)
any Senior Securities or Parity Securities or (ii) any class or series
of capital stock or any security convertible into or exercisable for
any class or series of capital stock,
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redeemable mandatorily or redeemable at the option of the holder
thereof at any time on or prior to May 13, 2008 (whether or not only
upon the occurrence of a specified event); provided, however, that no
consent or vote of the holders of the outstanding shares of the Series
D Preferred Stock shall be required for the creation or issuance by a
trust formed at the direction of the Corporation of any series of
preferred securities of such trust for financing purposes in an
aggregate amount not to exceed $250,000,000 ("Trust Preferred Stock").
No consent or vote of the holders of the outstanding shares of Series D
Preferred Stock shall be required to authorize, create or issue, or
increase the authorized amount of, any class or series of Junior
Securities, or any security convertible into a stock of any class or
series of Junior Securities, except to the extent such action would
violate Section H of this Article VIII.
G. Without the consent or affirmative vote of the holders of
at least a majority of the outstanding shares of Series D Preferred
Stock, voting separately as a class, the Corporation shall not (i)
amend, alter or repeal any provision of the Certificate of
Incorporation or the By-laws, if the amendment, alteration or repeal
alters or changes the powers, preferences or special rights of the
Series D Preferred Stock so as to affect them materially and adversely,
or (ii) authorize or take any other action if such action alters or
changes any of the rights of the Series D Preferred Stock in any
respect or otherwise would be inconsistent with the provisions of this
Certificate of Designations and the holders of any class or series of
the capital stock of the Corporation are entitled to vote thereon.
H. Other Securities. The Corporation shall not enter into any
agreement or issue any security that prohibits, conflicts or is
inconsistent with, or would be breached by, the Corporation's
performance of its obligations hereunder.
RESOLVED, that the definition of "Series A Warrants" in Article IX of the Series
D COD be amended to read in its entirety as follows:
"Series A Warrants" means the Series A Warrants issued by
the Corporation pursuant to the Investment Agreement or the Warrant
Agreement, dated as of January 31, 2000, between the Corporation and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company, as Warrant Agent, as amended, supplemented or
otherwise modified from time to time.
RESOLVED, that Article IX of the Series D COD be amended to delete therefrom
the definition of "Series B Warrants".
RESOLVED, that Article VIII of the Series E COD be amended to read in its
entirety as follows:
VIII. Voting Rights and Certain Restrictions
A. The holders of shares of Series E Preferred Stock shall
have no voting rights except as set forth below or as otherwise from
time to time required by law.
B. So long as any shares of Series E Preferred Stock are
outstanding, each share of Series E Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common
Stock, and the shares of Series E Preferred Stock shall vote together
with shares of Common Stock (and any Series D Securities (as defined
below) entitled to
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vote) as a single class; provided, however, that upon register or
transfer on the stock records of the Corporation of a share of Series E
Preferred Stock to any Person other than the Investor or an Affiliate
of the Investor, such Person, and any subsequent transferee, shall not
be entitled to such voting rights with respect to such share of Series
E Preferred Stock, regardless of whether it is subsequently acquired by
the Investor or its Affiliates. The term "Series D Securities" means
the Series D Debentures or, if the Series D Preferred has not been
exchanged for Series D Debentures, the Series D Preferred or, if the
Series D Preferred has been exchanged for consideration that includes
shares of another series of Preferred Stock and the Certificate of
Designations of such series expressly provides that such series shall
be deemed "Series D Securities" for purposes of this Article VIII, such
series of Preferred Stock. With respect to any such vote, the Investor
(together with its Affiliates) shall be entitled to a number of votes
per share of Series E Preferred Stock equal to the quotient of the
Investor Aggregate Vote Number, divided by the number of shares of
Series E Preferred Stock held by such Investor and its Affiliates as of
the record date for such vote. The "Investor Aggregate Vote Number"
shall equal the number of Warrant Shares that would be issuable upon
the exercise of Original Warrants (as defined below) by the holders
thereof (assuming all conditions precedent to such exercise have been
satisfied and that such exercise occurs as of the record date for such
vote), multiplied by the lesser of (x) the quotient of the number of
Original Warrants that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such vote
(excluding, however, any Original Warrants that have been transferred
on the books of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless of
whether any such Original Warrants are subsequently acquired by any
member of the Investor Group), divided by the number of Original
Warrants, and (y) the quotient of the number of Original Series E
Preferred Shares (as defined below) that are Beneficially Owned by
members of the Investor Group, in the aggregate, as of the record date
for such vote (excluding, however, any Original Series E Preferred
Shares transferred on the stock records of the Corporation by any
member of the Investor Group to any Person other than a member of the
Investor Group, regardless of whether any such Original Series E
Preferred Shares are subsequently acquired by any member of the
Investor Group), divided by the number of Original Series E Preferred
Shares. The term "Original Warrants" means those Warrants Beneficially
Owned by members of the Investor Group, in the aggregate, as of May 13,
1998. The term "Original Series E Preferred Shares" means those shares
of Series E Preferred Stock Beneficially Owned by members of the
Investor Group, in the aggregate, on February 13, 1999.
C. If on any date (i) dividends payable on the Series E
Preferred Stock shall have been in arrears and not
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paid in full for four consecutive quarterly periods or interest due and
payable on, or dividends payable on, the Series D Securities shall not
have been paid in full, or shall have been in arrears and not paid in
full, as the case may be, for four consecutive quarterly periods, or
(ii) the Corporation shall have failed to satisfy its obligations to
redeem or repay either shares of Series E Preferred Stock or Series D
Securities pursuant to the applicable certificate of designations or,
if applicable, the indenture relating to the Series D Securities, then
the number of directors constituting the Board of Directors shall,
without further action, be increased by two, and the holders of a
majority of the outstanding shares of Series E Preferred Stock and
Series D Securities shall have, in addition to the other voting rights
set forth herein, the exclusive right, voting together as a single
class without regard to series, to elect the two directors (the
"Additional Directors") of the Corporation to fill such newly-created
directorships (provided, that, if the shares of Series D Preferred
Stock have been exchanged for Series D Debentures, then the holders of
the Series D Debentures shall vote together with the holders of Series
E Preferred Stock as a single class, and the holders of Series E
Preferred Stock and Series D Debentures representing at least a
majority of the aggregate principal amount of Outstanding Series D
Debentures and Series E Preferred Stock shall have the exclusive right,
voting together as a single class without regard to series, to elect
the two Additional Directors, and, for this purpose, one share of
Series E Preferred Stock shall be deemed to be equal to a principal
amount of $1,000). Notwithstanding the foregoing, the Investor and its
Affiliates shall not be permitted to elect, pursuant to the preceding
sentence, more than the number of directors that would result in four
directors designated for nomination or elected by the Investor and its
Affiliates then being on the Board of Directors (including directors
that the Investor has a right to designate for nomination to the Board
of Directors pursuant to the Investment Agreement); provided, that if
at the time holders of Series E Preferred Stock and Series D Securities
have the right to elect Additional Directors and (i) the Investor and
its Affiliates Beneficially Own, in the aggregate, a majority of the
outstanding shares of Series E Preferred Stock and Series D Securities
(or, if the shares of Series D Preferred Stock have been exchanged for
Series D Debentures, a majority of the aggregate principal amount of
the Series E Preferred Stock and Series D Debentures), taken together
as a single class, and (ii) the Investor and its Affiliates are not
permitted to elect one or both of the Additional Directors as
aforesaid, then the holders of Series E Preferred Stock and Series D
Securities (other than the Investor and its Affiliates) shall have the
right to elect, voting together as a single class, one Additional
Director pursuant to this Section C. For the purposes of
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the preceding sentence, if the shares of Series D Preferred Stock have
been exchanged for Series D Debentures, one share of Series E Preferred
Stock shall be deemed to be equal to a principal amount of $1,000.
Additional Directors shall continue as directors and such additional
voting right shall continue until such time as (a) all dividends
accumulated on the Series E Preferred Stock and, if applicable, all
interest due and payable on, or dividends accumulated on, the Series D
Securities, as the case may be, shall have been paid in full and (b)
any redemption obligation with respect to the Series E Preferred Stock
and any redemption obligation with respect to, or any obligation to
repay the principal of, the Series D Securities, as the case may be,
that has become due shall have been satisfied or all necessary funds
shall have been set aside for payment, as the case may be, at which
time such Additional Directors shall cease to be directors and such
additional voting right of the holders of shares of Series E Preferred
Stock shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above and subject to
any rights as to the election of directors provided for the holders of
any other series of Preferred Stock of the Corporation.
D. [Reserved]
E. (a) The foregoing rights of holders of shares of Series E
Preferred Stock to take any action as provided in this Article VIII may
be exercised at any annual meeting of stockholders or at a special
meeting of stockholders held for such purpose as hereinafter provided
or at any adjournment thereof, or by the written consent, delivered to
the Secretary of the Corporation, of the holders of the minimum number
of shares required to take such action. So long as such right to vote
continues (and unless such right has been exercised by written consent
of the minimum number of shares required to take such 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 Series
E Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of
the holders of shares entitled to vote as provided herein. Such meeting
shall be held within 60 days after delivery of such request to the
Secretary, at the place upon the notice provided by law and in the
By-laws for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C of this
Article VIII shall serve until the next annual meeting or until his or
her successor shall be elected and shall qualify, unless the director's
term of office shall have terminated pursuant to the provisions of
Section C of this Article VIII. In case any vacancy shall occur among
the directors elected pursuant to Section C of this Article VIII, such
vacancy may be filled for the unexpired portion of the term by vote of
the remaining director or directors theretofore elected by such holders
(and, if applicable, holders of Series D Securities) (or such
director's or directors' successor in office), if any. If such vacancy
is not filled within 20 days
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after the creation thereof or if all of the directors so elected shall
cease to serve as directors before their term shall expire, the holders
of the shares then outstanding (and, if applicable, holders of Series D
Securities) and entitled to vote for such director pursuant to the
provisions of Section C of this Article VIII, as the case may be, may
elect successors to hold office for the unexpired terms of any vacant
directorships, by written consent as herein provided, or at a special
meeting of such holders (and, if applicable, holders of Series D
Securities) called as provided herein. The holders of a majority of the
shares entitled to vote for directors pursuant to Section C of this
Article VIII (or, if the Series D Preferred Stock has been exchanged
for Series D Debentures, the holders representing a majority of the
aggregate principal amount of Series E Preferred Stock and Series D
Debentures entitled to vote for directors pursuant to Section C of this
Article VIII), as the case may be, shall have the right to remove with
or without cause at any time and replace any directors such holders
(and, if applicable, holders of Series D Securities) have elected
pursuant to such section, by written consent as herein provided, or at
a special meeting of such holders (and, if applicable, holders of
Series D Securities) called as provided herein. For the purposes of the
two preceding sentences, if the shares of Series D Preferred Stock have
been exchanged for Series D Debentures, one share of Series E Preferred
Stock shall be deemed to be equal to a principal amount of $1,000.
F. Without the consent of affirmative vote of the holders of
at least a majority of the outstanding shares of Series E Preferred
Stock, voting separately as a class, the Corporation shall not
authorize, create or issue, or increase the authorized amount of, (i)
any Senior Securities or Parity Securities or (ii) any class or series
of capital stock or any security convertible into or exercisable for
any class or series of capital stock, redeemable mandatorily or
redeemable at the option of the holder thereof at any time on or prior
to May 13, 2008 (whether or not only upon the occurrence of a specified
event); provided, however, that no consent or vote of the holders of
the outstanding shares of the Series E Preferred Stock shall be
required for the creation or issuance by a trust formed at the
direction of the Corporation of any series of preferred securities of
such trust for financing purposes in an aggregate amount not to exceed
$250,000,000 ("Trust Preferred Stock"). No consent or vote of the
holders of the outstanding shares of Series E Preferred Stock shall be
required to authorize, create or issue, or increase the authorized
amount of, any class or series of Junior Securities, or any security
convertible into a stock of any class or series of Junior Securities,
except to the extent such action would violate Section H of this
Article VIII.
G. Without the consent or affirmative vote of the holders of
at least a majority of the outstanding shares of Series E Preferred
Stock, voting separately as a class, the Corporation shall not (i)
amend, alter or repeal any provision of the Certificate of
Incorporation or the By-laws, if the amendment, alteration or repeal
alters or changes the powers, preferences or special rights of the
Series E Preferred Stock so as to affect
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them materially and adversely, or (ii) authorize or take any other
action if such action alters or changes any of the rights of the Series
E Preferred Stock in any respect or otherwise would be inconsistent
with the provisions of this Certificate of Designations and the holders
of any class or series of the capital stock of the Corporation are
entitled to vote thereon.
H. Other Securities. The Corporation shall not enter into any
agreement or issue any security that prohibits, conflicts or is
inconsistent with, or would be breached by, the Corporation's
performance of its obligations hereunder.
RESOLVED, that the definition of "Warrants" in Article IX of the Series E
COD be amended to read in its entirety as follows:
"Warrants" means the Series B Warrants issued by the
Corporation pursuant to the Investment Agreement or the Warrant
Agreement, dated as of January 31, 2000, between the Corporation and
ChaseMellon Shareholder Series, L.L.C., a New Jersey limited liability
company, as Warrant Agent, as amended, supplemented or otherwise
modified from time to time.
RESOLVED, that the foregoing amendments be considered at the next annual
meeting of stockholders of the Corporation in accordance with Section 242
of the General Corporation Law of the State of Delaware.
RESOLVED, that the proper officers of the Corporation be and they hereby
are authorized and directed to take any and all actions necessary to effect
the foregoing amendments.
RESOLVED, that at any time prior to the effectiveness of the filing of the
foregoing amendments to the Certificate with the Secretary of State of the
State of Delaware, notwithstanding authorization of the proposed amendments
by the stockholders of the Corporation, the Board of Directors may abandon
such proposed amendments without further action by the stockholders.
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APPENDIX B
OXFORD HEALTH PLANS, INC.
1991 STOCK OPTION PLAN,
AS AMENDED THROUGH MAY 11, 2000
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Oxford Health Plans, Inc. 1991 Stock Option Plan
is to provide an incentive to key Employees, Directors and Consultants of Oxford
Health Plans, Inc. (the "Corporation"), who are in a position to contribute
materially to the long-term success of the Corporation, to increase their
interest in the Corporation's welfare, and to aid in attracting and retaining
Employees, Directors and Consultants of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the following
terms shall have the meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean the occurrence of any of the
following events:
Any "person" (as defined below) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the
Corporation representing 30% or more of the total voting power
represented by the Corporation's then outstanding voting
securities; or
A change in the composition of the Board occurs, as a result
of which fewer than two-thirds of the incumbent directors are
directors who either (i) had been directors of the Corporation
on the "look-back date" (as defined below) or (ii) were
elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the directors who
had been directors of the Corporation on the "look-back date"
and who were still in office at the time of the election or
nomination; or
The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation,
other than a merger or consolidation which would result in the
voting securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the total voting power
represented by the voting securities of the Corporation or
such surviving entity outstanding immediately after such
merger or consolidation; or
The stockholders of the Corporation approve (i) a plan of
complete liquidation of the Corporation or (ii) an agreement
for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.
For purposes of this Subsection (b), the term "person" shall
have the same meaning as when used in sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but shall exclude (i)
a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or
subsidiary of the Corporation, and (ii) a corporation owned
directly or indirectly by the stockholders of the Corporation
in substantially the same proportions as their ownership of
the common stock of the Corporation.
For purposes of this Subsection (b), the term "look-back date"
shall mean the date 24 months prior to the change in the
composition of the Board.
Any other provision of this Section 2(b) notwithstanding, the
term "Change in Control" shall not include either of the
following events, if undertaken at the election of the
Corporation:
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(i) A transaction, the sole purpose of which is
to change the state of the Corporation's
incorporation; or
(ii) A transaction, the result of which is to
sell all or substantially all of the assets
of the Corporation to another corporation
(the "surviving corporation"); provided that
the surviving corporation is owned directly
or indirectly by the stockholders of the
Corporation immediately following such
transaction in substantially the same
proportions as their ownership of the
Corporation's common stock immediately
preceding such transaction; and provided,
further, that the surviving corporation
expressly assumes this Plan and all
outstanding Stock Options.
(c) "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time.
(d) "Committee" shall mean a committee whose members shall, from
time to time, be appointed by the Board; provided, however,
that on such date as the Corporation's Stock is first
registered under Section 12 of the Securities Exchange Act of
1934 such committee shall consist of at lease two Directors,
all of whom are non-employees within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934.
.
(e) "Consultant" shall mean any person retained by the Corporation
or any of its subsidiaries to render services on a consulting
basis.
(f) "Corporation" shall mean Oxford Health Plans, Inc., a Delaware
corporation, and any successor thereto.
(g) "Directors" shall mean those members of the Board of Directors
of the Corporation who are not Employees.
(h) "Disability" shall mean a medically determinable physical or
mental condition which causes an Employee, Director or
Consultant to be unable to engage in any substantial gainful
activity and which can be expected to result in death or to be
of long-continued and indefinite duration.
(i) "Employee" shall mean any common law employee, including
officers, of the Corporation or any of its subsidiaries as
determined in the Code and the Treasury Regulations
thereunder.
(j) "Fair Market Value" shall mean the fair market value of the
Stock as determined by the Committee on the basis of a review
of the facts and circumstances at the time.
(k) "Grantee" shall mean an Employee, Director or Consultant
granted a Stock Option under this Plan.
(l) "Incentive Stock Option" shall mean an option granted pursuant
to the Incentive Stock Option provisions as set forth in Part
II of this Plan.
(m) "Non-Qualified Stock Option" shall mean an option granted
pursuant to the Non-Qualified Stock Option provisions as set
forth in Part III of this Plan.
(n) "Plan" shall mean the Oxford Health Plans, Inc. 1991 Stock
Option Plan as set forth herein and as amended from time to
time.
(o) "Stock" shall mean authorized but unissued shares of the
Common Stock of the Corporation or reacquired shares of the
Corporation's Common Stock.
(p) "Stock Option" shall mean an option granted pursuant to the
Plan to purchase shares of Stock.
(q) "Ten Percent Stockholder" shall mean an Employee, who at the
time a Stock Option is granted owns stock possessing more than
ten percent (10%) of the total combined voting power of all
Stock of the Corporation or of its parent or subsidiary
corporation.
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3. Shares of Stock Subject to the Plan. Subject to the provisions of Paragraph 2
of Part IV, the number of shares of Stock which may be issued or transferred
pursuant to Stock Options granted under the Plan shall not exceed 30,380,000
shares in the aggregate. If a Stock Option shall expire and terminate for any
reason, in whole or in part, without being exercised, the number of shares of
Stock as to which such expired or terminated Stock Option shall not have been
exercised may again become available for the grant of Stock Options. There shall
be no terms and conditions in a Stock Option which provide that the exercise of
an Incentive Stock Option reduces the number of shares of Stock for which an
outstanding Non-Qualified Stock Option may be exercised; and there shall be no
terms and conditions in a Stock Option which provide that the exercise of a
Non-Qualified Stock Option reduces the number of shares of Stock for which an
outstanding Incentive Stock Option may be exercised.
4. Administration of the Plan. The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to it, to determine the terms and provisions of Stock
Option agreements, and to make all other determinations necessary or advisable
for the administration of the Plan. Any controversy or claim arising out of or
related to this Plan shall be determined unilaterally by and at the sole
discretion of the Committee.
5. Amendment or Termination. The Board may, at any time, alter, amend, suspend,
discontinue, or terminate this Plan; provided, however, that such action shall
not adversely affect the right of Grantees to Stock Options previously granted
and no amendment, without the approval of the stockholders of the Corporation,
shall increase the maximum number of shares which may be awarded under the Plan
in the aggregate, materially increase the benefits accruing to Grantees under
the Plan, change the class of Employees eligible to receive options under the
Plan, or materially modify the eligibility requirements for participation in the
Plan.
6. Effective Date and Duration of the Plan. The Plan shall become effective upon
its approval by the Board subject to its subsequent approval by the stockholders
of the Corporation. This Plan shall terminate fifteen years from the date the
Plan becomes effective, and no Stock Option may be granted under the Plan
thereafter, but such termination shall not affect any Stock Option theretofore
granted.
7. Limitation on Grants. Subject to the provisions of Paragraph 2 of Part IV, no
individual optionee may be granted Stock Options to purchase more than 2,000,000
shares of Stock in any calendar year.
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II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
(a) Only key Employees of the Corporation shall be eligible to
receive Incentive Stock Options under the Plan. Directors of
the Corporation who are not also Employees shall not be
eligible for Incentive Stock Options.
(b) The purchase price of each share of Stock subject to an
Incentive Stock Option shall not be less than 100% of the Fair
Market Value of a share of the Stock on the date the Incentive
Stock Option is granted; provided, however, that (i) the
purchase price of each share of Stock subject to an Incentive
Stock Option granted to a Ten Percent Stockholder shall not be
less than 110% of the Fair Market Value of a share of the
Stock on the date the Incentive Stock Option is granted and
(ii) in the event an Incentive Stock Option is subject to
stockholder approval, the date of grant of such Incentive
Stock Option for purposes of the Plan shall be the date of
such stockholder approval.
(c) No Incentive Stock Option shall be exercisable more than seven
years from the date the Incentive Stock Option was granted;
provided, however, that an Incentive Stock Option granted to a
Ten Percent Stockholder shall not be exercisable more than
five years from the date the Incentive Stock Option was
granted.
(d) The Committee shall determine and designate from time to time
those Employees who are to be granted Incentive Stock Options
and specify the number of shares subject to each Incentive
Stock Option.
(e) Notwithstanding any other provisions hereof, the aggregate
Fair Market Value (determined at the time the option is
granted) of the Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Employee
during any calendar year (under all such plans of the
Grantee's employer corporation and its parent and subsidiary
corporations) shall not exceed $100,000.
(f) The Committee, in its sole discretion, shall determine whether
any particular Incentive Stock Option shall become exercisable
in one or more installments, specify the installment dates and
determine the total period during which the Incentive Stock
Option is exercisable. The Committee may make provision for
accelerated exercisability of Incentive Stock Options in the
event of the Optionee's death, disability or retirement or
other events. Further, the Committee may make such other
provisions as may appear generally acceptable or desirable to
the Committee or necessary to qualify its grants under the
provisions of Section 422 of the Code.
(g) The Committee may grant at any time new Incentive Stock
Options to an Employee who has previously received Incentive
Stock Options or other options whether such prior Incentive
Stock Options or other options are still outstanding, have
previously been exercised in whole or in part, or are
cancelled in connection with the issuance of new Incentive
Stock Options. The purchase price of the new Incentive Stock
Options may be established by the Committee without regard to
the existing Incentive Stock Options or other options.
(h) The Committee may determine, at the time of granting an
Incentive Stock Option or thereafter, that such Incentive
Stock Option shall become fully exercisable as to all Stock
subject to such Incentive Stock Option in the event that a
Change of Control occurs with respect to the Corporation. If
the Committee finds that there is a reasonable possibility
that, within the succeeding six months, a Change in Control
will occur with respect to the Corporation, then the Committee
at its sole discretion may determine that any or all
outstanding Incentive Stock Options shall become fully
exercisable as to all Stock subject to such Incentive Stock
Options.
2. Exercise of Incentive Stock Options.
(a) Except as otherwise provided by the Committee, the option
price of an Incentive Stock Option shall be payable on
exercise of the option (i) in cash or by check, bank draft or
postal or express money order, (ii) by the surrender of Stock
then owned by the Grantee, provided that the stock surrendered
by the Grantee has been owned by the Grantee for at least six
(6) months, or (iii) partially in accordance with clause (i)
and partially in
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accordance with clause (ii) of this Paragraph. In no event
shall payment of the exercise price of an Incentive Stock
Option be made by a promissory note or a loan by the
Corporation. Shares of Stock so surrendered in accordance with
clause (ii) or (iii) shall be valued at the Fair Market Value
thereof on the date of exercise, surrender of such Stock to be
evidenced by delivery of the certificate(s) representing such
shares in such manner, and endorsed in such form, or
accompanied by stock powers endorsed in such form, as the
Committee may determine.
3. Termination of Employment.
(a) Except as otherwise provided by the Committee, if a Grantee's
employment is terminated (other than by Disability or death)
the term of any then outstanding Incentive Stock Option held
by the Grantee shall extend for a period ending on the earlier
of the date on which such option would otherwise expire or
three months after such termination of employment, and such
option shall be exercisable to the extent it was exercisable
as of the date of termination of employment.
(b) If a Grantee's employment is terminated by reason of
Disability, the term of any then outstanding Incentive Stock
Option held by the Grantee shall extend for a period ending on
the earlier of the date on which such option would otherwise
expire or three months after the Grantee's last date of
employment, and such option shall be exercisable to the extent
it was exercisable as of such last date of employment.
(c) If a Grantee's employment is terminated by death, the
representative of his estate or beneficiaries thereof to whom
the option has been transferred shall have the right during
the three-month period following his death to exercise any
then outstanding Incentive Stock Options in whole or in part.
If a Grantee dies within three-months after his retirement
without having fully exercised any then outstanding Incentive
Stock Options, the representative of his estate or
beneficiaries thereof to whom the option has been transferred
shall have the right during such three-month period to
exercise such options in whole or in part. The number of
shares of Stock in respect of which an Incentive Stock Option
may be exercised after a Grantee's death shall be the number
of shares in respect of which such option could be exercised
as of the date of the Grantee's death or retirement, whichever
occurs first. In no event may the period for exercising an
Incentive Stock Option extend beyond the date on which such
option would otherwise expire.
(d) The Board may grant a leave of absence to any Grantee for
purposes of continuing such Grantee's employment with the
Corporation or its subsidiaries.
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III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Stock Options.
(a) Key Employees and Consultants of the Corporation shall be
eligible to receive Non-Qualified Stock Options under the
Plan. Directors of the Corporation, excluding members of the
Committee, who are not also Employees shall also be eligible
to receive Non-Qualified Stock Options.
(b) The Committee shall determine and designate from time to time
those Employees, Directors and Consultants who are to be
granted Non-Qualified Stock Options and the amount subject to
each Non-Qualified Stock Option.
(c) The Committee may grant at any time new Non-Qualified Stock
Options to an Employee, Director or Consultant who has
previously received Non-Qualified Stock Options or other
options, whether such prior Non-Qualified Stock Options or
other options are still outstanding, have previously been
exercised in whole or in part, or are canceled in connection
with the issuance of new Non-Qualified Stock Options.
(d) When granting a Non-Qualified Stock Option, the Committee
shall determine the purchase price of the Stock subject
thereto. Such price shall not be less than 100% of the Fair
Market Value of such Stock on the date the Non-Qualified Stock
Option is granted; provided, however, that in the event a
Non-Qualified Stock Option is subject to stockholder approval,
the date of grant of such Non-Qualified Stock Option for
purposes of the Plan shall be the date of such stockholder
approval.
(e) The Committee, in its sole discretion, shall determine whether
any particular Non-Qualified Stock Option shall become
exercisable in one or more installments, specify the
installment dates and determine the total period during which
the Non-Qualified Stock Option is exercisable. The Committee
may make provision for accelerated exercisability of
Non-Qualified Stock Options in the event of the Optionee's
death, disability or retirement or other events. Further, the
Committee may make such other provisions as may appear
generally acceptable or desirable to the Committee.
(f) No Non-Qualified Stock Option shall be exercisable more than
seven years from the date such option is granted.
(g) The Committee may determine, at the time of granting a
Non-Qualified Stock Option or thereafter, that such
Non-Qualified Stock Option shall become fully exercisable as
to all Stock subject to such Non-Qualified Stock Option in the
event that a Change of Control occurs with respect to the
Corporation. If the Committee finds that there is a reasonable
possibility that, within the succeeding six months, a Change
in Control will occur with respect to the Corporation, then
the Committee at its sole discretion may determine that any or
all outstanding Non-Qualified Stock Options shall become fully
exercisable as to all Stock subject to such Non-Qualified
Stock Options.
2. Exercise of Stock Options. The option price of a Non-Qualified Stock Option
shall be payable on exercise of the option (i) in cash or by check, bank draft
or postal or express money order, (ii) by the surrender of Stock then owned by
the Grantee, provided that the stock surrendered by the Grantee has been owned
by the Grantee for at least six (6) months, or (iii) partially in accordance
with clause (i) and partially in accordance with clause (ii) of this Paragraph.
In no event shall payment of the exercise price of a Non-Qualified Stock Option
be made by a promissory note or a loan by the Corporation. Shares of Stock so
surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair
Market Value thereof on the date of exercise, surrender of such to be evidenced
by delivery of the certificate(s) representing such shares in such manner, and
endorsed in such form, or accompanied by stock powers endorsed in such form, as
the Committee may determine.
3. Termination of Employment.
(a) Except as otherwise provided by the Committee, if a Grantee's
employment is terminated, a Director Grantee ceases to be a
Director or a Consultant Grantee ceases to be a Consultant
(other than by Disability or death), the term of any then
outstanding Non-Qualified Stock Option held by the Grantee
shall extend for a period ending on the earlier of the date on
which such option would otherwise expire or three months after
such termination of
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employment or cessation of being a Director or a Consultant,
and such option shall be exercisable to the extent it was
exercisable as of the date of termination of employment or
cessation of being a Director or a Consultant.
(b) If a Grantee's employment is terminated by reason of
Disability, a Director Grantee ceases to be a Director by
reason of Disability or a Consultant Grantee ceases to be a
Consultant by reason of Disability, the term of any then
outstanding Non-Qualified Stock Option held by the Grantee
shall extend for a period ending on the earlier of the date on
which such option would otherwise expire or three months after
the Grantee's last date of employment or being a Director or
Consultant, and such option shall be exercisable to the extent
it was exercisable as of such last date of employment or
cessation of being a Director or Consultant.
(c) If a Grantee's employment is terminated by death or a Director
Grantee ceases to be a Director or Consultant by reason of
death, the representative of his estate or beneficiaries
thereof to whom the option has been transferred shall have the
right during the three-month period following his death to
exercise any then outstanding Non-Qualified Stock Options in
whole or in part. If a Grantee dies within three-months after
his retirement without having fully exercised any then
outstanding Non-Qualified Stock Options, the representative of
his estate or beneficiaries thereof to whom the option has
been transferred shall have the right during such three month
period to exercise such options in whole or in part. The
number of shares of Stock in respect of which a Non-Qualified
Stock Option may be exercised after a Grantee's death shall be
the number of shares of Stock in respect of which such option
could be exercised as of the date of the Grantee's death or
retirement, whichever first occurs. In no event may the period
for exercising a Non-Qualified Stock Option extend beyond the
date on which such option would otherwise expire.
(d) The Board may grant a leave of absence to any Grantee for
purposes of continuing such Grantee's employment with the
Corporation or its subsidiaries.
IV. GENERAL PROVISIONS
1. Substitution of Options. In the event of a corporate merger or consolidation,
or the acquisition by the Corporation of property or stock of an acquired
corporation or any reorganization or other transaction qualifying under Section
425 of the Code, the Committee may, in accordance with the provisions of that
Section, substitute options under this Plan for options under the plan of the
acquired corporation provided (i) the excess of the aggregate fair market value
of the shares subject to option immediately after the substitution over the
aggregate option price of such shares is not more than the similar excess
immediately before such substitution and (ii) the new option does not give the
Employee additional benefits, including any extension of the exercise period.
2. Adjustment Provisions.
(a) If the shares of Stock outstanding are changed in number or
class by reason of a split-up, merger, consolidation,
reorganization, reclassification, recapitalization, or any
capital adjustment, including a stock dividend, or if any
distribution is made to the holders of common stock other than
a cash dividend, then
(i) the aggregate number and class of shares or
other securities that may be issued or
transferred pursuant to Paragraph 3 and
pursuant to Paragraph 7 of Part I,
(ii) the number and class of shares or other
securities which are issuable under
outstanding Stock Options, and
(iii) the purchase price to be paid per share
under outstanding Stock Options
shall be adjusted as provided hereinafter.
(b) Adjustment under this Paragraph 2 shall be made in an
equitable manner by the Committee, whose determination as to
what adjustments shall be made, and the extent thereof, shall
be final, binding, and conclusive.
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3. General.
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with
this Plan, as the Committee shall approve.
(b) The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any
right to be retained in the employ of the Corporation, and all
Employees shall remain subject to discharge to the same extent
as if the Plan were not in effect.
(c) No Employee, and no beneficiary or other person claiming under
or through him, shall have any right, title or interest by
reason of any Stock Option to any particular assets of the
Corporation, or any shares of Stock allocated or reserved for
the purposes of the Plan or subject to any Stock Option except
as set forth herein. The Corporation shall not be required to
establish any fund or make any other segregation of assets to
assure the payment of any Stock Option.
(d) No right under the Plan shall be subject to anticipation,
sale, assignment, pledge, encumbrance, or charge except by
will or the law of descent and distribution, and a Stock
Option shall be exercisable during the Grantee's lifetime only
by the Grantee.
(e) Notwithstanding any other provision of this Plan or agreements
made pursuant thereto, the Corporation's obligation to issue
or deliver any certificate or certificates for shares of Stock
under a Stock Option, and the transferability of Stock
acquired by exercise of a Stock Option, shall be subject to
all of the following conditions:
(i) Any registration or other qualification of
such shares under any state or federal law
or regulation, or the maintaining in effect
of any such registration or other
qualification which the Board shall, in its
absolute discretion upon the advice of
counsel, deem necessary or advisable;
(ii) The obtaining of any other consent,
approval, or permit from any state or
federal governmental agency which the Board
shall, in its absolute discretion upon the
advice of counsel, determine to be necessary
or advisable; and
(iii) Each stock certificate issued pursuant to a
Stock Option shall bear the following
legend:
"The transferability of this certificate and the shares of
Stock represented hereby are subject to restrictions, terms
and conditions contained in the Oxford Health Plans, Inc. 1991
Stock Option Plan, and an Agreement between the registered
owner of such Stock and Oxford Health Plans, Inc. A copy of
the Plan and Agreement are on file in the office of the
Secretary of Oxford Health Plans, Inc."
(f) All payments to Grantees or to their legal representatives
shall be subject to any applicable tax, community property, or
other statutes or regulations of the United States or of any
state having jurisdiction thereof. The Grantee may be required
to pay to the Corporation the amount of any withholding taxes
which the Corporation is required to withhold with respect to
a Stock Option or its exercise. In the event that such payment
is not made when due, the Corporation shall have the right to
deduct, to the extent permitted by law, from any payment of
any kind otherwise due to such person all or part of the
amount required to be withheld.
(g) In the case of a grant of a Stock Option to any Employee of a
subsidiary of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares, if any,
covered by the Stock Option to the subsidiary, for such lawful
consideration as the Committee may specify, upon the condition
or understanding that the subsidiary will transfer the shares
to the Employee in accordance with the terms of the provisions
of the Plan. For purposes of this Section, a subsidiary shall
mean any subsidiary corporation of the Corporation as defined
in Section 425 of the Code.
(h) A Grantee entitled to Stock as a result of the exercise of a
Stock Option shall not be deemed for any purpose to be, or
have rights as, a shareholder of the Corporation by virtue of
such exercise, except to the extent a stock
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certificate is issued therefor and then only from the date
such certificate is issued. No adjustments shall be made for
dividends or distributions or other rights for which the
record date is prior to the date such stock certificate is
issued. The Corporation shall issue any stock certificates
required to be issued in connection with the exercise of a
Stock Option with reasonable promptness after such exercise.
(i) The grant or exercise of Stock Options granted under the Plan
shall be subject to, and shall in all respects comply with,
applicable Delaware corporate law relating to such grant or
exercise without regard to principles of conflicts of law.
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PROXY OXFORD HEALTH PLANS, INC. PROXY
PROXY FOR 2000 ANNUAL MEETING ON MAY 11, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Norman C. Payson, M.D., Chairman and Chief
Executive Officer, and Jon S. Richardson, Secretary, and each of them, attorneys
with full power of substitution, to vote as directed below all shares of Common
Stock of Oxford Health Plans, Inc. registered in the name of the undersigned, or
which the undersigned may be entitled to vote, at the 2000 Annual Meeting to be
held at the Trumbull Marriott, 180 Hawley Lane, Trumbull, CT 06611, on May 11,
2000, at 10:00 a.m. and at any adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR Norman C. Payson, M.D. WITHHOLD AUTHORITY to vote
for Norman C. Payson, M.D.
FOR Robert B. Milligan, Jr. WITHHOLD AUTHORITY to vote
for Robert B. Milligan, Jr.
FOR Joseph W. Brown, Jr. WITHHOLD AUTHORITY to vote
for Joseph W. Brown, Jr.
</TABLE>
2. APPROVAL OF AMENDMENT TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND CLARIFICATION OF THE VOTING RIGHTS OF THE SERIES D
PREFERRED STOCK AND SERIES E PREFERRED STOCK.
FOR AGAINST ABSTAIN
3. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES ISSUABLE THEREUNDER.
FOR AGAINST ABSTAIN
4. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO EXTEND THE TERM
THEREOF.
FOR AGAINST ABSTAIN
5. APPROVAL OF SHAREHOLDER PROPOSAL TO REQUEST THAT THE COMPANY ESTABLISH A
NOMINATING COMMITTEE COMPRISED SOLELY OF INDEPENDENT DIRECTORS.
FOR AGAINST ABSTAIN
6. AS SUCH PROXIES MAY IN THEIR DISCRETION DETERMINE IN RESPECT OF ANY OTHER
BUSINESS PROPERLY TO COME BEFORE SAID MEETING (THE BOARD OF DIRECTORS
KNOWING OF NO SUCH OTHER BUSINESS).
THE DIRECTORS RECOMMEND A VOTE FOR ITEMS 1,2,3 AND 4 AND AGAINST ITEM 5.
(Continued on reverse side)
<PAGE> 79
(Continued from other side)
UNLESS THE STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS
1, 2, 3 AND 4 AND AGAINST ITEM 5.
VOTE BY PROXY CARD: DATE, SIGN AND RETURN TO PROXY SERVICES, EQUISERVE, PO BOX
9379, BOSTON, MA 02205-9954.
(Please sign in the same form as name appears hereon.
Executors and other fiduciaries should indicate
their titles. If signed on behalf of a corporation,
give title of officer signing.)
Dated
_________________________________________, 2000
_________________________________________
_________________________________________
Signature of Stockholder(s)
[ ] I plan on attending the Meeting
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS.
<PAGE> 80
PROXY OXFORD HEALTH PLANS, INC. PROXY
PROXY FOR 2000 ANNUAL MEETING ON MAY 11, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Norman C. Payson, M.D., Chairman and Chief
Executive Officer, and Jon S. Richardson, Secretary, and each of them, attorneys
with full power of substitution, to vote as directed below all shares of Series
D Cumulative Preferred Stock, par value $.01 per share, of Oxford Health Plans,
Inc. registered in the name of the undersigned, or which the undersigned may be
entitled to vote, at the 2000 Annual Meeting to be held at the Trumbull
Marriott, 180 Hawley Lane, Trumbull, CT 06611, on May 11, 2000, at 10:00 a.m.
and at any adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR Norman C. Payson, M.D. WITHHOLD AUTHORITY to vote
for Norman C. Payson, M.D.
FOR Robert B. Milligan, Jr. WITHHOLD AUTHORITY to vote
for Robert B. Milligan, Jr.
FOR Joseph W. Brown, Jr. WITHHOLD AUTHORITY to vote
for Joseph W. Brown, Jr.
</TABLE>
2. APPROVAL OF AMENDMENT TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND CLARIFICATION OF THE VOTING RIGHTS OF THE SERIES D
PREFERRED STOCK AND SERIES E PREFERRED STOCK.
FOR AGAINST ABSTAIN
3. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES ISSUABLE THEREUNDER.
FOR AGAINST ABSTAIN
4. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO EXTEND THE
TERM THEREOF.
FOR AGAINST ABSTAIN
5. APPROVAL OF SHAREHOLDER PROPOSAL TO REQUEST THAT THE COMPANY ESTABLISH A
NOMINATING COMMITTEE COMPRISED SOLELY OF INDEPENDENT DIRECTORS.
FOR AGAINST ABSTAIN
6. AS SUCH PROXIES MAY IN THEIR DISCRETION DETERMINE IN RESPECT OF ANY OTHER
BUSINESS PROPERLY TO COME BEFORE SAID MEETING (THE BOARD OF DIRECTORS
KNOWING OF NO SUCH OTHER BUSINESS).
THE DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2, 3 AND 4 AND AGAINST ITEM 5.
(Continued on reverse side)
<PAGE> 81
(Continued from other side)
UNLESS THE STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS
1,2,3 AND 4 AND AGAINST ITEM 5.
VOTE BY PROXY CARD: DATE, SIGN AND RETURN TO PROXY SERVICES, EQUISERVE, PO BOX
9379, BOSTON, MA 02205-9954.
(Please sign in the same form as name appears hereon. Executors and other
fiduciaries should indicate their titles. If signed on behalf of a corporation,
give title of officer signing.)
Dated ___________________________________, 2000
_________________________________________
_________________________________________
Signature of Stockholder(s)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS.
<PAGE> 82
PROXY OXFORD HEALTH PLANS, INC. PROXY
PROXY FOR 2000 ANNUAL MEETING ON MAY 11, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Norman C. Payson, M.D., Chairman and Chief
Executive Officer, and Jon S. Richardson, Secretary, and each of them, attorneys
with full power of substitution, to vote as directed below all shares of Series
E Cumulative Preferred Stock, par value $.01 per share, of Oxford Health Plans,
Inc. registered in the name of the undersigned, or which the undersigned may be
entitled to vote, at the 2000 Annual Meeting to be held at the Trumbull
Marriott, 180 Hawley Lane, Trumbull, CT 06611, on May 11, 2000, at 10:00 a.m.
and at any adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR Norman C. Payson, M.D. WITHHOLD AUTHORITY to vote
for Norman C. Payson, M.D.
FOR Robert B. Milligan, Jr. WITHHOLD AUTHORITY to vote
for Robert B. Milligan, Jr.
FOR Joseph W. Brown, Jr. WITHHOLD AUTHORITY to vote
for Joseph W. Brown, Jr.
</TABLE>
2. APPROVAL OF AMENDMENT TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND CLARIFICATION OF THE VOTING RIGHTS OF THE SERIES D
PREFERRED STOCK AND SERIES E PREFERRED STOCK.
FOR AGAINST ABSTAIN
3. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES ISSUABLE THEREUNDER.
FOR AGAINST ABSTAIN
4. APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO EXTEND THE TERM
THEREOF.
FOR AGAINST ABSTAIN
5. APPROVAL OF SHAREHOLDER PROPOSAL TO REQUEST THAT THE COMPANY ESTABLISH A
NOMINATING COMMITTEE COMPRISED SOLELY OF INDEPENDENT DIRECTORS.
FOR AGAINST ABSTAIN
6. AS SUCH PROXIES MAY IN THEIR DISCRETION DETERMINE IN RESPECT OF ANY OTHER
BUSINESS PROPERLY TO COME BEFORE SAID MEETING (THE BOARD OF DIRECTORS
KNOWING OF NO SUCH OTHER BUSINESS).
THE DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2, 3 AND 4 AND AGAINST ITEM 5.
(Continued on reverse side)
<PAGE> 83
(Continued from other side)
UNLESS THE STOCKHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS
1,2,3 AND 4 AND AGAINST ITEM 5.
VOTE BY PROXY CARD: DATE, SIGN AND RETURN TO PROXY SERVICES, EQUISERVE, PO BOX
9379, BOSTON, MA 02205-9954.
(Please sign in the same form as name appears hereon.
Executors and other fiduciaries should
indicate their titles. If signed on behalf of a corporation,
give title of officer signing.)
Dated ___________________________________, 2000
_________________________________________
_________________________________________
Signature of Stockholder(s)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS.
