-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QwvnDVPFDmjFgp3LAFG3zBLlnPLDG7psBc+Xegpa9D5qYjFfIF9u3I6iqXlDkoqr Gxjii+BARXqq7cxOM+z83Q== 0000914039-98-000222.txt : 19980519 0000914039-98-000222.hdr.sgml : 19980519 ACCESSION NUMBER: 0000914039-98-000222 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OXFORD HEALTH PLANS INC CENTRAL INDEX KEY: 0000865084 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 061118515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19442 FILM NUMBER: 98626655 BUSINESS ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038521442 MAIL ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ______________________ Commission File Number: 0-19442 OXFORD HEALTH PLANS, INC. (Exact name of registrant as specified in its charter) Delaware 06-1118515 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 800 Connecticut Avenue, Norwalk, Connecticut 06854 (Address of principal executive offices) (Zip Code) (203) 852-1442 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of common stock, par value $.01 per share, outstanding on May 12, 1998 was 80,330,974. 1 2 OXFORD HEALTH PLANS, INC. INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1 Financial Statements Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 ...................................................... 3 Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1997.................................................. 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 ........................................... 5 Notes to Condensed Consolidated Financial Statements ....................... 6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................... 8 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk.................. 13 PART II - OTHER INFORMATION ITEM 1 Legal Proceedings .......................................................... 14 ITEM 2 Changes in Securities and Use of Proceeds................................... 14 ITEM 5 Other Information........................................................... 14 ITEM 6 Exhibits and Reports on Form 8-K............................................ 14 SIGNATURES
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
Mar. 31, Dec. 31, ASSETS 1998 1997 ---- ---- Current assets: (Unaudited) Cash and cash equivalents $ 61,053 4,141 Short-term investments - available-for-sale, at market value 635,270 635,743 Premiums receivable, net 289,549 275,646 Other receivables 53,484 45,418 Prepaid expenses and other current assets 20,849 10,097 Refundable income taxes 71,603 120,439 Deferred income taxes 31,866 38,092 - --------------------------------------------------------------------------------------------------------------------- Total current assets 1,163,674 1,129,576 Property and equipment, at cost, net of accumulated depreciation and amortization of $139,999 in 1998 and $125,926 in 1997 171,801 147,093 Deferred income taxes 117,846 86,406 Other noncurrent assets 38,409 34,914 ===================================================================================================================== Total assets $1,491,730 1,397,989 ===================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bridge notes payable $ 200,000 - Current portion of capital lease obligations 6,186 - Medical costs payable 739,195 762,959 Trade accounts payable and accrued expenses 176,262 152,152 Unearned premiums 46,897 124,603 Deferred income taxes 7,798 9,059 - --------------------------------------------------------------------------------------------------------------------- Total current liabilities 1,176,338 1,048,773 - --------------------------------------------------------------------------------------------------------------------- Obligations under capital leases 14,123 - Shareholders' equity: Preferred stock, $.01 par value, authorized 2,000,000 shares - - Common stock, $.01 par value, authorized 400,000,000 shares; issued and outstanding 79,514,037 in 1998 and 79,474,439 in 1997 795 795 Additional paid-in capital 437,983 437,653 Retained earnings (deficit) (140,800) (95,498) Unrealized net appreciation of investments 3,291 6,266 - --------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 301,269 349,216 - --------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,491,730 1,397,989 =====================================================================================================================
See accompanying notes to condensed consolidated financial statements. 3 4 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended March 31 1998 1997 ---- ---- Revenues: Premiums earned $1,213,085 970,115 Third-party administration, net 5,002 3,076 Investment and other income, net 11,536 14,124 - -------------------------------------------------------------------------------------------------------------------- Total revenues 1,229,623 987,315 - -------------------------------------------------------------------------------------------------------------------- Expenses: Health care services 1,066,437 777,736 Marketing, general and administrative 201,033 149,784 Restructuring charges 25,000 - Interest expense 6,849 - - -------------------------------------------------------------------------------------------------------------------- Total expenses 1,299,319 927,520 - -------------------------------------------------------------------------------------------------------------------- Operating earnings (loss) (69,696) 59,795 Equity in net loss of affiliate - (900) - -------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes (69,696) 58,895 Income tax expense (benefit) (24,394) 24,516 ==================================================================================================================== Net earnings (loss) $ (45,302) 34,379 ==================================================================================================================== Earnings (loss) per common share - basic $ (.57) .44 Earnings (loss) per common share - assuming dilution $ (.57) .42 Weighted average common shares outstanding - basic 79,488 77,843 Effect of dilutive securities - stock options - 4,494 ==================================================================================================================== Weighted average common shares outstanding - assuming dilution 79,488 82,337 ====================================================================================================================
See accompanying notes to condensed consolidated financial statements. 4 5 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (IN THOUSANDS) (UNAUDITED)
1998 1997 ---- ---- Cash flows from operating activities: Net earnings (loss) $ (45,302) 34,379 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 16,059 13,112 Deferred income taxes (24,407) 3,415 Realized gain on sale of investments (1,372) (2,336) Other, net 1,312 1,020 Changes in assets and liabilities: Premiums receivable (13,903) (73,102) Other receivables (8,066) 2,483 Prepaid expenses and other current assets (10,752) (1,079) Refundable income taxes 48,836 - Other noncurrent assets 378 (2,455) Medical costs payable (23,764) 33,466 Trade accounts payable and accrued expenses 24,110 10,595 Income taxes payable - 18,538 Unearned premiums (77,706) (61,057) - ------------------------------------------------------------------------------------------------------------------------ Net cash used by operating activities (114,577) (23,021) - ------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Capital expenditures (29,657) (22,402) Purchases of available-for-sale securities (154,891) (156,489) Sales and maturities of available-for-sale securities 151,110 127,352 Other, net 4,597 (457) - ------------------------------------------------------------------------------------------------------------------------ Net cash used by investing activities (28,841) (51,996) - ------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from exercise of stock options 330 7,137 Proceeds of bridge notes payable 200,000 - - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 200,330 7,137 - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 56,912 (67,880) Cash and cash equivalents at beginning of period 4,141 72,160 ======================================================================================================================== Cash and cash equivalents at end of period $ 61,053 4,280 ======================================================================================================================== Supplemental cash flow information - net cash paid (refunded) for income taxes $ (46,018) 5,309 Supplemental schedule of noncash investing and financing activities: Unrealized appreciation (depreciation) of short-term investments (5,043) 12,004 Tax benefit realized on exercise of stock options - 6,562 Capital lease obligations incurred $ 20,309 -
See accompanying notes to condensed consolidated financial statements. 5 6 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION The interim condensed consolidated financial statements included herein have been prepared by Oxford Health Plans, Inc. ("Oxford") and Subsidiaries (collectively, the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to SEC rules and regulations; nevertheless, management of the Company believes that the disclosures herein are adequate to make the information presented not misleading. The condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for each of the years in the three-year period ended December 31, 1997, included in the Company's Form 10-K filed with the SEC in March and amended in April 1998. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of the Company with respect to the interim condensed consolidated financial statements have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. (2) RESTRUCTURING CHARGES Results of operations for the three months ended March 31, 1998 include a nonrecurring charge of $25,000,000 for severance costs and other expenses associated with the restructuring of certain of the Company's management and administrative functions. The charge increased the Company's net loss for the first quarter of 1998 by approximately $16,250,000,or 20 cents per share. (3) EARNINGS PER SHARE The Company has adopted the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which became effective in 1997. Under the provisions of SFAS 128, basic earnings per share is calculated on the weighted average number of common shares outstanding. Diluted earnings per share is calculated on the weighted average number of common shares and common share equivalents resulting from options outstanding. All prior year amounts have been restated to reflect these calculations. (4) COMPREHENSIVE INCOME Effective January 1, 1998, the Company has adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the financial statements. The statement of comprehensive earnings for the three months ended March 31, 1998 and 1997 is as follows:
1998 1997 ---- ---- (In thousands) Net earnings (loss) per statement of operations $(45,302) 34,379 Unrealized holding losses on available for sale securities, net of income taxes (2,083) (5,564) Less reclassification adjustment for gains included in net earnings (loss), net of income taxes (892) (1,518) - ---------------------------------------------------------------------------------------------------------------- Comprehensive earnings (loss) $(48,277) 25,919 ================================================================================================================
(5) SUBSEQUENT EVENT On May 13, 1998, the Company consummated a definitive agreement with the investment firm Texas Pacific Group under which Texas Pacific Group and others ("Texas Pacific") purchased $350 million in preferred stock 6 7 issued as Series A and Series B with dividend rates of 8% and 9%, respectively. Dividends on the preferred shares may be paid in kind for the first two years. The preferred shares were issued with warrants to acquire 22.5 million shares of Oxford common stock with an exercise price of $17.75. This price represents a 5% premium over the average trading price of Oxford shares for 30 trading days ended February 20, 1998. The exercise price will become 115% of the average trading price of Oxford common stock for the 20 trading days following the filing of the Company's annual report on Form 10-K for the year ending December 31, 1998, if such adjustment would reduce the exercise price. The Series A Preferred Stock carries a dividend of 8% and was issued with warrants to purchase 15,800,000 shares of common stock, or 19.9% of the present outstanding voting power of the Company's common stock. The Series A Preferred Stock has 16.6% of the combined voting power of the Company's outstanding common stock and the Series A shares. The Series B Preferred Stock, which was issued with warrants to purchase nonvoting junior participating preferred stock, is nonvoting and carries a dividend of 9%. The Series B Preferred Stock will become voting, the dividend rate will decrease to 8% and the related warrants will be exercisable for 6,730,000 shares of common stock at such time as the Company's shareholders approve the increase in voting rights of Texas Pacific to 22.1%. The terms of the agreement prohibits the Company from paying cash dividends on its common stock. Simultaneously with the consummation of the agreement with Texas Pacific, the Company issued $200 million principal amount of 11% Senior Notes due May 15, 2005. The Senior Notes are senior unsecured obligations of the Company and will rank pari passu in the right of payment with all current and future senior indebtedness of the Company. The Company's obligations under the Senior Notes will be effectively subordinated to all existing and future secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all existing and future indebtedness, if any, of the Company's subsidiaries. Interest is payable semi-annually on May 15 and November 15 of each year commencing November 15, 1998. The Senior Notes will not be redeemable at the Company's option prior to May 15, 2002. At the same time, the Company entered into a Term Loan Agreement pursuant to which the Company borrowed $150,000,000 in the form of a senior secured term loan (the "Term Loan") with a final maturity in 2003 at which time all outstanding amounts will be due and payable. Prior to the final maturity of the Term Loan there are no scheduled principal payments. In certain circumstances, the Term Loan provides for mandatory prepayments. The Term Loan bears interest at a rate per annum equal to the administrative agent's reserve adjusted LIBO rate plus 4.25%. Also simultaneously with the transactions described above, Norman C. Payson, M.D., the Company's Chief Executive Officer, purchased 644,330 shares of Oxford common stock for an aggregate purchase price of $10,000,000. The aggregate proceeds of the above transactions of $710,000,000 were utilized, in part, to retire previously outstanding bridge notes of $200,000,000 and make capital contributions to certain regulated subsidiaries pay fees and expenses approximating $39,000,000 related to the transactions. The remaining proceeds will be available for capital contributions to certain regulated subsidiaries and for general corporate purposes. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows membership by product:
As of March 31 Increase (Decrease) Membership: 1998 1997 Amount % ---- ---- ------ - Freedom Plan 1,400,200 1,143,500 256,700 22.4% HMO 280,900 224,300 56,600 25.2% Medicare 162,600 134,600 28,000 20.8% Medicaid 183,500 189,900 (6,400) (3.4%) - ------------------------------------------------------------------------------------ Total fully insured 2,027,200 1,692,300 334,900 19.8% Self-funded 68,500 46,500 22,000 47.3% ==================================================================================== Total membership 2,095,700 1,738,800 356,900 20.5% ====================================================================================
The following table provides certain statement of operations data expressed as a percentage of total revenues for the three months ended March 31, 1998 and 1997:
Three Months Ended March 31 Revenues: 1998 1997 ---- ---- Premiums earned 98.7% 98.3% Third-party administration, net 0.4% 0.3% Investment and other income, net 0.9% 1.4% - ----------------------------------------------------------------------------------------- Total revenues 100.0% 100.0% - ----------------------------------------------------------------------------------------- Expenses: Health care services 86.8% 78.7% Marketing, general and administrative 16.0% 15.2% Restructuring charges 2.0% - Interest expense (0.6%) - - ----------------------------------------------------------------------------------------- Total expenses 105.7% 93.9% - ----------------------------------------------------------------------------------------- Operating earnings (loss) (5.7%) 6.1% Equity in net loss of affiliate - (0.1%) - ----------------------------------------------------------------------------------------- Earnings (loss) before income taxes (5.7%) 6.0% Income tax expense (benefit) (2.0%) 2.5% ========================================================================================= Net earnings (loss) (3.7%) 3.5% ========================================================================================= Medical-loss ratio 87.9% 80.2% =========================================================================================
8 9 RESULTS OF OPERATIONS Overview The Company's revenues consist primarily of commercial premiums derived from its Freedom Plan and Liberty Plan, health maintenance organization ("HMO"), preferred provider organizations ("PPOs") and dental plan products, reimbursements under government contracts relating to its Medicare and Medicaid programs, third-party administration fee revenue for its self-funded plan services (which is stated net of direct expenses such as third-party reinsurance premiums) and investment income. Health care services expense primarily comprises payments to physicians, hospitals and other health care providers under fully insured health care business and includes an estimated amount for incurred but not reported claims ("IBNR"). The Company estimates IBNR expense based on a number of factors, including prior claims experience. The actual expense for claims attributable to any period may be more or less than the amount of IBNR reported. The Company's results for the year ended December 31, 1997 were adversely affected by additions to the Company's reserves for IBNR in the third and fourth quarters. See "Liquidity and Capital Resources." The Company has experienced substantial growth in membership and revenues since it began operations in 1986. The membership and revenue growth has been accompanied by increases in the cost of providing health care in New York, New Jersey, Pennsylvania, Connecticut, Illinois, Florida and New Hampshire. The Company does not expect its future growth in membership or revenue, if any, to be similar to its growth in prior years as the Company has to redirect its strategic initiatives to attempt to establish profitability. Since the Company provides services on a prepaid basis, with premium levels fixed for one-year periods, unexpected cost increases during the annual contract period cannot be passed on to employer groups or members. Software and hardware problems experienced in the conversion of a portion of the Company's computer system in September 1996 resulted in significant delays in the Company's billing of group and individual and have adversely affected the Company's premium billing. The Company's revenues in 1997 were adversely affected by adjustments of approximately $174 million related to estimates for terminations of group and individual members and for non-paying group and individual members. The Company is taking steps to attempt to improve billing timeliness, reduce billing errors, lags in recording enrollment and disenrollment notifications, and the Company's collection processes and is attempting to make requisite improvements in management information concerning the value and aging of outstanding accounts receivable. The Company believes it has made adequate provision in its estimates for group and individual member terminations and for non-paying group and individual members as of March 31, 1998. Adjustments to the estimates may be necessary, however, and any such adjustments would be included in the results of operations for the period in which such adjustments are made. The Company's commercial rates are often higher than those charged by competitors, in part reflecting the size and quality of the Company's provider network, additional services provided by the Company and other features of the Company's products. The Company's ability to receive requested rate increases from group customers may be adversely affected by publicity surrounding the losses announced by the Company for the third and fourth quarters of 1997 and the first quarter of 1998 and claims payment issues involving the Company's provider network. The Company believes that commercial premium pricing will continue to be highly competitive and may become more so in the future. However, the Company does not intend to promote revenue growth at the level of prior periods because the Company's priority in 1998 is to attempt to strengthen its service and systems infrastructure. Revenues may also be adversely affected as a result of the Company's decision to reduce its future investment in developing the Florida, Illinois and New Hampshire markets. Moreover, the Company expects that revenue growth will be adversely affected by customers' concern regarding recently publicized operating losses and provider dissatisfaction with timeliness of claims payment. In March 1998, the Company filed with the New York State Insurance Department ("NYSID") proposed rate increases of 50% and 64%, respectively for its New York mandated individual HMO and point-of-service plans (the "New York Mandated Plans") as a result of rapidly rising medical costs in those plans. The Company believes it experiences significant selection bias in these plans which are chosen, on average, by individuals that require more health care services than the average commercial population. The Company had 38,700 members in the mandated HMO and 14,400 members in the mandated point-of-service plan as of March 31, 1998. In April 1998, the NYSID denied the Company's rate request, but directed the Company to apply funds it will be allocated from the Demographic and Specified Medical Condition pools against rate relief in the individual and small group market. The Company expects that operating results for the individual product will continue to be adversely affected by high medical costs and that losses will continue in the absence of significant rate or regulatory relief. In 1997, the Clinton Administration and Congressional leadership reached an agreement on legislation aimed at balancing the Federal budget, which includes provisions for $115 billion in savings from Medicare programs over the next five years. This agreement was enacted into law as the Balanced Budget Act of 1997 (the "1997 Act"). The legislation changes the way health plans are compensated for Medicare members by eliminating over five years amounts paid for graduate medical education and increasing the blend of national cost factors applied in determining local reimbursement rates over a six-year phase-in period. Both changes will have the effect of reducing reimbursement in high cost metropolitan areas with a large number of teaching hospitals, such as the Company's service areas; however, the legislation includes provision for a minimum increase of 2% annually in health plan Medicare reimbursement for the next five years. The legislation also provides for expedited licensure of provider-sponsored Medicare plans and a repeal in 1999 of the rule requiring health plans to have one commercial enrollee for each Medicare or Medicaid enrollee. These changes could have the effect of increasing competition in the Medicare market. In 1998, the Company will receive a 2% increase in Medicare premiums, minus the user fee assessment of .428% of the Company's gross monthly Medicare premium. The user fee is applied to all Medicare risk contractors by HCFA to cover HCFA's costs relating to beneficiary enrollment, dissemination of information and certain counseling and assistance programs. On March 2, 1998 HCFA announced a 2% increase in premiums in 1999 for all plans in the Company's service areas. However, the user fee for 1999 has not been determined and may increase since the Clinton Administration is seeking legislation authorizing it to collect additional funds. Under the authority provided by the 1997 Act, HCFA has begun to collect hospital encounter data from Medicare risk contractors. The data will be used to develop and implement a new risk adjustment mechanism by January 1, 2000. Given the relatively high Medicare risk premium levels in the Company's market areas, the Company is in significant jeopardy that the new risk adjustment mechanism to be developed could significantly and adversely affect the Company's Medicare premium ratio going forward. President Clinton has proposed expanding Medicare coverage to individuals between the ages of 55 and 64. There is significant opposition to his proposal, and the Company cannot predict the outcome of the legislative process or the impact of the proposal on the Company's results of operations. In addition, long-term structural changes to the Medicare program are currently being considered by a newly appointed National Bipartisan Commission on the Future of Medicare. This Commission is required to submit a report to the President and Congress by March 1, 1999. The Company does not anticipate revenue growth at the level of prior years in its Medicare programs because the Company's priority in 1998 is to attempt to strengthen its service and systems infrastructure and mitigate operating losses. Medicare enrollment could also be adversely affected, perhaps substantially so, by customer concern over recently publicized operating losses and provider dissatisfaction, changes to the Company's Medicare provider network in certain counties and medical management policies designed to better control medical costs and HCFA's recent site examination of the Company, among other factors. Premium yields in the Company's Medicaid business in New Jersey and Connecticut will be unchanged in 1998. At March 31, 1998, the Company had approximately 33,300 Connecticut Medicaid members and 41,700 New Jersey Medicaid members. Premium yields in the Company's New York Medicaid program (approximately 42,200 members at March 31, 1998) were increased 4% effective April 1, 1998. Premium yields in the Company's Pennsylvania Medicaid program (approximately 66,300 members at March 31, 1998) were increased 7% effective January 1, 1998. No assurances can be given regarding prospective premium yields from these programs. The Company is taking a number of steps to address the deterioration of operating results in Medicare, Medicaid and the New York Mandated Plans. The Company is pursuing certain provider contracts for its Medicare programs pursuant to which a significant portion of the medical cost risk of some of the Company's Medicare enrollment may be transferred to network providers. Despite these efforts, no assurances can be given that such contracts will be consummated or, if consummated, will successfully control the Company's ultimate costs. In its Pennsylvania Medicaid program, the Company has entered into an agreement to transfer a substantial portion of the medical risk in that program to a third party. The Company is also attempting to implement new medical management policies aimed at reducing costs in various lines of business. The Company has also withdrawn from the Medicaid programs in New Jersey and Connecticut, effective July 1, 1998 and April 1, 1998, respectively. The Company's results of operations are dependent, in part, on its ability to predict and maintain effective control over health care costs (through, among other things, appropriate benefit design, utilization review and case management programs and its case rate and risk-sharing agreements with providers) while providing members with quality health care. Factors such as utilization, new technologies and health care practices, hospital costs, changes in demographics and trends, selection biases major epidemics, inability to establish acceptable compensation agreements with providers and numerous other factors may affect Oxford's ability to control such costs. The Company attempts to use its medical cost containment capabilities, such as claim auditing systems, physician tracking systems and utilization review protocols, and improved channeling to cost-effective providers with a view to reducing the rate of growth in health care services expense. There can be no assurance that Oxford will be successful in mitigating the effect of any or all of the above-listed or other factors. In addition, the Company's relationships with many of its contracted providers were adversely affected by the Company's computer systems and related claims payment problems which could impede the Company's efforts to obtain favorable arrangements with some of these providers going forward. Accordingly, past financial performance is not necessarily a reliable indicator of future performance, and investors should not use historical performance to anticipate results or future period trends. The Company continues to reconcile delayed claims and claims previously paid or denied in error and pay down backlogged claims. Information gained as the process continues may result in future changes to the Company's estimates of its medical costs and expected cost trends. The Company expects to report losses in 1998 as the result of high medical costs and high administrative costs. The Company intends to take steps to better control medical and administrative spending, but there can be no assurance that it will be successful. Results of operations will be adversely affected if such steps cannot be successfully implemented or if there are delays in such implementation. The three months ended March 31, 1998 compared with the three months ended March 31, 1997 Total revenues for the quarter ended March 31, 1998 were $1.23 billion, up 25% from $987.3 million during the same period in the prior year. The net loss for the first quarter of 1998 totaled $45.3 million, or 57 cents per share, compared to net earnings of $34.4 million, or 44 cents per share, for the first quarter of 1997. Results of operations for the first quarter of 1998 were adversely affected by significantly higher medical costs and approximately $25.0 million ($16.3 million after tax) of nonrecurring restructuring charges for severance and other costs expected to be incurred in connection with the restructuring of certain administrative and management functions. The restructuring charges increased the net loss for the quarter by $.20 per share. Membership in the Company's fully insured commercial health care programs as of March 31, 1998 increased by approximately 313,000 members (23%) over the level of such membership as of March 31, 1997, while membership in government programs increased by approximately 22,000 members (7%) during the same period. This enrollment growth reflects the quality and popularity of the Company's products. Total commercial premiums earned for the three months ended March 31, 1998 increased 26% to $872.6 million compared with $691.8 million in the same period in the prior year. This increase is attributable to a 24% increase in member months in the Company's commercial health care programs, including a 24% member months increase in the Freedom Plan. Premium yields of commercial programs were 1.5% higher on average than in the first quarter of 1997. Premiums earned from government programs increased 22% to $340.5 million in the first quarter of 1998 compared with $278.3 million in the first quarter of 1997. Membership growth accounted for most of the change as member months of Medicare programs increased 23% when compared with the prior year first quarter, while member months of Medicaid programs increased by 6% over the level of the prior year first quarter. Premium yields of Medicare programs in the first quarter of 1998 were 2.8% higher than in the prior year quarter and 3.7% higher in Medicaid programs. Net investment income for the three months ended March 31, 1998 decreased 22% to $11.1 million from $14.3 million for the same period last year primarily due to a decline in average invested balances in the first quarter of 1998 compared with the first quarter of 1997. The medical-loss ratio (health care services expense stated as a percentage of premium revenues) was 87.9% for the first quarter of 1998 compared with 80.2% for the first quarter of 1997. Software and hardware problems experienced in the conversion of a portion of the Company's computer system in September 1996 resulted in significant delays in the Company's payment of provider claims and adversely affected payment accuracy during the first quarter of 1997. Medical costs for 1997 reflect additions to the Company's reserves for IBNR in the third and fourth quarters of 1997 aggregating $327 million. These additions represent revisions to estimates of the Company's incurred medical costs based on information gained in the process of reviewing and reconciling previously delayed claims and claims paid or denied in error. A portion of the reserve additions represented revisions to estimates for claims incurred in years before 1997. The Company's paid and received claims data and revised estimates showed significant increases in medical costs in 1996 and 1997 for the Company's Medicare, Medicaid and New York Mandated Plans. These increases resulted primarily from higher expenses for hospital and specialist physician services and increases in per member per month pharmacy costs. Reserves for the first quarter for 1998 continued to reflect high costs in these areas. The Company believes it has made adequate provision for medical costs as of March 31, 1998. There can be no assurance that additional reserve additions will not be necessary as the Company continues to review and reconcile delayed claims and claims paid or denied in error. Additions to reserves could also result as a consequence of regulatory examinations and such additions would also be included in the results of operations for the period in which such adjustments are made. Marketing, general and administrative expenses totaled $201.0 million in the first quarter of 1998 compared with $149.8 million in the first quarter of 1997. The increase over the first quarter of 1997 is primarily attributable to a $27.3 million rise in payroll and benefits due to increased staffing and a $19.0 million increase in consulting fees primarily related to enhancements to management information systems. These expenses as a percent of operating revenue were 9 10 16.5% during the first quarter of 1998 compared with 15.4% during the first quarter of 1997 and 17.6% for the full year 1997. The Company expects that results for 1998 will continue to be adversely affected by high administrative costs, including consulting and other costs associated with strengthening its operation. Administrative costs in future periods will also be affected by the costs associated with responding to regulatory inquiries and investigations and defending pending securities class actions and shareholder derivative litigation, including fees and disbursements of counsel and other experts, to the extent such costs are not reimbursed under existing policies of insurance. LIQUIDITY AND CAPITAL RESOURCES Cash used by operations during the first quarter of 1998 aggregated $114.6 million, compared with $23.0 million for the first quarter of 1997. The increase in cash used by operations is substantially due to the Company's net loss for the first three months of 1998. The Company's capital expenditures for the first three months of 1998 totaled $29.7 million. Such funds were used primarily for management information systems and leasehold improvements. In addition, the Company in March 1998 incurred obligations under capital leases for peripheral computer equipment with an aggregate fair market value approximating $20 million. Except for anticipated capital expenditures and obligations to provide required levels of capital to its operating subsidiaries, the Company currently has no definitive commitments for use of material cash. As of March 31, 1998, cash aggregating $24.0 million has been segregated as restricted investments to comply with federal and state regulatory requirements. During April 1998, the Company segregated an additional $1.5 million in cash as a restricted investment. The Company's subsidiaries are also subject to certain restrictions on their abilities to make dividend payments, loans or other transfers of cash to the parent company, which limit the ability of the Company to use cash generated by subsidiary operations to pay the obligations of the parent, including debt service and other financing costs. As a result of the previously discussed delays in claims payments during the fourth quarter of 1996 and the first quarter of 1997, the Company experienced a significant increase in medical claims payable, but such increase was mitigated, in part, by progress in paying backlogged claims and making advance payments to providers during the first quarter of 1997 and thereafter. Outstanding advances aggregated approximately $183.4 million at March 31, 1998 and have been netted against medical costs payable in the Company's consolidated balance sheet. The Company has established a valuation reserve of $10 million against the advances. The Company believes that it will be able to recover outstanding advance payments, either through repayment by the provider or application against future claims, but any failure to recover funds advanced in excess of the reserve would adversely affect the Company's results of operations. The Company's medical costs payable was $922.6 million as of March 31, 1998 (including $803.6 million for IBNR and before netting advance claim payments of $183.4 million) compared with $965.9 million as of December 31, 1997 (including $859.0 for IBNR and before netting advance claim payments of $203.0 million). The decrease reflects progress in paying backlogged claims and more timely payment of current claims during the first quarter of 1998. The Company estimates the amount of its reserves using 10 11 standard actuarial methodologies based upon historical data, including the average interval between the date services are rendered and the date claims are paid and between the date services are rendered and the date claims are received by the Company, expected medical cost inflation, seasonality patterns and increases in membership. The liability is also affected by shared risk arrangements, including Private Practice Partnerships ("Partnership"). In determining the liability for medical costs payable, the Company accounts for the financial impact of the experience of risk-sharing Partnership providers (who may be entitled to credits from Oxford for favorable experience or subject to deductions for accrued deficits) and, in the case of Partnership providers subject to deficits, has established reserves to account for delays or other impediments to recovery of those deficits. The Company believes that its reserves for IBNR are adequate to satisfy its ultimate claim liability. However, the Company's rapid growth, delays in paying claims, paying or denying claims in error and changing speed of payment may affect the Company's ability to rely on historical information in making IBNR reserve estimates. During the first quarter of 1998, the Company made cash contributions to the capital of its HMO subsidiaries aggregating $243.4 million. The capital contributions were made to ensure that each subsidiary had sufficient surplus under applicable regulations after giving effect to operating losses and reductions to surplus resulting from the nonadmissibility of certain assets. The contributions were made with the proceeds of the issuance of $200 million of senior secured notes ("Bridge Notes") under the Bridge Securities Purchase Agreement, dated as of February 6, 1998, between the Company and an affiliate of Donaldson Lufkin & Jenrette Securities Corporation, as amended, on March 30, 1998. The Bridge Notes were repaid on May 13, 1998 with a portion of the proceeds of the financings described below. The Company expects that additional capital contributions to the subsidiaries will be required as the result of expected operating losses in 1998. On May 14, 1998, the Company made additional capital contributions of $52.5 million from the proceeds of the financings. Further, additional capital contributions will be required if there is an increase in the nonadmissible assets of the Company's subsidiaries or a need for reserve strengthening as the result of regulatory action or otherwise. Such contributions, if any, will also be funded with a portion of the proceeds of the financings. Pursuant to an Investment Agreement, dated as of February 23, 1998 (the "Investment Agreement"), between the Company and TPG Oxford LLC (together with the investors thereunder, the "Investors"), the Investors, on May 13, 1998, purchased $350,000,000 in Preferred Stock with Warrants to acquire up to 22,530,000 shares of common stock. Dividends on the Preferred Stock may be paid in kind for the first two years. The Warrants have an exercise price of $17.75, which represents a 5% premium over the average trading price of Oxford shares for the 30 trading days ended February 20, 1998. The exercise price is to become 115% of the average trading price of Oxford common stock for the 20 trading days following the filing of the Company's annual report on Form 10-K for the year ending December 31, 1998, if such adjustment would reduce the exercise price. The Preferred Stock was issued as Series A and Series B. The Series A Preferred Stock carries a dividend of 8% and was issued with Series A Warrants to purchase 15,800,000 shares of common stock, or 19.9% of the present outstanding voting power of Oxford's common stock. The Series A Preferred Stock has 16.6% of the combined voting power of Oxford's outstanding common stock and the Series A shares. The Series B Preferred stock, which was issued with Series B Warrants to purchase non-voting junior participating preferred stock, is nonvoting and carries a dividend of 9%. The Series B Preferred Stock will become voting, the dividend rate will decrease to 8% and the Series B warrants will be exercisable for 6,730,000 shares of common stock at such time as Oxford's shareholders approve the increase in voting rights of TPG to 22.1%. The Preferred Stock is not redeemable by the Company prior to the fifth anniversary of its original issuance. Thereafter, subject to certain conditions, the Series A and Series B Preferred Stock are redeemable at the option of the Company for an aggregate redemption price of $245,000,000 and $105,000,000, respectively (in each case, plus accrued and unpaid dividends), and are subject to mandatory redemption at the same price on the tenth anniversary of their original issuance. The Series A Warrants and the Series B Warrants expire on the earlier of the tenth anniversary of their original issuance or redemption of the related series of Preferred Stock. The Warrants are detachable from the Preferred Stock. Simultaneously with the consummation of the Investment Agreement, the Company issued $200,000,000 principal amount of 11% Senior Notes due May 15, 2005. The Senior Notes are senior 11 12 unsecured obligations of the Company and rank pari passu in the right of payment with all current and future senior indebtedness of the Company. The Company's obligations under the Senior Notes will be effectively subordinated to all existing and future secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all existing and future indebtedness, if any, of the Company's subsidiaries. Interest is payable semi-annually on May 15 and November 15 of each year commencing November 15, 1998. The Senior Notes will not be redeemable at the Company's option prior to May 15, 2002. At the same time, the Company entered into a Term Loan Agreement pursuant to which the Company borrowed $150,000,000 in the form of a senior secured term loan (the "Term Loan") with a final maturity in 2003 at which time all outstanding amounts will be due and payable. Prior to the final maturity of the Term Loan there are no scheduled principal payments. In certain circumstances, the Term Loan provides for mandatory prepayments. The Term Loan bears interest at a rate per annum equal to the administrative agent's reserve adjusted LIBO rate plus 4.25%. Also simultaneously with the transactions described above, Norman C. Payson, M.D., the Company's Chief Executive Officer, purchased 644,330 shares of Oxford Common Stock for an aggregate purchase price of $10,000,000. The aggregate proceeds of the above financings of $710,000,000 were utilized, in part, to retire the Bridge Notes of $200,000,000 and more capital contributions to certain regulated subsidiaries pay transaction fees and expenses approximating $39,000,000 related to the financings. The remaining proceeds will be available for capital contributions to regulated subsidiaries and for general corporate purposes. The Company believes that the above described proceeds will be sufficient to finance the capital needs referred to previously and to provide additional capital for losses or contingencies in excess of the Company's current expectations. However, there can be no assurance that such proceeds will be sufficient to finance the capital needs and to provide additional capital for losses or contingencies in excess of the Company's current expectations. 12 13 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations", including statements concerning future premium rates for commercial, Medicare and Medicaid business, future medical-loss ratio levels, the Company's ability to control health care costs, the Company's information systems, proposed efforts to control health care and administrative costs, government regulation and the future of the health care industry, and the impact on the Company of recent events, legal proceedings, and regulatory investigations and examinations, and other statements contained herein regarding matters that are not historical facts, are forward-looking statements (as such term is defined in the Securities Exchange Act of 1934, as amended). Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those discussed below. Net Losses; Turnaround Plan The Company incurred a net loss of $291 million in 1997 and $45 million in the first three months of 1998 and expects to incur additional losses in 1998, the extent of which cannot be predicted at this time. As a result of losses at certain of its HMO and insurance subsidiaries in 1997, the Company has had to make capital contributions to certain of its HMO and insurance subsidiaries and expects that additional capital contributions will be required to be made by the Company in 1998. The Company's ability to control net losses depends, to a large extent, on the success of its turnaround plan, which includes improving provider contracts, implementing certain medical management programs and improving operating margins by, among other things, strengthening commercial underwriting, reducing administrative and medical costs and, where appropriate, refining benefit plans and increasing premiums. There can be no assurance that new management will be successfully retained or that the other elements of the turnaround plan will be implemented in the manner described herein, or, if implemented, will be successful or that other efforts by the Company to control net losses will be successful. Moreover, the Company cannot predict the impact of adverse publicity, legal and regulatory proceedings or other future events on the Company's operations and financial results, including ongoing financial losses. There can be no assurance that new management will be successfully retained or that the other elements of the Turnaround Plan will be implemented in the manner described herein, or, if implemented, will be successful or that other efforts by the Company to control net losses will be successful. Implementation of the Company's turnaround plan depends, in part, on its ability to implement measures to reduce its medical and administrative costs below existing levels. The Company currently believes that, it has the ability and intent to reduce certain costs, including those specified in the turnaround plan and others. 14 Control Over and Predictability of Health Care Costs Oxford's future results of operations depend, in part, on its ability to predict and maintain effective control over health care costs (through, among other things, appropriate benefit design, utilization review and case management programs and its case rate and risk-sharing arrangements with providers) while providing members with quality health care. Factors such as utilization, new technologies and health care practices, hospital costs, changes in demographics and trends, selection biases, major epidemics, inability to establish acceptable compensation arrangements with providers, operational and regulatory issues which could delay, prevent or impede those arrangements, and numerous other factors may affect Oxford's ability to control such costs. There can be no assurance that Oxford will be successful in mitigating the effect of any or all of the above-listed or other factors. Medical costs payable in Oxford's financial statements include reserves for incurred but not reported claims ("IBNR") which are estimated by Oxford. Oxford estimates the amount of such reserves using standard actuarial methodologies based upon historical data including the average interval between the date services are rendered and the date claims are paid and between the date services are rendered and the date claims are received by the Company, expected medical cost inflation, seasonality patterns and increases in membership. The estimates for submitted claims and IBNR are made on an accrual basis and adjusted in future periods as required. Oxford believes that its reserves for IBNR are adequate in order to satisfy its ultimate claim liability. However, Oxford's rapid growth, delays in paying claims, paying or denying claims in error and changing speed of payment affect the Company's ability to rely on historical information in making IBNR reserve estimates. There can be no assurances as to the ultimate accuracy of such estimates. Any adjustments to such estimates could adversely affect Oxford's results of operations in future periods. 15 Administrative Costs A key element of the Company's Turnaround Plan is a reduction in administrative expenses. In 1998, however, the Company expects that results will continue to be adversely affected by high administrative costs associated with the Company's efforts to strengthen its operations. No assurance can be given that the Company will not continue to experience significant service and systems infrastructure problems in 1998 and beyond, which would have a significant impact on administrative costs. Government Regulation; Reimbursement The healthcare industry in general, and HMOs and health insurance companies in particular, are subject to substantial federal and state government regulation, including, but not limited to, regulation relating to cash reserves, minimum net worth, licensing requirements, approval of policy language and benefits, mandatory products and benefits, provider compensation arrangements, member disclosure, premium rates and periodic examinations by state and federal agencies. State regulations require the Company's HMO and insurance subsidiaries to maintain restricted cash or available cash reserves and restrict their ability to make dividend payments, loans or other transfers or cash to the Company. In addition, the ability of Oxford's HMO and insurance subsidiaries to declare and pay dividends to Oxford is limited by state regulations. In 1996 and 1997, significant federal and state legislation affecting the Company's business was enacted. For example, effective January 1998, New York State implemented a requirement that health plans pay interest on delayed payment of claims at a rate of 12% per annum." Moreover, state and federal government authorities are continually considering changes to laws and regulations applicable to Oxford and are currently considering regulation relating to mandatory benefits, provider compensation, health plan liability to members who fail to receive appropriate care, disclosure and composition of physician networks which would apply to the Company. In addition, Congress is considering significant changes to Medicare and Medicaid legislation and has in the past considered, and may in the future consider, proposals relating to healthcare reform. Changes in federal and state laws or regulations, if enacted, could increase healthcare costs and administrative expenses and reductions could be made in Medicare and Medicaid reimbursement rates. Oxford is unable to predict the ultimate impact on the Company of recently enacted and future legislation and regulations but such legislation and regulations, particularly in New York where much of the Company's business is located, could have a material adverse impact on the Company's operations, financial condition and prospects. Premiums for Oxford's Medicare and Medicaid programs are determined through formulas established by HCFA for Oxford's Medicare contracts and by state government agencies in the case of Medicaid. Medicaid premiums in New York were significantly reduced in 1996, and federal legislation enacted in 1997 provides for future adjustment of Medicare reimbursement by HCFA which could reduce the reimbursement received by the Company. Premium reductions or premium rate increases in a particular region, which are lower than the rate of increase in healthcare service expenses for Oxford's Medicare or 16 Medicaid members in such region, could adversely affect Oxford's results of operations. Oxford's Medicare programs are subject to certain risks relative to commercial programs, such as higher comparative medical costs and higher levels of utilization. Oxford's Medicare and Medicaid programs are subject to higher marketing and advertising costs associated with selling to individuals rather than to groups. Management of Growth Over the past five years the Company has experienced rapid growth in its business and in its staff and the Company will be affected by its ability to manage growth effectively, including its ability to continue to develop processes and systems to support its growing operations. In September 1996 the Company converted a significant part of its business operations to a new computer operating system. Unanticipated software and hardware problems arising in connection with the conversion resulted in significant delays in the Company's claims payments and group and individual billing and adversely affected claims payment and billing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company does not intend to promote growth at the level of prior years because the Company's priority in 1998 will be to strengthen its service and systems infrastructure. However, no assurance can be given that the Company will not continue to experience significant service and systems infrastructure problems in 1998 and beyond. Management of Information Systems There can be no assurance that the Company will be successful in mitigating the existing system problems that have resulted in payment delays and claims processing errors. Moreover, operating and other issues can lead to data problems that affect performance of important functions, including claims payment and group and individual billing. There can also be no assurance that the process of improving existing systems will not be delayed or that additional systems issues will not arise in the future. 17 Recent Events and Related Publicity Recent events at the Company in the last several months have resulted in adverse publicity. Such events and related publicity may adversely affect the Company's provider network and future enrollment in the Company's health benefit plans. 18 discretionary review of the Company. Collectibility of Advances As part of its attempts to ameliorate delays in processing claims for payment, as of March 31, 1998, the Company had advanced $183,375,000 in funds to providers pending the Company's disposition of claims for payment. The New York State Insurance Department is requiring the Company to obtain written acknowledgments of such advances from recipients of advances. If the Company is unable to receive written acknowledgments there can be no assurance that the insurance regulators will continue to recognize such advances as admissible assets for regulatory purposes. If the insurance regulators do not recognize such advances as admissible assets, the capital of certain of the Company's regulated subsidiaries could be impaired. The Company may have to make additional capital contributions to compensate for any impairment. Although the Company believes that the advances will be repaid in full, there can be no assurance that the advances will be repaid in full. 19 MARKET RISK DISCLOSURES The Company's consolidated balance sheet as of March 31, 1998 includes a significant amount of assets whose fair values are subject to market risk. Since the substantial portion of the Company's investments are in fixed rate debt securities, interest rate fluctuations represent the largest market risk factor affecting the Company's consolidated financial position. Interest rate risk is managed within a tight duration band, and credit risk is managed by investing in U.S. government obligations and in corporate and municipal debt securities with high average quality ratings and maintaining a diversified sector exposure within the debt securities portfolio. A hypothetical immediate increase of 100 basis points in market interest rates would decrease the fair value of the Company's investments in debt securities as of March 31, 1998 by approximately $11.3 million, while a 200 basis points increase in rates would decrease the value of such investments by approximately $22.5 million. A hypothetical immediate decrease of 100 basis points in market interest rates would increase the fair value of the Company's investments in debt securities as of March 31, 1998 by approximately $10.9 million, while a 200 basis points decrease in rates would increase the value of such investments by approximately $22.2 million. The Company's investment in equity securities as of March 31, 1998 is not significant. Caution should be used in evaluating the Company's overall market risk based on the above information since actual results could differ materially because the information was developed using hypothetical assumptions. YEAR 2000 DATE CONVERSION The Company is currently conducting a comprehensive review of its computer systems to identify the systems that could be affected by the "Year 2000" date conversion and is developing an implementation plan to resolve the issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize the date "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculations. The Company is utilizing and will utilize both internal and external resources to identify, correct or reprogram, and test the systems for Year 2000 compliance. The Company has not completed its assessment of the Year 2000 date conversion. Accordingly, the Company cannot estimate its Year 2000 compliance expense and the related potential effect on the Company's results of operations. The Company is communicating with certain material vendors to determine the extent to which the Company may be vulnerable to such vendors' failure to resolve their own "Year 2000" issues. The Company will attempt to mitigate its risk with respect to the failure of such vendors to be "Year 2000" compliant. The effect, if any, is not reasonably estimable at this time. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations under "Market Risk Disclosures." 13 20 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Securities Class Action Litigation As previously reported by the Company, following the October 27, 1997 decline in the price per share of the Company's common stock, purported securities class action lawsuits were filed on October 28, 29, and 30, 1997 against the Company and certain of its officers in the United States District Courts for the Eastern District of New York, the Southern District of New York and the District of Connecticut. Since that time, plaintiffs have filed additional securities class actions (see below) against Oxford and certain of its directors and officers in the United States District Courts for the Southern District of New York, the Eastern District of New York, the Eastern District of Arkansas, and the District of Connecticut. The complaints in these lawsuits purport to be class actions on behalf of purchasers of Oxford's securities during varying periods beginning on February 6, 1996 through December 9, 1997. The complaints generally allege that defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder by making false and misleading statements and failing to disclose certain allegedly material information regarding changes in Oxford's computer system, and the Company's membership enrollment, revenues, medical expenses, and ability to collect on its accounts receivable. Certain of the complaints also assert claims against the individual defendants alleging violations of Section 20(a) of the Exchange Act and claims against all of the defendants for negligent misrepresentation. The complaints also allege that certain of the individual defendants disposed of Oxford's common stock while the price of that stock was artificially inflated by allegedly false and misleading statements and omissions. The complaints seek unspecified damages, attorneys' and experts' fees and costs, and such other relief as the court deems proper. The complaints filed in the United States District Court for the Southern District of New York are Metro Services, Inc., et al. v. Oxford Health Plans, Inc., et al., No. 97 Civ. 08023 (filed Oct. 29, 1997); Worldco, LLC, et al. v. Oxford Health Plans, Inc., et al., No. 97 Civ. 8494 (filed Nov. 14, 1997); Jerovsek, et al. v. Oxford Health Plans, Inc., et al., No. 97 Civ. 8882 (filed Dec. 2, 1997); North River Trading Co., LLC v. Oxford Health Plans, Inc., et al., No. 97 Civ. 9372 (filed Dec. 22, 1997); National Industry Pension Fund v. Oxford Health Plans, Inc., et al., No. 97 Civ. 9566 (filed Dec. 31, 1997); Scheinfeld v. Oxford Health Plans, Inc., et al., No. 98 Civ. 1399 (originally filed Dec. 31, 1997 in the United States District Court for the District of Connecticut and transferred); and Paskowitz v. Oxford Health Plans, Inc., et al., No. 98 Civ. 1991 (filed March 19, 1998). The complaints filed in the United States District Court for the Eastern District of New York are Koenig v. Oxford Health Plans, et al., No. 97 Civ. 6188 (filed Oct. 29, 1997); Wolper v. Oxford Health Plans, Inc., et al., No. 97 Civ. 6299 (filed Oct. 29, 1997); Tawil v. Oxford Health Plans, Inc., et al., No. 97 Civ. 7289 (filed Dec. 11, 1997); and Winters, et al. v. Oxford Health Plans, Inc., et al., No. 97 Civ. 7449 (filed Dec. 18, 1997). The complaints filed in the United States District Court for the District of Connecticut are Heller v. Oxford Health Plans, Inc., et al., No. 397 CV 02295 (filed Oct. 28, 1997); Fanning v. Oxford Health Plans, Inc., et al., No. 397 CV 02300 (filed Oct. 29, 1997); Lowrie, IRA v. Oxford Health Plans, Inc., et al., No. 397 CV 02299 (filed Oct. 29, 1997); Barton v. Oxford Health Plans, Inc., et al., No. 397 CV 02306 (filed Oct. 30, 1997); Sager v. Oxford Health Plans, Inc., et al., No. 397 CV 02310 (filed Oct. 30, 1997); Cohen v. Oxford Health Plans, Inc., et al., No. 397 CV 02316 (filed Oct. 31, 1997); Katzman v. Oxford Health Plans, Inc., et al., No. 397 CV 02317 (filed Oct. 31, 1997); Shapiro v. Oxford Health Plans, Inc., et al., No. 397 CV 02324 (filed Oct. 31, 1997); Willis v. Oxford Health Plans, Inc., et al., No. 397 CV 02326 (filed Oct. 31, 1997); Saura v. Oxford Health Plans, Inc., et al., No. 397 CV 02329 (filed Nov. 3, 1997); Selig v. Oxford Health Plans, Inc., et al., No. 397 CV 02337 (filed Nov. 4, 1997); Brandes v. Oxford Health Plans, Inc., et al., No. 397 CV 02343 (filed Nov. 4, 1997); Ross v. Oxford Health Plans, Inc., et al., No. 397 CV 02344 (filed Nov. 4, 1997); Sole v. Oxford Health Plans, Inc., et al., No. 397 CV 02345 (filed Nov. 4, 1997); Henricks v. Wiggins, et al., No. 397 CV 02346 (filed Nov. 4 1997); Williams v. Oxford Health Plans, Inc., et al., No. 397 CV 02348 (filed Nov. 5, 1997); Direct Marketing Day in New York, Inc. v. Oxford Health Plans, Inc., et al., No. 397 CV 02349 (filed Nov. 5, 1997); Howard Vogel Retirement Plans, Inc., et al. v. Oxford Health Plans, Inc., et al., No. 397 CV 02325 (filed Oct. 31, 1997 and amended Dec. 17, 1997); Serbin v. Oxford Health Plans, Inc., et al., No. 397 CV 02426 (filed Nov. 18, 1997); Hoffman v. Oxford Health Plans, Inc., et al., No. 397 CV 02458 (filed Nov. 24, 1997); Armstrong v. Oxford Health Plans, Inc., et al., No. 397 CV 02470 (filed Nov. 25, 1997); Roeder, et al. v. Oxford Health Plans, Inc., et al., No. 397 CV 02496 (filed Nov. 26, 1997); Braun v. Oxford Health Plans, Inc., et al., No. 397 CV 02510 (filed Dec. 1, 1997); Blauvelt, et al. v. Oxford Health Plans, Inc., et al., No. 397 CV 02512 (filed Dec. 2, 1997); Hobler et al. v. Oxford Health Plans, Inc., et al., No. 397 CV 02535 (filed Dec. 3, 1997); Bergman v. Oxford Health Plans, Inc., et al., No. 397 CV 02564 (filed Dec. 8, 1997); Pasternak v. Oxford Health Plans, Inc., et al., No. 397 CV 02567 (filed Dec. 8, 1997); Perkins Partners I, Ltd. v. Oxford Health Plans, Inc., et al., No. 397 CV 02573 (filed Dec. 9, 1997); N.I.D.D., Ltd. v. Oxford Health Plans, Inc., et al., No. 397 CV 02584 (filed Dec. 9, 1997); Burch v. Oxford Health Plans, Inc., et al., No. 397 CV 02585 (filed Dec. 9, 1997); Mark v. Oxford Health Plans, Inc., et al., No. 397 CV 02594 (filed Dec. 11, 1997); Ross, et al. v. Oxford Health Plans, Inc., et al., No. 397 CV 02613 (filed Dec. 12, 1997); Lerchbacker v. Oxford Health Plans, Inc., et al., No. 397 CV 02670 (filed Dec. 22, 1997); State Board of Administration of Florida v. Oxford Health Plans, Inc., et al., No. 397 CV 02709 (filed Dec. 29, 1997) (the complaint, although purportedly not brought on behalf of a class of shareholders, invites similarly situated persons to join as plaintiffs); and Ceisler v. Oxford Health Plans, Inc., et al., No. 397 CV 02729 (filed Dec. 31, 1997). The complaint filed in the United States District Court for the Eastern District of Arkansas is Rudish v. Oxford Health Plans, Inc., et al., No. LR-C-97-1053 (filed Dec. 29, 1997). The Company anticipates that additional class action complaints containing similar allegations may be filed in the future. On January 6, 1998, certain plaintiffs filed an application with the Judicial Panel on Multidistrict Litigation ("JPML") to transfer most of these actions for consolidated or coordinated pretrial proceedings before Judge Charles L. Brieant of the United States District Court for the Southern District of New York. The Oxford defendants subsequently filed a similar application with the JPML seeking the transfer of all of these actions for consolidated or coordinated pretrial proceedings, together with the shareholder derivative actions discussed below, before Judge Brieant. The JPML heard argument on the applications on March 27, 1998. On April 28, 1998, the JPML entered an order transferring substantially all of these actions for consolidated or coordinated pretrial proceedings, together with the federal shareholder derivative actions discussed below, before Judge Brieant. The outcomes of these actions cannot be predicted at this time, although the Company believes that it and the individual defendants have substantial defenses to the claims asserted and intends to defend the actions vigorously. Shareholder Derivative Litigation As previously reported by the Company, in December 1997, purported shareholder derivative actions were filed on behalf of the Company in Connecticut Superior Court against the Company's directors and certain of its officers (and the Company itself as a nominal defendant). Several additional purported shareholder derivative actions (see below) subsequently were filed on behalf of Oxford 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 allege that defendants breached their fiduciary obligations to the Company, mismanaged the Company and wasted its assets in planning and implementing certain changes to Oxford's computer system, by making misrepresentations concerning the status of those changes in Oxford's computer system, by failing to design and to implement adequate financial controls and information systems for the Company, and by making misrepresentations concerning Oxford's membership enrollment, revenues, profits and medical costs in Oxford'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 Oxford 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. None of the plaintiffs has made a demand on the Company's Board of Directors that Oxford pursue the causes of action alleged in the complaint. Each complaint alleges that plaintiff's duty to make such a demand was excused by the directors' alleged conflict of interest with respect to the matters alleged therein. The complaints filed in Connecticut Superior Court are Reich v. Wiggins, et al., No. CV 97-485145 (filed on or about Dec. 12, 1997); Gorelkin v. Wiggins, et al., No. CV-98-0163665 S (filed on or about Dec. 24, 1997); and Kellmer v. Wiggins, et al., No. CV 98-0163664 S HAS (filed on or about Jan. 28, 1998). The complaints filed in the United States District Court for the Southern District of New York are Roth v. Wiggins, et al., No. 98 Civ. 0153 (filed Jan. 12, 1998); Plevy v. Wiggins, et al., No. 98 Civ. 0165 (filed Jan. 12, 1998); Mosson v. Wiggins, et al., No. 98 Civ. 0219 (filed Jan. 13, 1998); Boyd, et al. v. Wiggins, et al., No. 98 Civ. 0277 (filed Jan. 16, 1998); and Glick v. Wiggins, et al., No. 98 Civ. 0345 (filed Jan. 21, 1998). The complaints filed in the United States District Court for the District of Connecticut are Mosson v. Wiggins, et al., No. 397 CV 02651 (filed Dec. 22, 1997), and Fisher, et al. v. Wiggins, et al., No. 397 CV 02742 (filed Dec. 31, 1997). The Company anticipates that additional purported shareholder derivative actions containing similar allegations may be filed. Although the outcome of these actions cannot be predicted at this time, the Company believes that the defendants have substantial defenses to the claims asserted in the complaints. On March 16, 1998, Oxford and certain of the individual defendants filed a motion to dismiss or, alternatively, to stay two of the purported derivative actions pending in Connecticut Superior Court. On March 23, 1998, Oxford and certain of the individual defendants filed a motion to dismiss or, alternatively, to stay the third purported derivative action pending in Connecticut Superior Court. Since then, the parties to the state derivative actions have agreed in principle, under certain conditions, to hold all pretrial proceedings in those actions in abeyance during the pretrial proceedings in the federal derivative actions, and to allow the state derivative plaintiffs to participate to a limited extent in the pretrial proceedings in the federal derivative actions. In addition, on January 27, 1998, defendants filed an application with the JPML to transfer the federal derivative actions for consolidated or coordinated pretrial proceedings before Judge Charles L. Brieant of the Southern District of New York. The JPML heard argument on the application on March 27, 1998. As these applications are not opposed in any material respect, the Company anticipates that the federal purported derivative actions will be transferred for consolidated or coordinated pretrial proceedings before Judge Brieant. State Insurance Departments As previously reported by the Company, the New York State Insurance Department ("NYSID") is presently conducting its triennial examination and market conduct examination of Oxford's New York HMO and insurance subsidiaries. As previously reported, in December 1997, the Company made additions of $164 million to the reserves of its New York subsidiaries at the direction of the NYSID. The NYSID also issued a Market Conduct Report identifying several alleged violations of state law and NYSID regulations. On December 22, 1997, the NYSID and Oxford entered into a stipulation under which Oxford promised to take certain corrective measures and to pay restitution and paid a $3 million fine. The stipulation provides that the NYSID will not impose any other fines for Oxford's conduct up to November 1, 1997. The NYSID has continued to review market conduct issues, including, among others, those relating to claims processing. At this time, the Company cannot predict the outcome of such continuing review. The NYSID has directed the Company's New York subsidiaries to obtain notes or other written evidence of agreements to repay from each provider who has received an advance. The NYSID is presently conducting an examination of Oxford's finances and will focus on adequacy of reserves for medical costs payable, premiums receivable and provider advances. The NYSID is expected to issue a report in the coming months. The Company is also subject to ongoing examinations with respect to financial condition and market conduct for its HMO and insurance subsidiaries in other states where it conducts business. The outcome of these examinations cannot be predicted at this time. New York State Attorney General As previously reported, on November 6, 1997, the New York State Attorney General served a subpoena duces tecum on the Company requiring the production of various documents, records and materials "in regard to matters relating to the practices of the [Company] and others in the offering, issuance, sale, promotion, negotiation, advertisement, distribution or purchase of securities in or from the State of New York." Since then, Oxford has produced a substantial number of documents in response to the subpoena, and expects to produce additional documents. In addition, Oxford has been asked to provide testimony from some of its present and former directors and officers. As previously reported, the Company entered into an Assurance of Discontinuance, effective July 25, 1997, with the Attorney General under which the Company agreed to pay interest at 9% per annum on provider clean claims not paid by Oxford within 30 days on its New York commercial and Medicaid lines of business until January 22, 1998. Thereafter, the Company's obligations to make prompt payments are governed by applicable New York law. See "Recent Regulatory Developments". In addition, contemporaneously, the Company agreed to pay varying interest rates to providers in Connecticut, New Jersey, New Hampshire and Pennsylvania. The Company has subsequently responded to a number of inquiries by the Attorney General with respect to Oxford's compliance with the Assurance of Discontinuance. On February 2, 1998, the Attorney General served a subpoena duces tecum on Oxford seeking production of certain documents relating to complaints from providers and subscribers regarding nonpayment or untimely payment of claims, interest paid under the Assurance, accounts payable, provider claims processing, and suspended accounts payable. Oxford has produced a number of documents in response to the subpoena, and expects to produce additional documents. The Company intends to cooperate fully with the Attorney General's inquiries, the outcome of which cannot be predicted at this time. Securities and Exchange Commission As previously reported, the Company received an informal request on December 9, 1997 from the Securities and Exchange Commission's Northeast Regional Office seeking production of certain documents and information concerning a number of subjects, including disclosures made in the Company's October 27, 1997 press release announcing a loss in the third quarter. Oxford has produced documents and has provided information in response to this informal request. On January 30, 1998, pursuant to a formal order, the Commission served a subpoena duces tecum on Oxford for documents concerning a number of subjects, including internal and external audits, uncollectible premium receivables, timing of payments to vendors, doctors and hospitals, late payments to medical providers, computer system problems, agreements with the New York State Attorney General, and policies and procedures relating to the sale of Oxford securities by officers and directors. Oxford has also been requested to provide testimony from some of its present and former directors and officers. Oxford has produced documents in response to this subpoena, and intends to cooperate fully with the Commission. On April 23, 1998, pursuant to a formal order, the Commission served a second subpoena duces tecum on Oxford for documents concerning, among other things, advances to medical providers, additions to reserves for unpaid claims, and adjustments related to terminations of group and individual members and for non-paying group and individual members. Oxford intends to cooperate fully with the Commission and produce documents in response to this subpoena. Oxford cannot predict the outcome of the Commission's investigation at this time. Health Care Financing Administration From February 9, 1998 through February 13, 1998, the Health Care Financing Administration ("HCFA") conducted an enhanced site visit at Oxford to assess Oxford's compliance with federal regulatory requirements for HMO eligibility and Oxford's compliance with its obligations under its contract with HCFA. During the visit, HCFA monitored, among other things, Oxford's administrative and managerial arrangements, Oxford's quality assurance program, Oxford's health services delivery program, and all aspects of Oxford's implementation of the Medicare risk program. In its exit interview with the Company, HCFA expressed concern over claims payment delays and various other regulatory issues, including HCFA requirements regarding enrollment and disenrollment documentation and provider contracts. To the extent that alleged violations of regulatory requirements or contractual obligations are identified, HCFA may seek corrective action, impose fines, limit enrollment in the Company's Medicare plans and impose other sanctions. The Company has not received a final report from HCFA and cannot predict at this time any action HCFA might take as a result of its site visit. Arbitration Proceedings On February 3, 1998, the New York County Medical Society ("NYCMS") initiated an arbitration proceeding before the American Arbitration Association ("AAA") in New York against Oxford alleging breach of the written agreements between Oxford and some NYCMS physician members and failure to adopt standards and practices consistent with the intent of those agreements. The notice of intention to arbitrate was subsequently amended to join thirteen additional New York medical associations as co-claimants. NYCMS and the other claimants seek declaratory and injunctive relief requiring various changes to Oxford's internal practices and policies, including practices in the processing and payment of claims submitted by physicians. Oxford has petitioned the New York State Supreme Court for a permanent stay of this proceeding; the outcome of this motion cannot be predicted at this time. The NYCMS and other claimants also announced their intention to seek arbitration on behalf of physicians having particular claim disputes or seeking payment of delayed claims from Oxford. Two such arbitration proceedings have been commenced by individual physicians. The Company has been informed that on March 9, 1998, a purported class action arbitration was brought by two physicians before the AAA in Connecticut against Oxford alleging breach of contract and violation of the Connecticut Unfair Insurance Practices Act. The Company has not yet received a copy of the Demand for Arbitration and is considering its response. The outcome of the arbitration cannot be predicted at this time, although the Company believes that it has substantial defenses to the claims asserted and intends to defend the arbitration vigorously. Jeffrey S. Oppenheim, M.D., et al. v. Oxford Health Plans, Inc., et al., Index No. 97/109088 On May 19, 1997, Oxford was served with a purported "Class Action Complaint" filed in the New York State Supreme Court, New York County by two physicians and a medical association of five physicians. Plaintiffs alleged that Oxford (i) failed to make timely payments to plaintiffs for claims submitted for health care services and (ii) improperly withheld from plaintiffs a portion of plaintiffs' agreed compensation. Plaintiffs alleged causes of action for common law fraud and deceit, negligent misrepresentation, breach of fiduciary duty, breach of implied covenants and breach of contract. The complaint sought an award of an unspecified amount of compensatory and exemplary damages, an accounting, and equitable relief. On July 24, 1997, Oxford and plaintiffs reached a settlement in principle of the class claims wherein Oxford agreed to pay, from September 1, 1997 to January 1, 2000, interest at certain specified rates to physicians who did not receive payments from Oxford within certain specified time periods after submitting "clean claims" (a term that was to be applied in a manner consistent with certain industry guidelines). Moreover, Oxford agreed to provide to plaintiffs' counsel, on a confidential basis, certain financial information that Oxford believed would demonstrate that Oxford acted within its contractual rights in making decisions on payments withheld from plaintiffs and members of the alleged class. The settlement in principle provides that, if plaintiffs' counsel reasonably does not agree with Oxford's belief in this regard, plaintiffs retain the right to proceed individually (but not as a class) against Oxford by way of arbitration. Oxford has supplied financial information to plaintiffs' counsel and has exchanged draft settlement papers with plaintiffs' counsel. The parties have not yet submitted final settlement papers to the Court. Other In the ordinary course of its business, the Company is subject to claims and legal actions by members in connection with benefit coverage determinations and alleged acts by network providers and by health care providers and others. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS See information contained in note 5 of "Notes to Condensed Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 21 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS See information contained in note 5 of "Notes to Condensed Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 5. OTHER INFORMATION STATUS OF INFORMATION SYSTEMS In September 1996, the Company converted a significant part of its business operations to a new computer operating system developed at Oxford known as "Pulse." From September 1996, most business functions at the Company were operated on the Pulse system, with the exception of the processing of claims, which continued to operate on the previous system, known as "Pick." Since the conversion, the Company must transmit claims, provider, membership and other data from Pulse to Pick in order to process claims, and processed claims data is transmitted from Pick to Pulse where checks are prepared. This transmission of data between systems is known as "backbridging." Unanticipated software and hardware problems arising in connection with the conversion resulted in significant delays in the Company's claims payments and group and individual billing and adversely affected claims payment and billing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company implemented a number of systems and operational improvements during 1996 and 1997 which had the effect of improving claims turnaround times, and reducing claims backlogs and claims and billing errors. However, the backbridging process continues to create issues relating to transfer of data, which continues to cause delays for certain claims, and there have been delays in delivering all needed functionality under the Pulse system. The Company is continuing to seek improvements in the process referred to above and to added needed functionality. The Company has undertaken a thorough review of its information systems needs and capabilities with the assistance of independent experts. As a result of this review, the Company has decided not to continue the development of claims processing functionality in Pulse because of the risks associated with the development, integration and support of this functionality. The Company has also determined that significant risks would be involved integrating other claims processing systems available from third parties with the existing Pulse system. With the recent arrival of Mr. Marvin P. Rich as Chief Administrative Officer, the Company continues to review its long-term information system strategy, but has not reached any final decision concerning alternative information systems approaches. The Company's resources are currently focused on making improvements to the Pulse and Pick systems to improve performance and provide additional needed functionality pending any such decision. There can be no assurance that the Company will be successful in mitigating the existing system problems that have resulted in payment delays and claims processing errors. Moreover, operating and other issues can lead to data problems that affect performance of important functions, including claims payment and group and individual billing. There can also be no assurance that the process of identifying information systems alternatives and improving existing systems will not be delayed or that additional systems issues will not arise in the future. For information as to the "Year 2000" date conversion, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- Year 2000 Date Conversion." ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit No. Description of Document ----------- ----------------------- 3(a) Second Amended and Restated Certificate of Incorporation, as amended, of the Registrant 3(b) Amended and Restated Bylaws of the Registrant 10(a) Purchase Agreement, dated May 7, 1998, between Registrant and Donaldson, Lufkin & Jenrette Securities Corporation 10(b) Registration Rights Agreement, dated as of May 13, 1998, between Registrant and Donaldson, Lufkin & Jenrette Securities Corporation 10(c) Indenture of Registrant, dated as of May 13, 1998, between Registrant and The Chase Manhattan Bank, as Trustee, including form of 11% Senior Notes due 2005 10(d) Term Loan Agreement, dated as of May 13, 1998, among Registrant, Lenders Listed therein, DLJ Capital Funding, Inc. and IBJ Schroder Bank & Trust Company, including exhibits
(b) Reports on Form 8-K In a report on Form 8-K dated January 8, 1998, and filed January 8, 1998, the Company reported, under Item 5. "Other Events," the formation of a new executive committee. In a report on Form 8-K dated February 6, 1998, and filed February 9, 1998, the Company reported, under Item 5. "Other Events," the issuance of a $100 million senior secured increasing rate loan pursuant to a $200 million bridge securities purchase agreement. In a report on Form 8-K dated February 24, 1998, and filed February 24, 1998, the Company reported, under Item 5. "Other Events," its fourth quarter 1997 earnings press release. 14 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OXFORD HEALTH PLANS, INC. ---------------------------------------- (REGISTRANT) May 15, 1998 /s/ NORMAN C. PAYSON, M.D. - ------------------------ ---------------------------------------- Date NORMAN C. PAYSON, M.D., CHIEF EXECUTIVE OFFICER May 15, 1998 /s/ ALBERT A. KOCH - ------------------------ ---------------------------------------- Date ALBERT A. KOCH, CHIEF FINANCIAL OFFICER 15 23 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES INDEX TO EXHIBITS
Exhibit Page Number Description of Document Number - ------ ----------------------- ------ 3(a) Second Amended and Restated Certificate of Incorporation of Registrant, as amended ...................................................................... 17 3(b) Amended and Restated Bylaws of Registrant ............................................ XX 10(a) Purchase Agreement, dated May 7, 1998, between Registrant and Donaldson, Lufkin & Jenrette Securities Corporation ............................. XX 10(b) Registration Rights Agreement, dated May 13, 1998, between Registrant and Donaldson, Lufkin & Jenrette Securities Corporation .......................................................... XX 10(c) Indenture of Registrant, dated May 13, 1998, between Registrant and The Chase Manhattan Bank, as Trustee, including form of 11% Senior Notes due 2005........................................................ XX 10(d) Term Loan Agreement, dated May 13, 1998, among Registrant, Lenders Listed therein, DLJ Capital Funding, Inc. and IBJ Schroder Bank & Trust Company, including exhibits........................................................ XX
16 EX-3.A 2 EXHIBIT 3.A 1 Exhibit 3.a SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF OXFORD HEALTH PLANS, INC. (a Delaware corporation) OXFORD HEALTH PLANS, INC., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Oxford Health Plans, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 17, 1984, and the name under which it was originally incorporated was Integrated Health Plans, Inc. 2. This Restated Certificate of Incorporation amends, restates and integrates the provisions of the Certificate of Incorporation (as previously amended and restated) and has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, the written consent of the stockholders of the Corporation was given in accordance with Section 228 of the General Corporation Law of the State of Delaware, and written notice to the stockholders who did not consent in writing was provided as required by Section 228 of the General Corporation Law of the State of Delaware. 3. The text of the present Amended and Restated Certificate of Incorporation of the Company is hereby amended and restated in its entirety to read in full as set forth on the attached Exhibit A. IN WITNESS WHEREOF, OXFORD HEALTH PLANS, INC. has caused this Second Amended and Restated Certificate of Incorporation to be signed by Stephen F. Wiggins, its President, and attested by Donald V. Barrett, its Secretary, this 13th day of August, 1991. OXFORD HEALTH PLANS, INC. By: --------------------------------- Stephen F. Wiggins President ATTESTED: By: ------------------------------- Donald V. Barrett Secretary 2 Exhibit A SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF OXFORD HEALTH PLANS, INC. (a Delaware Corporation) ARTICLE FIRST Name The name of the corporation is OXFORD HEALTH PLANS, INC. (the "Corporation"). ARTICLE SECOND Purpose The purposes for which the Corporation is formed are as follows: 1. To establish a plan or plans under which the Corporation, directly or through one or more subsidiaries or affiliates, may provide health services and/or any form of health insurance to subscribers both individually and in groups; to engage in all of the activities of a health services or health maintenance or health insurance organization, however designated, as permitted by applicable law. Health services may include diagnostic services, preventive medicine and medical treatment in clinics, hospitals, treatment centers, or other medical facilities or institutions by licensed physicians, nurses and other health services personnel and the furnishing of drugs and other medical products and equipment; 2. To establish, operate, and maintain medical service centers, clinics and other medical facilities; 3. To contract for medical and related services with physicians, hospital service corporations, medical service corporations and other corporations, plans, persons and entities; 4. To own or contract with mutual and stock insurance companies, underwriters and other corporations and persons for and in connection with health insurance; 5. To contract with agencies of federal, state and local governments; 6. To acquire by purchase, lease or otherwise, and to construct, own, hold, use maintain, improve, and operate, and to sell, lease, and otherwise dispose of real and 3 personal property; 7. To form, participate in or acquire other health service or health maintenance organizations or health insurance companies or other business entities; 8. In general to perform and do, whether directly or indirectly and whether alone or in conjunction or cooperation with other persons and organizations of every kind and nature, all other acts and things incidental to or in furtherance of the accomplishment of the purposes of the Corporation, and to sue and exercise all applicable powers conferred from time to time by applicable law; and 9. To engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware (the "Delaware Statute"). ARTICLE THIRD Registered Office The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE FOURTH Capital Stock The total authorized capital stock of the Corporation consists of 15,000,000 shares, of which 2,000,000 are shares of Preferred Stock, $.01 par value ("Preferred Stock"), and 13,000,000 are shares of Common Stock, $.01 par value, ("Common Stock"). The designations and the powers, preferences and relative, participating, optional 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, optional 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 4 and recorded as required by law; (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 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 the 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 the 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 in so far 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. 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 5 Corporation upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation. The shares of an one series of Preferred Stock shall be identical with each other in all respects except as to the dates 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 shareholders 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. ARTICLE FIFTH Management of the Affairs of the Corporation Except as otherwise provided by this Certificate of Incorporation or as may otherwise be provided in the By-Laws of the Corporation, the Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal By-Laws of the Corporation. ARTICLE SIXTH Election of Directors Election of Directors of the Corporation need not be by written ballot except and to the extent provided in the By-Laws of the Corporation. ARTICLE SEVENTH Meetings of the Board The Board of Directors shall have the power to hold its meetings within or outside the State of Delaware, at such place as from time to time may be designated by the By-Laws or by resolution of the Board. ARTICLE EIGHTH Indemnification The Corporation shall indemnify its officers and directors to the fullest extent permitted by law. 6 ARTICLE NINTH Director's Liability To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director. ARTICLE TENTH Stockholder Action Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such holders. ARTICLE ELEVENTH Vote Required for Certain Business Transactions 1. In addition to the requirements of the provisions of any series of Preferred Stock which may be outstanding, and whether or not a vote of the stockholders is otherwise required, the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of the Voting Stock shall be required for the approval or authorization of any Business Transaction with a Related Person, or any Business Transaction in which a Related Person has an interest (other than only a proportionate interest as a stockholder of the Corporation); provided, however, that the eighty percent (80%) voting requirement shall not be applicable if (i) the Business Transaction is duly approved by the continuing Directors, or (ii) all of the following conditions are satisfied: (a) the Business Transaction is a merger or consolidation or sale of substantially all of the assets of the Corporation, and the aggregate amount of cash and the fair market value of the property, securities or other consideration to be received per share (on the date of effectiveness of such merger or consolidation or on the date of distribution to stockholders of the Corporation of the proceeds from such sale of assets) by holders of Common Stock of the Corporation (other than such Related Person) in connection with such Business Transaction is at least equal in value to such Related Person's Highest Common Stock Purchase Price; (b) after such Related Person has become the Beneficial Owner of not less than twenty percent (20%) of the voting power of the Voting Stock and prior to the consummation of such Business Transaction, such 7 Related Person shall not have become the Beneficial Owner of any additional shares of Voting Stock or securities convertible into Voting Stock, except (x) as a part of the transaction which resulted in such Related Person becoming the Beneficial Owner of not less than ten percent (10%) of the voting power of the Voting Stock or (y) as a result of a pro rata stock dividend or stock split; and (c) prior to the consummation of such Business Transaction, such Related Person shall not have, directly or indirectly, (x) received the benefit (other than only a proportionate benefit as a stockholder of the Corporation) of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or any of its subsidiaries, (y) caused any material change in the Corporation's business or equity capital structure, including, without limitation, the issuance of shares of capital stock of the Corporation or (z) except as duly approved by the Continuing Directors, caused the Corporation to fail to declare and pay quarterly cash dividends on the outstanding Common Stock on a per share basis at least equal to the cash dividends being paid thereon by the Corporation immediately prior to the date on which the Related Person became a Related Person. 2. For the purpose of this Article ELEVENTH: (i) The term "Business Transaction" shall mean (a) any merger or consolidation involving the Corporation or a subsidiary of the Corporation, (b) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions), including, with limitation, a mortgage or any other security device, of all or any Substantial Part of the assets either of the Corporation or of a subsidiary of the Corporation, (c) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transaction) of all or any Substantial Part of the assets of an entity to the Corporation or a subsidiary of the Corporation, (d) the issuance, sale, exchange, transfer or other disposition (in one transaction or in a series of related transactions) by the Corporation or a subsidiary of the Corporation of any securities of the Corporation or any subsidiary of the Corporation having an aggregate fair market value of $20,000,000 or more, (e) any recapitalization or reclassification of the securities of the Corporation (including, without limitation, any reverse stock split) or other transaction that would have the effect of increasing the voting power of a Related Person or reducing the number of shares of each class of Voting Stock outstanding, (f) any liquidation, spinoff, splitoff, splitup or dissolution of the 8 Corporation, and (g) any agreement contract or other arrangement providing for any of the transactions described in this definition of Business Transaction. (ii) The term "Related Person" shall mean and include (a) any individual, corporation, partnership, group, association or other person or entity which, together with its Affiliates and Associates, is the Beneficial Owner of not less than ten percent (10%) of the voting power of the Voting Stock or was the Beneficial Owner of no less than ten percent (10% ) of the voting power of the Voting Stock (x) at the time the definitive agreement providing for the Business Transaction (including any amendment thereof) was entered into, (y) at the time a resolution approving the Business Transaction was adopted by the Board of Directors of the Corporation or (z) as of the record date for the vote on, or consent to, the Business Transaction, and (b) any Affiliate or Associate of any such individual, corporation, partnership, group, association or other person or entity; provided, however, and notwithstanding anything in the foregoing to the contrary, the term "Related Person" shall not include the Corporation, a wholly-owned subsidiary of the Corporation, or any trustee of, or fiduciary with respect to, any such plan when acting in such capacity. (iii) The term "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on August 13, 1991; provided, however, that any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any Voting Stock at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such Voting Stock. (iv) The term "Highest Common Stock Purchase Price" shall mean the highest amount of consideration paid by such Related Person for a share of Common Stock of the Corporation (including any brokerage commission, transfer taxes and soliciting dealers' fees) in the transaction which resulted in such Related Person becoming a Related Person, at any time while such Related Person was a Related Person or within one year prior to the date such Related Person became a Related Person, whichever is higher; provided, however, that the Highest Common Stock Purchase Price shall be appropriately adjusted to reflect the occurrence of any reclassification, recapitalization, stock split, reverse stock split or other similar corporate readjustment in the number of outstanding shares of Common Stock of the Corporation between the last date upon which such Related Person paid the Highest Common Stock Purchase Price to the effective date of the merger or consolidation or the date of distribution to stockholders of the Corporation of the proceeds from the sale of substantially all of the assets of the Corporation referred to in subparagraph (a) 9 of Section 1 of this Article ELEVENTH. (v) The term "Substantial Part" shall mean more than twenty percent (20%) of the fair market value of the total assets of the entity in question, as reflected on the most recent consolidation balance sheet of such entity existing at the time the shareholders of the Corporation would be required to approve or authorize the Business Transaction involving the assets constituting any such Substantial Part. (vi) In the event of a merger in which the Corporation is the surviving corporation, for the purpose of subparagraph (a) of Section 1 of this Article ELEVENTH, the phrase "property, securities or other consideration to be received" shall include, without limitation, Common Stock of the Corporation retained by its stockholders (other than such Related Person). (vii) The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, considered for the purpose of this Article ELEVENTH as one class. (viii)The term "Preferred Stock" shall mean each class of series of capital stock which may from time to time be authorized in or by Article FOURTH of this Certificate of Incorporation which is not designated as "Common Stock". (ix) The term "Continuing Director" shall mean a Director who either was a member of the Board of Directors of the Corporation on August 13, 1991, or who became a Director of the Corporation subsequent to such date and whose election, or nomination for election by the Corporation's stockholders, was Duly Approved by the Continuing Directors then on the Board, either by a specific vote or by approval of the proxy statement issued by the Corporation on behalf of the Board of Directors in which such person is named as nominee for Director, without due objection to such nomination; provided, however, that in no event, shall a Director be considered a "Continuing Director" if such Director is a Related Person and the Business Transaction to be voted upon is with such Related Person or is one in which such Related Person has an interest (other than only a proportionate interest as a stockholder of the Corporation). (x) The term "Duly Approved by the Continuing Directors" shall mean an action approved by the vote of at least a majority of the Continuing Directors then on the Board, except, if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the Board of Directors if a vote by all of its members were to have been taken, then such term shall mean an action approved by the unanimous vote of the Continuing Directors so long as there are at least three Continuing Directors on the Board at the time of 10 such unanimous vote. (xi) The term "Affiliate", used to indicate a relationship to a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. (xii) The term "Associate", used to indicate a relationship with a specified person, shall mean (a) any corporation, partnership or other organization of which such specified person is an officer or partner (b) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity, (c) any relative or spouse of such specified person, or any relative of such spouse, who has the same home as such specified person or who is a Director or officer of the Corporation or any of its parents or subsidiaries and (d) any person who is a Director, officer or partner of such specified person or of any corporation (other than the Corporation or any wholly-owned subsidiary of the Corporation), partnership or other entity which is an Affiliate of such specified person. 3. For the purpose of this Article ELEVENTH, so long as Continuing Directors constitute at least a majority of the entire Board of Directors, the Board of Directors shall have the power to make a good faith determination, on the basis of information know to them, of: (i) the number of shares of Voting Stock of which any person is the Beneficial Owner, (ii) whether a person is a Related Person or is an Affiliate or Associate of another, (iii) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of Beneficial Owner herein, (iv) whether the assets subject to any Business Transaction constitute a Substantial Part, (v) whether any Business Transaction is with a Related Person or is one in which a Related Person has an interest (other than only a proportionate interest as a stockholder of the Corporation), (vi) whether a Related Person has, directly or indirectly, received the benefits or caused any of the changes referred to in subparagraph (c) of Section 1 of this Article ELEVENTH, and (vii) such other matters with respect to which a determination is required under this Article ELEVENTH; and such determination by the Board of Directors shall be conclusive and binding for all purposes of this Article ELEVENTH. 4. Nothing contained in this Article ELEVENTH shall be construed to relieve any Related Person of any fiduciary obligation imposed by law. 5. The fact that any Business Transaction complies with the provisions of Section 1 of this Article ELEVENTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Transaction or recommend its adoption or approval to the stockholders of the Corporation. 11 ARTICLE TWELFTH Board of Directors; Numbers; Qualifications; Classification 1. (i) The number of Directors shall be fixed from time to time by or pursuant to the By-Laws of the Corporation. Directors need not be stockholders. (ii) Unless waived by the Board of Directors, no person not already a director shall be eligible to be elected to or serve as a director unless such person's candidacy shall have been notified to the Board of Directors at least seventy-five (75) days before initiation of solicitation to the stockholders for election in the event of an election other than at an annual meeting and seventy-five (75) days before the corresponding date that had been the record date of the previous year's annual meeting in the event of an election at an annual meeting. Any such notification pursuant to this subparagraph (ii) shall be effective and such person shall be eligible to be elected or to serve only if the notification contains all information concerning such person which would be required to be included in a proxy statement pursuant to the rules and regulations under the Securities Exchange Act of 1934 or any successor provisions. (iii) The Directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of Directors constituting the entire Board of Directors. The term of the initial Class I Directors shall terminate on the date of the 1992 annual meeting of stockholders; the term of the initial Class II Directors shall terminate on the date of the 1993 annual meeting of stockholders, and the term of the initial Class III Directors shall terminate on the date of the 1994 annual meeting of stockholders. At each annual meeting of stockholders beginning in 1992, successors to the class of Directors whose term expires at that annual meeting, other than those Directors elected under particular circumstances by a separate class vote of the holders of any class or series of Preferred Stock, shall be elected for a three-year term. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director. 2. Each Director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any Director may resign at any time upon written notice to the Board of Directors or to the 12 President or the Secretary of the Corporation. Such written notice shall be necessary to make a Director's resignation effective. Except as may be provided in the terms of any class or series of Preferred Stock relating to the rights of the holders of such class or series to elect, by separate class vote, additional Directors, any Director or the entire Board of Directors may be removed only for cause, and only by the holders of 80% of the shares then entitled to vote at an election of Directors. Unless otherwise provided in this Certificate of Incorporation or in the By-Laws, vacancies and newly created directorships resulting from any increase in the authorized number of Directors or from any other cause may be filled by a majority of the Directors, although less than a quorum, then remaining in office and elected by the holders of the capital stock of the Corporation entitled to vote generally in the election of Directors or, in the event that there is only one such Director, by such sole remaining Director, and the Directors so chosen shall hold office for a term that shall coincide with the term of the class to which such Director shall have been elected. 3. In the event that the holders of any class or series of Preferred Stock are entitled, by a separate class vote, to elect Directors pursuant to the terms of such class or series, then the provisions of such class or series with respect to such rights of election shall apply to the election of such Directors. The number of Directors that may be elected by the holders of any such class or series of stock shall be in addition to the number fixed by or pursuant to the By-Laws. Except as otherwise expressly provided in the terms of such class or series, the number of directors that may be so elected by the holders of any such class or series of stock shall be elected for terms expiring at the next Annual Meeting of the Stockholders and without regard to the classification of the remaining members of the Board of Directors, and vacancies among Directors so elected by the separate class vote of any such class or series of Preferred Stock shall be filled by the affirmative vote of a majority of the remaining Directors elected by such class or series, or, if there are no such remaining Directors, by the holders of such class or series in the same manner in which such class or series initially elected a Director. If at any meeting for the election of Directors, more than one class of stock, voting separately as classes, shall be a quorum of only one such class of stock, that class of stock shall be entitled to elect its quota of Directors notwithstanding absence of a quorum of the other class or classes of stock. ARTICLE THIRTEENTH Amendment of By-Laws Subject to any limitations imposed by this Certificate of Incorporation, the Board of Directors shall have power to adopt, amend, or repeal the By-Laws of the Corporation, 13 Any By-Laws made by the Directors under the powers conferred hereby may be amended or repealed by the Directors or by the stockholders. Notwithstanding the foregoing and any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding that a lesser percentage may be specified by law), no provisions of the By-Laws shall be adopted, amended, or repealed by the stockholders without an affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, considered for the purposes of this Article as a single class. ARTICLE FOURTEENTH Higher Vote Requirement for Amendment Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding that a lesser percentage may be specified by law), the provisions of Articles TENTH, ELEVENTH, TWELFTH, THIRTEENTH OR FOURTEENTH hereof may not be amended or repealed unless such action is approved by the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, considered for the purpose of this Article as a single class. 14 CERTIFICATE OF AMENDMENT TO THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF OXFORD HEALTH PLANS, INC. Oxford Health Plans, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that at a meeting of the stockholders of the Corporation held on September 17, 1993, it was resolved by the duly adopted vote of the stockholders in accordance with Section 242 of the General Corporation Law of the State of Delaware that the first sentence of the first paragraph of Article Fourth of the Corporation's Second Amended and Restated Certificate of Incorporation be amended to read as follows: ARTICLE FOURTH CAPITAL STOCK The total authorized capital stock of the Corporation consists of 27,000,000 shares of which 2,000,000 are shares of Preferred Stock, $.01 par value ("Preferred Stock"), and 25,000,000 are shares of Common Stock, $.01 par value, ("Common Stock"). IN WITNESS WHEREOF, the Corporation has caused this amendment to be signed by Stephen F. Wiggins, its Chairman of the Board of Directors, and attested by Donald V. Barrett, its Secretary, this 17th day of September, 1993. OXFORD HEALTH PLANS, INC. By: ------------------------------- Stephen F. Wiggins Chairman of the Board of Directors ATTEST: By: -------------------------------- Donald V. Barrett Secretary 15 CERTIFICATE OF DESIGNATIONS of SERIES A CUMULATIVE PREFERRED STOCK of OXFORD HEALTH PLANS, INC. (Pursuant to Section 151 of the Delaware General Corporation Law) --------------------------- Oxford Health Plans, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Corporation (the "Board of Directors") pursuant to authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the "Certificate of Incorporation"), the Board of Directors hereby creates a series of the Corporation's previously authorized preferred stock, par value $0.01 per share (the "Preferred Stock"), and hereby states the designation and number thereof, and fixes the voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, as follows: Series A Cumulative Preferred Stock: I. Designation and Amount The designation of this series of shares shall be "Series A Cumulative Preferred Stock" (the "Series A Preferred Stock"); the stated value per share shall be $1,000 (the "Stated Value"); and the number of shares constituting such series shall be 300,000. The number of shares of the Series A Preferred Stock may be decreased from time to time by a resolution or resolutions of the Board of Directors; provided, however, that such number shall not be decreased below the aggregate number of shares of the Series A Preferred Stock then outstanding. 16 II. Rank A. With respect to dividend rights, the Series A Preferred Stock shall rank (i) junior to each other class or series of Preferred Stock which by its terms ranks senior to the Series A Preferred Stock as to payment of dividends, (ii) on a parity with each other class or series of Preferred Stock which by its terms ranks on a parity with the Series A Preferred Stock as to payment of dividends, including the Series B Preferred Stock, par value $0.01 per share, of the Corporation (the "Series B Preferred Stock") and (iii) prior to the Corporation's Common Stock, par value $.01 per share (the "Common Stock"), and, except as specified above, all other classes and series of capital stock of the Corporation hereafter issued by the Corporation. With respect to dividends, all equity securities of the Corporation to which the Series A Preferred Stock ranks senior, including the Common Stock, are collectively referred to herein as the "Junior Dividend Securities"; all equity securities of the Corporation with which the Series A Preferred Stock ranks on a parity, including the Series B Preferred Stock, are collectively referred to herein as the "Parity Dividend Securities"; and all equity securities of the Corporation (other than convertible debt securities) to which the Series A Preferred Stock ranks junior, with respect to dividends, are collectively referred to herein as the "Senior Dividend Securities." B. With respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Series A Preferred Stock shall rank (i) junior to each other class or series of Preferred Stock which by its terms ranks senior to the Series A Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up, (ii) on a parity with each other class or series of Preferred Stock which by its terms ranks on a parity with the Series A Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, including the Series B Preferred Stock, and (iii) prior to the Common Stock, and, except as specified above, all other classes and series of capital stock of the Corporation hereinafter issued by the Corporation. With respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, all equity securities of the Corporation to which the Series A Preferred Stock ranks senior, including the Common Stock, are collectively referred to herein as "Junior Liquidation Securities"; all equity securities of the Corporation (other than convertible debt securities) to which the Series A Preferred Stock ranks on parity, including the Series B Preferred Stock, are collectively referred to herein as "Parity Liquidation Securities"; and all equity securities of the Corporation to which the Series A Preferred Stock ranks junior are collectively referred to herein as "Senior Liquidation Securities." C. The Series A Preferred Stock shall be subject to the creation of Junior Dividend Securities and Junior Liquidation Securities (collectively, "Junior Securities") but no Parity Dividend Securities or Parity Liquidation Securities 17 (collectively, "Parity Securities") (other than the Series B Preferred Stock), or Senior Dividend Securities or Senior Liquidation Securities (collectively, "Senior Securities") shall be created except in accordance with the terms hereof and the Investment Agreement, including, without limitation, Article VIII, Section F hereof. III. Dividends A. Dividends. Prior to the Second Anniversary Date, shares of Series A Preferred Stock shall accumulate dividends at a rate of 8.243216% per annum, payment of which may be made in cash or by the issuance of additional shares of Series A Preferred Stock (which, upon issuance, shall be fully paid and nonassessable), at the option of the Company; provided that if any such dividend is paid after the Second Anniversary Date, such dividend shall be paid in cash. On and after the Second Anniversary Date, shares of Series A Preferred Stock shall accumulate dividends at a rate of 8% per annum, which dividends shall be paid in cash. On and prior to the Second Anniversary Date, dividends shall be paid annually on the anniversary of the original issuance of Series A Preferred Stock, and thereafter dividends shall be paid in four equal quarterly installments on the last day of March, June, September and December of each year, or if any such date is not a Business Day, the Business Day next preceding such day (each such date, regardless of whether any dividends have been paid or declared and set aside for payment on such date, a "Dividend Payment Date"), to holders of record (the "Registered Holders") as they appear on the stock record books of the Corporation on the fifteenth day prior to the relevant Dividend Payment Date. Dividends shall be paid only when, as and if declared by the Board of Directors out of funds at the time legally available for the payment of dividends. Dividends shall begin to accumulate on outstanding shares of Series A Preferred Stock from the date of issuance and shall be deemed to accumulate from day to day whether or not earned or declared until paid. Dividends shall accumulate on the basis of a 360-day year consisting of twelve 30-day months (four 90-day quarters) and the actual number of days elapsed in the period for which payable. B. Accumulation. Dividends on the Series A Preferred Stock shall be cumulative, and from and after any Dividend Payment Date on which any dividend that has accumulated or been deemed to have accumulated through such date has not been paid in full or any payment date set for a redemption on which such redemption payment has not been paid in full, additional dividends shall accumulate in respect of the amount of such unpaid dividends or unpaid redemption payment (the "Arrearage") at the annual rate then in effect as provided in Section A of this Article III (or such lesser rate as may be the maximum rate that is then permitted by applicable law). Such additional dividends in respect of any Arrearage shall be deemed to accumulate from day to day whether or not earned or declared until the Arrearage is paid, shall be calculated as of such successive Dividend Payment Date and shall constitute an additional Arrearage from and after any Dividend Payment Date to the extent not paid on such Dividend Payment Date. References in any Article herein to dividends that have accumulated or that have been 18 deemed to have accumulated with respect to the Series A Preferred Stock shall include the amount, if any, of any Arrearage together with any dividends accumulated or deemed to have accumulated on such Arrearage pursuant to the immediately preceding two sentences. Additional dividends in respect of any Arrearage may be declared and paid at any time, in whole or in part, without reference to any regular Dividend Payment Date, to Registered Holders as they appear on the stock record books of the Corporation on such record date as may be fixed by the Board of Directors (which record date shall be no less than 10 days prior to the corresponding payment date). Dividends in respect of any Arrearage shall be paid in cash. C. Method of Payment. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series A Preferred Stock shall be allocated pro rata on a share-by-share basis among all such shares then outstanding. After the Second Anniversary Date, dividends that are declared and paid in an amount less than the full amount of dividends accumulated on the Series A Preferred Stock (and on any Arrearage) shall be applied first to the earliest dividend which has not theretofore been paid. All cash payments of dividends on the shares of Series A Preferred Stock shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. IV. Liquidation Preference In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of then-outstanding shares of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation, whether such assets are capital or surplus of any nature, an amount per share equal to the sum of (i) the dividends, if any, accumulated or deemed to have accumulated thereon to the date of final distribution to such holders, whether or not such dividends are declared, and (ii) the Stated Value thereof, and no more, before any payment shall be made or any assets distributed to the holders of any Junior Liquidation Securities. After any such payment in full, the holders of Series A Preferred Stock shall not, as such, be entitled to any further participation in any distribution of assets of the Corporation. All the assets of the Corporation available for distribution to stockholders after the liquidation preferences of any Senior Liquidation Securities shall be distributed ratably (in proportion to the full distributable amounts to which holders of Series A Preferred Stock and Parity Liquidation Securities, if any, are respectively entitled upon such dissolution, liquidation or winding up) among the holders of the then-outstanding shares of Series A Preferred Stock and Parity Liquidation Securities, if any, when such assets are not sufficient to pay in full the aggregate amounts payable thereon. Neither a consolidation or merger of the Corporation with or into any other Person or Persons, nor a sale, conveyance, lease, exchange or transfer of all or part of the 19 Corporation's assets for cash, securities or other property to a Person or Persons shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Article IV, but the holders of shares of Series A Preferred Stock shall nevertheless be entitled from and after any such consolidation, merger or sale, conveyance, lease, exchange or transfer of all or part of the Corporation's assets to the rights provided by this Article IV following any such transaction. Notice of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable to each holder of shares of Series A Preferred Stock in such circumstances shall be payable, shall be given by first-class mail, postage prepaid, mailed not less than 30 days prior to any payment date stated therein, to holders of record as they appear on the stock record books of the Corporation as of the date such notices are first mailed. V. Redemption A. Optional Redemption. The Corporation shall not have any right to redeem any shares of Series A Preferred Stock prior to the fifth anniversary of the original issuance of the Series A Preferred Stock. On and after such date, the Corporation shall have the right, at its option and election, to redeem all the outstanding shares of Series A Preferred Stock, in whole but not in part, at any time, in accordance with the provisions of this Article V. The redemption price for such shares of Series A Preferred Stock shall be paid in cash out of funds legally available therefor and shall be in an amount per share equal to the sum of (i) the amount, if any, of all unpaid dividends accumulated thereon to the date of actual payment of the Redemption Price, whether or not such dividends have been declared, and (ii) the Stated Value thereof (the "Redemption Price"). B. Mandatory Redemption. On the tenth anniversary of the original issuance of the Series A Preferred Stock (the "Mandatory Redemption Date"), the Corporation shall redeem (the "Mandatory Redemption") all outstanding shares of Series A Preferred Stock by paying the Redemption Price therefor in cash out of funds legally available for such purpose. C. Notice and Redemption Procedures. Notice of the redemption of shares of Series A Preferred Stock pursuant to Section A or B hereof (a "Notice of Redemption") shall be sent to the holders of record of the shares of Series A Preferred Stock to be redeemed by first class mail, postage prepaid, at each such holder's address as it appears on the stock record books of the Corporation not more than 120 nor fewer than 90 days prior to the date fixed for redemption, which date shall be set forth in such notice (the "Redemption Date"); provided that failure to give such Notice of Redemption to any holder, or any defect in such Notice of Redemption to any holder shall not affect the validity of the proceedings for the redemption of any shares of Series A Preferred Stock held by any other holder. Notwithstanding the foregoing, in the event that contemporaneously with or prior to the delivery of a Notice of Redemption, the 20 Corporation irrevocably deposits, in accordance with Section F of this Article V, funds sufficient to pay the aggregate Redemption Price for the Series A Preferred Stock, such Notice of Redemption shall be delivered not more than 120 days nor fewer than 30 days prior to the Redemption Date; provided, however, that, if such Notice of Redemption is delivered fewer than 60 days prior to the Redemption Date and the Investor or any of its Affiliates Beneficially Owns shares of Series A Preferred Stock as of the date of the Notice of Redemption and uses its reasonable best efforts to consummate the sale of its shares of Series A Preferred Stock prior to the stated Redemption Date but has not completed the sale of all the Series A Preferred Stock Beneficially Owned by the Investor and its Affiliates (or such other amount desired to be sold by the Investor and its Affiliates), the Corporation shall, at the option of the Investor (or any such Affiliate), delay such Redemption Date for a period not to exceed 30 days as requested by the Investor (or any such Affiliate) in order to complete such sale or sales, and shall notify the holders of Series A Preferred Stock of such delay within five days of receiving the request therefor. Any delay of the Redemption Date pursuant to the proviso to the preceding sentence shall be requested by the Investor (or its Affiliate) in writing no later than the tenth day preceding the then-scheduled Redemption Date stated in the Notice of Redemption. The Redemption Date stated in a Notice of Redemption shall not be delayed more than once in connection with the redemption of shares of Series A Preferred Stock pursuant to such Notice of Redemption. In order to facilitate the redemption of shares of Series A Preferred Stock, the Board of Directors may fix a record date for the determination of the holders of shares of Series A Preferred Stock to be redeemed, in each case, not more than 30 days prior to the date the Notice of Redemption is mailed. On or after the Redemption Date, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. From and after the Redemption Date, all dividends on shares of Series A Preferred Stock shall cease to accumulate and all rights of the holders thereof as holders of Series A Preferred Stock shall cease and terminate, except to the extent the Corporation shall default in payment thereof on the Redemption Date. Prior to any Redemption Date that has been fixed by the Company, other than in connection with the Mandatory Redemption, the Corporation shall take all measures reasonably requested by the Investor to facilitate a sale or other disposition of Series A Preferred Stock by the Investor or its Affiliates prior to such Redemption Date, including, without limitation, participation in due diligence sessions and provision of information about the management, business and financial condition of the Corporation, preparation of offering memoranda, private placement memoranda and other similar documents and preparation and delivery of such other certificates or documents reasonably requested by the Investor. For so long as the Investor or an Affiliate of the Investor holds any shares of Series A Preferred Stock, no Notice of Redemption in connection with a redemption pursuant to Section A or B of this Article V shall be delivered unless (i) the Corporation's preferred stock is rated Baa or better by Moody's or BBB or better by S&P, or in the event the Corporation's preferred stock is not rated by Moody's and S&P, the Corporation's unsecured debt is rated Baa or better 21 by Moody's or BBB or better by S&P or (ii) the Corporation has sufficient funds reasonably available under committed lines of credit or other similar sources of financing established with financially sound financing providers to pay, on the Redemption Date, the aggregate Redemption Price in connection with such redemption (and shall reserve such funds or availability for the payment of the aggregate Redemption Price); provided, that the Corporation may deliver a Notice of Redemption without complying with the foregoing conditions if prior to, or contemporaneously with, the delivery of such notice the Corporation irrevocably deposits in accordance with Section F of this Article V funds sufficient to pay the aggregate Redemption Price for the Series A Preferred Stock. D. Change of Control. In the event there occurs a Change of Control, any holder of record of shares of Series A Preferred Stock, in accordance with the procedures set forth in Section E hereof, may require the Corporation to redeem any or all of the shares of Series A Preferred Stock held by such holder at the Redemption Price therefor. E. Change of Control Notice and Redemption Procedures. Notice of any Change of Control shall be sent to the holders of record of the outstanding shares of Series A Preferred Stock not more than five days following a Change of Control, which notice (a "Change of Control Notice") shall describe the transaction or transactions constituting such Change of Control and set forth each holder's right to require the Corporation to redeem any or all shares of Series A Preferred Stock held by him or her out of funds legally available therefor, the Redemption Date (which date shall be not more than 30 days from the date of such Change of Control Notice) and the procedures to be followed by such holders in exercising his or her right to cause such redemption; provided, however, that if shares of Series A Preferred Stock are owned by more than 50 holders or groups of Affiliated holders and if the Series A Preferred Stock is listed on any national securities exchange or quoted on any national quotation system, the Corporation shall give such Change of Control Notice by publication in a newspaper of general circulation in the Borough of Manhattan, The City of New York, within 30 days following such Change of Control and, in any case, a similar notice shall be mailed concurrently to each holder of shares of Series A Preferred Stock. Failure by the Corporation to give the Change of Control Notice as prescribed by the preceding sentence, or the formal insufficiency of any such Change of Control Notice, shall not prejudice the rights of any holder of shares of Series A Preferred Stock to cause the Corporation to redeem any such shares held by him or her. In the event a holder of shares of Series A Preferred Stock shall elect to require the Corporation to redeem any or all such shares of Series A Preferred Stock pursuant to Section D hereof, such holder shall deliver, prior to the Redemption Date as set forth in the Change of Control Notice, or, if the Change of Control Notice is not given as required by this Section E, at any time following the last day the Corporation was required to give the Change of Control Notice in accordance with this Section E (in which case the Redemption Date shall be the date which is the later of (x) 30 days following the last day the Corporation was required to give the Change of Control Notice in accordance with 22 this Section E and (y) 15 days following the delivery of such election by such holder), a written notice, in the form specified by the Corporation (if the Corporation did in fact give the notice required by this Section E), to the Corporation so stating, and specifying the number of shares to be redeemed pursuant to Section D hereof; provided, however, that if all of the shares of the Series A Preferred Stock are owned by 50 or fewer holders or groups of affiliated holders, such holders or groups may deliver a notice or an election to redeem at any time within 90 days following the occurrence of a Change of Control without awaiting receipt of a Change of Control Notice or the expiration of the time allowed for the delivery of a Change of Control Notice hereunder. The Corporation shall redeem the number of shares so specified on the Redemption Date fixed by the Corporation or as provided in the preceding sentence. The Corporation shall comply with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the shares of Series A Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this paragraph, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations hereunder by virtue thereof. F. Deposit of Funds. The Corporation shall, on or prior to any Redemption Date pursuant to this Article V, deposit with its transfer agent or other redemption agent in the Borough of Manhattan, The City of New York having a capital and surplus of at least $500,000,000 selected by the Board of Directors, as a trust fund for the benefit of the holders of the shares of Series A Preferred Stock to be redeemed, cash that is sufficient in amount to redeem the shares to be redeemed in accordance with the Notice of Redemption or Change of Control Notice, with irrevocable instructions and authority to such transfer agent or other redemption agent to pay to the respective holders of such shares, as evidenced by a list of such holders certified by an officer of the Corporation, the Redemption Price upon surrender of their respective share certificates. Such deposit shall be deemed to constitute full payment of such shares to the holders, and from and after the date of such deposit, all rights of the holders of the shares of Series A Preferred Stock that are to be redeemed as stockholders of the Corporation with respect to such shares, except the right to receive the Redemption Price upon the surrender of their respective certificates, shall cease and terminate. No dividends shall accumulate on any shares of Series A Preferred Stock after the Redemption Date for such shares (unless the Corporation shall fail to deposit cash sufficient to redeem all such shares). In case holders of any shares of Series A Preferred Stock called for redemption shall not, within two years after such deposit, claim the cash deposited for redemption thereof, such transfer agent or other redemption agent shall, upon demand, pay over to the Corporation the balance so deposited. Thereupon, such transfer agent or other redemption agent shall be relieved of all responsibility to the holders thereof and the sole right of such holders, with respect to shares to be redeemed, shall be to receive the Redemption Price as general creditors of the Corporation. Any interest accrued on any funds so deposited shall belong 23 to the Corporation, and shall be paid to it from time to time on demand. VI. Exchange of Series A Preferred Stock A. The Series A Preferred Stock shall be exchangeable, at any time, at the option of the Corporation and to the extent permitted by applicable law, in whole but not in part, on any Dividend Payment Date for Junior Subordinated Debentures (issued pursuant to an indenture (the "Indenture") prepared in accordance with the Investment Agreement), in principal amount of $1,000 per share of Series A Preferred Stock (a "Debenture" and, collectively, the "Debentures"), in accordance with this Article VI: (i) Each share of Series A Preferred Stock shall be exchangeable at the offices of the Corporation and at such other place or places, if any, as the Board of Directors may designate. Except with the prior written consent of the holders of all outstanding shares of Series A Preferred Stock, the Corporation may not exchange any shares of Series A Preferred Stock if (a) full cumulative dividends, to the extent payable or deemed payable through the date of exchange, have not been paid or set aside for payment on all outstanding shares of the Series A Preferred Stock, (b) the Corporation has failed to amend its Certificate of Incorporation pursuant to Delaware law to confer the power to vote upon holders of the Debentures as shall be contemplated by the Indenture or (c) such exchange could result in any tax consequence to the Investor or any of its Affiliates which is materially adverse. (ii) Prior to giving notice of its intention to exchange, the Corporation shall execute and deliver to a bank or trust company selected by the Board of Directors and, if required by applicable law, qualify under the Trust Indenture Act of 1939, as amended, the Indenture. (iii) The Corporation shall mail written notice of its intention to exchange Series A Preferred Stock for Debentures (the "Exchange Notice") to each holder of record of shares of Series A Preferred Stock not less than 90 nor more than 120 days prior to the date fixed for exchange. (iv) Prior to effecting any exchange provided above, the Corporation shall deliver to each holder of shares of Series A Preferred Stock an opinion of nationally recognized legal counsel to the effect that: (i) each of the Indenture and the Debentures have been duly authorized and executed by the Corporation and, when delivered by the Corporation in exchange for shares of Series A Preferred Stock, will constitute valid and legally binding obligations of the Corporation enforceable against the Corporation in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity; (ii) the exchange of the Debentures for the shares of Series A Preferred Stock shall not violate the provisions of this Article VI or of the Delaware General Corporation Law, including Section 221 24 thereof; and (iii) the exchange of the Debentures for the shares of Series A Preferred Stock is exempt from the registration requirements of the Securities Act or, if no such exemption is available, that the Debentures have been duly registered for such exchange under such Act. (v) Upon the exchange of shares of Series A Preferred Stock for Debentures, the rights of the holders of shares of Series A Preferred Stock as stockholders of the Corporation shall terminate and such shares shall no longer be deemed outstanding. (vi) Before any holder of shares of Series A Preferred Stock shall be entitled to receive Debentures, such holder shall surrender the certificate or certificates therefor, at the office of the Corporation or at such other place or places, if any, as the Board of Directors shall have designated, and shall state in writing the name or names (with addresses) in which he or she wishes the certificate or certificates for the Debentures to be issued. The Corporation will, as soon as practicable thereafter, issue and deliver at said office or place to such holder of shares of Series A Preferred Stock, or to his or her nominee or nominees, certificates for the Debentures to which he or she shall be entitled as aforesaid. Shares of Series A Preferred Stock shall be deemed to have been exchanged as of the close of business on the date fixed for exchange as provided above, and the Person or Persons entitled to receive the Debentures issuable upon such exchange shall be treated for all purposes (including the accrual and payment of interest) as the record holder or holders of such Debentures as of the close of business on such date. B. For purposes of clause (c) of paragraph (i) of Section A, an exchange of shares of Series A Preferred Stock shall be deemed to be an exchange that could result in a tax consequence to the Investor or any of its Affiliates which is materially adverse only if the Investor or its Affiliate shall have delivered to the Corporation a written notice to such effect on or before the fifteenth day after its receipt of the Exchange Notice (an "Objection Notice"), which Objection Notice shall be prepared in good faith and shall specify in reasonable detail the nature of such tax consequences which could result from the exchange (other than the difference between the tax treatment of distributions on the Series A Preferred Stock and interest payments on the Debentures); provided, that the Investor or its Affiliates shall not deliver an Objection Notice unless the Investor and its Affiliates Beneficially Own, in the aggregate, at least 1,000 shares of Series A Preferred Stock at the time of delivery of such Objection Notice to the Corporation. If the Corporation receives an Objection Notice, then the Corporation shall not exchange the shares of Series A Preferred Stock of the Investor and its Affiliates and the Corporation shall, within 15 days after its receipt of the Objection Notice mail written notice to the effect that it is canceling the proposed exchange of shares of Series A Preferred Stock to each holder of record of shares of Series A Preferred Stock to which it mailed the Exchange Notice. C. Shares of the Series A Preferred Stock may be exchanged for 25 Warrant Shares pursuant to Section 4 of the Warrants. VII. Restrictions on Dividends So long as any shares of the Series A Preferred Stock are outstanding, the Board of Directors shall not declare, and the Corporation shall not pay or set apart for payment any dividend on any Junior Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any Junior Securities or Parity Securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any Junior Securities or Parity Securities), or make any distribution in respect of the Junior Securities, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities or Parity Securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any Junior Securities or Parity Securities) unless prior to or concurrently with such declaration, payment, setting apart for payment, repurchase, redemption or other retirement or distribution, as the case may be, all accumulated and unpaid dividends on shares of the Series A Preferred Stock not paid on the dates provided for in paragraph A of Article III hereof (including Arrearages and accumulated dividends thereon) shall have been paid, except that when dividends are not paid in full as aforesaid upon the shares of Series A Preferred Stock, all dividends declared on the Series A Preferred Stock and any series of Parity Dividend Securities shall be declared and paid pro rata so that the amount of dividends so declared and paid on Series A Preferred Stock and such series of Parity Dividend Securities shall in all cases bear to each other the same ratio that accumulated dividends (including interest accrued on or additional dividends accumulated in respect of such accumulated dividends) on the shares of Series A Preferred Stock and such Parity Dividend Securities bear to each other. Notwithstanding the foregoing, this paragraph shall not prohibit (i) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value of shares of Series A Preferred Stock or any Parity Dividend Security by the Corporation in accordance with the terms of such securities or of any shares of Trust Preferred Stock (as defined in Section F of Article VIII) or (ii) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value by the Corporation of any Junior Dividend Securities by the Corporation in accordance with obligations in existence at the time of original issuance of the Series A Preferred Stock. VIII. Voting Rights 26 A. The holders of shares of Series A 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 the Series A Preferred Stock are outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to vote on all matters voted on by holders of Common Stock, and the shares of Series A Preferred Stock shall vote together with shares of Common Stock (and any shares of Series B Preferred Stock entitled to vote) as a single class; provided, however, that upon register or transfer on the stock records of the Corporation of a share of Series A Preferred Stock to any Person other than the Investor or an Affiliate of the Investor, the transferee, and any subsequent transferee, shall not be entitled to such voting rights. With respect to any such vote, the Investor (together with its Affiliates) shall be entitled to a number of votes per share of Series A Preferred Stock equal to the quotient of the Investor Aggregate Vote Number, divided by the number of shares of Series A 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 the 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 for purposes of this calculation, 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 A 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 for purposes of this calculation, however, any Original Series A 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 A Preferred Shares are subsequently acquired by any member of the Investor Group), divided by the number of Original Series A Preferred Shares. The term "Original Warrants" means those Warrants Beneficially Owned by members of the Investor Group, in the aggregate, as of the Closing. The term "Original Series A Preferred Shares" means those shares of Series A Preferred Stock Beneficially Owned by members of the Investor Group, in the aggregate, as of the Closing. C. If on any date (i) dividends payable on either the Series A Preferred Stock or the Series B Preferred Stock shall have been in arrears and not paid in full for four consecutive quarterly periods or if dividends shall have been in arrears and not paid in full on the first or second annual anniversary of the original issuance of the Series A Preferred Stock or Series B Preferred Stock, as the case may be, or (ii) the Corporation 27 shall have failed to satisfy its obligation to redeem either shares of Series A Preferred Stock or shares of Series B Preferred Stock pursuant to the relevant Certificate of Designations, 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 A Preferred Stock and Series B Preferred Stock 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 time holders of Series A Preferred Stock and Series B Preferred Stock 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 A Preferred Stock and Series B Preferred Stock, 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 A Preferred Stock and Series B Preferred Stock (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. Additional Directors shall continue as directors and such additional voting right shall continue until such time as (a) all dividends accumulated on the Series A Preferred Stock and/or Series B Preferred Stock, as the case may be, shall have been paid in full or (b) any redemption obligation with respect to the Series A Preferred Stock and/or the Series B Preferred Stock, 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 A 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 A 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 28 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 A 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 A 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 and upon the notice provided by law and in the Bylaws for the holding of meetings of stockholders. (b) Each director elected pursuant to Section C or D hereof 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 or D hereof, as the case may be. In case any vacancy shall occur among the directors elected pursuant to Section C or D hereof, 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 (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 of the shares then outstanding and entitled to vote for such director pursuant to the provisions of Section C or D hereof, 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 called as provided herein. The holders of a majority of the shares entitled to vote for directors pursuant to Section C or D hereof, as the case may be, shall have the right to remove with or without cause at any time and replace any directors such holders have elected pursuant to such section, by written consent as herein provided, or at a special meeting of such holders called as provided herein. F. Without the consent or affirmative vote of the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting separately as a 29 class, the Corporation shall not authorize, create or issue, or increase the authorized amount of, (i) any Senior Securities or Parity Securities (except Parity Securities to be issued in exchange for all outstanding shares of Series B Preferred Stock in connection with a simultaneous exchange of Parity Securities for all outstanding shares of Series A Preferred Stock) 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 the Mandatory Redemption Date (whether or not only upon the occurrence of a specified event) (except Parity Securities to be issued in exchange for all outstanding shares of Series B Preferred Stock in connection with a simultaneous exchange of Parity Securities for all outstanding shares of Series A Preferred Stock); provided, however, that no consent or vote of the holders of the outstanding shares of the Series A 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 A 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 A 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 Bylaws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the Series A 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 A 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 is entitled to vote thereon. The terms set forth in this Certificate of Designations may be amended or modifies without the affirmative vote of the stockholders of the Company (other than the holders of the Series A Preferred Stock as provided in the preceding sentence); provided, that the Board of Directors has determined that such amendment or modification will not have a material adverse effect on the Corporation. 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. IX. Additional Definitions For the purposes of this Certificate of Designations of Series A Preferred Stock, 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, TPG, and each Person controlled by, controlling or under common control with TPG (each, a "TPG Person"), shall not be deemed an "Affiliate" of any 30 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 (as 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 consequence of the Investment Agreement or the transactions contemplated thereby. "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Bylaws" means the Bylaws of the Corporation, as amended. "Change of Control" means such time as: (i) any Person or Group (other than the Investor, its Affiliates, the Corporation or any Subsidiaries of the Corporation, or any Group composed of such Persons) has become, directly or indirectly, the Beneficial Owner, by way of merger, consolidation or otherwise, of a majority of the voting power of the then-outstanding Voting Securities of the Corporation on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Corporation convertible into or exercisable for Voting Securities of the Corporation (whether or not such securities are then currently convertible or exercisable); or (ii) the sale, lease, transfer or other disposition of all or substantially all of the consolidated assets of the Corporation and its Subsidiaries to any Person or Group; or (iii) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Board of Directors, together with any new members of such Board of Directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a 31 vote of at least a majority of the members of such Board of Directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved or who were approved pursuant to Section 5.02 of the Investment Agreement or Article VIII, Section C, D or E of this Certificate of Designations, cease for any reason to constitute a majority of the directors of the Corporation then in office; or (iv) the Corporation consolidates with or merges with or into another Person or any Person consolidates with, or merges with or into, the Corporation, in any such event pursuant to a transaction in which immediately after the consummation thereof the Persons owning the then-outstanding Voting Securities of the Corporation immediately prior to such consummation shall not own a majority in the aggregate (by reason of such prior ownership) of the then-outstanding Voting Securities of the Corporation or the surviving entity if other than the Corporation; or (v) the adoption of a plan relating to the liquidation or dissolution of the Corporation, whether or not otherwise in compliance with the provisions of this Series A Preferred Stock. "Closing" shall have the meaning assigned to such term in the Investment Agreement. "Designated Purchaser" has the meaning assigned to such term in the Investment Agreement. "Designated Purchaser Person" has the meaning set forth in the definition of "Affiliate." "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, from time to time. "Group" has the meaning set forth in Rule 13d-5 under the Exchange Act. "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 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. 32 "Investor" means TPG. "Moody's" means Moody's Investors Service and its successors. "Person" means any individual, corporation, company, association, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Registration Rights Agreement" means the Registration Rights 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. "Second Anniversary Date" means the second anniversary of the original issuance of the Series A Preferred Stock. "Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, from time to time. "Series B Preferred Stock" has the meaning assigned to such term in the Investment Agreement. "S&P" means Standard and Poor's Ratings Group, a division of the McGraw-Hill Companies, and its successors. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of voting stock is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or combination thereof) and (ii) any partnership (A) the sole general partner of the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TPG" means TPG Oxford LLC, a Delaware limited liability company. "TPG Person" has the meaning set forth in the definition of "Affiliate." "Voting Securities" means the shares of Common Stock and any other securities of the Corporation entitled to vote generally for the election of directors. "Warrants" means the Series A Warrants issued by the Corporation on pursuant to the Investment Agreement. "Warrant Shares" has the meaning assigned to such term in the Warrants. 33 X. Miscellaneous A. Notices. Any notice referred to herein shall be in writing and, unless first-class mail shall be specifically permitted for such notices under the terms hereof, shall be deemed to have been given upon personal delivery thereof, upon transmittal of such notice by telecopy (with confirmation of receipt by telecopy or telex) or five days after transmittal by registered or certified mail, postage prepaid, addressed as follows: (i) if to the Corporation, to its office at 800 Connecticut Avenue Norwalk, Connecticut 06854 (Attention: General Counsel) or to the transfer agent for the Series A Preferred Stock; (ii) if to a holder of the Series A Preferred Stock, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Series A Preferred Stock); or (iii) to such other address as the Corporation or such holder, as the case may be, shall have designated by notice similarly given. B. Reacquired Shares. Any shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation, directly or indirectly, in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof (and shall not be deemed to be outstanding for any purpose) and, if necessary to provide for the lawful redemption or purchase of such shares, the capital represented by such shares shall be reduced in accordance with the Delaware General Corporation Law. All such shares of Series A Preferred Stock shall upon their cancellation and upon the filing of an appropriate certificate with the Secretary of State of the State of Delaware, become authorized but unissued shares of Preferred Stock, par value $0.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $0.01 per share, of the Corporation subject to the conditions or restrictions on issuance set forth herein. C. Enforcement. Any registered holder of shares of Series A Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designations or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. D. Transfer Taxes. Except as otherwise agreed upon pursuant to the terms of this Certificate of Designations, the Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes and other governmental charges that 34 may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of any issue or delivery of Debentures on exchange of, or other securities or property issued on account of, shares of Series A Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax or other charge that may be imposed in connection with any transfer involved in the issue or transfer and delivery of any certificate for Debentures or other securities or property in a name other than that in which the shares of Series A Preferred Stock so exchanged, or on account of which such securities were issued, were registered and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid or is not payable. E. Transfer Agent. The Corporation may appoint, and from time to time discharge and change, a transfer agent for the Series A Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of shares of Series A Preferred Stock. F. Record Dates. In the event that the Series A Preferred Stock shall be registered under either the Securities Act or the Exchange Act, the Corporation shall establish appropriate record dates with respect to payments and other actions to be made with respect to the Series A Preferred Stock. 35 IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Secretary and attested by its Controller, this ___ day of May, 1998. OXFORD HEALTH PLANS, INC. By:_____________________________________ Jeffery H. Boyd, Executive Vice President, General Counsel and Secretary [Corporate Seal] ATTEST: ------------------------- Brendan Shanahan, Vice President and Controller 36 CERTIFICATE OF DESIGNATIONS of SERIES B CUMULATIVE PREFERRED STOCK of OXFORD HEALTH PLANS, INC. (Pursuant to Section 151 of the Delaware General Corporation Law) ------------------------------------ Oxford Health Plans, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Corporation (the "Board of Directors") pursuant to authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the "Certificate of Incorporation"), the Board of Directors hereby creates a series of the Corporation's previously authorized preferred stock, par value $0.01 per share (the "Preferred Stock"), and hereby states the designation and number thereof, and fixes the voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, as follows: Series B Cumulative Preferred Stock: I. Designation and Amount The designation of this series of shares shall be "Series B Cumulative Preferred Stock" (the "Series B Preferred Stock"); the stated value per share shall be $1,000 (the "Stated Value"); and the number of shares constituting such series shall be 300,000. The number of shares of the Series B Preferred Stock may be decreased from time to time by a resolution or resolutions of the Board of Directors; provided, however, that such number shall not be decreased below the aggregate number of shares of the Series B Preferred Stock then outstanding. 37 II. Rank A. With respect to dividend rights, the Series B Preferred Stock shall rank (i) junior to each other class or series of Preferred Stock which by its terms ranks senior to the Series B Preferred Stock as to payment of dividends, (ii) on a parity with each other class or series of Preferred Stock which by its terms ranks on a parity with the Series B Preferred Stock as to payment of dividends, including the Series A Preferred Stock, par value $0.01 per share, of the Corporation (the "Series A Preferred Stock") and (iii) prior to the Corporation's Common Stock, par value $.01 per share (the "Common Stock"), and, except as specified above, all other classes and series of capital stock of the Corporation hereafter issued by the Corporation. With respect to dividends, all equity securities of the Corporation to which the Series B Preferred Stock ranks senior, including the Common Stock, are collectively referred to herein as the "Junior Dividend Securities"; all equity securities of the Corporation with which the Series B Preferred Stock ranks on a parity, including the Series A Preferred Stock, are collectively referred to herein as the "Parity Dividend Securities"; and all equity securities of the Corporation (other than convertible debt securities) to which the Series B Preferred Stock ranks junior, with respect to dividends, are collectively referred to herein as the "Senior Dividend Securities." B. With respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Series B Preferred Stock shall rank (i) junior to each other class or series of Preferred Stock which by its terms ranks senior to the Series B Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up, (ii) on a parity with each other class or series of Preferred Stock which by its terms ranks on a parity with the Series B Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, including the Series A Preferred Stock, and (iii) prior to the Common Stock, and, except as specified above, all other classes and series of capital stock of the Corporation hereinafter issued by the Corporation. With respect to the distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, all equity securities of the Corporation to which the Series B Preferred Stock ranks senior, including the Common Stock, are collectively referred to herein as "Junior Liquidation Securities"; all equity securities of the Corporation (other than convertible debt securities) to which the Series B Preferred Stock ranks on parity, including the Series A Preferred Stock, are collectively referred to herein as "Parity Liquidation Securities"; and all equity securities of the Corporation to which the Series B Preferred Stock ranks junior are collectively referred to herein as "Senior Liquidation Securities." C. The Series B Preferred Stock shall be subject to the creation of Junior Dividend Securities and Junior Liquidation Securities (collectively, "Junior 38 Securities") but no Parity Dividend Securities or Parity Liquidation Securities (collectively, "Parity Securities") (other than the Series A Preferred Stock), or Senior Dividend Securities or Senior Liquidation Securities (collectively, "Senior Securities") shall be created except in accordance with the terms hereof and the Investment Agreement, including, without limitation, Article VIII, Section F hereof. III. Dividends A. Dividends. Prior to the Second Anniversary Date, shares of Series B Preferred Stock shall accumulate dividends at a rate of 9.308332% per annum, payment of which may be made in cash or by the issuance of additional shares of Series B Preferred Stock (which, upon issuance, shall be fully paid and nonassessable), at the option of the Company; provided that if any such dividend is paid after the Second Anniversary Date, such dividend shall be paid in cash. On and after the Second Anniversary Date, shares of Series B Preferred Stock shall accumulate dividends at a rate of 9% per annum, which dividends shall be paid in cash. On and prior to the Second Anniversary Date, dividends shall be paid annually on the anniversary of the original issuance of Series B Preferred Stock, and thereafter dividends shall be paid in four equal quarterly installments on the last day of March, June, September and December of each year, or if any such date is not a Business Day, the Business Day next preceding such day (each such date, regardless of whether any dividends have been paid or declared and set aside for payment on such date, a "Dividend Payment Date"), to holders of record (the "Registered Holders") as they appear on the stock record books of the Corporation on the fifteenth day prior to the relevant Dividend Payment Date. Notwithstanding the foregoing, from and after the day on which the Shareholder Approval occurs, dividends shall accumulate on the Series B Preferred Stock (i) prior to the Second Anniversary Date, at a rate of 8.243216% per annum, payment of which may be made in cash or by the issuance of additional shares of Series B Preferred Stock (which upon issuance shall be fully paid and nonassessable), at the option of the Company, provided that if any such dividend is paid after the Second Anniversary Date, such dividend shall be paid in cash, and (ii) on and after the Second Anniversary Date, at a rate of 8% per annum, which dividends shall be paid in cash. Dividends shall be paid only when, as and if declared by the Board of Directors out of funds at the time legally available for the payment of dividends. Dividends shall begin to accumulate on outstanding shares of Series B Preferred Stock from the date of issuance and shall be deemed to accumulate from day to day whether or not earned or declared until paid. Dividends shall accumulate on the basis of a 360-day year consisting of twelve 30-day months (four 90-day quarters) and the actual number of days elapsed in the period for which payable. Dividends payable at more than one annual rate for any dividend period or partial dividend period shall be pro rated on the basis of the number of days in such dividend period or partial dividend period, calculated as aforesaid, and the actual number of days elapsed for which dividends are payable at each such annual rate. 39 B. Accumulation. Dividends on the Series B Preferred Stock shall be cumulative, and from and after any Dividend Payment Date on which any dividend that has accumulated or been deemed to have accumulated through such date has not been paid in full or any payment date set for a redemption on which such redemption payment has not been paid in full, additional dividends shall accumulate in respect of the amount of such unpaid dividends or unpaid redemption payment (the "Arrearage") at the annual rate then in effect as provided in Section A of this Article III (or such lesser rate as may be the maximum rate that is then permitted by applicable law). Such additional dividends in respect of any Arrearage shall be deemed to accumulate from day to day whether or not earned or declared until the Arrearage is paid, shall be calculated as of such successive Dividend Payment Date and shall constitute an additional Arrearage from and after any Dividend Payment Date to the extent not paid on such Dividend Payment Date. References in any Article herein to dividends that have accumulated or that have been deemed to have accumulated with respect to the Series B Preferred Stock shall include the amount, if any, of any Arrearage together with any dividends accumulated or deemed to have accumulated on such Arrearage pursuant to the immediately preceding two sentences. Additional dividends in respect of any Arrearage may be declared and paid at any time, in whole or in part, without reference to any regular Dividend Payment Date, to Registered Holders as they appear on the stock record books of the Corporation on such record date as may be fixed by the Board of Directors (which record date shall be no less than 10 days prior to the corresponding payment date). Dividends in respect of any Arrearage shall be paid in cash. C. Method of Payment. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series B Preferred Stock shall be allocated pro rata on a share-by-share basis among all such shares then outstanding. After the Second Anniversary Date, dividends that are declared and paid in an amount less than the full amount of dividends accumulated on the Series B Preferred Stock (and on any Arrearage) shall be applied first to the earliest dividend which has not theretofore been paid. All cash payments of dividends on the shares of Series B Preferred Stock shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. IV. Liquidation Preference In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of then-outstanding shares of Series B Preferred Stock shall be entitled to receive out of the assets of the Corporation, whether such assets are capital or surplus of any nature, an amount per 40 share equal to the sum of (i) the dividends, if any, accumulated or deemed to have accumulated thereon to the date of final distribution to such holders, whether or not such dividends are declared, and (ii) the Stated Value thereof, and no more, before any payment shall be made or any assets distributed to the holders of any Junior Liquidation Securities. After any such payment in full, the holders of Series B Preferred Stock shall not, as such, be entitled to any further participation in any distribution of assets of the Corporation. All the assets of the Corporation available for distribution to stockholders after the liquidation preferences of any Senior Liquidation Securities shall be distributed ratably (in proportion to the full distributable amounts to which holders of Series B Preferred Stock and Parity Liquidation Securities, if any, are respectively entitled upon such dissolution, liquidation or winding up) among the holders of the then-outstanding shares of Series B Preferred Stock and Parity Liquidation Securities, if any, when such assets are not sufficient to pay in full the aggregate amounts payable thereon. Neither a consolidation or merger of the Corporation with or into any other Person or Persons, nor a sale, conveyance, lease, exchange or transfer of all or part of the Corporation's assets for cash, securities or other property to a Person or Persons shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Article IV, but the holders of shares of Series B Preferred Stock shall nevertheless be entitled from and after any such consolidation, merger or sale, conveyance, lease, exchange or transfer of all or part of the Corporation's assets to the rights provided by this Article IV following any such transaction. Notice of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable to each holder of shares of Series B Preferred Stock in such circumstances shall be payable, shall be given by first-class mail, postage prepaid, mailed not less than 30 days prior to any payment date stated therein, to holders of record as they appear on the stock record books of the Corporation as of the date such notices are first mailed. V. Redemption A. Optional Redemption. The Corporation shall not have any right to redeem any shares of Series B Preferred Stock prior to the fifth anniversary of the original issuance of the Series B Preferred Stock. On and after such date, the Corporation shall have the right, at its option and election, to redeem all the outstanding shares of Series B Preferred Stock, in whole but not in part, at any time, in accordance with the provisions of this Article V. The redemption price for such shares of Series B Preferred Stock shall be paid in cash out of funds legally available therefor and shall be in an amount per share equal to the sum of (i) the amount, if any, of all unpaid dividends accumulated thereon to the date of actual payment of the Redemption Price, whether or not such dividends have been declared, and (ii) the 41 Stated Value thereof (the "Redemption Price"). B. Mandatory Redemption. On the tenth anniversary of the original issuance of the Series B Preferred Stock (the "Mandatory Redemption Date"), the Corporation shall redeem (the "Mandatory Redemption") all outstanding shares of Series B Preferred Stock by paying the Redemption Price therefor in cash out of funds legally available for such purpose. C. Notice and Redemption Procedures. Notice of the redemption of shares of Series B Preferred Stock pursuant to Section A or B hereof (a "Notice of Redemption") shall be sent to the holders of record of the shares of Series B Preferred Stock to be redeemed by first class mail, postage prepaid, at each such holder's address as it appears on the stock record books of the Corporation not more than 120 nor fewer than 90 days prior to the date fixed for redemption, which date shall be set forth in such notice (the "Redemption Date"); provided that failure to give such Notice of Redemption to any holder, or any defect in such Notice of Redemption to any holder shall not affect the validity of the proceedings for the redemption of any shares of Series B Preferred Stock held by any other holder. Notwithstanding the foregoing, in the event that contemporaneously with or prior to the delivery of a Notice of Redemption, the Corporation irrevocably deposits, in accordance with Section F of this Article V, funds sufficient to pay the aggregate Redemption Price for the Series B Preferred Stock, such Notice of Redemption shall be delivered not more than 120 days nor fewer than 30 days prior to the Redemption Date; provided, however, that, if such Notice of Redemption is delivered fewer than 60 days prior to the Redemption Date and the Investor or any of its Affiliates Beneficially Owns shares of Series B Preferred Stock as of the date of the Notice of Redemption and uses its reasonable best efforts to consummate the sale of its shares of Series B Preferred Stock prior to the stated Redemption Date but has not completed the sale of all the Series B Preferred Stock Beneficially Owned by the Investor and its Affiliates (or such other amount desired to be sold by the Investor and its Affiliates), the Corporation shall, at the option of the Investor (or any such Affiliate), delay such Redemption Date for a period not to exceed 30 days as requested by such Investor (or any such Affiliate) in order to complete such sale or sales, and shall notify the holders of Series B Preferred Stock of such delay within five days of receiving the request therefor. Any delay of the Redemption Date pursuant to the proviso to the preceding sentence shall be requested by the Investor (or any such Affiliate) in writing no later than the tenth day preceding the then-scheduled Redemption Date stated in the Notice of Redemption. The Redemption Date stated in a Notice of Redemption shall not be delayed more than once in connection with the redemption of shares of Series B Preferred Stock pursuant to such Notice of Redemption. In order to facilitate the redemption of shares of Series B Preferred Stock, the Board of Directors may fix a record date for the determination of the holders of shares of Series B Preferred Stock to be redeemed, in each case, not more than 30 days prior to the date the Notice of Redemption is mailed. On or after 42 the Redemption Date, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. From and after the Redemption Date, all dividends on shares of Series B Preferred Stock shall cease to accumulate and all rights of the holders thereof as holders of Series B Preferred Stock shall cease and terminate, except to the extent the Corporation shall default in payment thereof on the Redemption Date. Prior to any Redemption Date that has been fixed by the Company, other than in connection with the Mandatory Redemption, the Corporation shall take all measures reasonably requested by the Investor to facilitate a sale or other disposition of Series B Preferred Stock by the Investor or its Affiliates prior to such Redemption Date, including, without limitation, participation in due diligence sessions and provision of information about the management, business and financial condition of the Corporation, preparation of offering memoranda, private placement memoranda and other similar documents and preparation and delivery of such other certificates or documents reasonably requested by the Investor. For so long as the Investor or an Affiliate of the Investor holds any shares of Series B Preferred Stock, no Notice of Redemption in connection with a redemption pursuant to Section A or B of this Article V shall be delivered unless (i) the Corporation's preferred stock is rated Baa or better by Moody's or BBB or better by S&P, or in the event the Corporation's preferred stock is not rated by Moody's and S&P, the Corporation's unsecured debt is rated Baa or better by Moody's or BBB or better by S&P or (ii) the Corporation has sufficient funds reasonably available under committed lines of credit or other similar sources of financing established with financially sound financing providers to pay, on the Redemption Date, the aggregate Redemption Price in connection with such redemption (and shall reserve such funds or availability for the payment of the aggregate Redemption Price); provided, that the Corporation may deliver a Notice of Redemption without complying with the foregoing conditions if prior to, or contemporaneously with, the delivery of such notice the Corporation irrevocably deposits in accordance with Section F of this Article V funds sufficient to pay the aggregate Redemption Price for the Series B Preferred Stock. D. Change of Control. In the event there occurs a Change of Control, any holder of record of shares of Series B Preferred Stock, in accordance with the procedures set forth in Section E hereof, may require the Corporation to redeem any or all of the shares of Series B Preferred Stock held by such holder at the Redemption Price therefor. E. Change of Control Notice and Redemption Procedures. Notice of any Change of Control shall be sent to the holders of record of the outstanding shares of Series B Preferred Stock not more than five days following a Change of Control, which notice (a "Change of Control Notice") shall describe the transaction or transactions constituting such Change of Control and set forth each holder's right to 43 require the Corporation to redeem any or all shares of Series B Preferred Stock held by him or her out of funds legally available therefor, the Redemption Date (which date shall be not more than 30 days from the date of such Change of Control Notice) and the procedures to be followed by such holders in exercising his or her right to cause such redemption; provided, however, that if shares of Series B Preferred Stock are owned by more than 50 holders or groups of Affiliated holders and if the Series B Preferred Stock is listed on any national securities exchange or quoted on any national quotation system, the Corporation shall give such Change of Control Notice by publication in a newspaper of general circulation in the Borough of Manhattan, The City of New York, within 30 days following such Change of Control and, in any case, a similar notice shall be mailed concurrently to each holder of shares of Series B Preferred Stock. Failure by the Corporation to give the Change of Control Notice as prescribed by the preceding sentence, or the formal insufficiency of any such Change of Control Notice, shall not prejudice the rights of any holder of shares of Series B Preferred Stock to cause the Corporation to redeem any such shares held by him or her. In the event a holder of shares of Series B Preferred Stock shall elect to require the Corporation to redeem any or all such shares of Series B Preferred Stock pursuant to Section D hereof, such holder shall deliver, prior to the Redemption Date as set forth in the Change of Control Notice, or, if the Change of Control Notice is not given as required by this Section E, at any time following the last day the Corporation was required to give the Change of Control Notice in accordance with this Section E (in which case the Redemption Date shall be the date which is the later of (x) 30 days following the last day the Corporation was required to give the Change of Control Notice in accordance with this Section E and (y) 15 days following the delivery of such election by such holder), a written notice, in the form specified by the Corporation (if the Corporation did in fact give the notice required by this Section E), to the Corporation so stating, and specifying the number of shares to be redeemed pursuant to Section D hereof; provided, however, that if all of the shares of the Series B Preferred Stock are owned by 50 or fewer holders or groups of affiliated holders, such holders or groups may deliver a notice or an election to redeem at any time within 90 days following the occurrence of a Change of Control without awaiting receipt of a Change of Control Notice or the expiration of the time allowed for the delivery of a Change of Control Notice hereunder. The Corporation shall redeem the number of shares so specified on the Redemption Date fixed by the Corporation or as provided in the preceding sentence. The Corporation shall comply with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the shares of Series B Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this paragraph, the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations hereunder by virtue thereof. 44 F. Deposit of Funds. The Corporation shall, on or prior to any Redemption Date pursuant to this Article V, deposit with its transfer agent or other redemption agent in the Borough of Manhattan, The City of New York having a capital and surplus of at least $500,000,000 selected by the Board of Directors, as a trust fund for the benefit of the holders of the shares of Series B Preferred Stock to be redeemed, cash that is sufficient in amount to redeem the shares to be redeemed in accordance with the Notice of Redemption or Change of Control Notice, with irrevocable instructions and authority to such transfer agent or other redemption agent to pay to the respective holders of such shares, as evidenced by a list of such holders certified by an officer of the Corporation, the Redemption Price upon surrender of their respective share certificates. Such deposit shall be deemed to constitute full payment of such shares to the holders, and from and after the date of such deposit, all rights of the holders of the shares of Series B Preferred Stock that are to be redeemed as stockholders of the Corporation with respect to such shares, except the right to receive the Redemption Price upon the surrender of their respective certificates, shall cease and terminate. No dividends shall accumulate on any shares of Series B Preferred Stock after the Redemption Date for such shares (unless the Corporation shall fail to deposit cash sufficient to redeem all such shares). In case holders of any shares of Series B Preferred Stock called for redemption shall not, within two years after such deposit, claim the cash deposited for redemption thereof, such transfer agent or other redemption agent shall, upon demand, pay over to the Corporation the balance so deposited. Thereupon, such transfer agent or other redemption agent shall be relieved of all responsibility to the holders thereof and the sole right of such holders, with respect to shares to be redeemed, shall be to receive the Redemption Price as general creditors of the Corporation. Any interest accrued on any funds so deposited shall belong to the Corporation, and shall be paid to it from time to time on demand. VI. Exchange of Series B Preferred Stock A. The Series B Preferred Stock shall be exchangeable, at any time, at the option of the Corporation and to the extent permitted by applicable law, in whole but not in part, on any Dividend Payment Date for Junior Subordinated Debentures (issued pursuant to an indenture (the "Indenture") prepared in accordance with the Investment Agreement) in principal amount of $1,000 per share of Series B Preferred Stock (a "Debenture" and, collectively, the "Debentures"), in accordance with this Article VI: (1) Each share of Series B Preferred Stock shall be exchangeable at the offices of the Corporation and at such other place or places, if any, as the Board of Directors may designate. Except with the prior written consent of the holders of all outstanding shares of Series B Preferred Stock, the Corporation may not exchange any shares of Series B Preferred Stock if (a) full cumulative 45 dividends, to the extent payable or deemed payable through the date of exchange, have not been paid or set aside for payment on all outstanding shares of the Series B Preferred Stock, (b) the Corporation has failed to amend its Certificate of Incorporation pursuant to Delaware law to confer the power to vote upon holders of the Debentures as shall be contemplated by the Indenture or (c) such exchange could result in any tax consequence to the Investor or any of its Affiliates which is materially adverse. (2) Prior to giving notice of its intention to exchange, the Corporation shall execute and deliver to a bank or trust company selected by the Board of Directors and, if required by applicable law, qualify under the Trust Indenture Act of 1939, as amended, the Indenture. (3) The Corporation shall mail written notice of its intention to exchange Series B Preferred Stock for Debentures (the "Exchange Notice") to each holder of record of shares of Series B Preferred Stock not less than 90 nor more than 120 days prior to the date fixed for exchange. (4) Prior to effecting any exchange provided above, the Corporation shall deliver to each holder of shares of Series B Preferred Stock an opinion of nationally recognized legal counsel to the effect that: (i) each of the Indenture and the Debentures have been duly authorized and executed by the Corporation and, when delivered by the Corporation in exchange for shares of Series B Preferred Stock, will constitute valid and legally binding obligations of the Corporation enforceable against the Corporation in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity; (ii) the exchange of the Debentures for the shares of Series B Preferred Stock shall not violate the provisions of this Article VI or of the Delaware General Corporation Law, including Section 221 thereof; and (iii) the exchange of the Debentures for the shares of Series B Preferred Stock is exempt from the registration requirements of the Securities Act or, if no such exemption is available, that the Debentures have been duly registered for such exchange under such Act. (5) Upon the exchange of shares of Series B Preferred Stock for Debentures, the rights of the holders of shares of Series B Preferred Stock as stockholders of the Corporation shall terminate and such shares shall no longer be deemed outstanding. (6) Before any holder of shares of Series B Preferred Stock shall be entitled to receive Debentures, such holder shall surrender the certificate or certificates therefor, at the office of the Corporation or at such other place or 46 places, if any, as the Board of Directors shall have designated, and shall state in writing the name or names (with addresses) in which he or she wishes the certificate or certificates for the Debentures to be issued. The Corporation will, as soon as practicable thereafter, issue and deliver at said office or place to such holder of shares of Series B Preferred Stock, or to his or her nominee or nominees, certificates for the Debentures to which he or she shall be entitled as aforesaid. Shares of Series B Preferred Stock shall be deemed to have been exchanged as of the close of business on the date fixed for exchange as provided above, and the Person or Persons entitled to receive the Debentures issuable upon such exchange shall be treated for all purposes (including the accrual and payment of interest) as the record holder or holders of such Debentures as of the close of business on such date. B. For purposes of clause (c) of paragraph (i) of Section A, an exchange of shares of Series B Preferred Stock shall be deemed to be an exchange that could result in a tax consequence to the Investor or any of its Affiliates which is materially adverse only if the Investor or its Affiliate shall have delivered to the Corporation a written notice to such effect on or before the fifteenth day after its receipt of the Exchange Notice (an "Objection Notice"), which Objection Notice shall be prepared in good faith and shall specify in reasonable detail the nature of such tax consequences which could result from the exchange (other than the difference between the tax treatment of distributions on the Series B Preferred Stock and interest payments on the Debentures); provided, that the Investor or its Affiliates shall not deliver an Objection Notice unless the Investor and its Affiliates Beneficially Own, in the aggregate, at least 1,000 shares of Series B Preferred Stock at the time of delivery of such Objection Notice to the Corporation. If the Corporation receives an Objection Notice, then the Corporation shall not exchange the shares of Series B Preferred Stock of the Investor and its Affiliates and the Corporation shall, within 15 days after its receipt of the Objection Notice mail written notice to the effect that it is canceling the proposed exchange of shares of Series B Preferred Stock to each holder of record of shares of Series B Preferred Stock to which it mailed the Exchange Notice. C. Shares of the Series B Preferred Stock may be exchanged for Warrant Shares pursuant to Section 4 of the Warrants. VII. Restrictions on Dividends So long as any shares of the Series B Preferred Stock are outstanding, the Board of Directors shall not declare, and the Corporation shall not pay or set apart for payment any dividend on any Junior Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any 47 Junior Securities or Parity Securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any Junior Securities or Parity Securities), or make any distribution in respect of the Junior Securities, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities or Parity Securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any Junior Securities or Parity Securities) unless prior to or concurrently with such declaration, payment, setting apart for payment, repurchase, redemption or other retirement or distribution, as the case may be, all accumulated and unpaid dividends on shares of the Series B Preferred Stock not paid on the dates provided for in paragraph A of Article III hereof (including Arrearages and accumulated dividends thereon) shall have been paid, except that when dividends are not paid in full as aforesaid upon the shares of Series B Preferred Stock, all dividends declared on the Series B Preferred Stock and any series of Parity Dividend Securities shall be declared and paid pro rata so that the amount of dividends so declared and paid on Series B Preferred Stock and such series of Parity Dividend Securities shall in all cases bear to each other the same ratio that accumulated dividends (including interest accrued on or additional dividends accumulated in respect of such accumulated dividends) on the shares of Series B Preferred Stock and such Parity Dividend Securities bear to each other. Notwithstanding the foregoing, this paragraph shall not prohibit (i) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value of shares of Series B Preferred Stock or any Parity Dividend Security by the Corporation in accordance with the terms of such securities or of any shares of Trust Preferred Stock (as defined in Section F of Article VIII) or (ii) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value by the Corporation of any Junior Dividend Securities by the Corporation in accordance with obligations in existence at the time of original issuance of the Series B Preferred Stock. VIII. Voting Rights A. The holders of shares of Series B Preferred Stock shall have no voting rights except as set forth below or as otherwise from time to time required by law. B. Through the Approval Date, shares of Series B Preferred Stock shall have no voting rights except as set forth in Section C of this Article VIII. After the Approval Date, so long as any shares of the Series B Preferred Stock are outstanding, each share of Series B Preferred Stock shall entitle the holder thereof to 48 vote on all matters voted on by holders of Common Stock, and the shares of Series B Preferred Stock shall vote together with shares of Common Stock (and any shares of Series A Preferred Stock entitled to vote) as a single class; provided, however, that upon register or transfer on the stock records of the Corporation of a share of Series B Preferred Stock to any Person other than the Investor or an Affiliate of the Investor, the transferee, and any subsequent transferee, shall not be entitled to such voting rights. With respect to any such vote, the Investor (together with its Affiliates) shall be entitled to a number of votes per share of Series B Preferred Stock equal to the quotient of the Investor Aggregate Vote Number, divided by the number of shares of Series B 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 for purposes of this calculation, 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 B 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 for purposes of this calculation, however, any Original Series A 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 B Preferred Shares are subsequently acquired by any member of the Investor Group), divided by the number of Original Series B Preferred Shares. The term "Original Warrants" means those Warrants Beneficially Owned by members of the Investor Group, in the aggregate, as of the Closing. The term "Original Series B Preferred Shares" means those shares of Series B Preferred Stock Beneficially Owned by members of the Investor Group, in the aggregate, as of the Closing. C. If on any date (i) dividends payable on either the Series B Preferred Stock or the Series A Preferred Stock shall have been in arrears and not paid in full for four consecutive quarterly periods or if dividends shall have been in arrears and not paid in full on the first or second annual anniversary of the original issuance of the Series B Preferred Stock or Series A Preferred Stock, as the case may be, or (ii) the Corporation shall have failed to satisfy its obligation to redeem either shares of Series B Preferred Stock or shares of Series A Preferred Stock pursuant to the relevant Certificate of Designations, then the number of directors constituting the Board of Directors shall, without further action, be increased by two, and the holders 49 of a majority of the outstanding shares of Series B Preferred Stock and Series A Preferred Stock 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 time holders of Series A Preferred Stock and Series B Preferred Stock 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 B Preferred Stock and Series A Preferred Stock, 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 B Preferred Stock and Series A Preferred Stock (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. Additional Directors shall continue as directors and such additional voting right shall continue until such time as (a) all dividends accumulated on the Series B Preferred Stock and/or Series A Preferred Stock, as the case may be, shall have been paid in full or (b) any redemption obligation with respect to the Series B Preferred Stock and/or Series A Preferred Stock, 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 B 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. i. The foregoing rights of holders of shares of Series B 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 B Preferred Stock, addressed to the Secretary of the Corporation at 50 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 and upon the notice provided by law and in the Bylaws for the holding of meetings of stockholders. ii. Each director elected pursuant to Section C hereof 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 hereof, as the case may be. In case any vacancy shall occur among the directors elected pursuant to Section C hereof, 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 (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 of the shares then outstanding and entitled to vote for such director pursuant to the provisions of Section C hereof, 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 called as provided herein. The holders of a majority of the shares entitled to vote for directors pursuant to Section C hereof, as the case may be, shall have the right to remove with or without cause at any time and replace any directors such holders have elected pursuant to such section, by written consent as herein provided, or at a special meeting of such holders called as provided herein. F. Without the consent or affirmative vote of the holders of at least a majority of the outstanding shares of Series B 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 (except Parity Securities to be issued in exchange for all outstanding shares of Series A Preferred Stock in connection with a simultaneous exchange of Parity Securities for all outstanding shares of Series B Preferred Stock) 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 the Mandatory Redemption Date (whether or not only upon the occurrence of a specified event) (except Parity Securities to be issued in exchange for all outstanding shares of Series A Preferred Stock in connection with a simultaneous exchange of Parity Securities for all outstanding shares of Series B Preferred Stock); provided, however, that no consent or vote of the holders of the outstanding shares of the Series B 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 B 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 51 least a majority of the outstanding shares of Series B 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 Bylaws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the Series B 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 B 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 is entitled to vote thereon. The terms set forth in this Certificate of Designations may be amended or modified without the affirmative vote of the stockholders of the Corporation (other than the holders of the Series B Preferred Stock as provided in the preceding sentence); provided, that the Board of Directors has determined that such amendment or modification will not have a material adverse effect on the Corporation 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. IX. Additional Definitions For the purposes of this Certificate of Designations of Series B Preferred Stock, 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, TPG, and each Person controlled by, controlling or under common control with TPG (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. "Approval Date" shall have the meaning assigned to such term in the Series B Warrant. "Beneficially Own" with respect to any securities means having "beneficial ownership" of such securities (as 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 52 "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 consequence of the Investment Agreement or the transactions contemplated thereby. "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Bylaws" means the Bylaws of the Corporation, as amended. "Change of Control" means such time as: (1) any Person or Group (other than the Investor, its Affiliates, the Corporation or any Subsidiaries of the Corporation, or any Group composed of such Persons) has become, directly or indirectly, the Beneficial Owner, by way of merger, consolidation or otherwise, of a majority of the voting power of the then-outstanding Voting Securities of the Corporation on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Corporation convertible into or exercisable for Voting Securities of the Corporation (whether or not such securities are then currently convertible or exercisable); or (2) the sale, lease, transfer or other disposition of all or substantially all of the consolidated assets of the Corporation and its Subsidiaries to any Person or Group; or (3) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Board of Directors, together with any new members of such Board of Directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a vote of at least a majority of the members of such Board of Directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved or who were approved pursuant to Section 5.02 of the Investment Agreement or Article VIII, Section C, D or E of this Certificate of Designations, cease for any reason to constitute a majority of the directors of the Corporation then in office; or (4) the Corporation consolidates with or merges with or into 53 another Person or any Person consolidates with, or merges with or into, the Corporation, in any such event pursuant to a transaction in which immediately after the consummation thereof the Persons owning the then-outstanding Voting Securities of the Corporation immediately prior to such consummation shall not own a majority in the aggregate (by reason of such prior ownership) of the then-outstanding Voting Securities of the Corporation or the surviving entity if other than the Corporation; or (5) the adoption of a plan relating to the liquidation or dissolution of the Corporation, whether or not otherwise in compliance with the provisions of this Series B Preferred Stock. "Closing" shall have the meaning assigned to such term in the Investment Agreement. "Designated Purchaser" has the meaning assigned to such term in the Investment Agreement. "Designated Purchaser Person" has the meaning set forth in the definition of "Affiliate." "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, from time to time. "Group" has the meaning set forth in Rule 13d-5 under the Exchange Act. "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. "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 an Investor pursuant to the Investment Agreement. "Moody's" means Moody's Investors Service and its successors. "Person" means any individual, corporation, company, association, partnership, joint venture, trust or unincorporated organization, or a government or 54 any agency or political subdivision thereof. "Registration Rights Agreement" means the Registration Rights 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. "Second Anniversary Date" means the second anniversary of the original issuance of the Series B Preferred Stock. "Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, from time to time. "Series A Preferred Stock" has the meaning assigned to such term in the Investment Agreement. "Shareholder Approval" shall have the meaning assigned to such term in the Investment Agreement. "S&P" means Standard and Poor's Ratings Group, a division of the McGraw-Hill Companies, and its successors. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of voting stock is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or combination thereof) and (ii) any partnership (A) the sole general partner of the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TPG" means TPG Oxford LLC, a Delaware limited liability company. "TPG Person" has the meaning set forth in the definition of "Affiliate." "Voting Securities" means the shares of Common Stock and any other securities of the Corporation entitled to vote generally for the election of directors. "Warrants" means the Series B Warrants issued by the Corporation on pursuant to the Investment Agreement. "Warrant Shares" has the meaning assigned to such term in the Warrants. 55 X. Miscellaneous A. Notices. Any notice referred to herein shall be in writing and, unless first-class mail shall be specifically permitted for such notices under the terms hereof, shall be deemed to have been given upon personal delivery thereof, upon transmittal of such notice by telecopy (with confirmation of receipt by telecopy or telex) or five days after transmittal by registered or certified mail, postage prepaid, addressed as follows: (1) if to the Corporation, to its office at 800 Connecticut Avenue Norwalk, Connecticut 06854 (Attention: General Counsel) or to the transfer agent for the Series B Preferred Stock; (2) if to a holder of the Series B Preferred Stock, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Series B Preferred Stock); or (3) to such other address as the Corporation or such holder, as the case may be, shall have designated by notice similarly given. B. Reacquired Shares. Any shares of Series B Preferred Stock redeemed, purchased or otherwise acquired by the Corporation, directly or indirectly, in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof (and shall not be deemed to be outstanding for any purpose) and, if necessary to provide for the lawful redemption or purchase of such shares, the capital represented by such shares shall be reduced in accordance with the Delaware General Corporation Law. All such shares of Series B Preferred Stock shall upon their cancellation and upon the filing of an appropriate certificate with the Secretary of State of the State of Delaware, become authorized but unissued shares of Preferred Stock, par value $0.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $0.01 per share, of the Corporation subject to the conditions or restrictions on issuance set forth herein. C. Enforcement. Any registered holder of shares of Series B Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designations or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. D. Transfer Taxes. Except as otherwise agreed upon pursuant to the terms of this Certificate of Designations, the Corporation shall pay any and all 56 documentary, stamp or similar issue or transfer taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of any issue or delivery of Debentures on exchange of, or other securities or property issued on account of, shares of Series B Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax or other charge that may be imposed in connection with any transfer involved in the issue or transfer and delivery of any certificate for Debentures or other securities or property in a name other than that in which the shares of Series B Preferred Stock so exchanged, or on account of which such securities were issued, were registered and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid or is not payable. E. Transfer Agent. The Corporation may appoint, and from time to time discharge and change, a transfer agent for the Series B Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of shares of Series B Preferred Stock. F. Record Dates. In the event that the Series B Preferred Stock shall be registered under either the Securities Act or the Exchange Act, the Corporation shall establish appropriate record dates with respect to payments and other actions to be made with respect to the Series B Preferred Stock. 57 IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Secretary and attested by its Controller, this ___ day of May, 1998. OXFORD HEALTH PLANS, INC. By:________________________________ Jeffery H. Boyd, Executive Vice President, General Counsel and Secretary [Corporate Seal] ATTEST: ____________________________________ Brendan Shanahan, Vice President and Controller 58 CERTIFICATE OF DESIGNATIONS OF SERIES C JUNIOR PARTICIPATING PREFERRED STOCK OF OXFORD HEALTH PLANS, INC. (Pursuant to Section 151 of the General Corporation Law of the State of Delaware) --------------------------- OXFORD HEALTH PLANS, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Company"), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Company as required by Section 151 of the General Corporation Law of the State of Delaware at a meeting duly called and held on May 6, 1998: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Company (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Company's Certificate of Incorporation, as amended to date (hereinafter called the "Certificate of Incorporation"), the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share, of the Company and hereby states the designation and number of shares, and fixes the relative rights, powers and preferences thereof, and the limitations thereof, as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series C Junior Participating Preferred Stock" (the "Series C Preferred Stock") and the number of shares constituting the Series C Preferred Stock shall be 6,730. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series C Preferred Stock to a number less than the number of shares then outstanding. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Company (the "Preferred Stock") (or any similar stock) ranking prior and superior to the Series C Preferred Stock with respect to dividends, the holders of shares of Series C Preferred Stock, in preference to the holders of Common 59 Stock, par value $.0l per share (the "Common Stock"), of the Company and of any other stock of the Company ranking junior to the Series C Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, dividends and other distributions, in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, declared on the Common Stock since the immediately preceding dividend or distribution declared on the Series C Preferred Stock. In the event the Company shall at any time after May 13, 1998 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). (C) The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. Except as set forth in Section 10, or as otherwise from time to time required by law, holders of Series C Preferred Stock shall have no voting rights and their consent shall not be required for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever dividends or distributions payable on the Series C Preferred Stock as provided in Section 2 are in arrears, thereafter and until all unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred -46- 60 Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (as to dividends) to the Series C Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (as to dividends) with the Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Company ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series C Preferred Stock or rights, warrants or options to acquire such junior stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares of Series C Preferred Stock, or shares of Series C Preferred Stock and parity stock, as the case may be, upon such terms as the Board of Directors, after consideration of the respective dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not redeem or purchase or otherwise acquire shares of Common Stock (other than pursuant to any written agreement of the Company in existence on May 13, 1998 and other than redemptions or purchases or other acquisitions for aggregate consideration not in excess of $10,000,000 since May 13, 1998), unless, in each case, the Company promptly (within five business days) makes a purchase offer in writing or by publication (as determined by the Board of Directors) to all holders of shares of Series C Preferred Stock offering to purchase a number of shares of Series C Preferred Stock equal to one one-thousandth of the -47- 61 number of shares of Common Stock redeemed or purchased or otherwise acquired in such transaction at a price per share equal to 1000 times the amount of consideration paid for one share of Common Stock in such transaction and otherwise on terms and conditions no less favorable to the holders than those applicable in such transaction (as determined by the Board of Directors in good faith). In the event the Company shall at any time after May 13, 1998 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case (i) the number of shares of Series C Preferred Stock which holders thereof were entitled to have the Company offer to purchase immediately prior to such event under the preceding sentence shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event, and (ii) the amount per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately after such event. (C) The Company shall not, and shall not permit any subsidiary of the Company to, enter into any agreement with any person providing for the purchase or other acquisition by such person (or any other person), whether pursuant to tender offer, exchange offer or otherwise, unless in each case such person promptly (within five business days) makes a purchase offer in writing or by publication (as determined by the Board of Directors) to all holders of shares of Series C Preferred Stock offering to purchase a number of shares of Series C Preferred Stock equal to one-one thousandth of the number of shares of Common Stock purchased or otherwise acquired in such transaction at a price per share equal to 1000 times the amount of consideration paid for one share of Common Stock in such transaction and otherwise on terms and conditions no less favorable to the holders than those applicable in such transaction (as determined by the Board of Directors in good faith). In the event the Company shall at any time after May 13, 1998 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case (i) the number of shares of Series C Preferred Stock which holders thereof were entitled to have redeemed or purchased or otherwise acquired immediately prior to such event under the preceding sentence shall be adjusted by multiplying such number -48- 62 by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event, and (ii) the amount per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately after such event. (D) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) or (B) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series C Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Company, no distribution shall be made (A) to the holders of the Common Stock or of shares of any other stock of the Company ranking junior, upon liquidation, dissolution or winding up, to the Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received (i) $1.00 per share, plus (ii) an amount equal to declared and unpaid dividends and distributions thereon, to the date of such payment, plus (iii) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (B) to the holders of shares of stock ranking on a parity upon liquidation, dissolution or winding up with the Series C Preferred Stock, except distributions made ratably on the Series C Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall at any time after May 13, 1998 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount per share to which holders of shares of Series C Preferred Stock were entitled -49- 63 immediately prior to such event under clause (A)(iii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are converted into, exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series C Preferred Stock shall at the same time be similarly converted into, exchanged for or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is converted, exchanged or changed. In the event the Company shall at any time after May 13, 1998 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the conversion, exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series C Preferred Stock shall not be redeemable from any holder. Section 9. Rank. The Series C Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Company, junior to all other series of Preferred Stock (unless the terms of any such series shall provide otherwise) and senior to the Common Stock. Section 10. Amendment. Without the consent or affirmative vote of the holders of at least a majority of the outstanding shares of Series C Preferred Stock, voting separately as a class, the Company shall not (i) amend, alter or repeal any provision of the Certificate of Incorporation or the Bylaws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the Series C 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 -50- 64 Series C 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 Company is entitled to vote thereon. Section 11. Fractional Shares. Series C Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Preferred Stock. -51- 65 IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Company by its Secretary and attested by its Controller this ___ day of May, 1998. ___________________________________ Jeffery H. Boyd, Executive Vice President, General Counsel and Secretary Corporate Seal Attest: ________________________________ Brendan Shanahan, Vice President and Controller -52- EX-3.B 3 EXHIBIT 3.B 1 EXHIBIT 3(b) AMENDED AND RESTATED BY-LAWS OF OXFORD HEALTH PLANS, INC. ARTICLE I Stockholders Section 1.1. Annual Meeting. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meeting. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may be effected by any consent in writing by such holders. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholders entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of records entitled to vote at the meeting. 2 Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these by-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meeting of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of such designation by a chairman chosen at the meeting. The Secretary or in the absence of the Secretary an Assistant Secretary, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the secretary of the Corporation. Voting at meetings of stockholders need not be written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. With respect to other matters, unless otherwise provided by law or by the certificate or incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise 2 3 required by law or by the certificate or incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares or each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate or incorporation or these by-laws. Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day of which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the record entitled to notice of or to vote at the meeting of stockholder shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9. List of Stockholder Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. Advance Notice of Stockholder-Proposed Business at any Meeting of Stockholders. To be properly brought before any meeting of the stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, including (without limitation) requirements imposed by federal securities 3 4 laws pertaining to proxies, for business to be properly brought before any meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, at least seventy-five (75) days prior to the meeting provided, however, that in the event that less than ninety (90) days' notice or prior public disclosure of the date of annual meeting of stockholders is given or made to stockholders by the Corporation, notice by the Stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before any meeting of the stockholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholders, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at any meeting of the stockholders except in accordance with the procedures set forth in this Section 1.10, provided, however, that nothing in this Section 1.10 shall be deemed to preclude discussion by any stockholder as to any business properly brought before any meeting. The Chairman of the stockholders' meeting shall, if the facts warrant, determine and declare at any meeting of the Stockholders that business was not properly brought before the meeting in accordance with the provisions of this Section 1.10, and if he should determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. ARTICLE II Board of Directors Section 2.1. Powers; Numbers; Qualifications. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. (b) Except as otherwise fixed by or pursuant to the provisions or Article FOURTH of the certificate of incorporation (as it may be duly amended from time to time) relating to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation to elect, by separate class vote, additional directors, the number of directors of the Corporation shall be the number fixed from time to time by the affirmative vote of a majority of the total number of directors which the Corporation would have, prior to any increase or decrease, if there were no vacancies. Until otherwise fixed by the directors, the number of directors constituting the entire Board shall be twelve (12). The persons receiving the votes of a plurality in amount of 4 5 holders of the shares of capital stock of the Corporation, considered as a single class, entitled to vote generally in the election of directors for the term prescribed by Article TWELFTH of the certificate of incorporation or until their successors shall be elected and qualified. Section 2.2. Vacancies. Unless otherwise provided in the certificate of incorporation or in the by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors or from any other cause may be filled by a majority of the directors, although less than a quorum, then remaining in office and elected by the holders of the capital stock of the Corporation entitled to vote generally in the election of directors or, in the event that there is only one such director, by such sole remaining director, and the directors so chosen shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors, or any committee thereof, may be held at such places within or without the State of Delaware and at such times as the Board or such committee may from time to time determine, and, if so determined, notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors, or any committee thereof, may be held at such places within or without the State of Delaware whenever called, in the case of a Board Meeting, by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, or by any two or more Directors or, in the case of a committee meeting, by the Chairman of such committee, if any, or by any two or more committee members. At least 24 hours notice of any such meeting, which may, but need not, state the purpose thereof, shall be given by the person or persons calling the meeting or a representative or agent thereof. Section 2.5. Participation in Meeting by Conference Telephone Permitted. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. 5 6 Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereof in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders a dissolution of the Corporation or a revocation or dissolution, removing or identifying directors or amending these by-laws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of the provisions by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number 6 7 of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws. ARTICLE IV Officers Section 4.1. Officers; Elections. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer, except for the Chief Executive Officer, with or without cause at any time. The Board may remove the Chief Executive Officer only with an affirmative vote of at least a three-quarters (3/4) of the Directors of the Corporation. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring shall not of itself create contractual rights. Any vacancy occurring in any office or the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3. Powers and Duties. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these by-laws or in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meeting of the stockholders, the Board of Directors and any 7 8 committees in a book to be kept for the purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such holders in the corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before the such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate therefore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction or any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors and Committee. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed 8 9 equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. Indemnification of Directors, Officers and Employees. The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, including any action instituted by or on behalf of the Corporation, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation any other enterprise as a director or officer. Expenses incurred by any such person in defending any such actions, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it or an undertaking of such person to repay such expense if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. To the extent permitted by Delaware law, the Board may cause the Corporation to indemnify and reimburse other employees of the Corporation as it deems appropriate. For purposes of this by-laws, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director or officer of the Corporation, which imposes duties on, or involves services by, such director or officer with respect to any other enterprise or any employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan, shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interest of the Corporation. Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof 9 10 which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at the meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. Amendment of By-Laws. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders, by the affirmative vote of 80% of the voting power of all the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purposes of this Section as a single class may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. 10 As amended May 6, 1998 EX-10.A 4 EXHIBIT 10.A 1 EXHIBIT 10(a) $200,000,000 11% SENIOR NOTES DUE 2005 of OXFORD HEALTH PLANS, INC. PURCHASE AGREEMENT May 7, 1998 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 Dear Sirs: Oxford Health Plans, Inc., a Delaware corporation (the "COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER") an aggregate of $200,000,000 in principal amount of its 11% Senior Notes Due 2005 (the "SERIES A SENIOR NOTES"), subject to the terms and conditions set forth herein. The Series A Senior Notes are to be issued pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of May 13, 1998, between the Company and The Chase Manhattan Bank, as trustee (the "TRUSTEE"). The Series A Senior Notes and the Series B Senior Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "SENIOR NOTES". Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 1. OFFERING MEMORANDUM. The Series A Senior Notes will be offered and sold to the Initial Purchaser pursuant to one or more exemptions from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Company has prepared a preliminary offering memorandum, dated April 24, 1998 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering memorandum, dated May 7, 1998 (the "OFFERING MEMORANDUM"), relating to the Series A Senior Notes. Upon original issuance thereof, and until such time as the same is no longer required pursuant to the Indenture, the Series A Senior Notes (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: "THIS SENIOR NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS SENIOR NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D 2 UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SENIOR NOTE EXCEPT (A) TO THE COMPANY, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SENIOR NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SENIOR NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SENIOR NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SENIOR NOTE IN VIOLATION OF THE FOREGOING." 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions contained herein, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, an aggregate principal amount of $200,000,000 of Series A Senior Notes at a purchase price equal to 97% of the principal amount thereof (the "PURCHASE PRICE"). 3. TERMS OF OFFERING. The Initial Purchaser has advised the Company that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Series A Senior Notes purchased hereunder on the terms set forth in the Offering Memorandum, as amended or supplemented, solely (i) to persons whom the Initial Purchaser reasonably believes to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBS") in reliance upon Rule 144A under the Securities Act or (ii) in offshore transactions to certain eligible persons to which the Initial Purchaser is permitted to offer and sell the Series A Senior Notes in reliance upon Regulation S under the Securities Act (each, a "REGULATION S PURCHASER") (such persons specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchaser will offer the Series A Senior Notes to Eligible Purchasers initially at a price equal to 100% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Series A Senior Notes will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially the form of Exhibit A hereto, for so long as such Series A Senior Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) 2 3 a registration statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Company's 11% Series B Senior Notes Due 2005 (the "SERIES B SENIOR NOTES"), to be offered in exchange for the Series A Senior Notes (such offer to exchange being referred to as the "EXCHANGE OFFER"), and (ii) if applicable, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Series A Senior Notes and to use its best efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement and to consummate the Exchange Offer. This Agreement, the Indenture, the Senior Notes, the Registration Rights Agreement, the Investment Agreement dated February 23, 1998 (the "INVESTMENT AGREEMENT") between the Company and TPG Oxford LLC ("TPG") and the Term Loan Agreement to be dated May 13, 1998 (the "TERM LOAN AGREEMENT") among the Company and the Initial Purchaser, as arranger, DLJ Capital Funding, Inc., as syndication agent, and IBJ Schroder Bank & Trust Company, as facility manager, and the lenders named therein are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS." 4. DELIVERY AND PAYMENT. (a) Delivery of, and payment of the Purchase Price for, the Series A Senior Notes shall be made at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 or such other location as may be mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City time, on May 13, 1998 or at such other time on the same date or such other date as shall be agreed upon by the Initial Purchaser and the Company in writing. The time and date of such delivery and the payment for the Series A Senior Notes are herein called the "CLOSING DATE." (b) One or more of the Series A Senior Notes in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an aggregate principal amount corresponding to the aggregate principal amount of the Series A Senior Notes (collectively, the "GLOBAL SENIOR NOTE"), shall be delivered by the Company to the Initial Purchaser (or as the Initial Purchaser directs) in each case with any transfer taxes thereon duly paid by the Company against payment by the Initial Purchaser of the Purchase Price thereof by wire transfer in same day funds to the order of the Company. The Global Senior Note shall be made available to the Initial Purchaser for inspection not later than 9:30 a.m., New York City time, on the business day immediately preceding the Closing Date. 5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the Initial Purchaser as follows: (a) To advise the Initial Purchaser promptly and, if requested by the Initial Purchaser, confirm such advice in writing, (i) of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Series A Senior Notes for offering or sale in any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e) hereof, or the initiation of any proceeding by any state securities commission or any other federal or state regulatory authority for such purpose and (ii) of the happening of any event during the period referred to in Section 5(c) below that makes any statement of a material fact made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or that requires any additions to or changes in the Preliminary Offering Memorandum or the Offering Memorandum in order to make the statements therein not misleading. The Company shall use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Series A Senior Notes under any state securities or Blue Sky laws and, if at any time any state securities commission or other federal or state regulatory authority shall issue an order suspending the qualification or exemption of any Series A Senior Notes under any state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. 3 4 (b) To furnish the Initial Purchaser and those persons identified by the Initial Purchaser to the Company as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchaser may reasonably request for the time period specified in Section 5(c). Subject to the Initial Purchaser's compliance with its representations and warranties and agreements set forth in Section 7 hereof, the Company consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant hereto, by the Initial Purchaser in connection with Exempt Resales. (c) During such period as in the opinion of counsel for the Initial Purchaser an Offering Memorandum is required by law to be delivered in connection with Exempt Resales by the Initial Purchaser and in connection with market-making activities of the Initial Purchaser, (i) not to make any amendment or supplement to the Offering Memorandum of which the Initial Purchaser shall not previously have been advised or to which the Initial Purchaser shall reasonably object after being so advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable request, any amendment or supplement to the Offering Memorandum which may be necessary or advisable in connection with such Exempt Resales or such market-making activities. (d) If, during the period referred to in Section 5(c) above, any event shall occur or condition shall exist as a result of which, in the opinion of counsel to the Initial Purchaser, it becomes necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when such Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or if, in the opinion of counsel to the Initial Purchaser, it is necessary to amend or supplement the Offering Memorandum to comply with any applicable law, promptly to prepare an appropriate amendment or supplement to such Offering Memorandum so that the statements therein, as so amended or supplemented, will not, in the light of the circumstances when it is so delivered, be misleading, or so that such Offering Memorandum will comply with applicable law, and to furnish to the Initial Purchaser and such other persons as the Initial Purchaser may designate such number of copies thereof as the Initial Purchaser may reasonably request. (e) Prior to the sale of all Series A Senior Notes pursuant to Exempt Resales as contemplated hereby, to cooperate with the Initial Purchaser and counsel to the Initial Purchaser in connection with the registration or qualification of the Series A Senior Notes for offer and sale to the Initial Purchaser and pursuant to Exempt Resales under the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may request and to continue such registration or qualification in effect so long as required for Exempt Resales and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process or taxation other than as to matters relating to Exempt Resales, in any jurisdiction in which it is not now so subject. (f) So long as the Senior Notes are outstanding, (i) to mail and make generally available as soon as practicable after the end of each fiscal year to the record holders of the Senior Notes a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if any), all such financial reports to include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of shareholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for the preceding year, certified by the Company's independent public accountants and (ii) to mail and make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if any) as of the 4 5 end of and for such period, and for the period from the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (g) So long as the Senior Notes are outstanding, to furnish to the Initial Purchaser as soon as available copies of all reports or other communications furnished by the Company to its security holders or furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed and such other publicly available information concerning the Company and/or its subsidiaries as the Initial Purchaser may reasonably request. (h) So long as any of the Series A Senior Notes remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make available to any holder of Series A Senior Notes in connection with any sale thereof and any prospective purchaser of such Series A Senior Notes from such holder, the information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Securities Act. (i) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of the obligations of the Company under this Agreement, including: (i) the fees, disbursements and expenses of counsel to the Company and accountants of the Company in connection with the sale and delivery of the Series A Senior Notes to the Initial Purchaser and pursuant to Exempt Resales, and all other fees and expenses in connection with the preparation, printing, filing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and all amendments and supplements to any of the foregoing (including financial statements), including the mailing and delivering of copies thereof to the Initial Purchaser and persons designated by it in the quantities specified herein; provided, however, that the Company shall pay or cause to be paid the fees and expenses of counsel to the Initial Purchaser only if the transactions contemplated by this Agreement have not been consummated or if this Agreement is terminated through no fault of the Initial Purchaser, (ii) all costs and expenses related to the transfer and delivery of the Series A Senior Notes to the Initial Purchaser and pursuant to Exempt Resales, including any transfer or other taxes payable thereon, (iii) all costs of printing or producing this Agreement, the other Operative Documents and any other agreements or documents in connection with the offering, purchase, sale or delivery of the Series A Senior Notes, (iv) all expenses in connection with the registration or qualification of the Series A Senior Notes for offer and sale under the securities or Blue Sky laws of the several states and all costs of printing or producing any preliminary and supplemental Blue Sky memoranda in connection therewith (including the filing fees and fees and disbursements of counsel for the Initial Purchaser in connection with such registration or qualification and memoranda relating thereto), (v) the cost of printing certificates representing the Series A Senior Notes, (vi) all expenses and listing fees in connection with the application for quotation of the Series A Senior Notes in the PORTAL market ("PORTAL") of National Association of Securities Dealers, Inc. ("NASD"), (vii) the fees and expenses of the Trustee and the Trustee's counsel in connection with the Indenture and the Senior Notes, (viii) the costs and charges of any transfer agent, registrar and/or depositary (including DTC), (ix) any fees charged by rating agencies for the rating of the Senior Notes, (x) all costs and expenses of the Exchange Offer and any Registration Statement, as set forth in the Registration Rights Agreement, (xi) the expenses of the Initial Purchaser in connection with the Company's participation in the "road-show," and (xii) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. (j) To use its best efforts to effect and maintain the inclusion of the Series A Senior Notes in PORTAL for so long as the Series A Senior Notes are outstanding. (k) To obtain the approval of DTC for "book-entry" transfer of the Senior Notes, and to comply with all of its agreements set forth in the representation letters of the Company to 5 6 DTC relating to the approval of the Senior Notes by DTC for "book-entry" transfer. (l) During the period beginning on the date hereof and continuing to and including the Closing Date, not to offer, sell, contract to sell or otherwise transfer or dispose of any debt securities of the Company or any warrants, rights or options to purchase or otherwise acquire debt securities of the Company substantially similar to the Senior Notes (other than the Senior Notes), without the prior written consent of the Initial Purchaser. (m) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) that would be integrated with the sale of the Series A Senior Notes to the Initial Purchaser or pursuant to Exempt Resales in a manner that would require the registration of any such sale of the Series A Senior Notes under the Securities Act. (n) Not to voluntarily claim, and to actively resist any attempts to claim, the benefit of any usury laws against the holders of any Senior Notes. (o) To cause the Exchange Offer to be made in the appropriate form to permit Series B Senior Notes registered pursuant to the Securities Act to be offered in exchange for the Series A Senior Notes and to comply with all applicable federal and state securities laws in connection with the Exchange Offer. (p) To comply with all of its agreements set forth in the Registration Rights Agreement. (q) To use its best efforts (i) to do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Date and (ii) to satisfy all conditions precedent to the delivery of the Series A Senior Notes. 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of the date hereof, the Company represents and warrants to, and agrees with, the Initial Purchaser that: (a) The Preliminary Offering Memorandum and the Offering Memorandum do not, and any supplement or amendment to them will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph (a) shall not apply to statements in or omissions from the Preliminary Offering Memorandum or the Offering Memorandum (or any supplement or amendment thereto) based upon information relating to the Initial Purchaser furnished to the Company in writing by the Initial Purchaser expressly for use therein. No stop order preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act, has been issued. (b) Each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Preliminary Offering Memorandum and the Offering Memorandum and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or draw into question the validity of this Agreement or the other Operative Documents (a "MATERIAL ADVERSE EFFECT"). 6 7 (c) All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights. (d) The entities listed on Schedule A hereto are the only subsidiaries, direct or indirect, of the Company. All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and are owned by the Company, directly or indirectly through one or more subsidiaries (except for the subsidiaries specified in the Term Loan Agreement), free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature (each, a "LIEN"), except pursuant to the Term Loan Agreement and the Bridge Securities Purchase Agreement, dated as of February 6, 1998, between the Company and Oxford Funding, Inc. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The Indenture has been duly authorized by the Company and, on the Closing Date, will have been validly executed and delivered by the Company. When the Indenture has been duly executed and delivered by the Company, the Indenture will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (g) The Series A Senior Notes have been duly authorized and, on the Closing Date, will have been validly executed and delivered by the Company. When the Series A Senior Notes have been issued, executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the Series A Senior Notes will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. On the Closing Date, the Series A Senior Notes will conform in all material respects as to legal matters to the description thereof contained in the Offering Memorandum. (h) On the Closing Date, the Series B Senior Notes will have been duly authorized by the Company. When the Series B Senior Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Series B Senior Notes will be entitled to the benefits of the Indenture and will be the valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (i) The Registration Rights Agreement has been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company. When the Registration Rights Agreement has been duly executed and delivered, the Registration Rights Agreement will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. On the Closing Date, the Registration Rights Agreement will conform in all material respects as to legal matters to the description thereof in the Offering Memorandum. 7 8 (j) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, in each case, where such violation would have a Material Adverse Effect. (k) The execution, delivery and performance of this Agreement and the other Operative Documents by the Company, compliance by the Company with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states) and except for registration pursuant to the Registration Rights Agreement and the Registration Rights Agreement dated as of February 23, 1998 between the Company and TPG (the "TPG REGISTRATION RIGHTS AGREEMENT"), (ii) constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, any of its subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of the Company or any of its subsidiaries or result in any other impairment of the rights of the holder of any such Authorization, in each case, which would have a Material Adverse Effect. (l) All indebtedness of the Company that will be repaid with the proceeds of the issuance and sale of the Series A Notes was incurred for proper purposes and in good faith and the Company will be on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Series A Senior Notes) solvent, and will have on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Series A Senior Notes) sufficient capital for carrying on its business and will be on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Series A Senior Notes) able to pay its debts as they mature. (m) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject, which might result, singly or in the aggregate, in a Material Adverse Effect, except as disclosed in the Offering Memorandum. (n) Neither the Company nor any of its subsidiaries has violated any foreign federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. (o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any Authorization, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a Material Adverse Effect. 8 9 (p) Each of the Company and its subsidiaries has such permits, licenses, consents, exemptions, franchises, authorizations and other approvals (each, an "AUTHORIZATION") of, and has made all filings with and notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including without limitation, under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a Material Adverse Effect. Each such Authorization is valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation, suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries; except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a Material Adverse Effect, and except as disclosed in the Offering Memorandum. Neither the Company nor any of its subsidiaries has received any written notice from any governmental or regulatory authorities that it may lose an Authorization or that it may be restricted in any manner in which it currently conducts its business, except as disclosed in the Offering Memorandum. The Company has not received notice that any insurance regulatory authority has issued or commenced any proceeding for the issuance of any order or decree impairing, restricting or prohibiting the payment of dividends of any subsidiary to its parent other than such restrictions that apply to all insurance companies regulated by such regulatory authority. (q) The accountants, KPMG Peat Marwick LLP, that have certified the financial statements and supporting schedules included in the Preliminary Offering Memorandum and the Offering Memorandum are independent public accountants with respect to the Company, as required by the Securities Act and the Exchange Act. The historical financial statements, together with related schedules and notes, set forth in the Preliminary Offering Memorandum and the Offering Memorandum comply as to form in all material respects with the requirements applicable to registration statements on Form S-3 under the Securities Act. (r) The historical financial statements, together with related schedules and notes forming part of the Offering Memorandum (and any amendment or supplement thereto), present fairly in all material respects the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the basis stated in the Offering Memorandum at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data set forth in the Offering Memorandum (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (s) All reinsurance treaties and arrangements to which any subsidiary of the Company engaged in the business of insurance (an "INSURANCE SUBSIDIARY") is party are in full force and effect and no Insurance Subsidiary is in violation of or in default in the performance, observance or fulfillment of, any obligation, agreement, covenant or condition contained therein, which violation or default could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect; no Insurance Subsidiary has received any notice from any of the other parties to such treaties, contracts or agreements that such other party intends not to perform such treaty and, to the best knowledge of the Company and the Insurance Subsidiaries, the Company and Insurance Subsidiaries have no reason to believe that any of the other parties to such treaties or arrangements will be unable to 9 10 perform such treaty or arrangement except to the extent adequately and properly reserved for in the consolidated financial statements of the Company included in the Offering Memorandum. No insurance regulatory authority has required that the Company make a capital contribution to a subsidiary which requirement will not have been satisfied as of the Closing Date. (t) The Company is not and, after giving effect to the offering and sale of the Series A Senior Notes and the application of the net proceeds thereof as described in the Offering Memorandum, will not be, an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (u) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to include any securities of the Company with the Senior Notes registered pursuant to any Registration Statement. (v) Neither the Company nor any of its subsidiaries nor any agent thereof acting on the behalf of them (other than the Initial Purchaser, as to whom the Company makes no representation) has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Series A Senior Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (w) No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act (i) has imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company's retaining any rating assigned to the Company or any securities of the Company or (ii) has indicated to the Company that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of the Company or any securities of the Company. (x) Since the respective dates as of which information is given in the Offering Memorandum other than as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there has not occurred any material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) except for the loans contemplated by the Term Loan Agreement and the investment by TPG, there has not been any material adverse change or any development involving a prospective material adverse change in the capital stock or in the long-term debt of the Company or any of its subsidiaries and (iii) neither the Company nor any of its subsidiaries has incurred any material liability or obligation, direct or contingent. (y) When the Series A Senior Notes are issued and delivered pursuant to this Agreement, the Series A Senior Notes will not be of the same class (within the meaning of Rule 144A under the Securities Act) as any security of the Company that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. (z) No form of general solicitation or general advertising (as defined in Regulation D under the Securities Act) was used by the Company or any of its respective representatives (other than the Initial Purchaser, as to whom the Company make no representation) in connection with the offer and sale of the Series A Senior Notes contemplated hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Series A Senior Notes have been issued and sold by the Company within the six-month period immediately prior to the date 10 11 hereof. (aa) Prior to the effectiveness of any Registration Statement, the Indenture is not required to be qualified under the TIA. (bb) The Company and its respective affiliates and all persons acting on their behalf (other than the Initial Purchaser, as to whom the Company makes no representation) have complied with and will comply with the offering restrictions requirements of Regulation S under the Securities Act ("REGULATION S") in connection with the offering of the Series A Senior Notes outside the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902(h) under the Securities Act. (cc) The Company is a "reporting issuer", as defined in Rule 902 under the Securities Act. (dd) The sale of the Series A Senior Notes pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Securities Act. (ee) No registration under the Securities Act of the Series A Senior Notes is required for the sale of the Series A Senior Notes to the Initial Purchaser as contemplated hereby or for the Exempt Resales assuming the accuracy of, and compliance with, the Initial Purchaser's representations and warranties and agreements set forth in Section 7 hereof. (ff) Each certificate signed by any officer of the Company and delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be deemed to be a representation and warranty by the Company to the Initial Purchaser as to the matters covered thereby. The Company acknowledges that the Initial Purchaser and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser will rely as to facts upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial Purchaser represents and warrants to, and agrees with, the Company that: (a) The Initial Purchaser is a QIB, with such knowledge and experience in financial and business matters as is necessary in order to evaluate the merits and risks of an investment in the Series A Senior Notes. (b) The Initial Purchaser (A) is not acquiring the Series A Senior Notes with a view to any distribution thereof or with any present intention of offering or selling any of the Series A Senior Notes in a transaction that would violate the Securities Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Series A Senior Notes only to (x) QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A and (y) in offshore transactions in reliance upon Rule 903 of Regulation S. (c) The Initial Purchaser agrees that no form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) has been or will be used by the Initial Purchaser or any of its representatives in connection with the offer and sale of the Series A Senior Notes pursuant hereto, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 11 12 (d) The Initial Purchaser agrees that, in connection with Exempt Resales, such Initial Purchaser will solicit offers to buy the Series A Senior Notes only from, and will offer to sell the Series A Senior Notes only to, Eligible Purchasers. The Initial Purchaser further agrees that it will offer to sell the Series A Senior Notes only to, and will solicit offers to buy the Series A Senior Notes only from (A) Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs and (B) Regulation S Purchasers, in each case, that agree that (x) the Series A Senior Notes purchased by them may be resold, pledged or otherwise transferred within the time period referred to under Rule 144(k) (taking into account the provisions of Rule 144(d) under the Securities Act, if applicable) under the Securities Act, as in effect on the date of the transfer of such Series A Senior Notes, only (I) to the Company, (II) to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act, (III) in an offshore transaction (as defined in Rule 902 under the Securities Act) meeting the requirements of Rule 903 or 904 under the Securities Act, (IV) in a transaction meeting the requirements of Rule 144 under the Securities Act, (V) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to the Company) or (VI) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction, and (y) they will deliver to each person to whom such Series A Senior Notes or an interest therein is transferred a notice substantially to the effect of the foregoing. (e) The Initial Purchaser and its affiliates or any person acting on its or their behalf have not engaged or will not engage in any directed selling efforts within the meaning of Regulation S with respect to the Series A Senior Notes. (f) The Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Series A Senior Notes in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Series A Senior Notes pursuant hereto and the Closing Date, other than in accordance with Regulation S or another exemption from the registration requirements of the Securities Act. The Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Series A Senior Notes (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Series A Senior Notes. (g) The Initial Purchaser agrees that, at or prior to confirmation of a sale of Series A Senior Notes by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(c)(2) under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Senior Notes covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A), and in connection with any subsequent sale by you of the Series A Senior Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." (h) The Series A Senior Notes offered and sold by the Initial Purchaser pursuant hereto in reliance on Regulation S have been and will be offered and sold only in offshore transactions. 12 13 (i) The sale of the Series A Senior Notes offered and sold by the Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or scheme to evade the registration provisions of the Securities Act. The Initial Purchaser acknowledges that the Company and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser will rely upon the accuracy and truth of the foregoing representations and such Initial Purchaser hereby consents to such reliance. 8. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless the Initial Purchaser, its directors, its officers and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), the Preliminary Offering Memorandum or any Rule 144A Information provided by the Company to any holder or prospective purchaser of Series A Senior Notes pursuant to Section 5(h) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Initial Purchaser furnished in writing to the Company by the Initial Purchaser; provided, however, that the foregoing indemnity agreement shall not inure to the benefit of the Initial Purchaser if it failed to deliver a Final Offering Memorandum (as then amended or supplemented, provided by the Company to the Initial Purchaser in the requisite quantity and on a timely basis to permit proper delivery on or prior to the Closing Date) to the person asserting any losses, claims, damages and liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such material misstatement or omission or alleged material misstatement or omission was cured in the Final Offering Memorandum. (b) The Initial Purchaser agrees to indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company, to the same extent as the foregoing indemnity from the Company to the Initial Purchaser but only with reference to information relating to the Initial Purchaser furnished in writing to the Company by the Initial Purchaser expressly for use in the Preliminary Offering Memorandum or the Offering Memorandum. The only such information is in the third, sixth, ninth and tenth paragraphs and the fourth sentence of the seventh paragraph of the "Plan of Distribution" section. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as 13 14 provided below, shall be at the expense of the Initial Purchaser). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with the prior written consent of the indemnifying party or (ii) effected without its written consent if the settlement is entered into more than ninety days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchaser on the other hand from the offering of the Series A Senior Notes or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering of the Series A Senior Notes (after underwriting discounts and commissions, but before deducting expenses) received by the Company, and the total discounts and commissions received by the Initial Purchaser bear to the total price to investors of the Series A Senior Notes, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Initial Purchaser, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 14 15 The Company and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total discounts and commissions received by the Initial Purchaser exceeds the amount of any damages which the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of the Initial Purchaser to purchase the Series A Senior Notes under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date. (b) On or after the date hereof, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of the Company or any securities of the Company (including, without limitation, the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction), by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act, (ii) there shall not have occurred any change, nor shall any notice have been given of any potential or intended change, in the outlook for any rating of the Company or any securities of the Company by any such rating organization, and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Senior Notes than that on which the Senior Notes were marketed. (c) The execution and delivery by the Company of the Term Loan Agreement providing for a new $150 million senior secured term loan and the drawdown of $150 million in term loans shall have been consummated in accordance with the Term Loan Agreement. (d) The investment of $350 million by TPG in the Company shall have been consummated in accordance with the Investment Agreement. (e) The purchase of $10 million of common stock of the Company by Dr. Norman C. Payson shall have been consummated. (f) Since the respective dates as of which information is given in the Offering Memorandum other than as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there shall not have 15 16 occurred any change or any development involving a prospective change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) except as contemplated by (c), (d) and (e) above, there shall not have been any change or any development involving a prospective change in the capital stock or in the long-term debt of the Company or any of its subsidiaries, and (iii) neither the Company nor any of its subsidiaries shall have incurred any liability or obligation, direct or contingent, the result of which, in any such case described in clause 9(f)(i), 9(f)(ii) or 9(f)(iii), in your judgment, is material and adverse and, in your judgment, makes it impracticable to market the Series A Senior Notes on the terms and in the manner contemplated in the Offering Memorandum. (g) You shall have received on the Closing Date a certificate, dated the Closing Date, signed by the President and the Chief Financial Officer of the Company, confirming the matters set forth in Sections 6(x), 9(a) and 9(b) and stating that the Company has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied on or prior to the Closing Date. (h) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date, of Sullivan & Cromwell, counsel for the Company, to the effect that: (i) each of the Company and its subsidiaries incorporated in New York or Delaware has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the power and authority under its Certificate of Incorporation and the corporation law of its jurisdiction of incorporation to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties; (ii) all the shares being issued to TPG on the closing date have been duly authorized and validly issued and are fully paid; (iii) all of the outstanding shares of capital stock of each of the Company's subsidiaries incorporated in New York or Delaware have been duly authorized and validly issued and are fully paid and non-assessable, and are owned by the Company; (iv) the Series A Senior Notes have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture and will be valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (v) the Indenture has been duly authorized, executed and delivered by the Company and is a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (vi) this Agreement has been duly authorized, executed and delivered by the Company; 16 17 (vii) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; provided, however, that such counsel need not express any opinion as to Section 8 of the Registration Rights Agreement; (viii) the Series B Senior Notes have been duly authorized; (ix) such counsel is of the opinion ascribed to it in the Offering Memorandum under the caption "Certain Income Tax Considerations"; (x) the execution, delivery and performance of this Agreement and the other Operative Documents by the Company, the compliance by the Company with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as have been obtained or as may be required under the insurance or health laws of various states in connection with the enforcement of remedies under the Term Loan Agreement and except for registration pursuant to the Registration Rights Agreement and the TPG Registration Rights Agreement), (ii) constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound of which it is aware, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any Federal governmental body or agency of the United States or any governmental body or agency of the State of New York having jurisdiction over the Company, any of its subsidiaries or their respective property, or (iv) result in the termination, suspension or revocation of any State of New York Authorization of the Company or any of its subsidiaries or result in any other impairment of the rights of the holder of any such State of New York Authorization; provided, however, that for the purposes of this paragraph, such counsel need express no opinion with respect to Federal or state securities laws, other antifraud laws and fraudulent transfer laws; provided, further, that insofar as performance by the Company of its obligations under this Agreement and the other Operative Documents is concerned, such counsel need express no opinion as to bankruptcy, insolvency, reorganization, moratorium and similar laws or general applicability relating to or affecting creditors' rights; (xi) the Company is not and, after giving effect to the offering and sale of the Series A Senior Notes and the application of the net proceeds thereof as described in the Offering Memorandum, will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (xii) to the best of such counsel's knowledge after due inquiry, there are no contracts, agreements or understandings, other than the Registration 17 18 Rights Agreement and the TPG Registration Rights Agreement, between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities to require the Company to include such securities with the Senior Notes registered pursuant to any Registration Statement; (xiii) the Indenture complies as to form in all material respects with the requirements of the TIA, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; it is not necessary in connection with the offer, sale and delivery of the Series A Senior Notes to the Initial Purchaser in the manner contemplated by this Agreement or in connection with the Exempt Resales to qualify the Indenture under the TIA; (xiv) no registration under the Securities Act of the Series A Senior Notes is required for the sale of the Series A Senior Notes to the Initial Purchaser as contemplated by this Agreement or for the Exempt Resales assuming that (i) the Initial Purchaser is a QIB, (ii) the accuracy of, and compliance with, the Initial Purchaser's representations and agreements contained in Section 7 of this Agreement, and (iii) the accuracy of the representations of the Company set forth in Sections 5(h) and 6(bb), (cc) and (dd) of this Agreement; and (xv) nothing that came to such counsel's attention in the course of their review of the Offering Memorandum has caused such counsel to believe that, as of the date of the Offering Memorandum or as of the Closing Date, the Offering Memorandum, as amended or supplemented, if applicable (except for the financial statements and other financial data included therein, as to which such counsel need not express any belief) contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The opinions of Sullivan & Cromwell described in Section 9(h) above shall be rendered to you at the request of the Company and shall so state therein. Jeffery H. Boyd, General Counsel of the Company, may give the opinions set forth in Sections 9(h)(iii), 9(h)(x)(ii) and 9(h)(x)(iv) in lieu of Sullivan & Cromwell. In expressing their belief with respect to the matters covered by Section 9(h)(xv), Sullivan & Cromwell may state that their belief is based upon their participation in the preparation of the Offering Memorandum and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified. (i) The Initial Purchaser shall have received on the Closing Date an opinion, dated the Closing Date, of Simpson Thacher & Bartlett, counsel for the Initial Purchaser, in form and substance reasonably satisfactory to the Initial Purchaser. (j) The Initial Purchaser shall have received, at the time this Agreement is executed and at the Closing Date, letters dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Initial Purchaser from KPMG Peat Marwick LLP, independent public accountants, containing the information and statements of the type ordinarily included in accountants' "comfort letters" to the Initial Purchaser with respect to the financial statements and certain financial information contained in the Offering Memorandum. (k) The Series A Senior Notes shall have been approved by the NASD for trading and duly listed in PORTAL. 18 19 (l) The Initial Purchaser shall have received a counterpart, conformed as executed, of the Indenture which shall have been entered into by the Company and the Trustee. (m) The Company shall have executed the Registration Rights Agreement and the Initial Purchaser shall have received an original copy thereof, duly executed by the Company. (n) The Company shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. 10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto. This Agreement may be terminated at any time on or prior to the Closing Date by the Initial Purchaser by written notice to the Company if any of the following has occurred: (i) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in the Initial Purchaser's judgment, is material and adverse and, in the Initial Purchaser's judgment, makes it impracticable to market the Series A Senior Notes on the terms and in the manner contemplated in the Offering Memorandum, (ii) the suspension or material limitation of trading in securities or other instruments on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market or limitation on prices for securities or other instruments on such exchange or the Nasdaq National Market, (iii) the suspension of trading of any securities of the Company on any exchange or in the over-the-counter market, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in the Initial Purchaser's opinion materially and adversely affects, or will materially and adversely affect, the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal government or agency in respect of the monetary or fiscal affairs of the United States which in your opinion has a material adverse effect on the financial markets in the United States. 11. MISCELLANEOUS. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (i) if to the Company, to Oxford Health Plans, Inc., 800 Connecticut Avenue, Norwalk, Connecticut 06854, Attention: General Counsel, and (ii) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company and the Initial Purchaser set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Series A Senior Notes, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the officers or directors of the Initial Purchaser, any person controlling the Initial Purchaser, the Company, the officers or directors of the Company, or any person controlling the Company, (ii) acceptance of the Series A Senior Notes and payment for them hereunder and (iii) termination of this Agreement. If for any reason other than a breach or default by the Initial Purchaser under this Agreement the Series A Senior Notes are not delivered by or on behalf of the Company as provided herein, the Company agrees to reimburse the Initial Purchaser for all reasonable out-of-pocket expenses incurred by them. Notwithstanding any termination of this Agreement, the Company shall be liable for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the Initial Purchaser and its officers, directors and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act for 19 20 any and all reasonable fees and expenses (including without limitation the fees and expenses of counsel) incurred by them in connection with enforcing their rights under this Agreement (including without limitation its rights under Section 8). Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Initial Purchaser, their respective directors and officers, any controlling persons referred to herein, and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Series A Senior Notes from the Initial Purchaser merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 20 21 Please confirm that the foregoing correctly sets forth the agreement between the Company and the Initial Purchaser. Very truly yours, OXFORD HEALTH PLANS, INC. By: /s/ Jeffery H. Boyd -------------------------------- Name: Jeffery H. Boyd Title: EVP, General Counsel DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: -------------------------- Name: Title: 21 22 SCHEDULE A SUBSIDIARIES Oxford Health Plans (NY), Inc. Oxford Health Plans (NJ), Inc. Oxford Health Plans (CT), Inc. Oxford Health Plans (NH), Inc. Oxford Health Plans (FL), Inc. Oxford Health Plans (IL), Inc. Oxford Health Plans (PA), Inc. Oxford Health Insurance, Inc. Oxford Health Plans (Bermuda) Inc. Oxford Illinois Holdings, Inc. Compass PPA, Inc. Oaktree Health Plans, Inc. Oxford SE Holdings, Inc. Direct Script, Inc. Oxford On-Call, Inc. Oxford Aviation, Inc. Oxford Health Plans Ireland Limited Oxford Health Centers, Inc. Oxford Specialty Holdings, Inc. Oxford Specialty Management, Inc. Specialty Management Company (NY) IPA, Inc. Specialty Management Company (NJ) IPA, Inc. Specialty Management Company (CT) IPA, Inc. Specialty Management Company (PA) IPA, Inc. 23 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT EX-10.B 5 EXHIBIT 10.B 1 EXHIBIT 10.b EXECUTION COPY REGISTRATION RIGHTS AGREEMENT Dated as of May 13, 1998 by and among Oxford Health Plans, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of May 13, 1998 by and among Oxford Health Plans, Inc. (the "Company") and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser"), who has agreed to purchase the Company's 11% Senior Notes due 2005 (the "Series A Senior Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated May 7, 1998 (the "Purchase Agreement"), by and among the Company and the Initial Purchaser. In order to induce the Initial Purchaser to purchase the Senior Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser as set forth in Section 9(m) of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Broker-Dealer: Any broker or dealer registered under the Exchange Act. Business Day: Any day other than a Legal Holiday. Closing Date: The date of this Agreement. Commission: The Securities and Exchange Commission. Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Series B Senior Notes to be issued in the Exchange Offer, (b) the maintenance of such Registration Statement as continuously effective and the keeping open of the Exchange Offer for a period not less than the minimum period required pursuant to Section 3(b) hereof and (c) the delivery, by the Company to the Registrar under the Indenture, of Series B Senior Notes in the same aggregate principal amount as the aggregate principal amount of Series A Senior Notes tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Series A Senior Notes, each Interest Payment Date. Effectiveness Target Date: As defined in Section 5. 3 Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Offer: The registration by the Company under the Securities Act of the Series B Senior Notes pursuant to the Exchange Offer Registration Statement pursuant to which the Company shall offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities for Series B Senior Notes in an aggregate principal amount equal to the aggregate principal amount of Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchaser proposes to sell the Series A Senior Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, to persons who are not U.S. persons, as such term is defined in Regulation S under the Securities Act, in transactions conforming with such Regulation S and to certain institutional "accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act. Holders: As defined in Section 2 hereof. Indemnified Holder: As defined in Section 8(a) hereof. Indenture: The Indenture, dated as of May 7, 1998, among the Company and The Chase Manhattan Bank, as trustee (the "Trustee"), pursuant to which the Senior Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: As defined in the preamble hereto. Interest Payment Date: As defined in the Indenture and the Senior Notes. Investment Agreement: The agreement entered into on February 23, 1998 by and between the Company and TPG Oxford LLC, an affiliate of Texas Pacific Group. Legal Holiday: A Saturday, a Sunday or a day on which federal offices or banking institutions in the City of New York, in the city of the Corporate Trust Office of the Trustee, or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. NASD: National Association of Securities Dealers, Inc. 3 4 Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Record Holder: With respect to any Damages Payment Date relating to Senior Notes, each Person who is a Holder of Senior Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company relating to (a) an offering of Series B Senior Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities Act: The Securities Act of 1933, as amended. Senior Notes: The Series A Senior Notes and the Series B Senior Notes. Series B Senior Notes: The Company's 11% Series B Senior Notes due 2005 to be issued pursuant to the Indenture in the Exchange Offer. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Senior Note, until the earliest to occur of (a) the date on which such Senior Note is exchanged in the Exchange Offer by a Person other than a Broker-Dealer for a Series B Senior Note and is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) following the exchange by a Broker-Dealer in the Exchange Offer of a Senior Note for a Series B Senior Note, the date on which such Series B Senior Note is sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Senior Note effectively has been registered under the Securities Act and disposed of in accordance 4 5 with the Shelf Registration Statement or (d) the date on which such Senior Note is distributed to the public pursuant to Rule 144 under the Securities Act. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company shall (i) cause to be filed with the Commission the Exchange Offer Registration Statement on or prior to the 270th day after the Closing Date, provided, however, that, in the event the Board of Directors of the Company determines in good faith that an extension of the filing date beyond such 270th day is in the best interest of the Company, the filing day may be extended to the earliest date thereafter to which the Board determines it may be extended consistent with the best interest of the Company, but in no event later than the earlier of the filing of the registration statement required by the Investment Agreement or the 360th day after the Closing Date, (ii) use its best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Series B Senior Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) use its best efforts to issue on or prior to the 30th Business Day after the date on which the Exchange Offer Registration Statement is declared effective (the "Exchange Offer Effectiveness Date") Series B Senior Notes in exchange for all Series A Senior Notes tendered prior thereto in the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series B Senior Notes to be offered in exchange for the Series A Senior Notes that are Transfer Restricted Securities and to permit resales of Senior Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use its best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company shall 5 6 cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Senior Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Series A Senior Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Series A Senior Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and, consequently, must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Series B Senior Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Senior Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company shall use its best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Senior Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that such Exchange Offer Registration Statement conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer is Consummated. The Company shall promptly provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request, and in no event later than one day after such request, at any time during such one-year period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement with respect to the Series B Senior Notes or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by 6 7 applicable law (after the procedures set forth in Section 6(a) below have been complied with) or Commission policy or (ii) if any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th Business Day following the Consummation of the Exchange Offer that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the Series B Senior Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A Senior Notes acquired directly from the Company or one of its affiliates, then the Company shall (x) cause to be filed on or prior to 30 days after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above or 30 days after the date on which the Company receives the notice specified in clause (ii) above a shelf registration statement pursuant to Rule 415 under the Securities Act (which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement")), relating to all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof, and shall (y) use its best efforts to cause such Shelf Registration Statement to become effective on or prior to 90 days after the date on which the Company becomes obligated to file such Shelf Registration Statement. If, after the Company has filed an Exchange Offer Registration Statement which satisfies the requirements of Section 3(a) above, the Company is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer shall not be permitted under applicable federal law, then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above. Such an event shall have no effect on the requirements of clause (y) above, or on the Effectiveness Target Date as defined in Section 5 below. The Company shall use its best efforts to keep the Shelf Registration Statement discussed in this Section 4(a) continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the date on which such Shelf Registration Statement first becomes effective under the Securities Act. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 Business Days after receipt of a request therefor, such information specified in item 507 of Regulation S-K under the Securities Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the 7 8 information previously furnished to the Company by such Holder not materially misleading. (c) Restrictions on Sale of Certain Securities by Others. The Company agrees not to, and to use its best efforts to cause its affiliates not to, offer, sell, contract to sell or grant any option to purchase or otherwise transfer or dispose of any debt security issued by the Company or any security convertible into or exchangeable or exercisable for any such debt security, including a sale pursuant to Rule 144 under the Securities Act, during the 30-day period beginning on the closing date of each Underwritten Offering made pursuant to the Shelf Registration Statement (except as part of such Underwritten Registration). SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) the Company has failed either to use its best efforts to have such Registration Statement declared effective by the Commission pursuant to Section 3 of this Agreement or to have such Registration Statement declared effective by the Commission prior to the date specified for such effectiveness in Section 4 of this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) subject to the provisions of Section 6(c)(i) below, any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay liquidated damages to each Holder of Transfer Restricted Securities, with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of liquidated damages payable to each Holder shall increase by an additional $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder. All accrued liquidated damages shall be paid by the Company on each Damages Payment Date (i) to the Global Note Holder by wire transfer of immediately available funds and (ii) to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified, as provided in the Indenture. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. All obligations of the Company set forth in the preceding paragraph that are 8 9 outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company shall comply with all applicable provisions of Section 6(c) below, shall use its best efforts to effect such exchange and to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, following the date hereof there has been published a change in Commission policy with respect to exchange offers such as the Exchange Offer, such that in the reasonable opinion of counsel to the Company there is a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company hereby agrees to seek a no-action letter or other favorable decision from the Commission allowing the Company to Consummate an Exchange Offer for such Series A Senior Notes. The Company hereby agrees to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company hereby agrees to take all such other actions as are requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Series B Senior Notes to be issued in the Exchange Offer and (C) it is acquiring the Series B Senior Notes in its ordinary course of business. Each Holder hereby acknowledges and agrees (X) that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter 9 10 obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and (Y) that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series B Senior Notes obtained by such Holder in exchange for Series A Senior Notes acquired by such Holder directly from the Company or an Affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company shall provide, if requested by the Commission, a supplemental letter to the Commission (A) stating that the Company is registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that the Company has not entered into any arrangement or understanding with any Person to distribute the Series B Senior Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Senior Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Senior Notes received in the Exchange Offer and (C) including any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company shall comply with all of the provisions of Section 6(c) below and shall use its best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement in order to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Senior Notes by Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be 10 11 effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company promptly shall file an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of 11 12 such order at the earliest possible time; (iv) furnish to the Initial Purchaser, each of the selling Holders named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, shall reasonably object within five Business Days after the receipt thereof; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s) in connection with such sale, if any, make the Company's representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, reasonably may request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to any such underwriter(s), the purchase price being paid therefor and any other terms of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such 12 13 Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Senior Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s) in connection with such sale, if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement), and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by the Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company shall: (A) furnish to the Initial Purchaser, each selling Holder and each underwriter in connection with such sale, if any, and to each Restricted Broker Dealer in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, upon the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (x) the President or any Executive Vice President and (y) the principal financial officer of the Company, confirming, as of the date thereof, the matters set forth in paragraphs (a), (b), (f) and (j) of Section 9 of the Purchase Agreement and such other matters as such parties may reasonably request; 13 14 (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company covering the matters set forth in paragraph (h) of Section 9 of the Purchase Agreement and such other matters as the Holders and/or managing underwriter(s) reasonably may request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchaser's representatives and the Initial Purchaser's counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that on the basis of the foregoing (relying upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), that no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) customary comfort letters, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's past and present independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 7(l) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, 14 15 if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as reasonably may be requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (xi), if any. The provisions of this clause (A) shall be applicable at each closing under such underwriting or similar agreement, as and to the extent required thereunder and, if at any time the representations and warranties of the Company contemplated in clause (A)(1) above cease to be true and correct, the Company promptly shall so advise the Initial Purchaser and the underwriter(s) in connection with such sale, if any, and each selling Holder and each Restricted Broker Dealer and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s) in connection with such sale, if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) upon the request of any Holder of Series A Senior Notes covered by the Shelf Registration Statement, issue Series B Senior Notes, having an aggregate principal amount equal to the aggregate principal amount of Series A Senior Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder, such Series B Senior Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Senior Notes, as the case may be; in return, the Series A Senior Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s) in connection with such sale, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends, and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s) in connection with such sale, if any, may request at least two Business Days prior to any sale of Transfer Restricted Securities; 15 16 (xv) use its best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary in order to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities, and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to Consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to their security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Senior Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best 16 17 efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xxi) use its best efforts to cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority of the outstanding shares or aggregate principal amount of Series A Senior Notes, or the underwriters, if any; and (xxii) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15(d) of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(i) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of either such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by the Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Senior Notes to be issued in the Exchange Offer and printing of 17 18 Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing Senior Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. SECTION 8. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of each Holder and each controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Holder") to the fullest extent lawful, from and against any and all losses, claims, damages, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Person) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary Prospectus or Prospectus (including any amendments thereof and supplements thereto), or by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses are finally judicially determined by a competent court to have been caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to an Indemnified Holder furnished in writing to the Company by such Indemnified Holder expressly for use therein. The Company shall notify each Indemnified Holder promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation in connection with the matters addressed by this Agreement which involves the Company or an Indemnified Holder. (b) In case any action or proceeding (including any governmental regulatory 18 19 investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company in writing (provided, that the failure to give such notice shall not relieve the Company of its obligations pursuant to this Agreement). Such Indemnified Holder shall have the right to employ its own counsel (in addition to any local counsel) in any such action and the fees and expenses of such counsel shall be paid, as incurred, by the Company (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for the Indemnified Holders, which firm shall be designated by Donaldson, Lufkin & Jenrette Securities Corporation if Donaldson, Lufkin & Jenrette Securities Corporation is then an Indemnified Holder and otherwise by the Holders. The Company shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent will not be unreasonably withheld, and the Company agrees to indemnify and hold harmless each Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. Notwithstanding the immediately preceding sentence, if at any time an Indemnified Holder shall have requested an indemnifying party to reimburse the Indemnified Holder for fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than twenty business days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the Indemnified Holder in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of an Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of such Indemnified Holder from all Liabilities arising out of such action, claim, litigation or proceeding. (c) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company, and its directors, officers, and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company to each of the Indemnified Holders, but only with respect to losses, claims, damages, liabilities or expenses incurred in investigating, preparing, pursuing or defending claims and actions directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or omission or 19 20 alleged untrue statement of a material fact contained in any Registration Statement, preliminary Prospectus or Prospectus (including any amendments thereof and supplements thereto) that was made in reliance upon and in conformity with information relating to such Holder furnished in writing by or on behalf of such Holder expressly for use in any Registration Statement or Prospectus or any amendment or supplement thereto. In no event shall the liability of any selling Holder hereunder be greater than the amount by which the total proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation exceeds the sum of (A) the amount paid by such Holder for such Registrable Securities plus (B) the amount of any damages which such Holder has otherwise been required to pay by reason of a claim or action based on such information. (d) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Sections 8(a), 8(b) or 8(c) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Holders on the other hand from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and of the Indemnified Holder, as well as any other relevant equitable considerations. The relative benefits received by the Company and any Indemnified Holder shall be deemed to be in the same proportion as (x) the total proceeds from the offering of Senior Notes to the Initial Purchaser (net of discounts but before deducting expenses) received by the Company and (y) the total proceeds received by such Indemnified Holder upon its sale of Transfer Restricted Services which otherwise would give rise to the indemnification obligation, respectively. The relative fault of the Company, on the one hand, and of the Indemnified Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Indemnified Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other 20 21 fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any claim or action. Notwithstanding any other provision of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, an amount in excess of the amount by which the total proceeds received by such Holder with respect to the sale of its Transfer Restricted Securities pursuant to a Registration Statement exceeds the sum of (A) the amount paid by such Holder for such Transfer Restricted Securities plus (B) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the principal amount of Series A Senior Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act, to make available, upon request of any Holder of Transfer Restricted Securities, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. For any Underwritten Offering, the investment banker or investment bankers and manager or managers for any Underwritten Offering that will administer such offering will be selected by the Holders of a majority in aggregate 21 22 principal amount of the Transfer Restricted Securities included in such offering. Such investment bankers and managers are referred to herein as the "underwriters". SECTION 12. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE To the fullest extent permitted by applicable law, the Company irrevocably submits to the jurisdiction of any federal or state court in the City, County and State of New York, United States of America, in any suit or proceeding based on or arising under this Agreement (solely in connection with any such suit or proceeding), and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in any such court. The Company irrevocably and fully waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company hereby irrevocably designates and appoints Jeffery Boyd, Esq., 1133 Avenue of the Americas, New York, New York 10036 (the "Process Agent"), as the authorized agent of the Company upon whom process may be served in any such suit or proceeding, it being understood that the designation and appointment of Jeffery Boyd as such authorized agent shall become effective immediately without any further action on the part of the Company. The Company represents to the Initial Purchaser that it has notified the Process Agent of such designation and appointment and that the Process Agent has accepted the same in writing. The Company hereby irrevocably authorizes and directs the Process Agent to accept such service. The Company further agrees that service of process upon the Process Agent and written notice of said service to the Company mailed by prepaid registered first class mail or delivered to the Process Agent at its principal office, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the right of the Initial Purchaser or any person controlling the Initial Purchaser or any Indemnified Holder to serve process in any other manner permitted by law. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments as may be necessary to continue such designation and appointment of the Process Agent in full force and effect so long as the Company has any outstanding obligations under this Agreement. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of note, attachment prior to judgment, attachment in aid of execution, executor or otherwise) with respect to itself or its property, the Company hereby irrevocably waives such immunity in respect of their obligations under this Agreement, to the extent permitted by law. SECTION 13. OBLIGATION CURRENCY The obligation of the parties to make payments hereunder is in U.S. dollars (the "Obligation Currency") and such obligation shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency or any other realization in such other currency, whether as proceeds of set-off, security, guarantee, distributions, or otherwise, except to the extent to which such tender, recovery or realization shall result 22 23 in the effective receipt by the party which is to receive such payment of the full amount of the Obligation Currency expressed to be payable hereunder, and the party liable to make such payment agrees to indemnify the party which is to receive such payment (as an additional, separate and independent cause of action) for the amount (if any) by which such effective receipt shall fall short of the full amount of the Obligation Currency expressed to be payable hereunder and such obligation to indemnify shall not be affected by judgment being obtained for any other sums due under this Agreement. SECTION 14. MISCELLANEOUS (a) Remedies. Each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture, the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that a breach of any of the provisions of this Agreement will cause irreparable injury to the Holders, that monetary damages would not be adequate compensation for any loss incurred by reason of such breach, that the Holders have no adequate remedy by law in respect of such breach and, as a consequence, that each and every provision contained in this Agreement shall be specifically enforceable against the Company, and the Company hereby waives and agrees not to assert as a defense to the request or granting of specific performance of any such provision that any breach of any such provision does not or would not cause irreparable harm or is or would be compensable by an award of money damages in respect of such breach. (b) No Inconsistent Agreements. The Company will not enter, on or after the date of this Agreement, into any agreement with respect to its securities that would be inconsistent with the rights granted to the Holders in this Agreement or otherwise would conflict with the provisions hereof. The Company previously has not entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent in any way with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Senior Notes. The Company will not take any action, or permit any change to occur, with respect to the Senior Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 12(d)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates 23 24 exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, then at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company, then: Oxford Health Plans, Inc. 800 Connecticut Avenue Norwalk, Connecticut 06854 Telecopier No.: (203) 852-1442 Attention: Jeffery Boyd, Esq. With a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10014 Telecopier No.: (212) 558-3588 Attention: Dan Dunson, Esq. All such notices and communications shall be deemed to have been duly given as follows: (A) at the time delivered by hand, if personally delivered; (B) five Business Days after being deposited in the mail, postage prepaid, if mailed; (C) when answered back, if telexed; (D) when receipt acknowledged, if telecopied; and (E) on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be delivered concurrently to the Trustee, at the address specified in the Indenture, by the Person giving the same. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities directly from 24 25 such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 25 26 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. OXFORD HEALTH PLANS, INC. By: Name: Title: Accepted and agreed to as of the date first above written: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By:____________________________ Name: Title: EX-10.C 6 EXHIBIT 10.C 1 EXHIBIT 10.C INDENTURE, dated as of May 13, 1998, between Oxford Health Plans, Inc. a Delaware corporation ("the Company") and The Chase Manhattan Bank, as trustee (the "Trustee"). Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 11% Senior Notes due 2005 (the "Series A Senior Notes") and the 11% Series B Senior Notes due 2005 (the "Series B Senior Notes" and, together with the Series A Senior Notes, the "Senior Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS "Acquired Indebtedness" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary or is designated a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary or Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Applicable Procedures" means, with respect to any transfer or exchange of beneficial interests in a Global Senior Note, the rules and procedures of the Depository that apply to such transfer and exchange. "Asset Sale" means (i) the sale, lease (other than an operating lease), conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback, including any disposition by means of a merger, consolidation or similar transaction and including the issuance, sale or other transfer of any of the capital stock of any Restricted Subsidiary of such person) other than to the Company or to any of its Wholly Owned Subsidiaries (including the receipt of proceeds of insurance paid on account of the loss of or damage to any asset and awards of compensation for any asset taken by condemnation, eminent domain or similar proceeding) that have a fair market value (as determined in good faith by the Board of Directors of such Person) in excess of $2 million or for net cash proceeds in excess of $2 million); and (ii) the 2 2 issuance of Equity Interests in any Restricted Subsidiaries or the sale of any Equity Interests in any Restricted Subsidiaries, in each case, in one or a series of related transactions, provided, that notwithstanding the foregoing, the term "Asset Sale" shall not include: (a) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company, as permitted pursuant to Section 5.1 hereof, (b) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business and consistent with past practice, including, without limitation, the sale of any investments constituting a portion of an investment portfolio in the ordinary course of business and consistent with past practice, (c) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (d) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (e) Permitted Investments, (f) any cash dividend, distribution, Investment or payment made pursuant to the first or second paragraph of Section 4.10 hereof, (g) the sale or transfer of surplus or obsolete equipment in the ordinary course of business, (h) a pledge of all or any part of the Capital Stock of any Restricted Subsidiary or a Lien on any other property or asset of a Restricted Subsidiary permitted by the Indenture or (i) Excluded Asset Sales. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended, to the extent the lease payments during such extension period are required to be capitalized on a balance sheet as a liability in accordance with GAAP). "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of a limited liability company or similar entity, any membership or similar interests therein, (iii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iv) in the case of a partnership, partnership interests (whether general or limited) and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (i) U.S. Government Obligations or securities that 3 3 would be U.S. Government Obligations if such securities were not callable or redeemable at the option of the issuer thereof, in each case maturing not more than one year after the date of acquisition; (ii) any certificate of deposit, maturing not more than one year after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $100.0 million or its equivalent in foreign currency, whose debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or "Aa" (or higher) according to Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iii) obligations issued or fully guaranteed by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii), above entered into with any financial institution meeting the qualifications specified in clause (ii) above; and (v) commercial paper having one of the two of the highest ratings obtainable from either Moody's or S&P and in each case maturing within one year after the date of acquisition. "CEDEL" means Cedel Bank, societe anonyme. "Definitive Senior Notes" means Senior Notes that are substantially in the form of the Senior Note attached hereto as Exhibit A, that do not include the information or text called for by footnotes 1 and 3. "Change of Control" means such time as (i) the Company becomes aware that, a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) other than the Permitted Holders has become, directly or indirectly, the "beneficial owner", by way of merger, consolidation or otherwise, of 51% or more of the voting power of the voting stock of the Company on a fully-diluted basis after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Company (whether or not such securities are then currently convertible or exercisable), (ii) the sale, lease or transfer of all or substantially all of the assets of the Company to any person or group (other than the Permitted Holders), or (iii) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by the Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved or was approved by the Permitted Holders) cease for any reason to constitute a majority of the directors of the Company then in office. "Commission" means the Securities and Exchange Commission. "Consolidated Cashflow" means, with respect to the Company and its Restricted Subsidiaries for any period, the sum of, without duplication, (i) the Consolidated Net 4 4 Income for such period, plus (ii) to the extent deducted from Consolidated Net Income for such period, (x) the Fixed Charges for such period, plus (y) non-cash dividends on the Company's preferred stock, plus (iii) Consolidated Income Taxes for such period, plus (iv) consolidated depreciation, amortization (including amortization of goodwill and other intangibles), depletion and other non-cash charges of the Company and its Restricted Subsidiaries required to be reflected as expenses on the books and records of the Company, minus (v) cash payments with respect to any nonrecurring, non-cash charges previously added back pursuant to clause (iv). Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cashflow only to the extent that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Income Taxes" means, with respect to any Person for any period, taxes imposed upon such Person or other payments required to be made by such Person by any governmental authority which taxes or other payments are calculated by reference to the income or profits of such Person or such Person and its Subsidiaries (to the extent such income or profits were included in computing Consolidated Net Income for such period), regardless of whether such taxes or payments are required to be remitted to any governmental authority. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net Income of, or any dividends or other distributions from, any Unrestricted Subsidiary, to the extent otherwise included, shall be excluded, whether or not distributed to the Company or one or its Restricted Subsidiaries, (iii) without duplication, (x) losses of any Restricted Subsidiary shall be excluded with respect to the calculation under Section 4.12 hereof, (y) Net Income of any Restricted Subsidiary shall be excluded with respect to the calculation under such covenant to the extent that such Net Income has not been dividended or distributed in cash to the Company, and (z) intercompany payments to the Company by the Restricted Subsidiaries shall be included in Net Income of the Company and intercompany payments by the Company to the Restricted Subsidiaries shall be deducted from Net Income with respect to the calculation under such covenant, (iv) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (v) the cumulative effect of a change in accounting principles shall be excluded, and (vi) income or loss attributable to discontinued operations shall be excluded. "Consolidated Net Worth" of a Person at any date means the amount by which the assets of such Person and its consolidated Restricted Subsidiaries (less any revaluation or other write-up subsequent to the date of the Indenture in any such assets 5 5 (other than write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business)) exceed the sum of (a) the total liabilities of such Person and its consolidated Subsidiaries, plus (b) any Disqualified Stock of such Person or any consolidated Restricted Subsidiaries of such Person issued to any Person other than such Person or a wholly owned Restricted Subsidiary of such Person, in each case determined in accordance with GAAP. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 10.2 hereof or such other address as to which the Trustee may give notice to the Company. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Depositary" means, with respect to the Senior Notes issuable or issued in whole or in part in global form, the Person specified in the Indenture as the Depositary with respect to the Senior Notes, until a successor shall have been appointed and become such Depositary pursuant to the applicable provision of the Indenture, and, thereafter, "Depositary" shall mean or include such successor. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, is convertible or exchangeable for Indebtedness or Disqualified Stock or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date which is 91 days after the date that the Senior Notes mature. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Exchange Notes for Senior Notes. "Exchange Senior Notes" means the Series B Senior Notes to be issued in exchange for the Series A Senior Notes pursuant to the Registration Rights Agreement. "Excluded Asset Sales" means the sale of the capital stock or assets of American Psych Systems, Inc., Ralin Medical, Inc., Opticare Eye Health Centers, Inc., Oxford Health Plans (IL), Inc., Oxford Health Plan (FL), Inc., St. Augustine Health Care Inc. (Florida), the Medicaid businesses of Subsidiaries of Oxford in New Hampshire, New Jersey, New York, Florida and Pennsylvania, Oxford Specialty, Direct Script, Inc., Oxford On-Call, Inc., Oxford Health Centers, Inc., the Company's dental business and Collegiate Healthcare, Inc., in an aggregate amount of consideration not to exceed $55 million. To the extent the Company makes a Permitted Investment as described in 6 6 clause (xiii) of the definition thereof, cash and Marketable Securities from Excluded Asset Sales in an amount equal to such Investment shall be deemed proceeds from Asset Sales and subject to Section 4.10 hereof. To the extent the aggregate amount of consideration from Excluded Asset Sales received by the Company and its Restricted Subsidiaries equals or exceeds $55 million, such excess shall be deemed proceeds from Asset Sales and subject to Section 4.10 hereof. "Existing Indebtedness" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Term Loan Agreement) in existence on the date of the Indenture, until such amounts are repaid. "Euroclear" means Morgan Guaranty Trust Company of New York, the Brussels office, as operator of the Euroclear system. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon), and (iv) all dividend payments, whether or not in cash, on any series of preferred stock of any such Person payable to a party other than the Company or a Wholly Owned Subsidiary, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cashflow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or repays any Indebtedness (other than the incurrence or repayment of revolving credit borrowings used for working capital, except to the extent that a repayment is accompanied by a permanent reduction in revolving credit commitments) or issues preferred stock subsequent to the commencement of the four-quarter reference period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, 7 7 assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and shall give pro forma effect to the Consolidated Cashflow and Indebtedness of the Person which is the subject of any such acquisition (as well as any pro forma expense and cost reductions attributable thereto), and (ii) the Consolidated Cashflow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and Consolidated Cashflow shall reflect any pro forma expense and cost reductions relating to such discontinuance, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles in the United States which are in effect on the date of the Indenture. "Global Senior Notes" means, collectively, the U.S. Global Senior Note and the Reg S Global Senior Note. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Healthcare Service Business" means a business, the majority of whose revenues are derived from providing or arranging to provide or administering, managing or monitoring healthcare services or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including, without limitation, the issuance of health insurance. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Senior Note is registered on the Registrar's books. "Indebtedness" means, with respect to any Person, any indebtedness of such 8 8 Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person), the maximum fixed repurchase price of Disqualified Stock issued by such Person in each case, if held by any Person other than the Company or a Wholly Owned Subsidiary of the Company, and, to the extent not otherwise included, the guarantee by such Person of any indebtedness of any other Person. For the purposes of this definition, the "maximum fixed repurchase price" of Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Disqualified Stock. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds an interest through a Participant. "Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities Corporation. "Institutional Accredited Investor" means an entity which is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Investment Grade Securities" means: (i) U.S. Government Obligations; (ii) any certificate of deposit, maturing not more than 270 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $100.0 million or its equivalent in foreign currency, whose debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iii) commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) with a rating, at the time as of which any investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or higher) according to Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iv) any bankers acceptances or any money market deposit accounts, in each case, issued or offered by any commercial bank 9 9 having capital and surplus in excess of $100 million or its equivalent in foreign currency, whose debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (v) any other debt securities or debt instruments with a rating of "BBB -- " or higher by S&P, "Baa-3" or higher by Moody's, Class "2" or higher by the NAIC or the equivalent of such rating by S&P, Moody's or the NAIC, or if none of S&P, Moody's and the NAIC shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; and (vi) any fund investing exclusively in investments of the types described in clauses (i) through (v) above. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel, relocation and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided that an acquisition of assets, Equity Interests or other securities by the Company for consideration consisting of common equity securities of the Company shall not be deemed to be an Investment. "Issue Date" means the date on which Senior Notes are originally issued under the Indenture. "Legal Holiday" means a Saturday, a Sunday or a day on which federal offices or banking institutions in the City of New York, in the city of the principal Corporate Trust Office of the Trustee, or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages owing pursuant to the Registration Rights Agreement. "Marketable Securities" means debt or equity securities that are registered and, in the case of debt securities, are rated in one of the four highest ratings by one or more nationally recognized rating agencies. 10 10 "Maturity Date" means May 15, 2005. "Minority Investment" means an Investment in an Equity Interest in a Person which Investment is held by the Company or a Restricted Subsidiary such that the Company and its Restricted Subsidiaries do not have more than 50% of the voting control over all outstanding Equity Interests in such Person. "Moody's" means Moody's Investors Service, Inc. and its successors. "NAIC" means the National Association of Insurance Commissioners and its successors. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, and, for purposes of clause (b)(i) of Section 4.11 hereof, and for purposes of Section 4.12 hereof, before reduction for non-cash preferred stock dividends and for purposes of clause (b)(ii) of Section 4.11 hereof, before reduction for preferred stock dividends, excluding in each case, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss) and (iii) for purposes of Section 1.12 hereof, any capital contributions made or required to be made by the Company. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP and net of any Purchase Money Obligations relating to the assets comprising such Asset Sale. "Non-Insurance Litigation" means claims, investigations, proceedings and litigation arising out of or relating to federal or state law relating to the purchase or sale of securities, including without limitation stockholders derivative actions. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, keepwell, makewell, agreement or instrument that would constitute Indebtedness) or (b) is directly or 11 11 indirectly liable (as a guarantor or otherwise), (ii) no default with respect to which (including any rights that the Holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing that they will not have any recourse against any of the assets of the Company or its Restricted Subsidiaries. "Note Custodian" means the Trustee, as custodian with respect to the Global Senior Notes, or any successor entity thereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means the Offering Memorandum dated May 7, 1998, relating to the Company's offering and placement of the Senior Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 10.5 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 10.5 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Oxford Specialty" means Oxford Specialty Holdings, Inc., Oxford Specialty Management, Inc., Specialty Management Company (NY) IPA, Inc., Specialty Management Company (PA) IPA, Inc., Specialty Management Company (NJ) IPA, Inc. and Specialty Management Company (CT) IPA, Inc. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment to the Senior Notes. Pari passu means equal to and without preference, each to the other. "Participant" means, with respect to DTC, Euroclear or Cedel, a Person who has an account with DTC, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). 12 12 "Permitted Holders" means TPG Oxford LLC and its Affiliates. "Permitted Investments" means (i) any Investments in the Company or in any of its Restricted Subsidiaries; (ii) any Investment in any Person that becomes a Restricted Subsidiary as a result of such Investment provided that the Company, after giving pro forma effect to such Investment, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.12 hereof; (iii) Investments in existence, or made pursuant to legally binding written commitments in existence, on the Issue Date; (iv) Investments in cash, Cash Equivalents and Investment Grade Securities; (v) loans or advances to employees made in the ordinary course of business; (vi) receivables owing to the Company or any Restricted Subsidiary in the ordinary course of business; (vii) repurchase agreements and reverse repurchase agreements entered into by a Restricted Subsidiary with any lender or any primary dealer of United States government securities relating to Investment Grade Securities maturing within one year from the date of acquisition thereof; provided, that the terms of any such agreement comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy-Repurchase Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985 and, in the case of a repurchase agreement with a primary dealer, a Restricted Subsidiary of the Company or its duly authorized custodian shall take possession of the obligations subject to such agreement; (viii) Investments in Hedging Obligations and other similar agreements or arrangements designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the value of Investments of the Company and its Restricted Subsidiaries, in each case to the extent permitted under the Indenture; (ix) accounts receivable created or acquired, and prepaid expenses arising, in the ordinary course of business; (x) the endorsements of negotiable instruments for collection or deposit in the ordinary course of business; (xi) Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (xii) Investments in securities of trade creditors or customers received in settlement of obligations or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (xiii) Investments in St. Augustine Health Care, Inc. made after the Issue Date in an amount not to exceed $6,000,000; (xiv) Investments in an aggregate amount not to exceed $2.5 million at any one time outstanding which shall be in addition to Investments which may be made pursuant to clauses (i) through (xiii) above). "Permitted Liens" means (i) Liens securing Indebtedness incurred pursuant to any credit agreement or credit facility that is permitted by the terms of the Indenture to be outstanding (including, without limitation, Liens securing Indebtedness incurred under the Term Loan Agreement); (ii) Liens in favor of the Company or any Restricted Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were not incurred in connection with, or in contemplation of, such merger or consolidation and such Liens do not extend to any assets of the Company or any of its Restricted Subsidiaries other than the assets of the 13 13 Person so merged into or consolidated with the Company or such Restricted Subsidiary; (iv) Liens on property existing at the time of acquisition thereof by the Company or any of its Restricted Subsidiary; provided that such Liens were not incurred in connection with, or in contemplation of, such acquisition and do not extend to any assets of the Company or any of its Restricted Subsidiaries other than the property so acquired; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds or performance bonds, or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in any case incurred in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor; (vi) Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Indebtedness (to the extent permitted under the Indenture) of Unrestricted Subsidiaries; (ix) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any of its Restricted Subsidiaries; (x) statutory Liens of landlords or of mortgagees of landlords arising by operation of law, provided that the rental payments secured thereby are not yet due and payable; (xi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (xii) Purchase Money Liens (including extensions and renewals thereof); (xiii) interests of lessors in capital or operating leases; (xiv) Liens on deposits made in connection with hedging arrangements; (xv) Liens encumbering deposits made to secure obligations arising from statutory or regulatory, requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (xvi) prejudgment Liens and judgment Liens not giving rise to a Default or Event of Default so long as any appropriate legal proceeding that may have been duly initiated for the review of such judgment shall not have been finally terminated or so long as the period within which such proceeding may be initiated shall not have expired; and (xvii) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations permitted under the Indenture that do not exceed $1 million in principal amount in the aggregate at any one time outstanding. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness (including the issuance of Disqualified Stock in exchange for Disqualified Stock) of the Company or any of its Restricted Subsidiaries (other than Indebtedness under the Term Loan Agreement); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the outstanding principal amount (or then current accreted value, if applicable) and redemption premium of, plus accrued and unpaid interest on, the Indebtedness so 14 14 extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date at least as late as the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Senior Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Senior Notes on terms at least as favorable to the Holders of Senior Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, or other business entity or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Principal Subsidiary" means Oxford Health Plans (NY), Inc., Oxford Health Plans (NJ), Inc., Oxford Health Plans (CT), Inc. and Oxford Health Insurance, Inc. "Public Equity Offering" means an underwritten public offering pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of the Company) filed with the Commission of Equity Interests other than Disqualified Stock of the Company or any successor to the Company. "Purchase Money Lien" means a Lien granted on an asset or property to secure a Purchase Money Obligation permitted to be incurred under the Indenture and incurred solely to finance the purchase, or the cost of construction or improvement, of such asset or property; provided however, that such Lien encumbers only such asset or property and is granted within 180 days of such acquisition. "Purchase Money Obligations" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction or improvement, of real or personal property to be used in the business of such Person or any of its Restricted Subsidiaries in an amount that is not more than 100% of the cost, or fair market value, as appropriate, of such property, and incurred within 90 days after the date of such acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business). "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. 15 15 "Qualified Insurance Payments" means payments made by third party insurers to the Company and the Restricted Subsidiaries in respect of Non-Insurance Litigation, less reimbursement payments required from the Company or its Restricted Subsidiaries in connection with such payments. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of the Indenture, by and among the Company and the Initial Purchaser, as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S under the Securities Act. "Representative" means the indenture trustee or other trustee, client or representative for any senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Beneficial Interest" means any beneficial interest of a Participant or Indirect Participant in the U.S. Global Senior Note or the Reg S Global Senior Note. "Restricted Global Senior Note" means the U.S. Global Senior Note and the Reg S Global Senior Note, each of which shall bear the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "S&P" means Standard & Poor's Ratings Group and its successors. "Securities Act" means the Securities Act of 1933, as amended. "Senior Note Custodian" means the Trustee, as custodian for the Depository with respect to the Senior Notes in global form, or any successor entity thereto. "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Exchange Act, as such Regulation is in effect on the date hereof. 16 16 "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Term Loan Agreement" means, collectively, (i) that certain Term Loan Agreement, as in effect on the date of the Indenture, by and among the Company, the lenders that may be from time to time parties thereto and Donaldson, Lufkin & Jenrette Securities Corporation, as arranger, DLJ Capital Funding, Inc., as syndication agent, and IBJ Schroder Bank & Trust Company, as facility manager, together with all related guarantees, notes and collateral agreements, as the foregoing may from time to time be amended, renewed, supplemented, extended, substituted, replaced, refinanced, restructured or otherwise modified at the option of the parties thereto, including increases in the principal amount thereof and including successive substitutions, replacements and refinancings; and (ii) after the Term Loan Agreement has been terminated and all then outstanding Indebtedness thereunder or with respect thereto have been repaid in full in cash and discharged, any successors to or replacements of (as designated by the Board of Directors of the Company in its sole judgment, and evidenced by a resolution) such Term Loan Agreement, as such successors or replacements may from time to time be amended, renewed, supplemented, extended, substituted, replaced, refinanced, restructured or otherwise modified, including increases in the principal amount thereof. "TPG Investment Agreement" means the Investment Agreement dated as of February 23, 1998 between TPG Oxford LLC and Oxford Health Plans, Inc. "TPG Securities" means the securities issued by the Company pursuant to the TPG Investment Agreement. "Transfer Restricted Senior Notes" means Senior Notes that bear or are required to bear the Private Placement Legend. "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which the Indenture is qualified under the Trust Indenture Act. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Senior Notes" means one or more Global Senior Notes that do not and are not required to bear the Private Placement Legend. 17 17 "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe for additional Equity Interests or (2) to maintain or preserve such Person's financial condition or to cause such Person to achieve or maintain any specified levels of profitability; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.12 hereof and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at 18 18 any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares or shares required by applicable law to be held by third parties) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person. Unrestricted Subsidiaries shall not be included in the definition of Wholly Owned Subsidiary for any purposes of the Indenture. SECTION 1.2 OTHER DEFINITIONS
Defined Term in Section ---- ---------- "Affiliate Transaction" 4.16 "Asset Sale Offer" 4.8 "Asset Sale Offer Period" 4.8 "Asset Sale Offer Amount" 4.8 "Asset Sale Purchase Date" 4.8 "Bankruptcy Law" 6.1 "Change of Control Offer" 4.9 "Change of Control Offer Period" 4.9 "Change of Control Payment" 4.9 "Change of Control Purchase Date" 4.9 "Covenant Defeasance" 8.3 "Custodian" 6.1 "Distribution Compliance Period" 2.1 "DTC" 2.3 "Event of Default" 6.1 "Excess Proceeds" 4.8 "Group of Subsidiaries" 6.1 "incur" 4.12 "Interest" 2.13 "Legal Defeasance" 8.2 "Notice of Default" 6.1 "Paying Agent" 2.3 "Payment Default" 6.1 "Private Placement Legend" 2.6 "Reg S Global Senior Note" 2.1 "Registrar" 2.3 "Restricted Payments" 4.11 "Senior Notes" Preamble "Series A Senior Notes" Preamble
19 19
Defined Term in Section ---- ---------- "Series B Senior Notes" Preamble "U.S. Global Senior Note" 2.1
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings: "indenture securities" means the Senior Notes; "indenture security Holder" means a Holder of a Senior Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Senior Notes means the Company and any successor thereto. All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by the Trust Indenture Act reference to another statute or defined by Commission rule under the Trust Indenture Act have the meanings so assigned to them. SECTION 1.4 RULES OF CONSTRUCTION Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. 20 20 ARTICLE 2 THE SENIOR NOTES SECTION 2.1 FORM AND DATING (a) The Senior Notes and the Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit A hereto. The Senior Notes may have notations, legends or endorsements required by law, stock exchange rule or usage and as provided to the Trustee in writing by the Company. Each Senior Note shall be dated the date of its authentication. The Senior Notes shall be in denominations of $1,000 and integral multiples thereof. The Series A Senior Notes and the Series B Senior Notes will be the same except that the Private Placement Legend will be omitted from the Series B Senior Notes. The terms and provisions contained in the Senior Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (b) Global Senior Notes. The Senior Notes offered and sold to (i) QIBs in reliance on Rule 144A shall be issued initially in the form of U.S. Global Senior Notes (the "U.S. Global Senior Notes") which shall be deposited on behalf of the purchasers of the Senior Notes represented thereby with the Senior Note Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Senior Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. The Senior Notes being offered and sold in offshore transactions in reliance on Regulation S, if any, initially will be in the form of one or more registered, global book-entry notes without interest coupons (the "Reg S Global Senior Notes"). The Reg S Global Senior Notes will be deposited with the Trustee, as custodian for DTC, in New York, New York, and registered in the name of a nominee of DTC for credit to the accounts of Indirect Participants at Euroclear and Cedel. During the 40-day period commencing on the day after the later of the offering date and the original Issue Date of the Senior Notes (the "Distribution Compliance Period"), beneficial interests in the Reg S Global Senior Note may be held only through the DTC participants for Euroclear or CEDEL, and, pursuant to DTC's procedures, Indirect Participants that hold a beneficial interest in the Reg S Global Senior Note will not be able to transfer such interest to a person that takes delivery thereof in the form of an interest in the U.S. Global Senior Notes. After the Distribution Compliance Period expires and upon receipt by the Trustee of an Officer's Certificate from the Company stating that such expiration has occurred, (i) beneficial interests in the Reg S Global Senior Notes may be transferred to a person that takes delivery in the form of an interest in the U.S. Global Senior Notes and (ii) beneficial interests in the U.S. Global 21 21 Senior Notes may be transferred to a person that takes delivery in the form of an interest in the Reg S Global Senior Notes, provided, in each case, that the certification requirements described below are complied with. The aggregate principal amount of the Reg S Global Senior Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. Each Global Senior Note shall represent such of the outstanding Senior Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Senior Notes from time to time endorsed thereon and that the aggregate amount of outstanding Senior Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and transfers of interests. Any endorsement of a Global Senior Note to reflect the amount of any increase or decrease in the amount of outstanding Senior Notes represented thereby shall be made by the Trustee or the Senior Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.6 hereof. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "Management Regulations" and "Instructions to Participants" of Cedel shall be applicable to interests in the Reg S Global Senior Notes that are held by Participants through Euroclear or Cedel. The Trustee shall have no obligation to notify Holders of any such procedures or to monitor or enforce compliance with the same. Except as set forth in Section 2.6 hereof, the Global Senior Notes may be transferred, in whole and not in part, only to another nominee of the Depository or to a successor of the Depository or its nominee. (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to Global Senior Notes deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver the Global Senior Notes that (i) shall be registered in the name of the Depository or the nominee of the Depository and (ii) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instructions or held by the Senior Note Custodian. Participants shall have no rights either under this Indenture with respect to any Global Senior Note held on their behalf by the Depository or by the Senior Note Custodian as custodian for the Depository or under such Global Senior Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Senior Note for all purposes whatsoever under the Indenture. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Participants, the operation of 22 22 customary practices of such Depository governing the exercise of the rights of an owner of a beneficial interest in any Global Senior Note. (d) Certificated Senior Notes. Senior Notes issued in certificated form shall be substantially in the form of Exhibit A attached hereto (but without including the text referred to in footnotes 1 and 3 thereto). (e) Provisions Applicable to Forms of Notes. The Senior Notes may also have such additional provisions, omissions, variations or substitutions as are not inconsistent with the provisions of this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with this Indenture, any applicable law or with any rules made pursuant thereto or with the rules of any securities exchange or governmental agency or as may be determined consistently herewith by the Officers of the Company executing such Senior Notes, as conclusively evidenced by their execution of such Senior Notes. All Senior Notes will be otherwise substantially identical except as provided herein. Subject to the provisions of this Article 2, a Holder of a Global Senior Note may grant proxies and otherwise authorize any Person to take any action that a Holder is entitled to take under this Indenture or the Senior Notes. The Senior Notes shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. SECTION 2.2 EXECUTION AND AUTHENTICATION Two Officers shall sign the Senior Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Senior Note no longer holds that office at the time a Senior Note is authenticated, the Senior Note shall nevertheless be valid. A Senior Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Senior Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Senior Notes shall be substantially as set forth in Exhibit A hereto. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Senior Notes. An authenticating agent may authenticate Senior Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. 23 23 The Trustee shall authenticate Senior Notes for an original issue in the aggregate principal amount not to exceed $200,000,000 upon a written order of the Company in the form of an Officer's Certificate and an Opinion of Counsel in a form reasonably acceptable to the Trustee. The Officer's Certificate shall specify the amount of Senior Notes to be authenticated and the date on which they are to be authenticated. Upon receipt by the Trustee of an Officers' Certificate from the Company stating that a Registration Statement covering the Series A Senior Notes has become effective, together with a written order of the Company in the form of an Officers' Certificate requesting the authentication of the Exchange Senior Notes and an Opinion of Counsel relating to the Exchange Senior Notes, the Trustee shall authenticate the Exchange Senior Notes in like principal amount of Series A Senior Notes delivered for cancellation, in an amount not to exceed $200,000,000. Notwithstanding anything to the contrary contained herein, the aggregate principal amount of Series A Senior Notes, together with the aggregate principal amount of Exchange Senior Notes shall not exceed $200,000,000 at any time. SECTION 2.3 REGISTRAR AND PAYING AGENT The Company shall maintain (i) an office or agency where Senior Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) an office or agency where Senior Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Senior Notes and of their transfer and exchange. The Company may appoint one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints the Depository Trust Company ("DTC") to act as Depository with respect to the Global Senior Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Senior Note Custodian with respect to the Global Senior Notes. SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Senior Notes, and shall notify the Trustee in writing of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money 24 24 held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Senior Notes. SECTION 2.5 HOLDER LISTS The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Senior Notes, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.6 TRANSFER AND EXCHANGE (a) Transfer and Exchange of Global Senior Notes. The transfer and exchange of beneficial interests in Global Senior Notes shall be effected through the Depository, in accordance with this Indenture and the procedures of the Depository therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in a Global Senior Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Senior Note in accordance with the transfer restrictions set forth in the legend in subsection (g) of this Section 2.6. Transfers of beneficial interests in the Global Senior Notes to Persons required to take delivery thereof in the form of an interest in another Global Senior Note shall be permitted as follows: (i) U.S. Global Senior Note to Reg S Global Senior Note. If, at any time, an owner of a beneficial interest in a U.S. Global Senior Note deposited with the Depository (or the Senior Note Custodian) wishes to transfer its beneficial interest in such U.S. Global Senior Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Reg S Global Senior Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Reg S Global Senior Note as provided in this Section 2.6(a)(i). Upon receipt by the Trustee of (1) instructions given in accordance with the Applicable Procedures from a Participant directing the Trustee to credit or cause to be credited a beneficial interest in the Reg S Global Senior Note in an amount equal to the beneficial interest in the U.S. Global Senior Note to be exchanged, (2) a written order given in accordance with the Applicable Procedures 25 25 containing information regarding the Participant account of the Depository and the DTC participants for/or Euroclear or Cedel account to be credited with such increase, (3) a certificate in the form of Exhibit B-1 hereto given by the owner of such beneficial interest stating that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Senior Notes and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S, and (4) if requested by the Company or the Trustee, the delivery of an opinion of counsel, a certificate in the form of Exhibit B-1 hereto and/or other information satisfactory to them, then the Trustee, as Registrar, shall instruct the Depository to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable U.S. Global Senior Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable Reg S Global Senior Note by the principal amount at maturity of the beneficial interest in the U.S. Global Senior Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions, a beneficial interest in the Reg S Global Senior Note equal to the reduction in the aggregate principal amount at maturity of the U.S. Global Senior Note, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the U.S. Global Senior Note that is being exchanged or transferred. (ii) Reg S Global Senior Note to U.S. Global Senior Note. If, at any time, prior to the expiration of the Distribution Compliance Period, an owner of a beneficial interest in a Reg S Global Senior Note deposited with the Depository or with the Senior Note Custodian wishes to transfer its beneficial interest in such Reg S Global Senior Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a U.S. Global Senior Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a U.S. Global Senior Note as provided in this Section 2.6(a)(ii). Upon receipt by the Trustee of (1) instructions from the DTC participants for/or Euroclear or Cedel, if applicable, and the Depository, directing the Trustee, as Registrar, to credit or cause to be credited a beneficial interest in the U.S. Global Senior Note equal to the beneficial interest in the Reg S Global Senior Note to be exchanged, such instructions to contain information regarding the Participant account with the Depository to be credited with such increase, (2) a written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depository and (3) a certificate in the form of Exhibit B-2 attached hereto given by the owner of such beneficial interest stating that if the transfer is pursuant to Rule 144A, that the Person transferring such interest in a Reg S Global Senior Note reasonably believes that the Person acquiring such interest in a U.S. Global Senior Note is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable 26 26 blue sky or securities laws of any state of the United States in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction, then the Trustee, as Registrar, shall instruct the Depository to reduce or cause to be reduced the aggregate principal amount at maturity of such Reg S Global Senior Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable U.S. Global Senior Note by the principal amount at maturity of the beneficial interest in the Reg S Global Senior Note to be exchanged or transferred, and the Trustee, as Registrar, shall instruct the Depository, concurrently with such redemption, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the applicable U.S. Global Senior Note equal to the reduction in the aggregate principal amount at maturity of such Reg S Global Senior Note and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Reg S Global Senior Note that is being exchanged or transferred. (iii) Restricted Global Senior Notes to Institutional Accredited Investor. If, at any time, an owner of a beneficial interest in a Restricted Global Senior Note deposited with the Depository (or the Senior Note Custodian) wishes to transfer its beneficial interest in such Restricted Global Senior Note to a Person who is an Institutional Accredited Investor, such owner shall, subject to the Applicable Procedures and the other provisions of this Section 2.6, exchange or cause the exchange of such interest for a Restricted Certificated Senior Note in like aggregate principal amount as provided in this Section 2.6(a)(iii). Upon receipt by the Trustee of (1) instructions given in accordance with the Applicable Procedures from a Participant directing the Trustee to exchange a beneficial interest in the Restricted Global Senior Note for a Restricted Certificated Senior Note in like aggregate principal amount, (2) a written order given in accordance with the Applicable Procedures containing information regarding the name in which such Certificated Senior Note shall be registered, and (3) a certificate in the form of Exhibit C hereto given by the proposed transferee, together, and, if the Company should so request, an Opinion of Counsel provided by the transferor or the transferee (a copy of which the Transferor attaches to such certificate), in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act, then the Trustee, as Registrar, shall authenticate a Certificated Senior Note as registered in the name of the Person specified in such instructions, in an aggregate principal amount equal to the amount to be debited, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the Restricted Global Senior Note that is being exchanged or transferred. (b) Transfer and Exchange of Certificated Senior Notes. When Certificated Senior Notes are presented by a Holder to the Registrar with a request to register the 27 27 transfer of the Certificated Senior Notes or to exchange such Certificated Senior Notes for an equal principal amount of Certificated Senior Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested only if the Certificated Senior Notes are presented or surrendered for registration of transfer or exchange, are endorsed and contain a signature guarantee or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney and contains a signature guarantee, duly authorized in writing and the Registrar received the following documentation (all of which may be submitted by facsimile): (i) in the case of Certificated Senior Notes that are Transfer Restricted Senior Notes, such request shall be accompanied by the following additional information and documents, as applicable: (A) if such Transfer Restricted Global Note is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Transfer Restricted Global Note is being transferred to the Company, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); or (B) if such Transfer Restricted Global Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in an offshore transaction pursuant to and in compliance with Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); or (C) if such Transfer Restricted Global Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraph (B) above, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto), a certification substantially in the form of Exhibit C hereto, and, if requested by the Company, an Opinion of Counsel acceptable to the Company that such transfer is in compliance with the Securities Act; or (D) if such Transfer Restricted Global Note is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. 28 28 (c) Transfer of a Beneficial Interest in a U.S. Global Senior Note or Reg S Global Senior Note for a Certificated Senior Note. (i) Any Person having a beneficial interest in a U.S. Global Senior Note or Reg S Global Senior Note may upon request, subject to the Applicable Procedures, exchange such beneficial interest for a Certificated Senior Note. Upon receipt by the Trustee of written instructions or such other form of written instructions as is customary for the Depository (or Euroclear or Cedel, if applicable), from the Depository or its nominee on behalf of any Person having a beneficial interest in a U.S. Global Senior Note or Reg S Global Senior Note, and, in the case of a Transfer Restricted Global Note, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification to that effect from such Person (in substantially the form of Exhibit B-4 hereto); (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in an offshore transaction pursuant to and in compliance with Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto); (C) if such beneficial interest is being transferred to an Institutional Accredited Investor, pursuant to a private placement exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-4 hereto) and a certification from the applicable transferee (in substantially the form of Exhibit C hereto) and, if requested by the Company, an Opinion of Counsel acceptable to the Company that such transfer is in compliance with the Securities Act; or (D) if such beneficial interest is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto) and an Opinion of Counsel from the transferee or the transferor reasonably acceptable to the Company and to the 29 29 Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Senior Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depository and the Senior Note Custodian, cause the aggregate principal amount of U.S. Global Senior Notes or Reg S Global Senior Notes, as applicable, to be reduced accordingly and, following such reduction, the Company shall execute and, the Trustee shall authenticate and deliver to the transferee a Certificated Senior Note in the appropriate principal amount. (ii) Certificated Senior Notes issued in exchange for a beneficial interest in a U.S. Global Senior Note or Reg S Global Senior Note, as applicable, pursuant to this Section 2.6(c) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its Participants or Indirect Participants or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver such Certificated Senior Notes to the Persons in whose names such Senior Notes are so registered. Following any such issuance of Certificated Senior Notes, the Trustee, as Registrar, shall instruct the Depository to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Global Senior Note to reflect the transfer. (d) Restrictions on Transfer and Exchange of Global Senior Notes. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.6), a Global Senior Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (e) Authentication of Certificated Senior Notes in Absence of Depository. If at any time: (i) the Depository (A) notifies the Company that it is unwilling or unable to continue as depositary for the Global Senior Notes and the Company thereupon fails to appoint a successor depositary within 90 days or (B) has ceased to be a clearing agency registered under the Exchange Act (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Certificated Senior Notes under this Indenture, or (iii) there shall have occurred and be continuing a Default or an Event 30 30 of Default with respect to the Senior Notes. then the Company shall, execute, and the Trustee shall, upon receipt of an authentication order in accordance with Section 2.2 hereof, authenticate and deliver, Certificated Senior Notes in an aggregate principal amount equal to the principal amount of the Global Senior Notes in exchange for such Global Senior Notes. (f) Legends. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Senior Note certificate evidencing Global Senior Notes and Certificated Senior Notes (and all Senior Notes issued in exchange therefor or substitution thereof) shall bear a legend (the "Private Placement Legend") in substantially the following form: "THIS SENIOR NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS SENIOR NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SENIOR NOTE EXCEPT (A) TO THE COMPANY, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SENIOR NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL 31 31 AMOUNT OF SENIOR NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SENIOR NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING." (ii) Upon any sale or transfer of a Transfer Restricted Global Note (including any Transfer Restricted Global Note represented by a Global Senior Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Global Note that is a Certificated Senior Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Global Note for a Certificated Senior Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Global Note upon receipt of a certification from the transferring holder substantially in the form of Exhibit B-4 hereto; and (B) in the case of any Transfer Restricted Global Note represented by a Global Senior Note, such Transfer Restricted Global Note shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.6(a) and (b) hereof; provided, however, that with respect to any request for an exchange of a Transfer Restricted Global Note that is represented by a Global Senior Note for a Certificated Senior Note that does not bear the legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall 32 32 certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B-4 hereto). (iii) Upon any sale or transfer of a Transfer Restricted Global Note (including any Transfer Restricted Global Note represented by a Global Senior Note) in reliance on any exemption from the registration requirements of the Securities Act (other than exemptions pursuant to Rule 144A or Rule 144 under the Securities Act) in which the Holder or the transferee provides an Opinion of Counsel to the Company and the Registrar in form and substance reasonably acceptable to the Company and the Registrar (which Opinion of Counsel shall also state that the transfer restrictions contained in the legend are no longer applicable): (A) in the case of any Transfer Restricted Global Note that is a Certificated Senior Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Global Note for a Certificated Senior Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Global Note; and (B) in the case of any Transfer Restricted Global Note represented by a Global Senior Note, such Transfer Restricted Global Note shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.6(a) and (b) hereof. (iv) Notwithstanding the foregoing, upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.2 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Senior Notes in aggregate principal amount equal to the principal amount of the Restricted Beneficial Interests validly tendered and not properly withdrawn by Persons that certify in the letter of transmittal delivered in the Exchange Offer that they are not (x) brokerdealers, (y) Persons participating in the distribution of the Series B Senior Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Certificated Senior Notes that do not bear the Private Placement Legend in an aggregate principal amount equal to the principal amount of the Restricted Certificated Senior Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Senior Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global 33 33 Senior Notes to be reduced accordingly and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Certificated Senior Notes so accepted Certificated Senior Notes in the appropriate principal amount. Notwithstanding anything to the contrary contained herein, unless and until there is an effective Registration Statement covering the Senior Notes, the Company shall direct the Trustee in writing with respect to the removal of legends. (g) Cancellation and/or Adjustment of Global Senior Notes. At such time as all beneficial interests in Global Senior Notes have been exchanged for Certificated Senior Notes, redeemed, repurchased or cancelled, all Global Senior Notes shall be cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Senior Note is exchanged for Certificated Senior Notes, redeemed, repurchased or cancelled, the principal amount of Senior Notes represented by such Global Senior Note shall be reduced accordingly and an endorsement shall be made on such Global Senior Note, by the Trustee or the Senior Notes Custodian, at the direction of the Trustee, to reflect such reduction. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Senior Notes and Certificated Senior Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any stamp or transfer tax or similar governmental charge payable in connection therewith (other than any such stamp or transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.6, 4.10, 4.14 and 9.5 hereto). (iii) All Global Senior Notes and Certificated Senior Notes issued upon any registration of transfer or exchange of Global Senior Notes or Certificated Senior Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Senior Notes or Certificated Senior Notes surrendered upon such registration of transfer or exchange. (iv) The Registrar shall not be required: (A) to issue, to register the transfer of or to exchange Senior Notes during a period beginning at the opening of fifteen (15) Business Days before the day of any selection of Senior Notes for redemption under Section 3.2 hereof and ending at the close of business on the day of selection, (B) to 34 34 register the transfer of or to exchange any Senior Note so selected for redemption in whole or in part, except the unredeemed portion of any Senior Note being redeemed in part, or (C) to register the transfer of or to exchange a Senior Note between a record date and the next succeeding interest payment date. (v) Prior to due presentment for the registration of a transfer of any Senior Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Senior Note is registered as the absolute owner of such Senior Note for the purpose of receiving payment of principal of and interest on such Senior Notes and for all other purposes, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Senior Notes and Certificated Senior Notes in accordance with the provisions of Section 2.2 hereof. Notwithstanding anything to the contrary contained herein, the Trustee shall have no duty whatsoever to monitor compliance with federal or state securities laws. SECTION 2.7 REPLACEMENT OF SENIOR NOTES If any mutilated Senior Note is surrendered to the Trustee, or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Senior Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Senior Note if the Trustee's requirements are met. The Trustee and the Company shall require an indemnity bond to be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Senior Note is replaced. The Company may charge for its expenses in replacing a Senior Note. Every replacement Senior Note is a replacement obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Senior Notes duly issued hereunder. SECTION 2.8 OUTSTANDING SENIOR NOTES The Senior Notes outstanding at any time are all the Senior Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Senior Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.9 hereof, a Senior Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Senior Note. 35 35 If a Senior Note is replaced pursuant to Section 2.7 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Senior Note is held by a bona fide purchaser. If the principal amount of any Senior Note is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Senior Notes payable on that date, then on and after that date such Senior Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.9 TREASURY SENIOR NOTES In determining whether the Holders of the required principal amount of Senior Notes have concurred in any direction, waiver or consent, Senior Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Senior Notes that a Trustee receives an Officer's Certificate stating that such Senior Notes are so owned shall be so disregarded. SECTION 2.10 TEMPORARY SENIOR NOTES Until definitive Senior Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Senior Notes upon a written order of the Company signed by two Officers of the Company. Temporary Senior Notes shall be substantially in the form of definitive Senior Notes but may have variations that the Company considers appropriate for temporary Senior Notes and as shall be reasonably acceptable to the Trustee. without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Senior Notes in exchange for temporary Senior Notes. Holders of temporary Senior Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11 CANCELLATION The Company at any time may deliver Senior Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Senior Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Senior Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Senior Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Senior Notes shall be delivered to the 36 36 Company. The Company may not issue new Senior Notes to replace Senior Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12 DEFAULTED INTEREST If the Company defaults in a payment of interest on the Senior Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Senior Notes and in Section 4.1 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Senior Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13 RECORD DATE The record date for purposes of determining the identity of Holders of the Senior Notes entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA Section 316(c). SECTION 2.14 COMPUTATION OF INTEREST Interest on the Senior Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 2.15 CUSIP NUMBER The Company in issuing the Senior Notes may use a "CUSIP" number, and if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Senior Notes and that reliance may be placed only on the other identification numbers printed on the Senior Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.1 NOTICES TO TRUSTEE If the Company elects to redeem Senior Notes pursuant to the optional 37 37 redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Senior Notes to be redeemed and (iv) the redemption price. SECTION 3.2 SELECTION OF SENIOR NOTES TO BE REDEEMED If less than all of the Senior Notes are to be redeemed at any time, selection of the Senior Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Senior Notes are listed or, if the Senior Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Senior Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Senior Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Senior Notes selected for redemption and, in the case of any Senior Note selected for partial redemption, the portion of the principal amount thereof to be redeemed. Senior Notes and portions of Senior Notes selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Senior Notes of a Holder are to be redeemed, the entire outstanding amount of Senior Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Senior Notes called for redemption also apply to portions of Senior Notes called for redemption. SECTION 3.3 NOTICE OF REDEMPTION At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Senior Notes are to be redeemed at its registered address. The notice shall identify the Senior Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Senior Note is being redeemed in part, the portion of the principal amount of such Senior Note to be redeemed and that, after the redemption date upon surrender of such Senior Note, a new Senior Note or Senior Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Senior Note; (d) the name and address of the Paying Agent; 38 38 (e) that Senior Notes called for redemption (other than a Global Senior Note) must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Senior Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Senior Notes and/or Section of this Indenture pursuant to which the Senior Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Senior Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date (unless a shorter time is acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.3 hereof, Senior Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.5 DEPOSIT OF REDEMPTION PRICE On or prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued and unpaid interest, if any, on and Liquidated Damages, if any, on all Senior Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Senior Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Senior Notes or the portions of Senior Notes called for redemption. If a Senior Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Senior Note was registered at the close of business on such record date. If any Senior Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and 39 39 to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Senior Notes and in Section 4.1 hereof. SECTION 3.6 SENIOR NOTES REDEEMED IN PART Upon surrender of a Senior Note (other than a Global Senior Note) that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Senior Note equal in principal amount to the unredeemed portion of the Senior Note surrendered. The records of the Registrar and the Depositary shall reflect any partial redemption of any Global Senior Note. SECTION 3.7 OPTIONAL REDEMPTION (a) Except as set forth in clauses (b) and (c) of this Section 3.7, the Senior Notes shall not be redeemable at the Company's option prior to May 15, 2002. Thereafter, the Senior Notes shall be subject to redemption for cash at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to each Holder of Senior Notes to be redeemed at the following redemption prices (expressed as percentages of principal amount thereof) if redeemed during the twelve-month period beginning on May 15, 2002 of each of the years indicated below, in each case together with any accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date):
YEAR PERCENTAGE 2002 105.500% 2003 102.750% 2004 and thereafter 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.7, at any time on or before May 15, 2001, the Company may (but shall not have the obligation to) redeem for cash up to 33-1/3% of the original aggregate principal amount of the Senior Notes at a redemption price of 111% of the principal amount thereof, in each case plus any accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of a Public Equity Offering; provided that at least 66-2/3% of the original aggregate principal amount of the Senior Notes remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. (c) Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Section 3.1 through 3.6 hereof. 40 40 SECTION 3.8 NO MANDATORY REDEMPTION Except as set forth in Section 4.9 and Section 4.10, the Company shall not be required to make any mandatory redemption, purchase or sinking fund payments with respect to the Senior Notes prior to the Maturity Date. ARTICLE 4 COVENANTS SECTION 4.1 PAYMENT OF SENIOR NOTES The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Senior Notes on the dates and in the manner provided in the Senior Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall promptly notify the Trustee of a Registration Default (as defined in the Registration Rights Agreement) under the Registration Rights Agreement and any cure thereof by delivery of an Officers' Certificate setting forth the Liquidated Damages due for $1,000 in aggregate principal amount. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Senior Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Senior Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Senior Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the principal Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Senior Notes may be presented or surrendered for any or 41 41 all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the principal Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.3 hereof. SECTION 4.3 CORPORATE EXISTENCE Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of each of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of each of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Senior Notes. SECTION 4.4 MAINTENANCE OF PROPERTIES AND INSURANCE (a) The Company shall cause all material properties owned by or leased by it or any of its Subsidiaries useful and necessary to the conduct of its business or the business of any of its Subsidiaries to be improved or maintained and kept in normal condition, repair and working order and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 4.4 shall prevent the Company or any of its Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors or of the board of directors of any Subsidiary of the Company concerned, or of an officer (or other agent employed by the Company or of any of its Subsidiaries) of the Company or any of its Subsidiaries having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Subsidiary of the Company, and if such discontinuance or disposal is not adverse in any material respect to the Holders. (b) To the extent available at commercially reasonable rates, the Company shall maintain, and shall cause its Subsidiaries, to the extent such Subsidiaries maintain operations, to maintain, insurance with responsible carriers against such risks and in 42 42 such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses, of similar size. SECTION 4.5 COMPLIANCE WITH LAWS The Company shall comply, and shall cause each of its respective Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.6 REPORTS (a) Whether or not required by the Exchange Act or the rules and regulations of the Commission, so long as any Senior Notes are outstanding, the Company shall furnish to all Holders of Senior Notes within 15 days after it is or would have been required to file such with the Commission, all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-K, 10-Q or 8-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the independent public accountants of the Company. In addition, whether or not required by the rules and regulations of the Commission, the Company will file copies of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and will promptly make such information available to securities analysts and prospective investors upon request. (b) For so long as any Senior Notes remain outstanding, the Company will furnish to all Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act. SECTION 4.7 TAXES The Company shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Senior Notes. SECTION 4.8 STAY, EXTENSION AND USURY LAWS The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at 43 43 any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.9 CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Senior Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Senior Notes pursuant to the procedures required by this Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Senior Notes as a result of a Change of Control. The Change of Control Offer will remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Change of Control Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Change of Control Purchase Date"), the Company shall purchase all Senior Notes validly tendered and not properly withdrawn pursuant to the Change of Control Offer. Payment for any Senior Notes so purchased shall be made in the same manner as interest payments are made on the Senior Notes. If the Change of Control Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the Person in whose name a Senior Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Senior Notes pursuant to the Change of Control Offer. Upon the commencement of a Change of Control Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy of each such notice to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Senior Notes pursuant to the Change of Control Offer. The Change of Control Offer shall be made to all Holders. The notice, which shall govern the terms of the Change of Control Offer, shall state: (a) that the Change of Control Offer is being made pursuant to this 44 44 covenant and the length of time the Change of Control Offer shall remain open; (b) the purchase price and the Change of Control Purchase Date; (c) that any Senior Note which is not validly tendered or are otherwise not accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Senior Note accepted for payment pursuant to the Change of Control Offer shall cease to accrete or accrue interest after the Change of Control Purchase Date; (e) that Holders electing to have a Senior Note purchased pursuant to any Change of Control Offer shall be required to surrender the Senior Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Change of Control Purchase Date; and (f) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Change of Control Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Senior Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Senior Note purchased. On the Change of Control Purchase Date, the Company shall, to the extent lawful, (1) accept for payment all Senior Notes or portions thereof validly tendered and not properly withdrawn pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Senior Notes or portions thereof so validly tendered and not properly withdrawn and (3) deliver or cause to be delivered to the Trustee the Senior Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Senior Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Senior Notes so validly tendered and not properly withdrawn the Change of Control Payment for such Senior Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Senior Note equal in principal amount to any unpurchased portion of the Senior Notes surrendered, if any; provided that each such new Senior Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on the Change of Control Purchase Date. SECTION 4.10 ASSET SALES AND EXCLUDED ASSET The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the 45 45 fair market value of the assets or Equity Interests sold or otherwise disposed of and, in the case of a lease of assets, a lease providing for rent and other conditions which are no less favorable to the Company (or the Restricted Subsidiary, as the case may be) in any material respect than the then prevailing market conditions (evidenced in each case by a resolution of the Board of Directors of such entity set forth in an Officers' Certificate delivered to the Trustee upon which the Trustee may conclusively rely) and (ii) at least 75% (100% in the case of lease payments) of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of any liabilities (as shown on the most recent balance sheet of the Company or such Restricted Subsidiary) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Senior Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability shall be deemed to be cash for the purposes of clause (ii). The Company will cause its Restricted Subsidiaries to transfer to the Company all consideration received by the Restricted Subsidiaries from Asset Sales and Excluded Asset Sales as promptly as practicable, except in the case of Asset Sales to the extent the proceeds thereof are applied as set forth in clause (a)(iii) or (b) of the immediately following paragraph. Within 364 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the Restricted Subsidiary, as applicable) may (a) apply such Net Proceeds (i) to make an investment in, to make a capital expenditure relating to, or to acquire other tangible assets in, the commercial group health benefit business in New York, New Jersey, or Connecticut, (ii) to the reduction of Indebtedness under the Term Loan Agreement or the permanent reduction of any other Pari Passu Indebtedness of the Company or the permanent reduction of any long-term Indebtedness of a Restricted Subsidiary, or (iii) to make capital contributions to regulated Restricted Subsidiaries covering commercial lives operating in New York, New Jersey or Connecticut which contributions are required by law or requested in writing to be made by the appropriate state regulatory authorities or (b) with respect to Net Proceeds received from an Asset Sale by a regulated Restricted Subsidiary which are not permitted by appropriate state regulatory authorities to be distributed or otherwise transferred, retain such Net Proceeds as capital of such regulated Restricted Subsidiary. Any Net Proceeds from Asset Sales that are not applied or invested or committed to be applied or invested, as provided in the preceding sentence of this paragraph will be deemed to constitute "Excess Proceeds". On the earlier of (i) the 365th day after an Asset Sale or (ii) such date as the Board of the Company or the Restricted Subsidiary determines not to apply the Net Proceeds relating to such Asset Sale in the manner set forth above, if the aggregate amount of Excess Proceeds exceeds $20 million, the Company will be required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Senior Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the 46 46 Indenture. To the extent that the aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Senior Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes to be purchased on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Asset Sale Offer will remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Asset Sale Offer Period"). No later than five Business Days after the termination of the Asset Sale Offer Period (the "Asset Sale Purchase Date"), the Company will purchase the principal amount of Senior Notes required to be purchased pursuant to this covenant (the "Asset Sale Offer Amount") or, if less than the Asset Sale Offer Amount has been validly tendered and not properly withdrawn, all Senior Notes validly tendered and not properly withdrawn in response to the Asset Sale Offer. Payment for any Senior Notes so purchased shall be made in the same manner as interest payments are made on the Senior Notes. If the Asset Sale Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Liquidated Damages, if any, will be paid to the Person in whose name a Senior Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Senior Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Senior Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this covenant and the length of time the Asset Sale Offer shall remain open; (b) the Asset Sale Offer Amount, the purchase price and the Asset Sale Purchase Date; (c) that any Senior Note which are not validly tendered or are not otherwise accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Senior Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Asset Sale Purchase Date; (e) that Holders electing to have a Senior Note purchased pursuant to any 47 47 Asset Sale Offer shall be required to surrender the Senior Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Asset Sale Purchase Date; (f) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Senior Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Senior Note purchased; (g) that, if the aggregate principal amount of Senior Notes surrendered by Holders exceeds the Asset Sale Offer Amount, the Company shall select the Senior Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Senior Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (h) that Holders whose Senior Notes were purchased only in part shall be issued new Senior Notes equal in principal amount to the unpurchased portion of the Senior Notes surrendered (or transferred by book-entry transfer). On or before the Asset Sale Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Sale Offer Amount of Senior Notes or portions thereof validly tendered and not properly withdrawn pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been validly tendered and not properly withdrawn, all Senior Notes validly tendered and not properly withdrawn, and shall deliver to the Trustee an Officers' Certificate stating that such Senior Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this covenant. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Senior Notes validly tendered and not properly withdrawn by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Senior Note, and the Trustee, upon delivery of an Officers' Certificate from the Company, shall authenticate and mail or deliver such new Senior Note to such Holder, in a principal amount equal to any unpurchased portion of the Senior Note surrendered. Any Senior Note not so accepted will be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase Date. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Senior Notes pursuant to any Asset Sale Offer. The Company agrees that (i) a sale of the stock or assets of FPA Medical 48 48 Management, Inc. shall be for cash only, (ii) at least 50% of the consideration received by the Company or a Restricted Subsidiary from the sale of stock or assets of Oxford Specialty and Oxford Health Plans (NH), Inc. shall be cash or Marketable Securities, (iii) there shall be no restrictions on the consideration received by the Company and its Restricted Subsidiaries from the sale of the stock or assets of or Indebtedness issued by a Minority Investment or the New York, New Jersey, Florida or Pennsylvania Medicaid business, Oxford Health Plans (IL), Inc. or Oxford Health Plans (FL), Inc. and (iv) the consideration received by the Company and its Restricted Subsidiaries from all other Excluded Asset Sales shall be cash. The Company and its Restricted Subsidiaries will sell all such Marketable Securities for cash no later than the earlier of 60 days from receipt and the termination or expiration of any governmental limitation of such sale. SECTION 4.11 RESTRICTED PAYMENTS The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Wholly Owned Subsidiary of the Company or dividends payable in preferred stock in accordance with the TPG Investment Agreement as in effect on the closing date); or make any payment (other than in Equity Interests (other than Disqualified Stock)) in connection with any settlement or resolution of any Non-Insurance Litigation involving the Company or any of its Restricted Subsidiaries (excluding Qualified Insurance Payments); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary of the Company (other than any such Equity Interests owned by the Company or any Restricted Subsidiary of the Company); (iii) prepay, purchase, redeem, defease or otherwise acquire or retire for value prior to its stated maturity any Indebtedness that is subordinated to the Senior Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) (i) at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four quarter period, the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Restricted Payment is made would have been at least 2.25 to 1; and (ii) such Restricted Payment when taken together with all other Restricted Payments relating to such period shall not exceed 50% of Consolidated Net Income of the Company for the most recently ended four fiscal quarters for which internal 49 49 financial statements are available immediately preceding the date on which such Restricted Payment is made. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the making of any Restricted Payment (other than the payment of a dividend) in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of, or from substantially concurrent additional capital contributions in respect of, Equity Interests of the Company (other than Disqualified Stock); (iii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of, or from substantially concurrent additional capital contributions in respect of, other Equity Interests of the Company (other than any Disqualified Stock); (iv) the defeasance, redemption or repurchase of subordinated Indebtedness with the net cash proceeds from (X) an incurrence of Permitted Refinancing Indebtedness or (Y) the substantially concurrent sale (other than to a Subsidiary of the Company) of, or from substantially concurrent additional capital contributions in respect of, Equity Interests of the Company (other than Disqualified Stock); (v) an exchange of Disqualified Stock for Disqualified Stock that constitutes Permitted Refinancing Indebtedness; and (vi) any dividend or other distribution made by any Wholly Owned Subsidiary of the Company to another Wholly Owned Subsidiary of the Company or to the Company; provided, however, that in the case of any transaction described in clauses (ii) through (vi) no Default or Event of Default will have occurred and be continuing immediately after such transaction. The Board of Directors may designate any Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default or Event of Default. For purposes of making such determination, all outstanding Investments after the Issue Date by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) will be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee upon which the Trustee may conclusively rely) on the date of the Restricted Payment of the asset(s) proposed to be transferred by the Company or the applicable Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company will deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this covenant were computed, which calculations may be based upon the Company's latest available financial statements. 50 50 SECTION 4.12 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness) and the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; and (ii) no Default or Event of Default will have occurred and be continuing or would occur as a consequence thereof. The foregoing provisions will not apply to: (i) the incurrence by the Company of Indebtedness under the Term Loan Agreement (and any guarantees by the Company's Subsidiaries with respect thereto) provided that the aggregate principal amount of all Indebtedness outstanding under the Term Loan Agreement does not, at any time, exceed $150 million; (ii) the incurrence by the Company of Indebtedness represented by the Senior Notes; (iii) all Existing Indebtedness; (iv) the incurrence by the Company or its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, Purchase Money Obligations or similar financing transactions relating to its properties, assets and rights acquired after the Issue Date, provided that the aggregate principal amount of such Indebtedness under this clause does not exceed 100% of the cost of such properties, assets and rights; (v) the incurrence by the Company or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness of such entity that was permitted by the Indenture to be incurred; (vi) the incurrence by the Company or any Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any Wholly Owned Subsidiaries or between or among any Wholly Owned Subsidiaries; 51 51 provided, however, that (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than a Wholly Owned Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Subsidiary will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence, assumption or creation of Hedging Obligations of the Company or a Restricted Subsidiary pursuant to interest rate protection obligations, but only to the extent that the stated aggregate notional amounts of such obligations do not exceed 100% of the aggregate principal amount of the Indebtedness covered by such interest rate protection obligations; (viii) the incurrence by the Company or any Restricted Subsidiaries of Indebtedness constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement-type obligations regarding workers' compensation claims; (ix) the incurrence by the Company or any Restricted Subsidiaries of obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiaries in the ordinary course of business; (x) the incurrence or assumption by the Company or any Restricted Subsidiaries of Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed by the Company or a Restricted Subsidiary in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition or otherwise; provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition; and (xi) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness in an aggregate principal amount of up to $50 million which shall be in addition to amounts which may be incurred pursuant to clauses (i) through (x) above. Notwithstanding any other provision of this covenant, a guarantee of Indebtedness permitted by the terms of the Indenture at the time such Indebtedness was incurred will not constitute a separate incurrence of Indebtedness. In the event that Indebtedness falls within more than one category of 52 52 permitted Indebtedness under the Indenture, the Company will determine the applicable category and such Indebtedness will only be counted once. If Indebtedness is issued at less than the principal amount thereof, the amount of such Indebtedness for purposes of the above limitations shall equal the amount of the liability as determined in accordance with GAAP. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided, however, that the Company or any of its Restricted Subsidiaries may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.12 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.14 hereof, (ii) the net cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee upon which the Trustee can conclusively rely) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the proceeds of such transaction are applied in compliance with, Section 4.10 hereof. SECTION 4.14 LIENS The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien securing Indebtedness of any kind (other than Permitted Liens) upon any of its property or assets, now owned or hereafter acquired, or upon any income or profits therefrom, or assign or convey any right to receive income therefrom, unless contemporaneously therewith effective provision is made to secure the Indebtedness under this Indenture and the Senior Notes on an equal and ratable basis with (or prior to in the case of Liens with respect to obligations subordinated to the Senior Notes) the Indebtedness so secured for so long as such Indebtedness is secured by such Lien. SECTION 4.15 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or 53 53 assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of the Indenture, (b) the Term Loan Agreement as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the Term Loan Agreement as in effect on the date of the Indenture, (c) the Indenture and the Senior Notes, (d) any instrument governing Acquired Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Acquired Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (e) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (f) customary non-assignment provisions in licenses, leases and agreements relating to intellectual property entered into in the ordinary course of business and consistent with past practices, (g) agreements relating to the financing of the acquisition of real or tangible personal property acquired after the date of the Indenture, provided that such encumbrance or restriction relates only to the property which is acquired and in the case of any encumbrance or restriction that constitutes a Lien, such Lien constitutes a Purchase Money Lien, (h) any law or any governmental regulation or order or pursuant to any agreement or understanding with any regulatory body or agency; provided that, if such order would prevent the Company from making a payment under the Indenture, the Company has used its reasonable efforts to have any such order diminished or removed by any regulator authorized to do so and to obtain any exemptive orders from the relevant regulator with respect to such encumbrance or restriction to the extent such exemptive orders are reasonably practicable under applicable laws and regulations, or (i) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary. SECTION 4.16 TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is in the ordinary course of business, (ii) the terms of such Affiliate Transaction are fair and reasonable to the Company or such Restricted Subsidiary, as the case may be, and are at least as favorable as the terms which could be obtained by the Company or such Restricted Subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties and (iii) the Company delivers to the 54 54 Trustee (a) with respect to any Affiliate Transaction entered into after the date of the Indenture involving aggregate consideration in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction involving aggregate consideration in excess of $5 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an investment banking firm or appraisal firm of national standing; provided that the following will not be deemed to be Affiliate Transactions; (u) the transactions contemplated by the TPG Investment Agreement and the TPG Securities or any exchange of Disqualified Stock under paragraph (v) of Section 4.12 hereof or amendment to the Certificates of Designations in lieu of any such exchange; (v) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers and directors of the Company or any Restricted Subsidiary as determined in good faith by the appropriate Board of Directors or senior management; (w) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture and which comply with the terms of clause (ii) above; (x) transactions constituting Permitted Investments; (y) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary (including, without limitation, any such employment agreements entered into prior to the date of the Indenture) and (z) transactions between or among the Company and/or its Restricted Subsidiaries. SECTION 4.17 LINE OF BUSINESS The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than (i) the Healthcare Service Business and such business activities incidental or related thereto and (ii) acting as a holding company for companies engaged in the businesses specified in (i) above. SECTION 4.18 LIMITATION AS TO UNRESTRICTED SUBSIDIARIES The Company will not permit any Unrestricted Subsidiary to create, assume, incur, guarantee or otherwise become liable in respect of any Indebtedness except Non-Recourse Debt; provided, however, if any such Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to constitute an incurrence of Indebtedness by the Company or a Restricted Subsidiary subject to Section 4.12 hereof. The Company and its Restricted Subsidiaries will not designate, create or purchase any Unrestricted Subsidiary, unless the Board of Directors of the Company shall have made a determination (as set forth in the resolution approving such designation, creation or purchase) that the designation, creation and operation of the Unrestricted Subsidiary is not reasonably expected to materially and adversely affect the financial condition, business, or operations of the Company and its Restricted Subsidiaries taken together as a whole (which resolution shall be conclusive evidence of compliance with this 55 55 provision). SECTION 4.19 LIMITATION ON SALE OF STOCK OR ASSETS OF PRINCIPAL SUBSIDIARIES Except for a transaction subject to the provisions of Section 5.1 hereof, or a transaction described under the definition of "Excluded Asset Sales" in Section 1.1 hereof, the Company will not, and will not permit any Subsidiary to, directly or indirectly, sell, transfer, convey or otherwise dispose of (other than to the Company or a Wholly Owned Restricted Subsidiary of the Company) any Capital Stock of a Principal Subsidiary or any securities convertible into or warrants, rights or options to subscribe for Capital Stock of any Principal Subsidiary, and the Company will not permit any Principal Subsidiary to issue, sell, transfer, convey or otherwise dispose of (other than to the Company or a Wholly Owned Restricted Subsidiary of the Company) any of its Capital Stock or securities convertible into or rights, warrants or options to subscribe for its Capital Stock or sell, transfer, convey or otherwise dispose of any of its group contracts or subscriber contracts relating to commercial group health benefit plans. SECTION 4.20 PAYMENTS FOR CONSENTS Neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Senior Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Senior Notes unless such consideration is offered to be paid or is paid to all Holders of the Senior Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.21 LIMITATIONS ON ISSUANCE OF GUARANTEES The Company will not permit any Restricted Subsidiary, directly or indirectly, to guarantee or secure any Pari Passu Indebtedness (other than the Term Loan Agreement) or any Subordinated Indebtedness unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Trustee providing for the guarantee of the payment of the Senior Notes by such Restricted Subsidiary; provided that, in the case of any Subordinated Indebtedness, the guarantee of the Senior Notes is senior to any guarantee of such Subordinated Indebtedness. Notwithstanding the foregoing, any such guarantee by a Restricted Subsidiary of the Senior Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged upon either (i) the release or discharge of such guarantee of payment of Pari Passu Indebtedness or any Subordinated Indebtedness, as applicable, or (ii) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's stock in, or all or substantially all the assets of, such Restricted Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture, including, without limitation, the provisions of Section 5.1 hereof. 56 56 SECTION 4.22 COMPLIANCE CERTIFICATE (a) the Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Senior Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.6(a) hereof shall be accompanied by a written statement of the independent public accountants of the Company (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof (except that, such written statement need not address the Company's compliance with the provisions of Sections 4.02 or 4.14 hereof) or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) the Company shall, so long as any of the Senior Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. ARTICLE 5 SUCCESSORS SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not the Company is the surviving corporation), or directly and/or indirectly through its Restricted Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its 57 57 properties or assets determined on a consolidated basis for the Company and its Restricted Subsidiaries taken as a whole in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of one of the states of the United States or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Senior Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default shall occur and be continuing or result as a consequence thereof; (iv) except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.12 hereof; (v) if any of the property or assets of the Company would thereupon become subject to any Lien, the outstanding Senior Notes shall be secured equally and ratably with (or prior to) the obligation or liability secured by such Lien, unless the Company could create such Lien without equally and ratably securing the Senior Notes; and (vi) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Trustee with respect to the foregoing matters. SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to "the Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor of the Company shall not be relieved from the obligation to pay the principal, premium, if any, and interest and Liquidated Damages, if any, on the Senior Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.1 hereof. 58 58 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1 EVENTS OF DEFAULT An "Event of Default" occurs if: (A) the Company defaults in the payment of interest on, or Liquidated Damages with respect to, any Senior Note when the same becomes due and payable and the Default continues for a period of 30 days; (B) the Company defaults in the payment of the principal of or premium, if any, on any Senior Note when the same becomes due and payable at maturity, upon redemption or otherwise; (C) the Company fails to observe or perform any covenant, condition or agreement on the part of the Company to be observed or performed pursuant to Sections 4.9, 4.10, 4.11 or 5.1 hereof; (D) the Company fails to comply with any of its other agreements or covenants in, or provisions of, the Senior Notes or this Indenture and the Default continues for a period of 30 days after the notice thereof to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in principal amount of the outstanding Senior Notes; (E) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), other than Indebtedness owed to the Company or a Wholly Owned Subsidiary, whether such Indebtedness or guarantee exists on the date of this Indenture or shall be created thereafter, which default (a) is caused by a failure to pay when due (after giving effect to any grace period related thereto) any principal of or premium, if any, or interest on such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (F) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries and such judgment or judgments remain undischarged or unpaid or stayed for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such 59 59 undischarged and unpaid judgments exceeds $10.0 million (net of any amounts with respect to which a reputable and creditworthy insurance company has acknowledged liability in writing); (G) the Company or any of its Significant Subsidiaries or group of Restricted Subsidiaries that, together taken (as of the latest audited consolidated financial statement for the Company and its Subsidiaries), would constitute a Significant Subsidiary (a "Group of Subsidiaries"), pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (H) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any Significant Subsidiary or Group of Subsidiaries in an involuntary case, or (b) appoints a Custodian of the Company or any Significant Subsidiary or Group of Subsidiaries or for all or substantially all of the property of the Company or any Significant Subsidiary or Group of Subsidiaries, or (c) orders the liquidation of the Company or any Significant Subsidiary or Group of Subsidiaries, (d) and in each case the order or decree remains unstayed and in effect for 30 consecutive days. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. An Event of Default shall not be deemed to have occurred under clause (C), (E) or (F) until a Responsible Officer of the Trustee shall have received written notice from the Company or any of the Holders or unless a Responsible Officer shall have obtained actual knowledge of such Event of Default. The notice referred to in 60 60 clause (D) must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." SECTION 6.2 ACCELERATION If an Event of Default (other than an Event of Default specified in clauses (G) or (H) of Section 6.1 relating to the Company, any Significant Subsidiary or any Group of Subsidiaries) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Senior Notes by written notice to the Company and the Trustee may declare the unpaid principal of and any accrued interest and Liquidated Damages, if any, on all the Senior Notes to be due and payable. Upon such declaration the principal and interest and Liquidated Damages, if any, shall be due and payable immediately (together with the premium referred to in Section 6.1, if applicable). If an Event of Default specified in clause (G) or (H) of Section 6.1 relating to the Company, any Significant Subsidiary or any Group of Subsidiaries occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Senior Notes by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or interest or Liquidated Damages that has become due solely because of the acceleration) have been cured or waived. The Trustee may withhold from Holders of the Senior Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the event of a declaration of acceleration of the Senior Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness specified in clause (E) of Section 6.1 hereof, the declaration of acceleration of the Senior Notes shall be automatically annulled if the holders of any Indebtedness specified in clause (E) of Section 6.1 hereof have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (a) the annulment of the acceleration of Senior Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (b) all existing Events of Default, except nonpayment of principal or interest on the Senior Notes that became due solely because of the acceleration of the Senior Notes, have been cured or waived. SECTION 6.3 OTHER REMEDIES If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Senior Notes or to enforce the performance of any provision of the Senior Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Senior Notes or does not produce any of them in the proceeding. A delay or 61 61 omission by the Trustee or any Holder of a Senior Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.4 WAIVER OF PAST DEFAULTS Subject to Section 6.7 and Section 9.2, Holders of not less than a majority in aggregate principal amount of the then outstanding Senior Notes by notice to the Trustee may on behalf of the Holders of all of the Senior Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Senior Notes (including in connection with an offer to purchase). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.5 CONTROL BY MAJORITY Holders of a majority in principal amount of the then outstanding Senior Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of other Holders of Senior Notes or that may involve the Trustee in personal liability. SECTION 6.6 LIMITATION ON SUITS A Holder of a Senior Note may pursue a remedy with respect to this Indenture or the Senior Notes only if: (a) the Holder of a Senior Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Senior Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Senior Note or Holders of Senior Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and 62 62 (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Senior Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Senior Note may not use this Indenture to prejudice the rights of another Holder of a Senior Note or to obtain a preference or priority over another Holder of a Senior Note. SECTION 6.7 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT Notwithstanding any other provision of this Indenture, the right of any Holder of a Senior Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Senior Note, on or after the respective due dates expressed in the Senior Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8 COLLECTION SUIT BY TRUSTEE If an Event of Default specified in Section 6.1(A) or (B) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Senior Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.7. SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Senior Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Senior Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, 63 63 dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Senior Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Senior Notes for amounts due and unpaid on the Senior Notes for principal and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Senior Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Senior Notes pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Senior Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Senior Notes. ARTICLE 7 TRUSTEE SECTION 7.1 DUTIES OF TRUSTEE 64 64 (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it 65 65 except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2 RIGHTS OF TRUSTEE (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture and subject to Section 7.2(b), any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.1 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.1(A) (other than with respect to Liquidated Damages ) or 6.1(B), or (ii) any Default or Event of Default of which a Responsible Officer of the Trustee shall have received written notification or obtained actual knowledge. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make 66 66 such further inquiry or investigation into such facts or matters as it may see fit and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney. SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE The Trustee in its individual or any other capacity may become the owner or pledgee of Senior Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the Trust Indenture Act) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.4 TRUSTEE'S DISCLAIMER The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Senior Notes or the Offering Memorandum, it shall not be accountable for the Company's use of the proceeds from the Senior Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Senior Notes or any other document in connection with the sale of the Senior Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.5 NOTICE OF DEFAULTS If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Senior Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Senior Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Senior Notes. SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES Upon qualification of this Indenture and as required by the Trust Indenture Act, within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Senior Notes remain outstanding, the Trustee shall mail to the Holders of the Senior Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). 67 67 A copy of each report at the time of its mailing to the Holders of Senior Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Senior Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Senior Notes are listed on any stock exchange. SECTION 7.7 COMPENSATION AND INDEMNITY The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.7) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.7 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture and any other termination including a termination under any bankruptcy laws. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Senior Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Senior Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.1(G) or 6.1(H) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. 68 68 The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.8 REPLACEMENT OF TRUSTEE A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Senior Notes of a majority in principal amount of the then outstanding Senior Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Senior Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee notifies the Company of its resignation is removed, the retiring Trustee, the Company, or the Holders of Senior Notes of at least 10% in principal amount of the then outstanding Senior Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Senior Note who has been a Holder of a Senior Note for at least six months, fails to comply with Section 7.10, such Holder of a Senior Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, together with the payment of all amounts due and owing to the retiring Trustee under Section 7.7 hereof, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee 69 69 shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Senior Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Senior Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE 70 70 Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.2, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Senior Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Senior Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Senior Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Senior Notes to receive solely from the trust fund described in Section 8.4 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Senior Notes when such payments are due, (b) the Company's obligations with respect to such Senior Notes under Article 2 and Section 4.2 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof. SECTION 8.3 COVENANT DEFEASANCE Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be released from its obligations under the covenants contained in Sections 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and Section 5.1(iv), (v), (vi) hereof with respect to the outstanding Senior Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Senior Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Senior Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1 hereof, but, except as specified above, the remainder of this Indenture and such Senior Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3 hereof, subject to the satisfaction of the conditions set forth in Section 71 71 8.4 hereof, Sections 6.1(E) and 6.1(F) hereof shall not constitute Events of Default. SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE The following shall be the conditions to the application of either Section 8.2 or 8.3 hereof to the outstanding Senior Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Obligations or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, on the outstanding Senior Notes on the stated maturity date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Senior Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.2 hereof, the Company shall have delivered to the Trustee (1) an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Senior Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.3 hereof, the Company shall have delivered to the Trustee (1) an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Senior Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Senior Notes pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.1(G) or 6.1(H) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; 72 72 (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to Section 8.6 hereof, all money and non-callable Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Senior Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Senior Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Senior Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Obligations deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Obligations held by it as provided in Section 8.4 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which 73 73 may be the opinion delivered under Section 8.4(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.6 REPAYMENT TO THE COMPANY Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, Liquidated Damages or interest on any Senior Note and remaining unclaimed for two years after such principal, and premium, if any, Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Senior Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.7 REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Senior Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Senior Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Senior Notes to receive such payment from the money held by the Trustee or Paying Agent. SECTION 8.8 SURVIVAL OF CERTAIN OBLIGATIONS Notwithstanding the satisfaction and discharge of this Indenture and of the Senior Notes referred to in Sections 8.1, 8.2, 8.3, and 8.4 hereof, the respective obligations of the Company and the Trustee under Sections 2.3, 2.4, 2.6, 2.7, 2.11, 7.7 and 8.7 hereof shall survive until the Senior Notes are not longer outstanding, and thereafter the obligations of the Company and the Trustee under Section 7.7 and 8.7 shall survive. Nothing contained in this Article Eight shall abrogate any of the rights, obligations or duties of the Trustee under this Indenture. 74 74 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES Notwithstanding Section 9.2 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Senior Notes without the consent of any Holder of a Senior Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Senior Notes in addition to or in place of certificated Senior Notes; (c) to provide for the assumption of the Company's obligations to the Holders of the Senior Notes in the case of a merger or consolidation pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Senior Notes or that does not adversely affect the legal rights hereunder of any such Holder of the Senior Notes; or (e) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act or to provide for the succession of a Successor Trustee. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.2 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2 WITH CONSENT OF HOLDERS OF SENIOR NOTES Except as provided below in this Section 9.2, the Company and the Trustee may amend or supplement this Indenture (including Sections 4.9 and 4.11 hereof) and the Senior Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Senior Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Senior Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Senior Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this 75 75 Indenture or the Senior Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Senior Notes (including consents obtained in connection with a tender offer or exchange offer for the Senior Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Senior Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.2 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Senior Notes under this Section 9.2 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Senior Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal amount of the Senior Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Senior Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Senior Notes held by a non-consenting Holder): (a) reduce the principal amount of Senior Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Senior Note or alter the provisions with respect to the redemption of the Senior Notes, except as provided above with respect to Sections 4.9 and 4.10 hereof; (c) reduce the rate of or change the time for payment of interest or Liquidated Damages, if any, on any Senior Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on or Liquidated Damages, if any, with respect to the Senior Notes (except a rescission of acceleration of the Senior Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Senior Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Senior Note payable in money other than that stated in the 76 76 Senior Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Senior Notes to receive payments of principal of, premium or Liquidated Damages, if any, or interest on the Senior Notes; (g) waive a redemption payment with respect to any Senior Note; or (h) make any change in Section 6.4 or 6.7 hereof or in the foregoing amendment and waiver provisions. SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT Every amendment or supplement to this Indenture or the Senior Notes shall be set forth in an amended or supplemental Indenture that complies with the Trust Indenture Act as then in effect. SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Senior Note is a continuing consent by the Holder of a Senior Note and every subsequent Holder of a Senior Note or portion of a Senior Note that evidences the same debt as the consenting Holder's Senior Note, even if notation of the consent is not made on any Senior Note. However, any such Holder of a Senior Note or subsequent Holder of a Senior Note may revoke the consent as to its Senior Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES The Company may place an appropriate notation about an amendment, supplement or waiver on any Senior Note thereafter authenticated. The Company in exchange for all Senior Notes may issue and the Trustee shall authenticate new Senior Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Senior Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to 77 77 receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.1) shall be fully protected in relying upon, in addition to the documents required by Section 10.4, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligation of the Company subject to customary exceptions. ARTICLE 10 MISCELLANEOUS SECTION 10.1 TRUST INDENTURE ACT CONTROLS If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 10.2 NOTICES Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company: Oxford Health Plans, Inc. 800 Connecticut Avenue Norwalk, Connecticut 06854 Attention: General Counsel Telephone No.: (203) 852-1442 Telecopier No.: (203) 852-2465 If to the Trustee: The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, New York 10001-2697 Attention: Global Trust Services Telephone No.: (212) 946-3084 Telecopier No.: (212) 946-8161/8162 The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt acknowledged, if telecopied; and the next Business Day after 78 78 timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the Trust Indenture Act. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 10.3 COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF SENIOR NOTES Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Senior Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company, upon request, shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.5 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Persons making such certificate or opinion have 79 79 read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Persons, they have made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Persons, such condition or covenant has been satisfied. SECTION 10.6 RULES BY TRUSTEE AND AGENTS The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 10.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Senior Notes, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. SECTION 10.8 GOVERNING LAW THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE SENIOR NOTES. SECTION 10.9 AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES By the execution and delivery of this Indenture or any amendment or supplement hereto, the Company (i) acknowledges that it has, by separate written instrument, designated and appointed CT Corporation System (the "Process Agent") currently located at 1633 Broadway, New York, New York 10019, as its authorized agent upon which process may be served in any suit, action or proceeding with respect to, arising out of, or relating to, this Indenture or the Senior Notes or brought under U.S. federal or state securities laws, may be instituted in any U.S. federal or state court located in The City of New York, New York, and acknowledges that the Process Agent 80 80 has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit, action or proceeding, and (iii) agrees that service of process upon the Process Agent shall be deemed in every respect effective service of process upon the Company in any such suit, action or proceeding. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments as may be necessary to continue such designation and appointment of the Process Agent in full force and effect so long as this Indenture shall be in full force and effect; provided that the Company may and shall (to the extent the Process Agent ceases to be able to be served on the basis contemplated herein), by written notice to the Trustee, designate such additional or alternative agents for service of process under this Section 10.9 that (i) maintains an office located in the Borough of Manhattan, The City of New York in the State of New York, (ii) are either (a) counsel for the Company or (b) a corporate service company which acts as agent for service of process for other persons in the ordinary course of its business and for other persons in the ordinary course of its business and (iii) agrees to act as agent for service of process in accordance with this Section 10.9. Such notice shall identify the name of such agent for process and the address of such agent for process in the Borough of Manhattan, The City of New York, State of New York. Upon the request of any Holder of a Senior Note, the Trustee shall deliver such information to such Holder. Notwithstanding the foregoing, there shall, at all times, be at least one agent for service of process for the Company appointed and acting in accordance with this Section 10.9. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Company hereby irrevocably waives such immunity in respect of its obligations under this Indenture and the Senior Notes, to the extent permitted by law. SECTION 10.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.11 SUCCESSORS All agreements of the Company in this Indenture and the Senior Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.12 SEVERABILITY In case any provision in this Indenture or in the Senior Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 81 81 SECTION 10.13 COUNTERPART ORIGINALS The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 10.14 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 82 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, as of the date first written above. (SEAL) OXFORD HEALTH PLANS, INC. By: Name: Title: (SEAL) THE CHASE MANHATTAN BANK, as Trustee By: Name: Title: 83 (Face of Senior Note) Exhibit A [Unless and until it is exchanged in whole or in part for Senior Notes in definitive form, this Senior Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co.] or such other entity as may be requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.](1) THIS SENIOR NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS SENIOR NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SENIOR NOTE EXCEPT (A) TO THE COMPANY, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SENIOR NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SENIOR NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON (1) This paragraph should be included only if the Senior Note is issued in global form. A-83 84 AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SENIOR NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.(2) 11% [Series A] [Series B] Senior Notes due 2005 OXFORD HEALTH PLANS, INC. CUSIP No. No. $___________ OXFORD HEALTH PLANS, INC. promises to pay to _______________ or registered assigns, the principal sum of Dollars on May 15, 2005. Interest Payment Dates: May 15 and November 15 Record Dates: May 1 and November 1 Reference is hereby made to the further provisions of this Senior Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. (2) This paragraph should be removed upon the exchange of Series A Senior Notes for Series B Senior Notes in the Exchange Offer or upon the registration of Series A Senior Notes pursuant to the terms of the Registration Rights Agreement. A-84 85 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed, and its corporate seal to be hereunto affixed, as of the date written below. OXFORD HEALTH PLANS, INC. (SEAL) By: Name: Title: By: Name: Title: Dated: Certificate of Authentication: This is one of the Senior Notes referred to in the within-mentioned Indenture: THE CHASE MANHATTAN BANK as Trustee By:_________________________________ Authorized Signatory A-85 86 (Reverse of Senior Note) 11% [Series A] [Series B] Senior Notes due 2005 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Oxford Health Plans, Inc., a Delaware corporation ("the Company"), promises to pay interest on the principal amount of this Senior Note at 11% per annum from May 13, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on May 15 and November 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Senior Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Senior Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be November 15, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Senior Notes (except defaulted interest) and Liquidated Damages (as defined below), if any, to the Persons who are registered Holders of Senior Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date, even if such Senior Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Senior Notes will be payable as to principal, premium, interest and Liquidated Damages at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium, if any, and Liquidated Damages on, all Global Senior Notes and all other Senior Notes the Holders of which shall have provided wire transfer instructions to the Company and the Paying Agent prior to the applicable Record Date for such payment. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private A-86 87 debts. 3. Paying Agent and Registrar. Initially, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Senior Notes under an Indenture dated as of May 13, 1998 ("Indenture") between the Company and The Chase Manhattan Bank, as trustee (the "Trustee"). The terms of the Senior Notes include those stated in the Indenture and those made part of the Indenture by reference to the U.S. Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Senior Notes are unsecured obligations of the Company limited to $200.0 million in aggregate principal amount. 5. Optional Redemption. (a) Except as set forth in clauses 5(b) and (c) of this Senior Note, the Senior Notes shall not be redeemable at the Company's option prior to May 15, 2002. Thereafter, the Senior Notes shall be subject to redemption for cash at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to each Holder of Senior Notes to be redeemed at the following redemption prices (expressed as percentages of principal amount thereof) if redeemed during the twelve-month period beginning on May 15, 2002 of each of the years indicated below, in each case together with any accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date): YEAR PERCENTAGE 2002 105.500% 2003 102.750% 2004 and thereafter 100.000% (b) Notwithstanding the provisions of clause 5(a) of this Senior Note, at any time on or before May 15, 2001, the Company may (but shall not have the obligation to) redeem for cash up to 33-1/3% of the original aggregate principal amount of the Senior Notes at a redemption price of 111% of the principal amount thereof, in each case plus any accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of a Public Equity Offering; provided that at least 66-2/3% of the original aggregate principal amount of the Senior Notes remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. A-87 88 (c) Notices of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Senior Notes are to be redeemed at its registered address. Senior Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000, unless all of the Senior Notes held by a Holder are to be redeemed. Unless the Company defaults in making such redemption payment, on and after the redemption date interest ceases to accrue on Senior Notes or portions thereof called for redemption. 6. Mandatory Redemption. Except as contemplated by clause 7 below, the Company shall not be required to make any mandatory redemption, purchase or sinking fund payments with respect to the Senior Notes prior to the maturity date. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Senior Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Senior Notes pursuant to the procedures required by this Indenture and described in such notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Senior Notes as a result of a Change of Control. On the Change of Control Purchase Date, the Company will, to the extent lawful, (1) accept for payment all Senior Notes or portions thereof validly tendered and not properly withdrawn pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Senior Notes or portions thereof so validly tendered and not properly withdrawn and (3) deliver or cause to be delivered to the Trustee the Senior Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Senior Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Senior Notes so validly tendered and not properly withdrawn the Change of Control Payment for such Senior Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Senior Note equal in principal amount to any unpurchased portion of the Senior Notes surrendered, if any; provided that each such new Senior Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on the Change of Control Purchase Date. (b) The Company shall not, and shall not permit any of its Restricted A-88 89 Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests sold or otherwise disposed of and, in the case of a lease of assets, a lease providing for rent and other conditions which are no less favorable to the Company (or the Restricted Subsidiary, as the case may be) in any material respect than the then prevailing market conditions (evidenced in each case by a resolution of the Board of Directors of such entity set forth in an Officers' Certificate delivered to the Trustee) and (ii) at least 75% (100% in the case of lease payments) of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of any liabilities (as shown on the most recent balance sheet of the Company or such Restricted Subsidiary) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Senior Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability shall be deemed to be cash for the purposes of clause (ii). The Company shall cause its Restricted Subsidiaries to transfer to the Company all consideration received by the Restricted Subsidiaries from Asset Sales and Excluded Asset Sales as promptly as practicable, except in the case of Asset Sales to the extent the proceeds thereof are applied as set forth in clause (a)(iii) or (b) of the immediately following paragraph. Within 364 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the Restricted Subsidiary, as applicable) may (a) apply such Net Proceeds (i) to make an investment in, to make a capital expenditure relating to, or to acquire other tangible assets in, the commercial group health benefit business in New York, New Jersey, or Connecticut, (ii) to the reduction of Indebtedness under the Term Loan Agreement or the permanent reduction of any other Pari Passu Indebtedness of the Company or the permanent reduction of any long-term Indebtedness of a Restricted Subsidiary, or (iii) to make capital contributions to regulated Restricted Subsidiaries covering commercial lives operating in New York, New Jersey or Connecticut which contributions are required by law or requested in writing to be made by the appropriate state regulatory authorities or (b) with respect to Net Proceeds received from an Asset Sale by a regulated Restricted Subsidiary which are not permitted by appropriate state regulatory authorities to be distributed or otherwise transferred, retain such Net Proceeds as capital of such regulated Restricted Subsidiary. Any Net Proceeds from Asset Sales that are not applied or invested or committed to be applied or invested, as provided in the preceding sentence of this paragraph shall be deemed to constitute "Excess Proceeds". On the earlier of (i) the 365th day after an Asset Sale or (ii) such date as the Board of the Company or the Restricted Subsidiary determines not to apply the Net Proceeds relating to such Asset Sale in the manner set forth above, if the aggregate amount of Excess Proceeds exceeds $20 million, the Company shall be required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Senior Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the A-89 90 Indenture. To the extent that the aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Senior Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes to be purchased on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company agrees that (i) a sale of the stock or assets of FPA Medical Management, Inc. shall be for cash only, (ii) at least 50% of the consideration received by the Company or a Restricted Subsidiary from the stock or assets of Oxford Specialty and Oxford Health Plans (NH), Inc. shall be cash or Marketable Securities, (iii) there shall be no restrictions on the consideration received by the Company and its Restricted Subsidiaries from the sale of the stock or assets of or Indebtedness issued by a Minority Investment or the New York, New Jersey, Florida or Pennsylvania Medicaid business, Oxford Health Plans (IL), Inc. or Oxford Health Plans (FL), Inc. and (iv) the consideration received by the Company and its Restricted Subsidiaries from all other Excluded Asset Sales shall be cash. The Company and its Restricted Subsidiaries will sell all such Marketable Securities for cash no later than the earlier of 60 days from receipt and the termination or expiration of any governmental limitation of such sale. 8. Denominations, Transfer, Exchange. The Senior Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Senior Notes may be registered and Senior Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Senior Note or portion of a Senior Note selected for redemption, except for the unredeemed portion of any Senior Note being redeemed in part. Also, it need not exchange or register the transfer of any Senior Notes for a period of 15 days before a selection of Senior Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 9. Persons Deemed Owners. The registered Holder of a Senior Note may be treated as its owner for all purposes. 10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Senior Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Senior Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for Senior Notes), and any existing default or compliance with any provision of the Indenture or the Senior Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Senior Notes. Without the consent of any Holder of a Senior Note, the Indenture or the Senior Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for A-90 91 uncertificated Senior Notes in addition to or in place of certificated Senior Notes, to provide for the assumption of the Company's obligations to Holders of the Senior Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Senior Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or to provide for the succession of a successor Trustee. 11. Defaults and Remedies. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Senior Notes; (ii) default in payment when due of the principal of or premium, if any, on the Senior Notes; (iii) failure by the Company to comply with Sections 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv) failure by the Company for 30 days after notice to comply with any of its other agreements in the Indenture or the Senior Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee exists on the date of the Indenture, or is created thereafter, which default (a) is caused by a failure to pay when due (after giving effect to any grace period related thereto) any principal of or premium, if any, or interest on such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million (net of any amounts with respect to which a reputable and creditworthy insurance company has acknowledged liability in writing), which judgments are not paid or discharged or stayed for a period of 60 days; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Subsidiaries), would constitute a Significant Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Subsidiaries), would constitute a Significant Subsidiary, all outstanding Senior Notes will become due and payable without further action or notice. Holders of the Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Senior Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Senior Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or A-91 92 interest) if it determines that withholding notice is in their interest. In the event of a declaration of acceleration of the Senior Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (v) of the first sentence of this paragraph, the declaration of acceleration of the Senior Notes shall be automatically annulled if the holders of any Indebtedness described in clause (v) of the first sentence of this paragraph have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (a) the annulment of the acceleration of Senior Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (b) all existing Events of Default, except nonpayment of principal or interest on the Senior Notes that became due solely because of the acceleration of the Senior Notes, have been cured or waived. Subject to certain limitations, the Holders of a majority in aggregate principal amount of the Senior Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Senior Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, premium and Liquidated Damages, if any, on the Senior Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 12. Defeasance Prior to Maturity or Redemption. Subject to certain conditions contained in the Indenture, the Company at any time may terminate some or all of its obligations under the Senior Notes and the Indenture if the Company deposits with the Trustee cash in U.S. dollars or non-callable Government Obligations or a combination thereof sufficient to pay the principal of, premium, interest and Liquidated Damages, if any, on, the Senior Notes to maturity or a particular redemption date, as the case may be. 13. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Senior Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Senior Notes. 15. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SENIOR NOTE. 16. Authentication. This Senior Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. A-92 93 17. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. Additional Rights of Holders of Transfer Restricted Senior Notes. In addition to the rights provided to Holders of Senior Notes under the Indenture, Holders of Transferred Restricted Senior Notes (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Senior Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Oxford Health Plans, Inc. 800 Connecticut Avenue Norwalk, Connecticut 06854 Attention: General Counsel Telephone No.: (203) 852-1442 Telecopier No.: (203) 852-2465 A-93 94 ASSIGNMENT FORM To assign this Senior Note, fill in the form below: (I) or (we) assign and transfer this Senior Note to (Insert assignee's Social Security or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Senior Note on the books of the Company or the agent appointed by the Company to maintain such books. The agent appointed hereby may substitute another to act for him. Date:____________________ Your signature:______________________________ (Sign exactly as your name appears on the face of this Senior Note) Signature Guarantee: A-94 95 Option of Holder to Elect Purchase If you want to elect to have this Senior Note purchased by the Company pursuant to Section 4.9 or 4.10 of the Indenture, check the box below: [ ] Section 4.9 [ ] Section 4.10 If you want to elect to have only part of the Senior Note purchased by the Company pursuant to Section 4.9 or Section 4.10 of the Indenture, state the amount you elect to have purchased: $__________________ Date:____________________ Your Signature: (Sign exactly as your name appears on the Senior Note) Social Security or Tax Identification No.:____________ Signature Guarantee. A-95 96 SCHEDULE OF CHANGES IN PRINCIPAL AMOUNT OF SENIOR NOTE3/ The following changes in the principal amount of this Global Senior Note have been recorded:
Date of Transaction Amount of decrease in Amount of increase in Principal Amount of this Signature of ------------------- Principal Amount of Principal Amount of Global Senior Note authorized officer this Global Senior Note this Global Senior Note following such decrease of Trustee ----------------------- ----------------------- (or increase) ---------- -------------
- ---------------------- 4. This should be included only if the Senior Note is issued in global form. A-96 97 Exhibit B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM U.S. GLOBAL SENIOR NOTE TO REG S GLOBAL SENIOR NOTE (Pursuant to Section 2.6(a)(1) of the Indenture) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001-2697 Attention: Global Trust Services Re: 11% Senior Notes due 2005 of Oxford Health Plans, Inc. Reference is hereby made to the Indenture, dated as of May 13, 1998 (the "Indenture"), between Oxford Health Plans, Inc. ("the Company") and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to $___________ principal amount of Senior Notes which are evidenced by one or more U.S. Global Senior Notes and held with the Depository in the name of _____________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Senior Notes to a Person who will take delivery thereof in the form of an equal principal amount of Senior Notes evidenced by one or more Reg S Global Senior Notes, which amount, immediately after such transfer, is to be held with the Depository through Euroclear or Cedel or both. In connection with such request and in respect of such Senior Notes, the Transferor hereby certifies that such transfer has been effected in compliance with the transfer restrictions applicable to the Global Senior Notes and pursuant to and in accordance with Rule 903 or Rule 904 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor hereby further certifies that: (1) The offer of the Senior Notes was not made to a person in the United States and, if the Distribution Compliance Period has not yet expired and the Transferor is a dealer (as defined in Section 2(12) of the Securities Act, or a person receiving a selling concession, fee or other remuneration in respect of the Senior Notes being sold (collectively, "Dealers"), (i) neither the Transferor or any person acting on its behalf knows that the transferee is a U.S. person and (ii) if the Transferor or any person acting on its behalf knows that the transferee is a Dealer, the Transferor or person acting on its behalf has sent a confirmation or other notice to the transferee stating that the Senior Notes may be offered or sold during the Distribution Compliance Period only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act; 98 (2) either: (a) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed and believes that the transferee was outside the United States; or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 904(b) of Regulation S; (4) the transaction is not part of a plan or scheme to evade the registration provisions of the Securities Act; and (5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the Depository through Euroclear or Cedel or both. Upon giving effect to this request to exchange a beneficial interest in a U.S. Global Senior Note for a beneficial interest in a Reg S Global Senior Note. the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Reg S Global Senior Notes pursuant to the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, Donaldson, Lufkin & Jenrette Securities Corporation, the Initial Purchaser of such Senior Notes being transferred. We acknowledge that you, the Company and the Initial Purchaser will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:_______________________ Name: Title: Dated: cc: Oxford Health Plans, Inc. Donaldson, Lufkin & Jenrette Securities Corporation B-1-98 99 Exhibit B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM REG S GLOBAL SENIOR NOTE TO U.S. GLOBAL SENIOR NOTE (Pursuant to Section 2.6(a)(ii) of the Indenture) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001-2697 Attention: Global Trust Services Re: 11% Senior Notes due 2005 of Oxford Health Plans, Inc. Reference is hereby made to the Indenture dated as of May 13, 1998 (the "Indenture"), between Oxford Health Plans, Inc. ("the Company"), and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to $____________ principal amount of Senior Notes which are evidenced by one or more Reg S Global Senior Notes and held with the Depository through Euroclear or Cedel in the name of (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Senior Notes to a Person who will take delivery thereof in the form of an equal principal amount of Senior Notes evidenced by one or more U.S. Global Senior Notes, to be held with the Depository. In connection with such request and in respect of such Senior Notes, the Transferor hereby certifies that: [CHECK ONE] [ ] such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act") and, accordingly, the Transferor hereby further certifies that the Senior Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Senior Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A; or [ ] such transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; 100 or [ ] such transfer is being effected in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; or [ ] such transfer is being effected pursuant to an effective registration statement under the Securities Act; or [ ] such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Senior Notes are being transferred in compliance with the transfer restrictions applicable to the Global Senior Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and such Senior Notes are being transferred in compliance with any applicable blue sky or securities laws of any state of the United States or any other applicable jurisdiction. Upon giving effect to this request to exchange a beneficial interest in Reg S Global Senior Notes for a beneficial interest in U.S. Global Senior Notes, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to U.S. Global Senior Notes pursuant to the Indenture and the Securities Act. B-2-100 101 This certificate and the statements contained herein are made for your benefit and the benefit of the Company, Donaldson, Lufkin & Jenrette Securities Corporations, the Initial Purchaser of such Senior Notes being transferred. We acknowledge that you, the Company and the Initial Purchaser will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:_______________________ Name: Title: Dated: cc: Oxford Health Plans, Inc. Donaldson, Lufkin & Jenrette Securities Corporation B-2-101 102 Exhibit B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER OF CERTIFICATED SENIOR NOTES (Pursuant to Section 2.6(b) of the Indenture) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001-2697 Attention: Global Trust Services Re: 11% Senior Notes due 2005 of Oxford Health Plans, Inc. Reference is hereby made to the Indenture dated as of May 13, 1998 (the "Indenture"), between Oxford Health Plans, Inc. ("the Company"), and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This relates to $_________ principal amount of Senior Notes which are evidenced by one or more Certificated Senior Notes in the name of ______________ (the "Transferor"). The Transferor has requested an exchange or transfer of such Certificated Senior Note(s) in the form of an equal principal amount of Senior Notes evidenced by one or more Certificated Senior Notes, to be delivered to the Transferor or, in the case of a transfer of such Senior Notes, to such Person as the Transferor instructs the Trustee. In connection with such request and in respect of the Senior Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior Notes"), the Holder of such Surrendered Senior Notes hereby certifies that: [CHECK ONE] [ ] the Surrendered Senior Notes are being acquired for the Transferor's own account, without transfer; or [ ] the Surrendered Senior Notes are being transferred to the Company; or [ ] the Surrendered Senior Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Senior Notes are being transferred to a Person that the Transferor reasonably believes is 103 purchasing the Surrendered Senior Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or [ ] the Surrendered Senior Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; or [ ] the Surrendered Senior Notes are being transferred in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; or [ ] the Surrendered Senior Notes are being transferred to Institutional Accredited Investor pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Senior Notes and Certificated Senior Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by a certificate attached hereto executed by the Transferee in the form of Exhibit C to the Indenture, and, if the Company should so --------- request, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act to the effect that such Transfer is in compliance with the Securities Act; or [ ] the Surrendered Senior Notes are being transferred pursuant to an effective registration statement under the Securities Act; or [ ] such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Senior Notes are being transferred in compliance with the transfer restrictions applicable to the Global Senior Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Senior Notes are being transferred in compliance with any applicable blue B-3-103 104 sky or securities laws of any state of the United States or any other applicable jurisdiction. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, Donaldson, Lufkin & Jenrette Securities Corporation, the Initial Purchaser of such Senior Notes being transferred. We acknowledge that you, the Company and the Initial Purchaser will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:_______________________ Name: Title: Dated: cc: Oxford Health Plans, Inc. Donaldson, Lufkin & Jenrette Securities Corporation B-3-104 105 Exhibit B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM U.S. GLOBAL SENIOR NOTE OR REG S GLOBAL SENIOR NOTE TO CERTIFICATED SENIOR NOTE (Pursuant to Section 2.6(c) of the Indenture) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001-2697 Attention: Global Trust Services Re: 11% Senior Notes due 2005 of Oxford Health Plans, Inc. Reference is hereby made to the Indenture dated as of May 13, 1998 (the "Indenture"), between Oxford Health Plans, Inc. ("the Company"), and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to $_____________ principal amount of Senior Notes which are evidenced by a beneficial interest in one or more U.S. Global Senior Notes or Reg S Global Senior Notes in the name of __________________ (the "Transferor"). The Transferor has requested an exchange or transfer of such beneficial interest in the form of an equal principal amount of Senior Notes evidenced by one or more Certificated Senior Notes, to be delivered to the Transferor or, in the case of a transfer of such Senior Notes, to such Person as the Transferor instructs the Trustee. In connection with such request and in respect of the Senior Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior Notes"), the Holder of such surrendered Senior Notes hereby certifies that: [CHECK ONE] [ ] the Surrendered Senior Notes are being transferred to the beneficial owner of such Senior Notes; or [ ] the Surrendered Senior Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Senior Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Senior Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such 106 Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or [ ] the Surrendered Senior Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; or [ ] such transfer is being effected in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; or [ ] the Surrendered Senior Notes are being transferred to an Institutional Accredited Investor pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Senior Notes and Certificated Senior Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by (x) if such transfer is in respect of a principal amount of Senior Notes at the time of Transfer of $100,000 or more, a certificate executed by the Transferee in the form of Exhibit C to the Indenture, or (y) if such Transfer is in respect of a principal amount of Senior Notes at the time of transfer of less than $100,000, (1) a certificate executed in the form of Exhibit C to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that (1) such Transfer is in compliance with the Securities Act and (2) such Transfer complies with any applicable blue sky securities laws of any state of the United States; or [ ] the Surrendered Senior Notes are being transferred pursuant to an effective registration statement under the Securities Act; or [ ] the Surrendered Senior Notes are being transferred pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Senior Notes are being transferred in compliance with the transfer restrictions applicable to the Global Senior Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; B-4-106 107 and the Surrendered Senior Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, Donaldson, Lufkin & Jenrette Securities Corporation, the Initial Purchaser of such Senior Notes being transferred. We acknowledge that you, the Company and the Initial Purchaser will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:_______________________ Name: Title: Dated: cc: Oxford Health Plans, Inc. Donaldson, Lufkin & Jenrette Securities Corporation B-4-107 108 Exhibit C FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001-2697 Attention: Global Trust Services Re: 11% Senior Notes due 2005 of Oxford Health Plans, Inc. Reference is hereby made to the Indenture dated as of May 13, 1998 (the "Indenture"), between Oxford Health Plans, Inc. ("the Company"), and The Chase Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. In connection with our proposed purchase of $________________ aggregate principal amount of: (a) [ ] Beneficial interests, or (b) [ ] Certificated Senior Notes, we confirm that: (i) we are an entity which is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional Accredited Investor"); (ii) any purchase of Senior Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors; (iii) in the event that we purchase any Senior Notes, we will acquire Senior Notes having a minimum purchase price of at least $100,000 for our own account and for each separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Senior Notes; (v) we are not acquiring Senior Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any 109 State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and (vi) we have received a copy of the Offering Memorandum and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase Senior Notes. We understand that the Senior Notes are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Senior Notes have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any notes, that (A) such Senior Notes may be offered, resold, pledged or otherwise transferred only (i) to a person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States in a transaction meeting the requirements of Rule 904 under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (ii) to the Company or (iii) pursuant to an effective registration statement under the Securities Act, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction and (B) that we will, and each subsequent Holder is required to, notify any subsequent purchaser from it of the resale restrictions set forth in (A) above. We understand that the registrar and transfer agent will not be required to accept for registration of transfer any Senior Notes, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Senior Notes purchased by us will bear a legend reflecting the substance of this paragraph. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, Donaldson, Lufkin & Jenrette Securities Corporation, the Initial Purchaser of such Senior Notes being transferred. We acknowledge that you, the Company and the Initial Purchaser will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ____________________________________ (Name of Purchaser) C-109 110 By:__________________________________ Name: Title: Address: C-110 111 CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section ----------- ----------------- 310(a)(1) ...................................................................... 7.10 (a)(2) ...................................................................... 7.10 (a)(3) ...................................................................... N.A. (a)(4) ...................................................................... N.A. (b) ...................................................................... 7.3; 7.8; 7.10 (c) ...................................................................... N.A. 311(a) ...................................................................... 7.11 (b) ...................................................................... 7.11 (c) ...................................................................... N.A. 312(a) ..................................................................... 2.5 (b) ...................................................................... 10.3 (c) ...................................................................... 10.3 313(a) ...................................................................... 7.6 (b)(1) ...................................................................... N.A. (b)(2) ................................................................... 7.6 (c) ................................................................... 7.6; 10.2 (d) ................................................................... 7.6 314(a) ..................................................................... 4.6; 10.2 (b) ................................................................... N.A. (c)(1) ................................................................... 10.4 (c)(2) ................................................................... 7.2; 10.4 (c)(3) ................................................................... N.A. (d) ................................................................... N.A. (e) ................................................................... 10.5 (f) ................................................................... N.A. 315(a) ..................................................................... 7.1(a) (b) ................................................................... 7.5; 10.2 (c) ................................................................... 7.1(b) (d) ................................................................... 7.1(c) (e) ................................................................... 6.11 316(a)(last sentence) .................................................................. 2.9 (a)(1)(A) ...................................................................... 6.5 (a)(1)(B) ...................................................................... 6.4 (a)(2) ...................................................................... N.A. (b) ...................................................................... 6.7 317(a)(1) ...................................................................... 6.8 (a)(2) ...................................................................... 6.9 (b) ...................................................................... 2.4 318(a) ...................................................................... 10.1
----------------------------------- N.A. means not applicable. 112 * This Cross-Reference is not part of the Indenture. 113 EXECUTION COPY OXFORD HEALTH PLANS, INC. as Issuer $200,000,000 11% Senior Notes due 2005 --------------- INDENTURE Dated as of May 13, 1998 --------------- THE CHASE MANHATTAN BANK as Trustee 114 Page ---- TABLE OF CONTENTS ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1 SECTION 1.1 DEFINITIONS 1 SECTION 1.2 OTHER DEFINITIONS 17 SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT 18 SECTION 1.4 RULES OF CONSTRUCTION 18 ARTICLE 2 THE SENIOR NOTES 19 SECTION 2.1 FORM AND DATING 19 SECTION 2.2 EXECUTION AND AUTHENTICATION 21 SECTION 2.3 REGISTRAR AND PAYING AGENT 22 SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST 22 SECTION 2.5 HOLDER LISTS 23 SECTION 2.6 TRANSFER AND EXCHANGE 23 SECTION 2.7 REPLACEMENT OF SENIOR NOTES 32 SECTION 2.8 OUTSTANDING SENIOR NOTES 33 SECTION 2.9 TREASURY SENIOR NOTES 33 SECTION 2.10 TEMPORARY SENIOR NOTES 33 SECTION 2.11 CANCELLATION 34 SECTION 2.12 DEFAULTED INTEREST 34 SECTION 2.13 RECORD DATE 34 SECTION 2.14 COMPUTATION OF INTEREST 34 SECTION 2.15 CUSIP NUMBER 34 ARTICLE 3 REDEMPTION AND PREPAYMENT 35 SECTION 3.1 NOTICES TO TRUSTEE 35 SECTION 3.2 SELECTION OF SENIOR NOTES TO BE REDEEMED 35 SECTION 3.3 NOTICE OF REDEMPTION 35 SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION 36 SECTION 3.5 DEPOSIT OF REDEMPTION PRICE 36 SECTION 3.6 SENIOR NOTES REDEEMED IN PART 37 SECTION 3.7 OPTIONAL REDEMPTION 37 SECTION 3.8 NO MANDATORY REDEMPTION 38 ARTICLE 4 COVENANTS 38 SECTION 4.1 PAYMENT OF SENIOR NOTES 38 SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY 38 115
Page ---- SECTION 4.3 CORPORATE EXISTENCE 39 SECTION 4.4 MAINTENANCE OF PROPERTIES AND INSURANCE 39 SECTION 4.5 COMPLIANCE WITH LAWS 40 SECTION 4.6 REPORTS 40 SECTION 4.7 TAXES 40 SECTION 4.8 STAY, EXTENSION AND USURY LAWS 40 SECTION 4.9 CHANGE OF CONTROL 41 SECTION 4.10 ASSET SALES AND EXCLUDED ASSET 42 SECTION 4.11 RESTRICTED PAYMENTS 45 SECTION 4.12 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK 47 SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS 49 SECTION 4.14 LIENS 50 SECTION 4.15 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES 50 SECTION 4.16 TRANSACTIONS WITH AFFILIATES 51 SECTION 4.17 LINE OF BUSINESS 51 SECTION 4.18 LIMITATION AS TO UNRESTRICTED SUBSIDIARIES 52 SECTION 4.19 LIMITATION ON SALE OF STOCK OR ASSETS OF PRINCIPAL SUBSIDIARIES 52 SECTION 4.20 PAYMENTS FOR CONSENTS 52 SECTION 4.21 LIMITATIONS ON ISSUANCE OF GUARANTEES 52 SECTION 4.22 COMPLIANCE CERTIFICATE 53 ARTICLE 5 SUCCESSORS 54 SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS 54 SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED 54 ARTICLE 6 DEFAULTS AND REMEDIES 55 SECTION 6.1 EVENTS OF DEFAULT 55 SECTION 6.2 ACCELERATION 57 SECTION 6.3 OTHER REMEDIES 57 SECTION 6.4 WAIVER OF PAST DEFAULTS 58 SECTION 6.5 CONTROL BY MAJORITY 58 SECTION 6.6 LIMITATION ON SUITS 58 SECTION 6.7 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT 59 SECTION 6.8 COLLECTION SUIT BY TRUSTEE 59 SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM 59 SECTION 6.10 PRIORITIES 60 SECTION 6.11 UNDERTAKING FOR COSTS 60 ARTICLE 7 TRUSTEE 60
-115- 116 Page ---- SECTION 7.1 DUTIES OF TRUSTEE 60 SECTION 7.2 RIGHTS OF TRUSTEE 61 SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE 62 SECTION 7.4 TRUSTEE'S DISCLAIMER 63 SECTION 7.5 NOTICE OF DEFAULTS 63 SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES 63 SECTION 7.7 COMPENSATION AND INDEMNITY 63 SECTION 7.8 REPLACEMENT OF TRUSTEE 64 SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC 65 SECTION 7.10 ELIGIBILITY; DISQUALIFICATION 65 SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY 66 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE 66 SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE 66 SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE 66 SECTION 8.3 COVENANT DEFEASANCE 67 SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE 67 SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS 68 SECTION 8.6 REPAYMENT TO THE COMPANY 69 SECTION 8.7 REINSTATEMENT 69 SECTION 8.8 SURVIVAL OF CERTAIN OBLIGATIONS 70 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER 70 SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES 70 SECTION 9.2 WITH CONSENT OF HOLDERS OF SENIOR NOTES 71 SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT 72 SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS 72 SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES 72 SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC 73 ARTICLE 10 MISCELLANEOUS 73 SECTION 10.1 TRUST INDENTURE ACT CONTROLS 73 SECTION 10.2 NOTICES 73 SECTION 10.3 COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF 74 SECTION 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT 74 -116- 117 SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION 75 SECTION 10.6 RULES BY TRUSTEE AND AGENTS 75 SECTION 10.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS 75 SECTION 10.8 GOVERNING LAW 75 SECTION 10.9 AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES 76 SECTION 10.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS 76 SECTION 10.11 SUCCESSORS 76 SECTION 10.12 SEVERABILITY 77 SECTION 10.13 COUNTERPART ORIGINALS 77 SECTION 10.14 TABLE OF CONTENTS, HEADINGS, ETC 77
EXHIBITS EXHIBIT A Form of Senior Note EXHIBIT B-1 Form of Certificate for Exchange or Registration of Transfer from U.S. Global Senior Note to Reg S Global Senior Note EXHIBIT B-2 Form of Certificate for Exchange or Registration of Transfer from Reg S Global Senior Note to U.S. Global Senior Note EXHIBIT B-3 Form of Certificate for Exchange or Registration of Transfer of Certificated Senior Notes EXHIBIT B-4 Form of Certificate for Exchange or Registration of Transfer from U.S. Global Senior Note or Reg S Global Senior Note to Certificated Senior Note EXHIBIT C Form of Certificate from acquiring institutional accredited investor
-117- EX-10.D 7 EXHIBIT 10.D 1 Exhibit 10.d OXFORD HEALTH PLANS, INC. $150,000,000 TERM LOAN AGREEMENT This TERM LOAN AGREEMENT is dated as of May 13, 1998 and entered into by and among OXFORD HEALTH PLANS, INC., a Delaware corporation ("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "LENDER" and collectively as "LENDERS"), DLJ CAPITAL FUNDING, INC. ("DLJ CAPITAL FUNDING"), as Syndication Agent (in such capacity, "SYNDICATION AGENT"), and IBJ SCHRODER BANK & TRUST COMPANY ("IBJ SCHRODER"), as Facility Manager for Lenders (in such capacity, "FACILITY MANAGER"). R E C I T A L S WHEREAS, Company desires to make certain Capital Contributions (this and other capitalized terms used in these recitals without definition being used as defined in subsection 1.1) to its Regulated Subsidiaries and to obtain financing for such Capital Contributions; WHEREAS, Company is a party to the Bridge Agreement pursuant to which Company has obtained $200,000,000 in financing for certain Capital Contributions, which financing is due and payable no later than February 6, 1999; WHEREAS, Company desires to refinance its outstanding Indebtedness under the Bridge Agreement with longer-term financing and to obtain additional financing to make additional Capital Contributions; WHEREAS, on or before the Closing Date, Company will issue and sell not less than $200,000,000 in aggregate principal amount of Senior Notes; WHEREAS, on or before the Closing Date, Company will issue and sell not less than $350,000,000 in Preferred Stock; WHEREAS, Lenders have agreed to extend certain credit facilities to Company, the proceeds of which will be used, together with the proceeds of the issuance and sale of the Senior Notes described above and the proceeds of the issuance and sale of the Preferred Stock described above, to provide financing for such Capital Contributions and to provide for the general corporate purposes of Company and its Restricted Subsidiaries; and 1 2 WHEREAS, Company desires to secure all of the Obligations hereunder and under the other Loan Documents by granting to Facility Manager, on behalf of Lenders, a First Priority Lien on substantially all of its real, personal and mixed property, including a pledge of all of the Capital Stock of each of its Principal Subsidiaries, except to the extent prohibited from doing so by regulatory restrictions with respect to its Regulated Subsidiaries; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agents agree as follows: SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement shall have the following meanings: "ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary or is designated a Restricted Subsidiary of such specified Person, including without limitation Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary or Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the offered rate per annum at which deposits in Dollars appears on Page 3750 of the Dow Jones & Company Telerate screen as shown under the heading "USD" (or any successor page), determined as of 11:00 A.M. (London Time) two Business Days prior to the beginning of such Interest Period for delivery on the first date of such Interest Period and with a maturity comparable to such Interest Period by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "AFFECTED LENDER" has the meaning assigned to that term in subsection 2.6C. "AFFECTED LOANS" has the meaning assigned to that term in subsection 2.6C. 2 3 "AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, and "AFFILIATES" means such affiliates in the plural; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "AGENTS" means Facility Manager and Syndication Agent. "AGREEMENT" means this Term Loan Agreement dated as of May 13, 1998, as it may be amended, supplemented or otherwise modified from time to time. "APPLICABLE MARGIN" means, with respect to the applicable Loan bearing interest at a rate determined by reference to either the Base Rate or the Adjusted Eurodollar Rate as set forth below, as of any date of determination, the corresponding percentage per annum set forth below:
Type of Loan Applicable Margin ------------ ----------------- Base Rate Loans 3.25% Eurodollar Rate Loans 4.25%
"APPROVED FUND" means, with respect to any Lender that is a fund or trust that makes, buys or invests in commercial loans, any other fund or trust that makes, buys or invests in commercial loans and is managed by the same investment advisor as such Lender. "ASSET SALE" means (i) the sale, lease (other than an operating lease), conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback, including any disposition by means of a merger, consolidation or similar transaction and including the issuance, sale or other transfer of any of the Capital Stock of any Restricted Subsidiary of such Person) other than to Company or to any of its Wholly Owned Subsidiaries (including the receipt of proceeds of insurance paid on account of the loss of or damage to any asset and awards or compensation for any asset taken by condemnation, eminent domain or similar proceeding) that have a fair market value (as determined in good faith by the Board of Directors of such Person) in excess of $2,000,000 or for net cash proceeds in excess of $2,000,000); and (ii) the issuance of Equity Interests in any Restricted Subsidiaries or the sale of any Equity Interests in any Restricted Subsidiaries, in each case, in one or a series of related transactions; provided that, notwithstanding the foregoing, the term "Asset Sale" shall not include: (a) the sale, lease, conveyance, disposition or other transfers of all or substantially all 3 4 of the assets of Company, as permitted pursuant to subsection 6.11, (b) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business and consistent with past practice, including, without limitation, the sale of any investments constituting a portion of an investment portfolio in the ordinary course of business and consistent with past practice, (c) a transfer of assets (1) by Company to a Subsidiary Guarantor which is not a Regulated Subsidiary, (2) by Company or a Restricted Subsidiary to a Restricted Subsidiary to the extent required to comply with applicable regulatory requirements or (3) by a Restricted Subsidiary to Company or to a Subsidiary Guarantor which is not a Regulated Subsidiary, (d) an issuance of Equity Interests by a Restricted Subsidiary to Company or to a Subsidiary Guarantor which is not a Regulated Subsidiary or to a Restricted Subsidiary to the extent required to comply with applicable regulatory requirements, (e) Permitted Investments, (f) any dividend, distribution, Investment or payment made in Cash pursuant to subsection 6.1(a) or subsection 6.1(b), (g) the sale or transfer of surplus or obsolete equipment in the ordinary course of business, (h) a pledge of all or any part of the Capital Stock of any Restricted Subsidiary to Facility Manager for the benefit of the Lenders or a Lien on any other property or asset of a Restricted Subsidiary permitted by this Agreement or (i) Excluded Asset Sales. "ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of Exhibit VII annexed hereto. "ATTRIBUTABLE DEBT" means, in respect of a sale and leaseback transaction, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended, to the extent the lease payments during such extension period are required to be capitalized on a balance sheet as a liability in accordance with GAAP). "AUDITOR'S LETTER" means a letter, substantially in the form of Exhibit VIII annexed hereto, acknowledged and agreed to by Company which shall be delivered to Facility Manager pursuant to subsection 3.1Q. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "BASE RATE" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "BASE RATE LOANS" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. 4 5 "BOARD OF DIRECTORS" means the Board of Directors of Company, or any authorized committee of the Board of Directors. "BRIDGE AGREEMENT" means that certain Bridge Securities Purchase Agreement dated as of February 6, 1998, between Company and Oxford Funding, Inc., a Delaware corporation, as amended by Amendment No. 1 dated as of March 30, 1998. "BUSINESS DAY" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York and Connecticut or is a day on which banking institutions located in such states are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the London interbank market. "CAPITAL CONTRIBUTIONS" means the contributions by Company to the capital of one or more of its Restricted Subsidiaries in order to satisfy regulatory requirements for statutory capital levels at such Restricted Subsidiaries. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of a limited liability company or similar entity, any membership or similar interests therein, (iii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iv) in the case of a partnership, partnership interests (whether general or limited) and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH" means money, currency or a credit balance in any demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "CASH EQUIVALENTS" means (i) U.S. Government Obligations or Securities that would be U.S. Government Obligations if such Securities were not callable or redeemable at the option of the issuer thereof, in each case maturing not more than one year after the date of acquisition; (ii) any certificate of deposit, maturing not more than one year after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $100,000,000 or its equivalent in foreign currency, whose 5 6 debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or "Aa" (or higher) according to Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iii) obligations issued or fully guaranteed by any State of the United States of America or any political subdivision of any such State or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (iv) repurchase obligations with a term of not more than seven days for underlying Securities of the types described in clauses (i) and (ii) above entered into with any financial institution meeting the qualifications specified in clause (ii) above; and (v) commercial paper having one of the two of the highest ratings obtainable from either S&P or Moody's and in each case maturing within one year after the date of acquisition. "CERTIFICATE RE NON-BANK STATUS" means a certificate in form and substance satisfactory to Facility Manager delivered by a Lender to Facility Manager pursuant to subsection 2.7B(iii) pursuant to which such Lender certifies that it is not (i) a "bank" as such term is defined in subsection 881(c)(3) of the Internal Revenue Code; (ii) a 10 percent shareholder of Company within the meaning of Section 871(h)(3)(B) or Section 881(c)(3)(B) of the Internal Revenue Code; or (iii) a "controlled" foreign corporation related to Company within the meaning of Section 864(d)(4) of the Internal Revenue Code. "CHANGE OF CONTROL" means such time as (i) Company becomes aware that, a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) other than the Permitted Holders has become, directly or indirectly, the "beneficial owner," by way of merger, consolidation or otherwise, of 35% or more of the voting power of the voting stock of Company on a fully-diluted basis after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of Company (whether or not such securities are then currently convertible or exercisable), (ii) the sale, lease or transfer of all or substantially all of the assets of Company to any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) other than the Permitted Holders, or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by the shareholders of Company was approved by a vote of a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved or was approved by the Permitted Holders) cease for any reason to constitute a majority of the directors of Company then in office. "CLOSING DATE" means the date on or before May 30, 1998, on which the Loans are made. 6 7 "COLLATERAL" means, collectively, all the property and assets (tangible and intangible) of Company and each direct and indirect domestic Significant Subsidiary of Company and all the Capital Stock of Company's direct and indirect Significant Subsidiaries, whenever acquired and wherever located, in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations, in each case except to the extent applicable regulatory restrictions with respect to Regulated Subsidiaries do not permit such Liens to be provided to secure the Obligations. "COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement executed and delivered by Company and Facility Manager on the Closing Date, substantially in the form of Exhibit XVI annexed hereto, as such Collateral Account Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "COLLATERAL DOCUMENTS" means the Company Pledge Agreement, the Company Security Agreement, the Company Trademark Security Agreement, the Collateral Account Agreement, the Third-Party Account Agreements, the Subsidiary Pledge Agreements, the Subsidiary Security Agreements, the Subsidiary Trademark Security Agreements, any Mortgages and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Facility Manager, on behalf of Lenders, a Lien on any real, personal or mixed property of that Loan Party as security for the Obligations. "COMMITMENT" means the commitment of a Lender to make a Loan to Company pursuant to subsection 2.1A, and "COMMITMENTS" means such commitments of all Lenders in the aggregate. "COMPANY" has the meaning assigned to that term in the introduction to this Agreement. "COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit IX annexed hereto, as such Company Pledge Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPANY SECURITY AGREEMENT" means the Company Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of Exhibit X annexed hereto, as such Company Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPANY TRADEMARK SECURITY AGREEMENT" means the Company Trademark Security Agreement executed and delivered by Company on the Closing Date, substantially in 7 8 the form of Exhibit XI annexed hereto, as such Company Trademark Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit IV annexed hereto delivered to Facility Manager and Lenders by Company pursuant to subsection 5.1(iv). "CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest as to which the lessor has agreed in writing for the benefit of Facility Manager (which writing has been delivered to Facility Manager), whether under the terms of the applicable lease, under the terms of a Landlord Consent and Estoppel, or otherwise, to the matters described in the definition of "Landlord Consent and Estoppel," which interest, if a subleasehold or sub-subleasehold interest, is not subject to any contrary restrictions contained in a superior lease or sublease. "CONSOLIDATED CASHFLOW" means, with respect to Company and its Restricted Subsidiaries for any period, the sum of, without duplication, (i) the Consolidated Net Income for such period, plus (ii) to the extent deducted from Consolidated Net Income for such period, (x) the Fixed Charges for such period, plus (y) non-cash dividends on Company's preferred stock, plus (iii) Consolidated Income Taxes for such period, plus (iv) consolidated depreciation, amortization (including amortization of goodwill and other intangibles), depletion and other non-cash charges of Company and its Restricted Subsidiaries required to be reflected as expenses on the books and records of Company, minus (v) Cash payments with respect to any nonrecurring, non-cash charges previously added back pursuant to clause (iv). Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cashflow only to the extent that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "CONSOLIDATED INCOME TAXES" means, with respect to any Person for any period, taxes imposed upon such Person or other payments required to be made by such Person by any Governmental Entity which taxes or other payments are calculated by reference to the income or profits of such Person or Person and its Subsidiaries (to the extent such income or profits were included in computing Consolidated Net Income for such period), regardless of whether such taxes or payments are required to be remitted to any Governmental Entity. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or 8 9 distributions paid in Cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net Income of, or any dividends or other distributions from, any Unrestricted Subsidiary, to the extent otherwise included, shall be excluded, whether or not distributed to Company or one of its Restricted Subsidiaries, (iii) without duplication, (x) losses of any Restricted Subsidiary shall be excluded with respect to the calculation under subsection 6.2, (y) Net Income of any Restricted Subsidiary shall be excluded with respect to the calculation under such subsection 6.2 to the extent that such Net Income has not been dividended or distributed in Cash to Company and (z) intercompany payments to Company by Restricted Subsidiaries shall be included in Net Income of Company and intercompany payments by Company to the Restricted Subsidiaries shall be deducted from Net Income with respect to the calculation under such subsection 6.2, (iv) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (v) the cumulative effect of a change in accounting principles shall be excluded, and (vi) income or loss attributable to discontinued operations shall be excluded. "CONSOLIDATED NET WORTH" of a Person at any date means the amount by which the assets of such Person and its consolidated Restricted Subsidiaries (less any revaluation or other write-up subsequent to the date of this Agreement in any such assets (other than write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business)) exceed the sum of (a) the total liabilities of such Person and its consolidated Subsidiaries, plus (b) any Disqualified Stock of such Person or any consolidated Restricted Subsidiaries of such Person issued to any Person other than such Person or a wholly owned Restricted Subsidiary of such Person, in each case determined in accordance with GAAP. "CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, is convertible or exchangeable for Indebtedness or Disqualified Stock or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which is 91 days after the date that the Loans mature. "DLJ CAPITAL FUNDING" has the meaning assigned to that term in the introduction to this Agreement. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. 9 10 "ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys or invests in loans as one of its businesses including insurance companies, funds, trusts and lease financing companies; and (B) any Lender and any Affiliate of any Lender or an Approved Fund; provided, however, that "Eligible Assignee" shall not include any entity which is a competitor of Company and its Restricted Subsidiaries in the Healthcare Service Business. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA other than a Multiemployer Plan which is or was maintained or contributed to by Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates. "ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Entity or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Entities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Restricted Subsidiaries or any Facility, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as amended or 10 11 supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. "EQUITY CONTRIBUTION" means the $350,000,000 in gross proceeds to be received by Company from the issuance and sale of the Preferred Stock to TPG. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt Security that is convertible into or exchangeable for Capital Stock). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Company or any of its Restricted Subsidiaries shall continue to be considered an ERISA Affiliate of Company or such Restricted Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Restricted Subsidiary and with respect to liabilities arising after such period for which Company or such Restricted Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan that would be reasonably likely to result in material liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of 11 12 proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA in an amount that would be material; (vii) the withdrawal of Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates of material fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Restricted Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan in an amount that would be material. "EURODOLLAR RATE LOANS" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "EVENT OF DEFAULT" means each of the events set forth in Section 7. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "EXCLUDED ASSET SALES" means the sale of the Capital Stock of, or of the assets of, the Regulated Subsidiaries or other entities identified on Schedule 1.1A annexed hereto; provided that (1) to the extent Company, a Principal Subsidiary or any Subsidiary Guarantor has transferred Cash or other assets to, made loans to or other Investments in, or made any Capital Contributions to, any of such Regulated Subsidiaries after the Closing Date, the value of all such transferred Cash, other assets, loans, other Investments or Capital Contributions (collectively, the "POST-CLOSING CONTRIBUTIONS") shall reduce the amount of Excluded Asset 12 13 Sale Proceeds (as hereinafter defined) on a dollar-for-dollar basis; (2) the aggregate amount of consideration received from such sales and excluded from the provisions of subsection 6.9 does not exceed an amount equal to $55,000,000 (the "EXCLUDED ASSET SALE PROCEEDS"); and (3) the consideration that may be received with respect to such Excluded Asset Sales is subject to the limitations set forth in subsection 6.9. To the extent Company makes a Permitted Investment as described in clause (xiii) of the definition thereof, Cash and Marketable Securities from Excluded Asset Sales in an amount equal to such Investment shall be deemed proceeds from Asset Sales and subject to subsection 6.9. "EXCLUDED ASSET SALE PROCEEDS" has the meaning assigned to that term in the definition of "Excluded Asset Sales". "EXISTING INDEBTEDNESS" means the Indebtedness of Company and its Restricted Subsidiaries (other than Indebtedness under this Agreement) in existence on the date of this Agreement and set forth on Schedule 1.1B annexed hereto, until such amounts are repaid. "FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Company or any of its Restricted Subsidiaries or any of their respective predecessors or Affiliates. "FACILITY MANAGER" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Facility Manager appointed pursuant to subsection 8.5. "FAIR MARKET VALUE" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Facility Manager from three Federal funds brokers of recognized standing selected by Facility Manager. "FINANCIAL PLAN" has the meaning assigned to that term in subsection 5.1(xii). "FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien has priority over any other 13 14 Lien on such Collateral and (ii) such Lien is the only Lien (other than Permitted Liens) to which such Collateral is subject. "FISCAL QUARTER" means a fiscal quarter of any Fiscal Year. "FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends. "FIXED CHARGES" means, with respect to any Person for any period, the sum without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon), and (iv) all dividend payments, whether or not in Cash, on any series of preferred stock of any such Person payable to a party other than Company or a Wholly Owned Subsidiary, other than dividend payments on Equity Interests payable solely in Equity Interests of Company. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of (x) the Consolidated Cashflow of such Person and its Restricted Subsidiaries for such Period to (y) the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or repays any Indebtedness (other than the incurrence or repayment of revolving credit borrowings used for working capital, except to the extent that a repayment is accompanied by a permanent reduction in revolving credit commitments) or issues preferred stock subsequent to the commencement of the four-quarter reference period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of making the computation referred to above, (i) acquisitions that have been made by Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the 14 15 Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and shall give pro forma effect to the Consolidated Cashflow and Indebtedness of the Person which is the subject of any such acquisition (as well as any pro forma expense and cost reductions attributable thereto), and (ii) the Consolidated Cashflow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and Consolidated Cashflow shall reflect any pro forma expense and cost reductions relating to such discontinuance, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "FORM 8-K" means that certain Form 8-K filed by Company with the Securities and Exchange Commission on April 27, 1998. "FORM 10-K" means that certain Form 10-K filed by Company with the Securities and Exchange Commission on March 30, 1998, as amended on April 30, 1998. "FUNDING AND PAYMENT OFFICE" means (i) the office of Facility Manager located at One State Street, New York, New York 10004 or (ii) such other office of Facility Manager as may hereafter be designated from time to time in a written notice delivered by Facility Manager to Company and each Lender. "GAAP" means generally accepted accounting principles in the United States of America which are in effect on the Closing Date. "GOVERNMENTAL AUTHORIZATION" means (i) any and all certificates, permits, licenses, franchises, concessions, grants, consents, approvals, orders, registrations, authorizations, waivers, variances or clearances from, or filings or registrations with, any Governmental Entities, and (ii) any and all waiting periods imposed by applicable laws, rules and regulations. "GOVERNMENTAL ENTITY" means any governmental or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, including without limitation any Healthcare Regulator, or any court or arbitrator or alternative dispute resolution body, in each case whether federal, state, local or foreign. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. 15 16 "HAZARDOUS MATERIALS" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", acutely hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste", "infectious waste", "toxic substances", or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Entity or which might reasonably be expected to pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "HEALTHCARE AUTHORIZATIONS" means any and all Governmental Authorizations (i) necessary to enable Company or any of its Restricted Subsidiaries to engage in the Healthcare Service Business, operate as an HMO or insurance company, participate in the Medicare, Medicaid or comparable state programs or otherwise continue to conduct its business as it is conducted on the Closing Date or (ii) required by any Healthcare Regulator or under any Healthcare Regulation, law or regulation relating to Medicare, Medicaid or comparable state programs or other law or regulation applicable to HMOs, insurance companies or other Persons engaged in the Healthcare Service Business. "HEALTHCARE REGULATIONS" means all laws, regulations, directives, administrative orders and decisions applicable to HMOs, healthcare service providers, healthcare-related insurance companies, Persons engaged in the Healthcare Service Business or any other similar Persons and any rules, regulations, orders, directives and decisions promulgated or issued pursuant thereto. 16 17 "HEALTHCARE REGULATOR" means any Person charged with the administration, oversight or enforcement of any Healthcare Regulation, whether primarily, secondarily or jointly. "HEALTHCARE SERVICE BUSINESS" means a business, the majority of whose revenues are derived from providing or arranging to provide or administering, managing or monitoring healthcare services or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including, without limitation, the issuance of health insurance. "HEDGING OBLIGATIONS" means with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HMO" means any Person doing business as a health maintenance organization (or required to qualify or to be licensed as such) under applicable Healthcare Regulations. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person), the maximum fixed repurchase price of Disqualified Stock issued by such Person in each case, if held by any Person other than Company or a Wholly Owned Subsidiary of Company, and, to the extent not otherwise included, the guarantee by such Person of any indebtedness of any other Person. For the purposes of this definition the "maximum fixed repurchase price" of Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Disqualified Stock. "INDEMNITEE" has the meaning assigned to that term in subsection 9.3. 17 18 "INTEREST PAYMENT DATE" (i) with respect to any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include the date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "INTEREST PERIOD" has the meaning assigned to that term in subsection 2.2B. "INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "INVESTMENT" means, with respect to any Person, any investment by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commissions, travel, relocation and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other Securities and all other items that are or would be classified as investments on a balance sheets prepared in accordance with GAAP; provided that an acquisition of assets, Equity Interests or other Securities by Company for consideration consisting of common equity Securities of Company shall not be deemed to be an Investment. "INVESTMENT AGREEMENT" means that certain Investment Agreement dated as of February 23, 1998 between Company and TPG Oxford, as amended from time to time after the Closing Date to the extent permitted pursuant to subsection 6.12. "INVESTMENT GRADE SECURITIES" means: (i) U.S. Government Obligations; (ii) any certificate of deposit, maturing not more than 270 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $100,000,000 or its equivalent in foreign currency, whose debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iii) commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of Company) with a rating, at the time as of which any investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or higher) according to Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (iv) any bankers' acceptances or any money market deposit accounts, in each case, issued or offered by any commercial bank having capital and surplus in 18 19 excess of $100,000,000 or its equivalent in foreign currency, whose debt is rated at the time as of which any investment therein is made, "A" (or higher) according to S&P or Moody's, or if neither S&P nor Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (v) any other debt Securities or debt instruments with a rating of "BBB--" or higher by S&P, "Baa-3" or higher by Moody's, Class "2" or higher by the NAIC or the equivalent of such rating by S&P, Moody's or the NAIC, or if none of S&P, Moody's and the NAIC shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; and (vi) any fund investing exclusively in investments of the types described in clauses (i) through (v) above. "IP COLLATERAL" means, collectively, the Collateral under the Company Trademark Security Agreement and the Subsidiary Trademark Security Agreements. "JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, satisfactory in form and substance to Facility Manager, pursuant to which such lessor agrees, for the benefit of Facility Manager, (i) that without any further consent of such lessor or any further action on the part of the Loan Party holding such Leasehold Property, such Leasehold Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if Facility Manager, any Lender, or an Affiliate of either so acquires such Leasehold Property), (ii) that such lessor shall not terminate such lease as a result of a default by such Loan Party thereunder without first giving Facility Manager notice of such default and at least 60 days (or, if such default cannot reasonably be cured by Facility Manager within such period, such longer period as may reasonably be required) to cure such default, and (iii) to such other matters relating to such Leasehold Property as Facility Manager may reasonably request. "LEASEHOLD PROPERTY" means any leasehold interest of any Loan Party as lessee under any lease of real property. "LENDER" and "LENDERS" means the persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 9.1. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other 19 20 title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the UCC). "LOAN" or "LOANS" means one or more of the Base Rate Loans or Eurodollar Rate Loans or any combination thereof. "LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary Guaranty and the Collateral Documents. "LOAN EXPOSURE" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Loans on the Closing Date, that Lender's Commitment and (ii) after the funding of the Loans, the outstanding principal amount of the Loans of that Lender. "LOAN PARTY" means each of Company and any of Company's Subsidiaries from time to time executing a Loan Document, and "LOAN PARTIES" means all such Persons, collectively. "MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MARKETABLE SECURITIES" means debt or equity Securities that are registered, and, in the case of debt Securities, are rated in one of the four highest ratings by one or more nationally recognized rating agencies. "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Restricted Subsidiaries or (ii) the impairment in any material respect of the ability of any Loan Party to perform, or of Agents or Lenders to enforce, the Obligations. "MATERIAL CONTRACT" means any contract or other arrangement to which Company or any of its Restricted Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could have a Material Adverse Effect. "MINORITY INVESTMENT" means an Investment in an Equity Interest in a Person which Investment is held by Company or a Restricted Subsidiary such that Company and its Restricted Subsidiaries do not have more than 50% of the voting control over all outstanding Equity Interests in such Person. "MOODY'S" means Moody's Investors Service Inc. and its successors. 20 21 "MORTGAGE" means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Loan Party, in form and substance as may be approved by Facility Manager in its sole discretion, with such changes thereto as may be recommended by Facility Manager's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at Facility Manager's option, in the case of an Additional Mortgaged Property (as defined in subsection 5.9), an amendment to an existing Mortgage, in form and substance satisfactory to Facility Manager, adding such Additional Mortgaged Property to the Real Property Assets and Leasehold Properties encumbered by such existing Mortgage, in either case as such security instrument may be amended, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments, including any Additional Mortgages (as defined in subsection 5.9). "MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. "NAIC" means the National Association of Insurance Commissioners and its successors. "NET DEBT SECURITIES PROCEEDS" has the meaning assigned to that term in subsection 2.4B(ii)(b). "NET EQUITY SECURITIES PROCEEDS" has the meaning assigned to that term in subsection 2.4B(ii)(c). "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, and, for purposes of clause (B)(i) of subsection 6.1(a) and for purposes of subsection 6.2, before reduction for non-cash preferred stock dividends and for purposes of clause (B)(ii) of subsection 6.1(a), before reduction for preferred stock dividends, excluding in each case however (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any Securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provisions for taxes on such extraordinary or nonrecurring gain (but not loss) and (iii) for purposes of subsection 6.2, any capital contribution made or required to be made by Company. "NET PROCEEDS" means the aggregate Cash proceeds received by Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any Cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, 21 22 legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP and net of any Purchase Money Obligations relating to the assets comprising such Asset Sale. "NON-INSURANCE LITIGATION" means claims, investigations, proceedings and litigation arising out of or relating to federal or state law relating to the purchase or sale of Securities, including without limitation stockholders derivative actions. "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Company nor any of its Restricted Subsidiaries (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, keepwell, makewell, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Company or any of its Restricted Subsidiaries to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which such lenders have been notified in writing that they will not have any recourse against any of the assets of Company or its Restricted Subsidiaries. "NOTES" means (i) the promissory notes of Company issued pursuant to subsection 2.1E on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 9.1B(i) in connection with assignments of the Commitments or Loans of any Lenders, in each case substantially in the form of Exhibit III annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "NOTICE OF BORROWING" means a notice substantially in the form of Exhibit I annexed hereto delivered by Company to Facility Manager pursuant to subsection 2.1B with respect to a proposed borrowing. "NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the form of Exhibit II annexed hereto delivered by Company to Facility Manager pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "OBLIGATIONS" means all obligations of every nature of each Loan Party from time to time owed to Facility Manager, Lenders or any of them under the Loan Documents, whether for principal, interest, fees, expenses, indemnification or otherwise. 22 23 "OFFERING MEMORANDUM" means that certain Offering Memorandum of Company dated May 7, 1998 relating to the Senior Notes. "OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate executed on behalf of such corporation by its chairman of the board (if an officer) or its president or one of its vice presidents and by its chief financial officer or its treasurer; provided that every Officers' Certificate with respect to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "OXFORD SPECIALTY" means Oxford Specialty Holdings, Inc., Oxford Specialty Management, Inc., Specialty Management Company (NY) IPA, Inc., Specialty Management Company (PA) IPA, Inc., Specialty Management Company (NJ) IPA, Inc. and Specialty Management Company (CT) IPA, Inc. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "PERMITTED HOLDERS" means TPG Oxford and its respective Affiliates. "PERMITTED INVESTMENT" means (i) any Investments in Company, in any Subsidiary Guarantor which is not a Regulated Subsidiary, in any Restricted Subsidiary which is a Regulated Subsidiary to the extent required to comply with applicable regulatory requirements and in any other Restricted Subsidiary to the extent such Investment is made to fund operating expenses in the ordinary course of business consistent with past practices; (ii) any Investment in any Person that becomes a wholly-owned Subsidiary Guarantor which is not a Regulated Subsidiary as a result of such Investment; provided that Company, after giving pro forma effect to such Investment, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in subsection 6.2; (iii) Investments in existence, or made pursuant to legally binding written commitments in existence, on the Closing Date, in each case as set forth on Schedule 1.1C annexed hereto; (iv) Investments in Cash, Cash Equivalents and Investment Grade Securities; (v) loans or advances to employees made in the ordinary course of business; (vi) receivables owing to Company or any Restricted Subsidiary in the ordinary course of business; (vii) repurchase agreements 23 24 and reverse repurchase agreements entered into by a Restricted Subsidiary with any lender or any primary dealer of United States government securities relating to Investment Grade Securities maturing within one year from the date of acquisition thereof; provided that the terms of any such agreement comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy-Repurchase Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985 and, in the case of a repurchase agreement with a primary dealer, a Restricted Subsidiary of Company or its duly authorized custodian shall take possession of the obligations subject to such agreement; (viii) Investments in Hedging Obligations and other similar agreements or arrangements designed to protect Company or any of its Restricted Subsidiaries against fluctuations in the value of Investments of Company and its Restricted Subsidiaries, in each case to the extent permitted under this Agreement; (ix) accounts receivable created or acquired, and prepaid expenses arising, in the ordinary course of business; (x) the endorsements of negotiable instruments for collection or deposit in the ordinary course of business; (xi) Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with subsection 6.9; (xii) Investments in Securities of trade creditors or customers received in settlement of obligations or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (xiii) Investments made after the Closing Date in St. Augustine Health Care, Inc. (Florida) in an aggregate amount not to exceed $6,000,000; and (xiv) Investments in an aggregate amount not to exceed $2,500,000 at any one time outstanding which shall be in addition to Investments which may be made pursuant to clauses (i) through (xiii) above). "PERMITTED LIENS" means (i) Liens securing Indebtedness incurred under this Agreement or the other Loan Documents; (ii) Liens in favor of Company or any Restricted Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with Company or any Subsidiary Guarantor which is not a Regulated Subsidiary of Company; provided that such Liens were not incurred in connection with, or in contemplation of, such merger or consolidation and such Liens do not extend to any assets of Company or any Subsidiary Guarantor which is not a Regulated Subsidiary other than the assets of the Person so merged into or consolidated with Company or such Subsidiary Guarantor which is not a Regulated Subsidiary; (iv) Liens on property existing at the time of acquisition thereof by Company or any Subsidiary Guarantor which is not a Regulated Subsidiary; provided that such Liens were not incurred in connection with, or in contemplation of, such acquisition and do not extend to any assets of Company or any Subsidiary Guarantor which is not a Regulated Subsidiary other than the property so acquired; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds or performance bonds, or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in any case incurred in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor; (vi) Liens existing on the Closing Date, as set forth on Schedule 1.1D annexed hereto; (vii) Liens for taxes, 24 25 assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt (to the extent permitted under this Agreement) of Unrestricted Subsidiaries; (ix) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of Company or any of its Restricted Subsidiaries; (x) statutory Liens of landlords or of mortgagees of landlords arising by operation of law; provided that the rental payments secured thereby are not yet due and payable; (xi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (xii) Purchase Money Liens (including extensions and renewals thereof); (xiii) interest of lessors in Capital Leases or operating leases; (xiv) Liens on deposits made in connection with Hedging Obligations; (xv) Liens encumbering deposits made to secure obligations arising from statutory or regulatory requirements of Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (xvi) prejudgment Liens and judgment Liens not giving rise to an Event of Default or Potential Event of Default so long as any appropriate legal proceeding that may have been duly initiated for the review of such judgment shall not have been finally terminated or so long as the period within which such proceeding may be initiated shall not have expired; and (xvii) Liens incurred in the ordinary course of business of Company or any Subsidiary Guarantor which is not a Regulated Subsidiary of Company with respect to obligations permitted under this Agreement that do not exceed $1,000,000 in principal amount in the aggregate at any one time outstanding. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness (including the issuance of Disqualified Stock in exchange for Disqualified Stock) of Company or any of its Restricted Subsidiaries (other than Indebtedness under this Agreement); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or then current accreted value, if applicable) and redemption premium of, plus accrued and unpaid interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date at least as late as the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Loans, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of the Loans and is subordinated in right of payment to the Loans on terms at least as favorable to the holders of the Loans as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or 25 26 refunded; and (v) such Indebtedness is incurred either by Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced defeased or refinanced. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. "PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as defined in the Company Pledge Agreement and the Subsidiary Pledge Agreements. "POST-CLOSING CONTRIBUTIONS" has the meaning assigned to that term in the definition of "Excluded Asset Sales". "POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "PREFERRED STOCK" means Company's Series A Cumulative Preferred Stock, par value $0.01 per share, Company's Series B Cumulative Preferred Stock, par value $0.01 per share, and Company's Series C Junior Participating Preferred Stock, par value $0.01 per share, in each case as amended from time to time after the Closing Date to the extent permitted pursuant to subsection 6.12. "PRIME RATE" means the rate that Facility Manager announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Facility Manager or any Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "PRINCIPAL SUBSIDIARY" means Oxford Health Plans (NY), Inc., Oxford Health Plans (NJ), Inc., Oxford Health Plans (CT), Inc. and Oxford Health Insurance, Inc. "PRO RATA SHARE" means, with respect to each Lender, the percentage obtained by dividing (x) the Loan Exposure of that Lender by (y) the aggregate Loan Exposure of all Lenders, as such percentage may be adjusted by assignments permitted pursuant to subsection 9.1. The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. 26 27 "PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Facility Manager, desirable in order to create or perfect Liens on any IP Collateral. "PURCHASE MONEY LIEN" means a Lien granted on an asset or property to secure a Purchase Money Obligation permitted to be incurred under this Agreement and incurred solely to finance the purchase, or the cost of construction or improvement, of such asset or property; provided, however, that such Lien encumbers only such asset or property and is granted within 180 days of such acquisition. "PURCHASE MONEY OBLIGATIONS" means, with respect to any Person, any obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction or improvement, of real or personal property to be used in the business of such Person or any of its Restricted Subsidiaries in an amount that is not more than 100% of the cost, or fair market value, as appropriate, of such property, and incurred within 90 days after the date of such acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business). "QUALIFIED INSURANCE PAYMENTS" means payments made by third party insurers to Company and its Restricted Subsidiaries in respect of Non-Insurance Litigation less reimbursement payments required from Company or its Restricted Subsidiaries in connection with such payments. "REAL PROPERTY ASSET" means, at any time of determination, any interest then owned or leased by any Loan Party in any real property. "RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in Facility Manager's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Facility Manager. "REGISTER" has the meaning assigned to that term in subsection 2.1D. "REGULATED SUBSIDIARY" means each of the following Subsidiaries of Company: Oxford Health Plans (PA), Inc., Oxford Health Plans (NH), Inc., Oxford Health Plans (NJ), 27 28 Inc., Oxford Health Plans (NY), Inc., Oxford Health Plans (FL), Inc., Oxford Health Insurance, Inc., Oxford Health Plans (CT), Inc., Oxford Health Plans (IL), Inc. and Compass PPA, Inc. and any Person engaged in the Healthcare Service Business which after the Closing Date becomes a Subsidiary of Company. "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "RELATED AGREEMENTS" means, collectively, the Investment Agreement, the Certificates of Designations with respect to the Preferred Stock, the Senior Note Indenture, the Senior Notes and the Warrants. "RELEASE" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the uncontrolled or unpermitted movement of any Hazardous Materials through the air, soil, surface water or groundwater. "REQUISITE LENDERS" means Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PAYMENT" has the meaning assigned to that term in subsection 6.1. "RESTRICTED SUBSIDIARY" means, with respect to any Person, any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Group and its successors. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute. 28 29 "SENIOR NOTE INDENTURE" means the indenture dated as of May 13, 1998, between Company and The Chase Manhattan Bank, as Trustee, pursuant to which the Senior Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 6.12. "SENIOR NOTES" means the $200,000,000 in aggregate principal amount of senior unsecured notes of Company issued pursuant to the Senior Note Indenture, as such notes may be amended from time to time to the extent permitted under subsection 6.12. "SIGNIFICANT SUBSIDIARY" means any Principal Subsidiary or any other Restricted Subsidiary that either (x) would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Exchange Act, as such Regulation S-X is in effect on the date hereof or (y) accounted for more than 10% of the consolidated revenues of Company and its Subsidiaries as shown on the consolidated audited financial statements of Company for the immediately preceding Fiscal Year. "SOLVENT" means, with respect to any Person, that as of the date of determination both (A) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; (B) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances; and (C) such Person is "solvent" within the meaning given that term and similar terms under applicable Healthcare Regulations. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. 29 30 "SUBSIDIARY GUARANTOR" means any Subsidiary of Company that executes and delivers a counterpart of the Subsidiary Guaranty from time to time after the Closing Date pursuant to subsection 5.8. "SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and delivered by Significant Subsidiaries of Company from time to time after the Closing Date in accordance with subsection 5.8, substantially in the form of Exhibit XII annexed hereto, as such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise modified from time to time. "SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge Agreement executed and delivered by any Subsidiary Guarantor from time to time after the Closing Date in accordance with subsection 5.8, substantially in the form of Exhibit XIII annexed hereto, as such Subsidiary Pledge Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY PLEDGE AGREEMENTS" means all such Subsidiary Pledge Agreements, collectively. "SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security Agreement executed and delivered by any Subsidiary Guarantor from time to time after the Closing Date in accordance with subsection 5.8, substantially in the form of Exhibit XIV annexed hereto, as such Subsidiary Security Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY SECURITY AGREEMENTS" means all such Subsidiary Security Agreements, collectively. "SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means each Subsidiary Trademark Security Agreement executed and delivered by any Subsidiary Guarantor from time to time after the Closing Date in accordance with subsection 5.8, substantially in the form of Exhibit XV annexed hereto, as such Subsidiary Trademark Security Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY TRADEMARK SECURITY AGREEMENTS" means all such Subsidiary Trademark Security Agreements, collectively. "SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term in subsection 8.1B. "SYNDICATION AGENT" has the meaning assigned to that term in the introduction to this Agreement. "TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in 30 31 the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, net worth, capital, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its lending office). "THIRD-PARTY ACCOUNT AGREEMENT" means the Third-Party Account Agreement executed and delivered by Company, Facility Manager and a third-party securities intermediary or similar financial institution on the Closing Date, substantially in the form of Annex A annexed to the Collateral Account Agreement, as such Third-Party Account Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "TPG" means TPG Partners II, L.P., a Delaware limited partnership. "TPG OXFORD" means TPG Oxford LLC, a Delaware limited liability company and an Affiliate of TPG. "TPG SECURITIES" means the Securities, including without limitation the Preferred Stock and the Warrants, issued by Company pursuant to the Investment Agreement. "TRANSACTION COSTS" means the fees, costs and expenses payable by Company on or before the Closing Date in connection with the transactions contemplated by the Loan Documents and the Related Agreements. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with Company or any Restricted Subsidiary of Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Company or such Restricted Subsidiary than those that might be obtained at the time from persons who are not Affiliates of Company; (c) is a Person with respect to which neither Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe for additional Equity Interests or (2) to maintain or preserve such Person's financial condition or to cause such Person to achieve or maintain any specified levels of profitability; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Company or any of its Restricted Subsidiaries; and (e) has no Subsidiaries other than Unrestricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to Facility Manager by filing with Facility Manager a resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted 31 32 Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Company as of such date. The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under subsection 6.2 and (ii) no Event of Default or Potential Event of Default would be in existence following such designation. "U.S. GOVERNMENT OBLIGATIONS" means Securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "WARRANTS" means Company's Series A Warrants to purchase shares of Company's Common Stock in the form attached to Company's Series A Preferred Stock, and Company's Series B Warrants to purchase shares of Company's Common Stock in the form attached to Company's Series B Preferred Stock, in each case as such warrants may be amended from time to time to the extent permitted under subsection 6.12. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares or shares required by applicable law to be held by 32 33 third parties) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person. Unrestricted Subsidiaries shall not be included in the definition of Wholly Owned Subsidiary for any purposes of this Agreement. 1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT. Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. 1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION. A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. C. The use in any of the Loan Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. 33 34 SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES. A. COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company set forth herein, each Lender severally agrees to lend to Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Lender's Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate amount of the Commitments is $150,000,000; provided that the Commitments of Lenders shall be adjusted to give effect to any assignments of the Commitments pursuant to subsection 9.1B. Each Lender's Commitment shall expire immediately and without further action on July 15, 1998 if the Loans are not made on or before that date. Company may make only one borrowing under the Commitments. Amounts borrowed under this subsection 2.1A and subsequently repaid or prepaid may not be reborrowed. B. BORROWING MECHANICS. Loans made on the Closing Date shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Company shall deliver to Facility Manager a Notice of Borrowing no later than 12:00 Noon (New York City time) at least three Business Days in advance of the Closing Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the Closing Date (in the case of a Base Rate Loan). The Notice of Borrowing shall specify (i) the proposed Closing Date (which shall be a Business Day), (ii) the amount of Loans requested, (iii) whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (iv) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period requested therefor. Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing, Company may give Facility Manager telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Facility Manager on or before the Closing Date. Neither Facility Manager nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Facility Manager believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B, and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected Loans hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable 34 35 on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. C. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Facility Manager of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Facility Manager shall notify each Lender of the proposed borrowing. Each Lender shall make the amount of its Loan available to Facility Manager not later than 12:00 Noon (New York City time) on the Closing Date, in same day funds in Dollars, at the Funding and Payment Office. Upon satisfaction or waiver of the conditions precedent specified in subsection 3.1 and subsection 3.2, Facility Manager shall make the proceeds of such Loans available to Company on the Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Facility Manager from Lenders to be credited to the account of Company at the Funding and Payment Office. Unless Facility Manager shall have been notified by any Lender prior to the Closing Date that such Lender does not intend to make available to Facility Manager the amount of such Lender's Loan requested on the Closing Date, Facility Manager may assume that such Lender has made such amount available to Facility Manager on the Closing Date and Facility Manager may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on the Closing Date. If such corresponding amount is not in fact made available to Facility Manager by such Lender, Facility Manager shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Closing Date until the date such amount is paid to Facility Manager, at the customary rate set by Facility Manager for the correction of errors among banks for three Business Days and thereafter at 2.00% over the Adjusted Eurodollar Rate. If such Lender does not pay such corresponding amount forthwith upon Facility Manager's demand therefor, Facility Manager shall promptly notify Company and Company shall immediately pay such corresponding amount to Facility Manager together with interest thereon, for each day from the Closing Date until the date such amount is paid to Facility Manager, at 2.00% over the rate payable under this Agreement for Adjusted Eurodollar Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. 35 36 D. THE REGISTER. (i) Facility Manager shall maintain, at its address referred to in subsection 9.8, a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "REGISTER"). The Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. (ii) Facility Manager shall record in the Register the Commitment and the Loan from time to time of each Lender and each repayment or prepayment in respect of the principal amount of the Loan of each Lender. Any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; provided that failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any applicable Loans. (iii) Each Lender shall record on its internal records (including any Notes held by such Lender) the amount of the Loan made by it and each payment in respect thereof. Any such recordation shall be conclusive and binding on Company, absent manifest error; provided that failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any applicable Loans; and provided, further that in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (iv) Company, Facility Manager and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Facility Manager and recorded in the Register as provided in subsection 9.1B(ii). Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (v) Company hereby designates Facility Manager to serve as Company's agent solely for purposes of maintaining the Register as provided in this subsection 2.1D, and Company hereby agrees that, to the extent Facility Manager serves in such 36 37 capacity, Facility Manager and its officers, directors, employees, agents and affiliates shall constitute Indemnitees for all purposes under subsection 9.3. E. NOTES. Unless otherwise requested by a Lender, Company shall execute and deliver to each Lender (or to Facility Manager for that Lender) on the Closing Date a Note substantially in the form of Exhibit III annexed hereto to evidence that Lender's Loan, in the principal amount of that Lender's Loan and with other appropriate insertions. Facility Manager may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Facility Manager as provided in subsection 9.1B(ii). Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, assignee or transferee of that Note or of any Note or Notes issued in exchange therefor. 2.2 INTEREST ON THE LOANS. A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7, each Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Adjusted Eurodollar Rate. The applicable basis for determining the rate of interest with respect to any Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Loan is outstanding with respect to which notice has not been delivered to Facility Manager in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E and 2.7, the Loans shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at the sum of the Base Rate plus the Applicable Margin; or (ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus the Applicable Margin. B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall be, at Company's option, either a one, two, three or six month period, or if available, twelve months; provided that: 37 38 (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the date of funding in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period with respect to any portion of the Loans shall extend beyond May 13, 2003; (vi) there shall be no more than three Interest Periods outstanding at any time; and (vii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one month. 38 39 C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity). D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time all or any part of its outstanding Loans equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto. Company shall deliver a Notice of Conversion/Continuation to Facility Manager no later than 10:00 A.M. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, Company may give Facility Manager telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be confirmed in writing by delivery of a Notice of Conversion/Continuation to Facility Manager no later than 10:00 A.M. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Upon receipt of written or telephonic notice of any proposed conversion/continuation under this subsection 2.2D, Facility Manager shall promptly transmit such notice by telefacsimile or telephone to each Lender. Neither Facility Manager nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Facility Manager believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon conversion 39 40 or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. E. DEFAULT RATE. Any principal payments or premiums on the Loans not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate which is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Facility Manager or any Lender. F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. 2.3 FEES. 40 41 A. ANNUAL ADMINISTRATIVE FEES. Company agrees to pay to Facility Manager an annual administrative fee in such amount as is agreed upon between Company and Facility Manager, such administrative fee to be payable in advance on the Closing Date and on each anniversary of the Closing Date. B. OTHER FEES. Company agrees to pay to Agents such other fees in the amounts and at the times separately agreed upon between Company and Agents. 2.4 REPAYMENTS AND PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS. A. SCHEDULED PAYMENTS OF LOANS. The Loans are not subject to any scheduled amortization. Full repayment of the outstanding principal amount of all Loans is due on May 13, 2003. 41 42 B. PREPAYMENTS. (i) Voluntary Prepayments. Company may, at any time after the one-year anniversary of the Closing Date, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Facility Manager by 12:00 Noon (New York City time) on the date required and if given by telephone, confirmed in writing to Facility Manager at least one Business Day in advance of such prepayment (which original written or telephonic notice Facility Manager will promptly transmit by telefacsimile or telephone to each Lender), prepay any Loans on any Business Day in whole or in part in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount; provided, however, that a Eurodollar Rate Loan may only be prepaid on the expiration of the Interest Period applicable thereto unless Company pays any additional compensation required by subsection 2.6D. Any voluntary prepayment of Loans made by Company (i) after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date shall be subject to the payment of a premium of 5.00% of the principal amount of Loans so prepaid, (ii) after the second anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date shall be subject to the payment of a premium of 2.50% of the principal amount of Loans so prepaid and (iii) after the third anniversary of the Closing Date shall not be subject to any prepayment penalties. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4B(iii). Notwithstanding anything to the contrary contained in this subsection 2.4B(i), subsection 9.5 or any other provision of this Agreement, Company may purchase all or any portion of the Loans of any Lender pursuant to an agreement between such Lender and Company and such purchase shall not be deemed to be a voluntary prepayment hereunder; provided that (x) an Event of Default has not then occurred and is not then continuing or would not occur as a result of such purchase, (y) Facility Manager acknowledges receipt of a copy of such agreement and (z) the Loans so purchased or held by any Affiliate of Company are disregarded and not deemed outstanding (as to which Company hereby agrees) for purposes of (1) the making of, or the application of, any payments to the Lenders hereunder or under any other Loan Document, (2) the making of any request, demand, authorization, direction, notice, consent or waiver hereunder or under any other Loan Document or (3) the determination of Requisite Lenders, or for any similar or related purpose hereunder or under any other Loan Document. (ii) Mandatory Prepayments. The Loans shall be prepaid in the amounts and under the circumstances set forth below, all such prepayments to be applied as set forth below or as more specifically provided in subsection 2.4B(iii). No prepayment penalty, 42 43 other than any compensation required under subsection 2.6D, will be payable with respect to the mandatory prepayments described in clauses (a), (b), and (c) of this subsection 2.4B(ii). Prepayments made as a result of a Change of Control, as described in clause (d) of this subsection 2.4B(ii), will be subject to a prepayment premium equal to 1.00% of the principal amount of the Loans so prepaid. (a) Prepayments From Asset Sales. Company and any Restricted Subsidiary making an Asset Sale shall prepay the Loans in an aggregate amount equal to such Net Proceeds to the extent required by and in accordance with the provisions of subsection 6.9. If Company or any such Restricted Subsidiary would otherwise be required to apply any portion of such Net Proceeds to prepay the Senior Notes or any other Indebtedness, then notwithstanding anything contained in this subsection 2.4B(ii)(a) or subsection 6.9 to the contrary, Company or such Restricted Subsidiary shall apply such Net Proceeds toward the prepayment of the Loans as provided in this subsection 2.4B(ii)(a) so as to eliminate the obligation to prepay such other Indebtedness. Company shall deliver to Facility Manager concurrently with the receipt of any such Net Proceeds an Officers' Certificate certifying as to the facts giving rise to any exclusion from the prepayment requirements set forth in this subsection 2.4B(ii)(a) and setting forth the proposed use of such Net Proceeds and such other information with respect to such proposed use as Facility Manager may reasonably request; provided that any mandatory prepayments required to be made from Asset Sales by Regulated Subsidiaries will be subject to compliance with applicable regulatory requirements, including without limitation under any Healthcare Regulations. (b) Prepayments Due to Issuance of Debt Securities. On the date of receipt by Company or any of its Restricted Subsidiaries of the Cash proceeds (any such proceeds, net of reasonable and customary underwriting discounts and commissions, financial advisory or placement fees and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, being "NET DEBT SECURITIES PROCEEDS") from the issuance of any debt Securities of Company or any of its Restricted Subsidiaries after the Closing Date, Company shall prepay the Loans in an aggregate amount equal to 100% of such Net Debt Securities Proceeds. (c) Prepayments Due to Issuance of Equity Securities. On the date of receipt by Company or any of its Restricted Subsidiaries of the Cash proceeds (any such proceeds, net of (x) reasonable and customary under writing discounts and commissions, financial advisory or placement fees and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, (y) any Capital Contributions required to be made from such proceeds to 43 44 Company's Principal Subsidiaries and (z) payments from such proceeds made in connection with any settlement or resolution of any Non-Insurance Litigation, being "NET EQUITY SECURITIES PROCEEDS") from the issuance of any equity Securities of Company or any of its Restricted Subsidiaries after the Closing Date, Company shall prepay the Loans in an aggregate amount equal to 50% of such Net Equity Securities Proceeds; provided that Company shall have delivered to Facility Manager, on or before such date of receipt, an Officers' Certificate certifying as to the facts giving rise to any Capital Contributions required to be made with such Net Equity Securities Proceeds. (d) Prepayments Due to Change of Control. Upon the occurrence of a Change of Control, Company shall prepay the Loans in full, together with a premium equal to 1.00% of the aggregate principal amount of Loans so prepaid. (e) Calculations of Net Proceeds Amounts; Additional Prepayments Based on Subsequent Calculations. Concurrently with any prepayment of the Loans pursuant to subsections 2.4B(ii)(a)-(c), Company shall deliver to Facility Manager an Officers' Certificate demonstrating the calculation of the amount (the "NET PROCEEDS AMOUNT") of the applicable Net Proceeds, Net Debt Securities Proceeds or Net Equity Securities Proceeds, as the case may be, that gave rise to such prepayment. In the event that Company shall subsequently determine that the actual Net Proceeds Amount was greater than the amount set forth in such Officers' Certificate, Company shall promptly make an additional prepayment of the Loans in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Facility Manager an Officers' Certificate demonstrating the derivation of the additional Net Proceeds Amount resulting in such excess. (f) Waivable Mandatory Prepayments. With respect to prepayments under subsections 2.4B(ii)(a)-(d), Company shall notify Facility Manager in writing of such prepayment not less than ten Business Days before any prepayment is due under such subsections 2.4B(ii)(a)-(d) (a "WAIVABLE MANDATORY PREPAYMENT") and each Lender shall have the option to waive their rights to receive such Waivable Mandatory Prepayment. Facility Manager shall, upon receipt of such notice, notify each Lender thereof and of the amount of such Waivable Mandatory Prepayment to be applied to such Lender's Loan. In the event any Lender desires to waive such Lender's right to receive such Waivable Mandatory Prepayment, such Lender shall so advise Facility Manager in writing no later than the close of business not more than five Business Days after it receives such notice from Facility Manager. (iii) Application of Prepayments 44 45 (a) Application of Voluntary Prepayments. Any voluntary prepayments pursuant to subsection 2.4B(i) shall be applied to reduce the outstanding principal amounts of the Loans that are unpaid at the time of such prepayment. (b) Application of Mandatory Prepayments. Any mandatory prepayments of the Loans pursuant to subsection 2.4B(ii) shall be applied to reduce the outstanding principal amounts of the Loans that are unpaid at the time of such prepayment. (c) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans. Any prepayments of any Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. C. GENERAL PROVISIONS REGARDING PAYMENTS. (i) Manner and Time of Payment. All payments by Company of principal, interest, fees and other Obligations hereunder and under the Notes shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Facility Manager not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Facility Manager after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. Company hereby authorizes Facility Manager to charge its accounts with Facility Manager in order to cause timely payment to be made to Facility Manager of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (ii) Application of Payments to Principal and Interest. All payments in respect of the principal amount of any Loan shall include payment of premiums, if any, and accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate principal and interest payments received by Facility Manager shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Facility Manager shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by 45 46 Facility Manager. Notwithstanding the foregoing provisions of this subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Facility Manager shall give effect thereto in apportioning payments received thereafter. (iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder. (v) Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER SUBSIDIARY GUARANTY. (i) Application of Proceeds of Collateral. Except as provided in subsection 2.4B(ii)(a) with respect to prepayments from Net Proceeds, all proceeds received by Facility Manager in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document may, in the discretion of Facility Manager, be held by Facility Manager as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Facility Manager against, the applicable Secured Obligations (as defined in such Collateral Document) in the following order of priority: (a) To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to Facility Manager and its agents and counsel, and all other expenses, liabilities and advances made or incurred by Facility Manager in connection therewith, and all amounts for which Facility Manager is entitled to indemnification under such Collateral Document and all advances made by Facility Manager thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Facility Manager in connection with the exercise of any right or remedy under such Collateral Document, all in accordance with the terms of this Agreement and such Collateral Document; 46 47 (b) thereafter, to the extent of any excess such proceeds, to the payment of all other such Secured Obligations for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. (ii) Application of Payments Under Subsidiary Guaranty. All payments received by Facility Manager under the Subsidiary Guaranty shall be applied promptly from time to time by Facility Manager in the following order of priority: (a) To the payment of the costs and expenses of any collection or other realization under the Subsidiary Guaranty, including reasonable compensation to Facility Manager and its agents and counsel, and all expenses, liabilities and advances made or incurred by Facility Manager in connection therewith, all in accordance with the terms of this Agreement and the Subsidiary Guaranty; (b) thereafter, to the extent of any excess such payments, to the payment of all other Guarantied Obligations (as defined in the Subsidiary Guaranty) for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such payments, to the payment to the applicable Subsidiary Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 2.5 USE OF PROCEEDS. A. LOANS. The proceeds of the Loans, together with the $200,000,000 in proceeds from the issuance and sale of the Senior Notes and the $350,000,000 in Equity Contribution, shall be used for (i) current and future reserve and regulatory capital requirements of Company's Regulated Subsidiaries as required to comply with applicable regulatory requirements, including without limitation any applicable Healthcare Regulations, (ii) the repayment in full of the existing Indebtedness under the Bridge Agreement, (iii) the making of capital expenditures, (iv) the payment of interest on Indebtedness in an amount which does not exceed the amount of such interest net of the amount of interest income, (v) the payment of Transaction Costs and (vi) other general corporate purposes. 47 48 B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Restricted Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS. Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to the Eurodollar Rate Loans as to the matters covered: A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable after 12:00 Noon (New York City time) on each Interest Rate Determination Date, Facility Manager shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that Facility Manager shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Facility Manager shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Facility Manager notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event that on any date any Lender shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Facility Manager) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order enacted, modified or amended after the date hereof (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material 48 49 hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Facility Manager of such determination (which notice Facility Manager shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Facility Manager of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Facility Manager shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i)) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other 49 50 default by Company in the repayment of its Eurodollar Rate Loans when required by the terms of this Agreement. E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A. G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Conversion/Continuation given by Company with respect to a requested conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY. A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or govern mental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Entity, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Governmental Entity or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this 50 51 Agreement or any of its obligations hereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the interbank Eurodollar market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company (with a copy to Facility Manager) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error. B. WITHHOLDING OF TAXES. (i) Payments to Be Free and Clear. All sums payable by Company under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America. (ii) Grossing-up of Payments. If Company or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Facility Manager or any Lender under any of the Loan Documents: 51 52 (a) Company shall notify Facility Manager of any such requirement or any change in any such requirement within a reasonable time after Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Facility Manager or such Lender, as the case may be) on behalf of and in the name of Facility Manager or such Lender; (c) the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Facility Manager or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Facility Manager evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. 52 53 (iii) Evidence of Exemption from U.S. Withholding Tax. (a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.7B(iii), a "NON-US LENDER") shall deliver to Facility Manager for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Facility Manager (each in the reasonable exercise of its discretion), (1) two original copies of Internal Revenue Service Form 1001 or 4224 (or any successor forms), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents or (2) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Loan Documents. (b) Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Facility Manager for transmission to Company two new original copies of Internal Revenue Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with 53 54 respect to payments to such Lender under the Loan Documents or (2) notify Facility Manager and Company of its inability to deliver any such forms, certificates or other evidence. (c) Company shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iii); provided that if such Lender shall have satisfied the requirements of subsection 2.7B(iii)(a) on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iii)(c) shall relieve Company of its obligation to pay any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a). C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Entity, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Entity, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to Company (with a copy to Facility Manager) a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error. 54 55 2.8 OBLIGATION OF LENDERS TO MITIGATE; REPLACEMENT LENDERS. A. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans of such Lender becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under subsection 2.7, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, fund or maintain the Commitments of such Lender or the affected Loans of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to subsection 2.7 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this subsection 2.8A unless Company agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8A (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company (with a copy to Facility Manager) shall be conclusive absent manifest error. B. In the event that any Lender shall give notice to Company that such Lender is an Affected Lender pursuant to subsection 2.6C or that such Lender is entitled to receive payments under subsection 2.7, and unless the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments are no longer in effect, Company shall have the right, if no Potential Event of Default or Event of Default then exists, to replace such Lender (a "REPLACED LENDER") with one or more Eligible Assignees (collectively, the "REPLACEMENT LENDER") acceptable to Facility Manager; provided that (i) at the time of any replacement pursuant to this subsection 2.8B, the Replacement Lender shall enter into one or more Assignment Agreements pursuant to subsection 9.1B (and with all fees payable pursuant to such subsection 9.1B to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the outstanding Loans of the Replaced Lender and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender and (B) an amount equal to all accrued, but theretofore unpaid, fees owing to the Replaced Lender with respect thereto, and (ii) all obligations (including without limitation all such amounts, if any, owing under subsection 2.6D and subsection 2.7) of Company owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is 55 56 concurrently being, paid), shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective Assignment Agreements, recordation of such assignment in the Register by Facility Manager pursuant to subsection 2.1D, the payment of amounts referred to in clauses (i) and (ii) above and delivery to the Replacement Lender of the appropriate Note or Notes executed by Company, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder except with respect to indemnification provisions under this Agreement which by the terms of this Agreement survive the termination of this Agreement, which indemnification provisions shall survive as to such Replaced Lender. SECTION 3. CONDITIONS TO LOANS The obligations of Lenders to make the Loans are subject to the prior or concurrent satisfaction of the conditions set forth in this Section 3: 3.1 CONDITIONS TO LOANS. The obligations of Lenders to make the Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 3.2, subject to prior or concurrent satisfaction of the following conditions: A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall, and shall cause each other Loan Party to, deliver to Lenders (or to Facility Manager for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following with respect to Company or such Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of the Certificate or Articles of Incorporation of such Person, together with a good standing certificate from the Secretary of State of its jurisdiction of incorporation and each other state in which such Person is qualified as a foreign corporation to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date; (ii) Copies of the Bylaws of such Person, certified as of the Closing Date by such Person's corporate secretary or an assistant secretary; (iii) Resolutions of the Board of Directors of such Person approving and authorizing the execution, delivery and performance of the Loan Documents and Related Agreements to which it is a party, certified as of the Closing Date by the corporate 56 57 secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party; (v) Executed originals of the Loan Documents to which such Person is a party; and (vi) Such other documents as Facility Manager may reasonably request. B. NO MATERIAL ADVERSE EFFECT. Since March 30, 1998, no Material Adverse Effect (in the reasonable opinion of Syndication Agent) shall have occurred. C. CORPORATE STRUCTURE, OWNERSHIP, ETC. Schedule 4.1D sets forth the corporate structure of Company and its Subsidiaries. Facility Manager shall have received an Officers' Certificate, in form and substance satisfactory to Agents, to the effect that Schedule 4.1D accurately and correctly identifies all Regulated Subsidiaries of Company which not permitted by applicable regulatory restrictions to execute and deliver the Subsidiary Guaranty and/or any Collateral Documents with respect to the Obligations. D. PROCEEDS OF DEBT AND EQUITY CAPITALIZATION OF COMPANY. (i) Equity Contribution; Preferred Stock. On or before the Closing Date, Company shall have received not less than $350,000,000 in gross proceeds from the Equity Contribution. The terms and conditions of the Preferred Stock and the other TPG Securities, including the type and amount of dividend payments and any redemption provisions, shall be substantially as set forth in Exhibits A and C to the Investment Agreement as in effect on March 30, 1998, or as is otherwise satisfactory to Agents and Requisite Lenders. On the Closing Date, not less than $200,000,000 of such Preferred Stock shall be directly or indirectly controlled by TPG. (ii) Senior Note Proceeds; Senior Note Indenture. On or before the Closing Date, Company shall have received not less than $200,000,000 in gross proceeds from the issuance and sale of the Senior Notes. The terms and conditions of the Senior Notes and of the Senior Note Indenture shall be substantially as set forth in the Offering Memorandum or as is otherwise satisfactory to Agents and Requisite Lenders. (iii) Use of Proceeds by Company. Company shall have provided evidence satisfactory to Agents that (x) the proceeds from the Equity Contribution described in the preceding clause (i) and (y) the proceeds from the sale and issuance of Senior Notes described in the immediately preceding clause (ii) have been irrevocably committed, 57 58 prior to the application of the proceeds of the Loans on the Closing Date, to (1) the Capital Contributions, (2) the repayment of the outstanding Indebtedness of Company under the Bridge Agreement and (3) the payment of the Transaction Costs. E. RELATED AGREEMENTS. Facility Manager shall have received (a) a fully executed or conformed copy of each Related Agreement and any documents executed in connection therewith, and each Related Agreement shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Facility Manager to be material, in each case without the consent of Agents and Requisite Lenders and (b) an Officers' Certificate from Company, in form and substance satisfactory to Agents, certifying to the effect that each such agreement (which shall be attached thereto) is correct and complete and is in full force and effect and certifying as to such matters with respect to each of the Related Agreements. F. MATTERS RELATING TO EXISTING INDEBTEDNESS. (i) Termination of Bridge Agreement. On the Closing Date, Company shall have (a) repaid in full all Indebtedness outstanding under the Bridge Agreement, (b) terminated any commitments to lend or make other extensions of credit thereunder and (c) delivered to Facility Manager all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Company and its Subsidiaries thereunder, in each case on terms and conditions satisfactory to Agents. (ii) No Existing Indebtedness to Remain Outstanding. Facility Manager shall have received an Officers' Certificate of Company, in form and substance satisfactory to Agents, to the effect that, after giving effect to the transactions described in this subsection 3.1F, Company and its Restricted Subsidiaries have no outstanding Indebtedness other than Indebtedness under the Loan Documents and Related Agreements except as set forth in Schedule 1.1B annexed hereto. G. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF WAITING PERIODS, ETC. Company shall have obtained all Governmental Authorizations, Healthcare Authorizations and all approvals or consents of any other Persons, including without limitation Healthcare Regulators, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the Related Agreements, and each of the foregoing shall be in full force and effect, in each case other than those the failure to obtain or maintain which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority, including without limitation any Healthcare Regulators, which would restrain, prevent or otherwise impose material adverse conditions on the transactions contemplated by the Loan Documents or the Related Agreements. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with 58 59 respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. H. INVESTMENT AGREEMENT, EQUITY CONTRIBUTION AND CAPITAL CONTRIBUTIONS. (i) the Investment Agreement shall be in full force and effect and shall not have been amended, supplemented, waived or otherwise modified in any material respect without the consent of Agents and Requisite Lenders, including without limitation any Closing Date supplements, amendments or modifications to such Investment Agreement, and executed or conformed copies thereof (including all exhibits and schedules thereto) and any amendments or modifications thereto and all documents executed in connection therewith have been delivered to Facility Manager; (ii) all conditions to the Equity Contribution set forth in the Investment Agreement shall have been satisfied or the fulfillment of such conditions shall have been waived with the consent of Syndication Agent; (iii) the Equity Contribution shall have become effective in accordance with the terms of the Investment Agreement; (iv) the aggregate gross amount of the Equity Contribution shall not be less than $350,000,000; and (v) Facility Manager shall have received and Officers' Certificate of Company, in form and substance satisfactory to Agents, to the effect set forth in clauses (i) - (iv) and stating that Company shall proceed to consummate the Capital Contributions immediately upon the making of the Loans. I. MORTGAGES. With respect to the Real Property Assets and Leasehold Properties of Company and its Restricted Subsidiaries as of the Closing Date, as identified in Schedule 4.5B annexed hereto, no Mortgages will be placed on such Real Property Assets or Leasehold Properties for the benefit of Lenders. J. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. Facility Manager shall have received evidence satisfactory to it that Company shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clauses (iii), (iv) and (v) below) that may be necessary or, in the opinion of Facility Manager, desirable in order to create in favor of Facility Manager, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire personal and mixed property Collateral. Such actions shall include the following: 59 60 (i) Schedules to Collateral Documents. Delivery to Facility Manager of accurate and complete schedules to all of the applicable Collateral Documents. (ii) Stock Certificates and Instruments. Delivery to Facility Manager of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Facility Manager) representing all capital stock pledged pursuant to the Company Pledge Agreement and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Facility Manager) evidencing any Collateral; (iii) Lien Searches and UCC Termination Statements. Delivery to Facility Manager of (a) the results of a recent search, by a Person satisfactory to Facility Manager, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of Company, together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement). (iv) UCC Financing Statements and Fixture Filings. Delivery to Facility Manager of UCC financing statements and, where appropriate, fixture filings, duly executed by Company with respect to all personal and mixed property Collateral of Company, for filing in all jurisdictions as may be necessary or, in the opinion of Facility Manager, desirable to perfect the security interests created in such Collateral pursuant to the Collateral Documents; (v) PTO Cover Sheets, Etc. Delivery to Facility Manager of all cover sheets or other documents or instruments required to be filed with the PTO in order to create or perfect Liens in respect of any IP Collateral; (vi) Opinions of Local Counsel. To the extent requested by Syndication Agent, delivery to Facility Manager of an opinion of counsel (which counsel shall be reasonably satisfactory to Facility Manager) under the laws of each jurisdiction in which Company or any personal or mixed property Collateral is located with respect to the creation and perfection of the security interests in favor of Facility Manager in such Collateral and such other matters governed by the laws of such jurisdiction regarding such security interests as Facility Manager may reasonably request, in each case in form and substance reasonably satisfactory to Facility Manager. 60 61 (vii) Other Documents. Delivery to Facility Manager of such other documents and instruments that Facility Manager reasonably deems necessary or advisable to establish, preserve and perfect First Priority Liens granted to Facility Manager on behalf of Lenders under the Collateral Documents. K. FEES. Company shall have paid to Syndication Agent, for distribution (as appropriate) to Agents and Lenders, the fees payable on the Closing Date referred to in subsection 2.3. L. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before the Closing Date, Lenders shall have received from Company: (i) audited financial statements of Company and its Subsidiaries for the Fiscal Year ended December 31, 1997, consisting of a consolidated balance sheet and the related consolidated statements of operations, shareholders' equity and cash flows for such Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present in all material respects the financial condition of Company and its Subsidiaries as at such date and the results of the operations of Company and its Subsidiaries for the period ended on such date, all in accordance with GAAP; provided that such audited financial statements shall not differ in any material respect from the draft audited financial statements previously delivered to Syndication Agent; (ii) unaudited financial statements of Company and its Subsidiaries as at March 31, 1998, consisting of a balance sheet and the related consolidated and consolidating statements of operations, stockholders' equity and cash flows for the three-month period ending on such date, all in reasonable detail and certified by the chief financial officer of Company that they fairly present in all material respects the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; (iii) pro forma consolidated balance sheet of Company and its Subsidiaries as at March 31, 1998, prepared in accordance with GAAP and reflecting the consummation of the transactions contemplated by the Loan Documents and the Related Agreements, which pro forma financial statements shall be in form and substance satisfactory to Lenders; and (iv) projected consolidated and consolidating financial statements of Company and its Subsidiaries, consisting of balance sheets and the related consolidated and consolidating statements of income, stockholders' equity and cash flows, for the five-year period after the Closing Date, each of which shall be (x) substantially consistent 61 62 with any financial statements for the same periods previously delivered to Syndication Agent and (y) otherwise in form and substance satisfactory to Syndication Agent. M. EVIDENCE OF INSURANCE. Facility Manager shall have received a certificate or certificates from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 5.4B is in full force and effect and that Facility Manager on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 5.4B. N. OPINION OF COUNSEL TO COMPANY. Lenders and their respective counsel shall have received (i) originally executed copies of one or more favorable written opinions of Sullivan & Cromwell, counsel for Company, and of Jeffery H. Boyd, General Counsel to Company, in form and substance reasonably satisfactory to Agents and their respective counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit V annexed hereto and as to such other matters as Agents acting on behalf of Lenders may reasonably request and (ii) evidence satisfactory to Agents that Company has requested such counsel to deliver such opinions to Lenders. O. OPINION OF AGENTS' COUNSEL. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers LLP, counsel to Agents, dated as of the Closing Date, substantially in the form of Exhibit VI annexed hereto and as to such other matters as Agents acting on behalf of Lenders may reasonably request. P. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS. Facility Manager and its counsel shall have received copies of each of the opinions of counsel delivered to the parties under the Related Agreements, together with a letter from each such counsel (to the extent not inconsistent with such counsel's established internal policies) authorizing Lenders to rely upon such opinion to the same extent as though it were addressed to Lenders; provided that Agents and Lenders shall not be able to rely upon the disclosure opinion. Q. AUDITOR'S LETTER. Facility Manager shall have received an executed Auditor's Letter from KPMG Peat Marwick LLP. R. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Facility Manager an Officers' Certificate, in form and substance satisfactory to Agents, to the effect that the representations and warranties in Section 4 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or,to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions 62 63 which this Agreement provides shall be performed or satisfied by it on or before the Closing Date, except as otherwise disclosed and agreed to in writing by Agents and Requisite Lenders. S. NO DISRUPTION OF FINANCIAL AND CAPITAL MARKETS. There shall have been no material disruption of or material adverse change after March 30, 1998 in current financial, banking or capital markets that would materially impair the satisfactory syndication of the Loans, as determined in the good faith judgment of Syndication Agent. T. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agents, acting on behalf of Lenders, and their respective counsel shall be satisfactory in form and substance to Agents and such counsel, and Agents and such counsel shall have received all such counterpart originals or certified copies of such documents as Agents may reasonably request. Each Lender hereby agrees that by its execution and delivery of its signature page hereto and by the funding of its Loans to be made on the Closing Date, such Lender approves of and consents to each of the matters set forth in this Section 3 which must be approved by, or which must be satisfactory to, Requisite Lenders; provided that, in the case of any agreement or document which must be approved by, or which must be satisfactory to, Requisite Lenders, Facility Manager or Company shall have delivered a copy of such agreement or document to such Lender on or prior to the Closing Date. 3.2 ADDITIONAL CONDITIONS. A. NOTICE OF BORROWING. Facility Manager shall have received on or before the Closing Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing executed by the chief executive officer, the chief financial officer or the treasurer of Company. B. NO DEFAULT. No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or Potential Event of Default. C. NO ORDERS, JUDGMENTS OR DECREES. No order, judgment or decree of any court, arbitrator or other Governmental Entity shall purport to enjoin or restrain any Lender from making the Loans to be made by it. D. NO VIOLATION OF LAW. The making of the Loans shall not violate any law including, without limitation, Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other comparable or similar law of any Governmental Entity. 63 64 E. NO PENDING OR THREATENED ACTIONS, SUITS, ETC. There shall not be pending or, to the knowledge of Company, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Company or any of its Restricted Subsidiaries or any property of Company or any of its Restricted Subsidiaries that has not been disclosed by Company in writing pursuant to subsection 4.6 or 5.1(ix) prior to the execution of this Agreement, and there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the opinion of either Agent or of Requisite Lenders, would be expected to have a Material Adverse Effect; and no injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by this Agreement or the making of Loans hereunder. SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make the Loans, Company represents and warrants to each Lender, on the date of this Agreement and on the Closing Date, that the following statements are true, correct and complete: 4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES. A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation as specified in Schedule 4.1D annexed hereto. Each Loan Party has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and Related Agreements to which it is a party and to carry out the transactions contemplated thereby. B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and will not have a Material Adverse Effect. C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 6.10. D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in Schedule 4.1D annexed hereto, as said Schedule 4.1D may be supplemented from time to time pursuant to the provisions of subsection 5.1(xv). Schedule 4.1D shall identify which 64 65 Subsidiaries of Company are Restricted Subsidiaries, Unrestricted Subsidiaries, Regulated Subsidiaries, Principal Subsidiaries and Significant Subsidiaries and which Subsidiaries of Company are Loan Parties hereunder. Based on efforts made by Company including discussions between officers of Company and Healthcare Regulators, in the judgment of Company any Significant Subsidiary of Company which is not identified as a Loan Party in Schedule 4.1D would not be permitted by applicable Healthcare Regulators or regulatory restrictions to execute and deliver the Subsidiary Guaranty and/or any Collateral Documents with respect to the Obligations. The Capital Stock of each of the Subsidiaries of Company identified in Schedule 4.1D annexed hereto is duly authorized, validly issued, fully paid and nonassessable and none of such capital stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 4.1D annexed hereto is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation set forth therein, has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such corporate power and authority has not had and will not have a Material Adverse Effect. Schedule 4.1D annexed hereto correctly sets forth the jurisdiction of incorporation and the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein. 65 66 4.2 AUTHORIZATION OF BORROWING, ETC. A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Loan Documents and the Related Agreements have been duly authorized by all necessary corporate action on the part of each Loan Party that is a party thereto. B. NO CONFLICT. The execution, delivery and performance by Loan Parties of the Loan Documents and the Related Agreements to which they are parties and the consummation of the transactions contemplated by the Loan Documents and such Related Agreements do not and will not (i) violate any provision of any law or any governmental rule or regulation, including without limitation any Healthcare Regulation, applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any Governmental Entity binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Facility Manager on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person, including without limitation any Healthcare Regulator, under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders. C. COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS. (a) Except in each case as is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect and except in connection with the matters disclosed in the Offering Memorandum, the Form 10-K, the Form 8-K or on Schedule 4.6 annexed hereto, each of Company and its Subsidiaries is in compliance with the requirements of all applicable Healthcare Authorizations, laws, rules, regulations and orders (including without limitation all Environmental Laws) of any Governmental Entity. (b) Except in each case as is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect, all Healthcare Authorizations have been duly obtained and are in full force and effect without any known conflict with the rights of others and free from any unduly burdensome restrictions. Except in each case as is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect and except in connection with the matters disclosed in the Offering Memorandum, the Form 10-K or the Form 8-K, since December 31, 1997, none of Company or any of its Subsidiaries has received any written notice or other written communications from 66 67 any Governmental Entity regarding (i) any revocation, withdrawal, suspension, termination or modification of, or the imposition of any material conditions with respect to, any Healthcare Authorizations, (ii) any violation by Company or any of its Subsidiaries of any applicable law, rule, regulation or order (including without limitation any Environmental Law) of any Governmental Entity or (iii) any other limitations on the conduct of business by Company or any of its Subsidiaries. D. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Loan Parties of the Loan Documents and the Related Agreements to which they are parties and the consummation of the transactions contemplated by the Loan Documents and such Related Agreements do not and will not require any Governmental Authorizations or notice to, or other action to, with or by, any Governmental Entity or registration, consent or approval or other action under any Healthcare Regulations, except for such Governmental Authorizations, registrations, consents, approvals or notices which will be obtained or taken on or before the Closing Date and disclosed in writing to Lenders. E. BINDING OBLIGATION. Each of the Loan Documents and Related Agreements has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. VALID ISSUANCE OF PREFERRED STOCK AND SENIOR NOTES. (i) Preferred Stock. The shares of Preferred Stock sold on or before the Closing Date are duly and validly issued, fully paid and nonassessable. No stockholder of Company has or will have any preemptive rights to subscribe for any additional equity Securities of Company. The issuance and sale of such shares of Preferred Stock (a) have been registered or qualified under applicable federal and state securities laws or (b) are exempt therefrom. (ii) Senior Notes. Company has the corporate power and authority to issue the Senior Notes. The Senior Notes, when issued and paid for, will be the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The Senior Notes, when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. 4.3 FINANCIAL CONDITION. 67 68 Company has heretofore delivered to Lenders, at Lenders' request, the following financial statements and information: (i) audited financial statements of Company and its Subsidiaries for the fiscal year ended December 31, 1997, (ii) unaudited financial statements of Company and its Subsidiaries as at March 31, 1998 and (iii) pro forma consolidated and consolidating balance sheets of Company and its Subsidiaries as at the Closing Date. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. None of the Loan Parties (and will not following the funding of the Loans) have any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries taken as a whole. 4.4 NO MATERIAL ADVERSE CHANGE. Since March 30, 1998, no event or change has occurred that has caused, either in any case or in the aggregate, a Material Adverse Effect. 4.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY. A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 6.9 or subsection 6.11. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. B. REAL PROPERTY. As of the Closing Date, Schedule 4.5B annexed hereto contains a true, accurate and complete list of (i) all fee properties and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Leasehold Property of Company or any Subsidiary, regardless of whether Company or such Subsidiary is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as 68 69 specified in Schedule 4.5B annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and Company does not have knowledge of any default that has occurred and is continuing thereunder which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and each such agreement constitutes the legally valid and binding obligation of Company or each applicable Subsidiary, enforceable against Company or such Subsidiary in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. 4.6 LITIGATION. Except as set forth in Schedule 4.6 annexed hereto, there are no actions, suits, proceedings, arbitrations or governmental investigations (including any Environmental Claims) (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, before or by any Governmental Entity or pursuant to any Healthcare Regulations that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 4.7 PAYMENT OF TAXES. Except to the extent permitted by subsection 5.3, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been or will be filed on or before the date due, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL CONTRACTS. A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, would not have a Material Adverse Effect. 69 70 B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreements or instruments or any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. C. All Material Contracts of Company and its Subsidiaries are in full force and effect and no material defaults currently exist thereunder. 4.9 GOVERNMENTAL REGULATION. Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness (other than with respect to Regulated Subsidiaries, applicable Healthcare Regulations) or which may otherwise render all or any portion of the Obligations unenforceable. 4.10 SECURITIES ACTIVITIES. A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. B. Following application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 6.4 or 6.9 or subject to any restriction contained in any agreement or instrument between Company and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of subsection 7.2, will be Margin Stock. 4.11 EMPLOYEE BENEFIT PLANS. A. Each Employer Benefit Plan is in substantial compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan. Company, each of its Subsidiaries and each of their respective ERISA Affiliates have performed substantially all their obligations under each Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. B. No ERISA Event has occurred or is reasonably expected to occur. C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 4.11 annexed hereto, no Employee Benefit Plan provides 70 71 health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company or any of its Subsidiaries. D. As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $1,000,000. E. Neither the Company nor any Subsidiary contributes to, or has ever contributed to any Multiemployer Plan. 4.12 CERTAIN FEES. No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 4.13 ENVIRONMENTAL PROTECTION. Except as set forth in Schedule 4.13 annexed hereto: (i) neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (ii) neither Company nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law; (iii) there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and 71 72 (iv) compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws will not, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect. Notwithstanding anything in this subsection 4.13 to the contrary, no event or condition has occurred or is occurring with respect to the past or present activities of Company or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity, including any matter disclosed on Schedule 4.13 annexed hereto, which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 4.14 EMPLOYEE MATTERS. There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 4.15 SOLVENCY. Each Loan Party is and, upon the incurrence of any Obligations by such Loan Party on any date on which this representation is made, will be, Solvent. 4.16 MATTERS RELATING TO COLLATERAL. A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by the Loan Parties, together with (i) the actions taken on or prior to the date hereof pursuant to subsections 3.1J, 5.8 and 5.9 and (ii) the delivery to Facility Manager of any Pledged Collateral not delivered to Facility Manager at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Facility Manager for the benefit of Lenders, as security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid and perfected First Priority Lien on all of the Collateral, and all filings and other actions necessary or desirable to perfect and maintain the perfection and First Priority status of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Facility Manager for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Facility Manager. B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other action by, and no notice to or filing with, any Governmental Entity is required for either (i) the pledge or grant by any Loan Party of the Liens purported to be created in favor of Facility Manager pursuant to any of the Collateral Documents or (ii) the exercise by Facility Manager of any 72 73 rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 4.16A, except as may be required, in connection with the disposition of any Pledged Collateral, by laws generally affecting the offering and sale of securities and except for such authorizations, approvals, notices, filings or other actions as may be required under any Healthcare Regulations in connection with the pledge of the shares of Regulated Subsidiaries all of which authorizations, approvals, notices, filings or other actions have been made or obtained or will be made or obtained as soon as practicable after the Closing Date, but in any event within ten Business Days thereafter, or in connection with the exercise by Facility Manager of any rights or remedies in respect of any Collateral. C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Facility Manager as contemplated by subsection 4.16A, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO. D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. E. INFORMATION REGARDING COLLATERAL. All information supplied to Facility Manager by or on behalf of any Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects. 4.17 RELATED AGREEMENTS. A. DELIVERY OF RELATED AGREEMENTS. Company has delivered to Lenders complete and correct copies of each Related Agreement and of all exhibits and schedules thereto. B. WARRANTIES OF TPG OXFORD. To the knowledge of Company and except to the extent otherwise set forth herein or in the schedules hereto, each of the representations and warranties given by TPG Oxford to Company in the Investment Agreement is true and correct in all material respects as of the date hereof (or as of any earlier date to which such representation and warranty specifically relates) and will be true and correct in all material respects as of the Closing Date (or as of such earlier date, as the case may be ), in each case subject to the qualifications set forth in the schedules to the Investment Agreement. C. WARRANTIES OF COMPANY. Subject to the qualifications set forth therein, each of the representations and warranties given by Company in the Investment Agreement is true and 73 74 correct in all material respects as of the date thereof and will be true and correct in all material respects as of the Closing Date. D. SURVIVAL. The representations and warranties of TPG Oxford and Company set forth in subsections 4.17B and 4.17C, respectively, shall, solely for purposes of this Agreement, survive the Closing Date for the benefit of Lenders. 4.18 DISCLOSURE. No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or Related Agreement, the Form 10-K, the Form 8-K or the Offering Memorandum or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries pursuant to this Agreement or the Related Agreements contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Restricted Subsidiaries to perform, all covenants in this Section 5. 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Company will maintain, and cause each of its Restricted Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Facility Manager and Lenders: 74 75 (i) Monthly Financials: as soon as available and in any event within 45 days after the end of each month ending after the Closing Date, the consolidated balance sheet of Company and its Subsidiaries as at the end of such month and the related consolidated and consolidating (to the extent such consolidating statements are prepared by Company for internal purposes) statements of operations, stockholders' equity and cash flows of Company and its Subsidiaries for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, to the extent prepared on a monthly basis, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; (ii) Quarterly Financials: as soon as available and in any event within 45 days after the end of each Fiscal Quarter, (a) the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated and consolidating statements of operations, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; (iii) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of operations, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of 75 76 Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Year, and (c) in the case of such consolidated financial statements, a report thereon of KPMG Peat Marwick LLP or other independent certified public accountants of recognized national standing selected by Company and reasonably satisfactory to Facility Manager, which report shall be unqualified and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iv) Officers' and Compliance Certificates: together with each delivery of financial statements of Company and its Subsidiaries pursuant to subdivisions (ii) and (iii) above, (a) an Officers' Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officers' Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in Section 6 and setting forth the information as to Post-Closing Contributions as described in the definition of "Excluded Asset Sales"; (v) Accountants' Certification: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of this Agreement and the other Loan Documents as they relate to accounting matters, (b) stating whether, in connection with their audit examination, any condition or event that constitutes an Event of Default or Potential Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of 76 77 Default that would not be disclosed in the course of their audit examination, and (c) stating that based on their audit examination nothing has come to their attention that causes them to believe either or both that the information contained in the certificates delivered therewith pursuant to subdivision (iv) above is not correct or that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (b) of subdivision (iv) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; (vi) Accountants' Reports: promptly upon receipt thereof (unless restricted by applicable professional standards), copies of all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their annual audit; (vii) SEC Filings and Press Releases: promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any Governmental Entity or private regulatory authority, and (c) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries; (viii) Events of Default, etc.: promptly upon any officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Facility Manager) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 7.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officers' Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, 77 78 default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (ix) Litigation or Other Proceedings: promptly upon any officer of Company obtaining knowledge of (X) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in writing by Company to Lenders or (Y) any material development in any Proceeding that, in any case: (1) if adversely determined, has a reasonable possibility of giving rise to a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within twenty days after the end of each Fiscal Quarter, a schedule of all Proceedings involving an alleged liability of, or claims against or affecting, Company or any of its Subsidiaries equal to or greater than $10,000,000 (except for frivolous assertions of damages), and promptly after request by Facility Manager such other information as may be reasonably requested by Facility Manager to enable Facility Manager and its counsel to evaluate any of such Proceedings; (x) ERISA Events: promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (xi) ERISA Notices: with reasonable promptness, copies of (a) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Company, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (b) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Facility Manager shall reasonably request; 78 79 (xii) Financial Plans: as soon as practicable and in any event no later than 30 days prior to the beginning of each Fiscal Year, a consolidated and consolidating plan and financial forecast for such Fiscal Year (the "FINANCIAL PLAN" for such Fiscal Year), including (a) forecasted consolidated and consolidating balance sheets and forecasted consolidated and consolidating statements of income and cash flows of Company and its Subsidiaries for each such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, (b) forecasted consolidated and consolidating statements of income and cash flows of Company and its Subsidiaries for each month of each such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, (c) the amount of forecasted unallocated overhead for each such Fiscal Year, and (d) such other information and projections as any Lender may reasonably request; (xiii) Insurance: as soon as practicable and in any event by the last day of each Fiscal Year, a report in form and substance satisfactory to Facility Manager outlining all material insurance coverage maintained as of the date of such report by Company and its Subsidiaries and all material insurance coverage planned to be maintained by Company and its Subsidiaries in the immediately succeeding Fiscal Year; (xiv) Board of Directors: with reasonable promptness, written notice of any change in the Board of Directors; (xv) New Subsidiaries: promptly upon any Person becoming a Subsidiary of Company, a written notice setting forth with respect to such Person (a) the date on which such Person became a Subsidiary of Company and (b) all of the data required to be set forth in Schedule 4.1D annexed hereto with respect to all Subsidiaries of Company (it being understood that such written notice shall be deemed to supplement Schedule 4.1D annexed hereto for all purposes of this Agreement); (xvi) Health Care Compliance: promptly upon any officer of Company obtaining knowledge of (i) any material claim, complaint, notice or request for information received by Company or any of its Subsidiaries with respect to compliance with Healthcare Regulations relating to the delivery of healthcare services of the type provided by Company or any of its Subsidiaries and payment therefor (excluding malpractice claims and routine license and certification surveys, unless such surveys include a recommendation that the Medicare, Medicaid or comparable state program certification or license of a Facility should be terminated, revoked or suspended), including, but not limited to, any violation or alleged violation of any federal, state or local statute, regulation or ordinance, including without limitation any Healthcare Regulation, relating to the delivery of medical services and payment therefor, including, but not limited to, the requirements set forth under federal Medicare and Medicaid 79 80 statutes, 42 U.S.C. Section Section 1320a-7, 1320a-7a, 1320a-7b and 1395nn, and the regulations promulgated thereunder and related state or local statutes or regulations (or any successor federal or state statute or regulation) or (ii) the suspension, termination, revocation or restriction or proposed suspension, termination, revocation or restriction of any material Healthcare Authorization by any Governmental Entity; (xvii) UCC Search Report: as promptly as practicable after the date of delivery to Facility Manager of any UCC financing statement executed by any Loan Party pursuant to subsection 3.1J(iv) or 5.8A, copies of completed UCC searches evidencing the proper filing, recording and indexing of all such UCC financing statement and listing all other effective financing statements that name such Loan Party as debtor, together with copies of all such other financing statements not previously delivered to Facility Manager by or on behalf of Company or such Loan Party; and (xviii) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 5.2 CORPORATE EXISTENCE, ETC. (a) Except as permitted under subsection 6.11, Company will, and will cause each of its Restricted Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; provided, however, that neither Company nor any of its Restricted Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of Company or such Restricted Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Restricted Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Restricted Subsidiary or Lenders. (b) Company will, and will cause each of its Restricted Subsidiaries to, at all times preserve and maintain and keep in full force and effect all Healthcare Authorizations, except where the failure to do so would not result in a Material Adverse Effect. 5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. A. Company will, and will cause each of its Restricted Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such charge or claim need be paid if it is being contested in good faith by 80 81 appropriate proceedings promptly instituted and diligently conducted, so long as (1) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (2) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim. B. Company will not, nor will it permit any of its Restricted Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 5.4 MAINTENANCE OF PROPERTIES; INSURANCE. A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Restricted Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Restricted Subsidiaries (including all intellectual property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Restricted Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Each such policy of insurance shall (a) name Facility Manager for the benefit of Lenders as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Facility Manager, that names Facility Manager for the benefit of Lenders as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least 30 days prior written notice to Facility Manager of any modification or cancellation of such policy. 5.5 INSPECTION RIGHTS; LENDER MEETING. A. INSPECTION RIGHTS. Company shall, and shall cause each of its Restricted Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or of any of its Restricted Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such 81 82 discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. B. LENDER MEETING. Company will, upon the request of Facility Manager or Requisite Lenders, participate in a meeting of Facility Manager and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Facility Manager) at such time as may be agreed to by Company and Facility Manager. 5.6 COMPLIANCE WITH LAWS, ETC. Company shall comply, and shall cause each of its Restricted Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Entity (including without limitation all Healthcare Regulations and Environmental Laws), except (i) where compliance therewith is contested reasonably and in good faith by appropriate proceedings, (ii) where, in the case of any non-compliance known to an officer of the Company, corrective actions are being taken with respect thereto, or (iii) for such noncompliance as could not reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect. 82 83 5.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. A. ENVIRONMENTAL REVIEW AND INVESTIGATION. Company agrees that Facility Manager may, upon an Event of Default or upon a reasonable belief that an event has occurred that could result in a material Environmental Claim or in a Material Adverse Effect, (i) retain, at Company's expense, an independent professional consultant to review any environmental audits, investigations, analyses and reports relating to Hazardous Materials prepared by or for Company and (ii) conduct its own investigation of any Facility; provided that, in the case of any Facility no longer owned, leased, operated or used by Company or any of its Restricted Subsidiaries, Company shall only be obligated to use reasonable efforts to obtain permission for Facility Manager's professional consultant to conduct an investigation of such Facility. For purposes of conducting such a review and/or investigation, Company hereby grants to Facility Manager and its agents, employees, consultants and contractors the right to enter into or onto any Facilities currently owned, leased, operated or used by Company or any of its Restricted Subsidiaries and to perform such tests on such property (including taking samples of soil, groundwater and suspected asbestos-containing materials) as are reasonably necessary in connection therewith. Any such investigation of any Facility shall be conducted, unless otherwise agreed to by Company and Facility Manager, during normal business hours and, to the extent reasonably practicable, shall be conducted so as not to interfere with the ongoing operations at such Facility or to cause any damage or loss to any property at such Facility. Company and Facility Manager hereby acknowledge and agree that any report of any investigation conducted at the request of Facility Manager pursuant to this subsection 5.7A will be obtained and shall be used by Facility Manager and Lenders for the purposes of Lenders' internal credit decisions, to monitor and police the Loans and to protect Lenders' security interests, if any, created by the Loan Documents. Facility Manager agrees to deliver a copy of any such report to Company with the understanding that Company acknowledges and agrees that (x) it will indemnify and hold harmless Facility Manager and each Lender from any costs, losses or liabilities relating to Company's use of or reliance on such report, (y) neither Facility Manager nor any Lender makes any representation or warranty with respect to such report, and (z) by delivering such report to Company, neither Facility Manager nor any Lender is requiring or recommending the implementation of any suggestions or recommendations contained in such report. B. ENVIRONMENTAL DISCLOSURE. Company will deliver to Facility Manager and Lenders: (i) Environmental Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character in its possession or control, whether prepared by personnel of 83 84 Company or any of its Restricted Subsidiaries or by independent consultants, Governmental Entities or any other Persons, with respect to significant environmental matters at any Facility which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or with respect to any Environmental Claims which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly upon the occurrence thereof, written notice describing in reasonable detail (a) any Release required to be reported to any Governmental Entity under any applicable Environmental Laws, (b) any remedial action taken by Company or any other Person in response to (1) any Hazardous Materials Activities the existence of which has a reasonable possibility of resulting in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect, or (2) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of resulting in a Material Adverse Effect, and (c) Company's discovery of any material occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws. (iii) Written Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Restricted Subsidiaries, a copy of any and all written communications with respect to (a) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect, (b) any Release required to be reported to any Governmental Entity, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity. (iv) Notice of Certain Proposed Actions Having Environmental Impact. Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or property by Company or any of its Restricted Subsidiaries that could reasonably be expected to (1) expose Company or any of its Restricted Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (2) affect the ability of Company or any of its Restricted Subsidiaries to maintain in full force and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations and (b) any proposed action to be taken by Company or any of its Restricted Subsidiaries to modify current operations in a manner that could reasonably be expected to subject Company or any of its Restricted Subsidiaries to any additional obligations or requirements under any Environmental Laws that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 84 85 (v) Other Information. With reasonable promptness, such other documents and information as from time to time may be reasonably requested by Facility Manager in relation to any matters disclosed pursuant to this subsection 5.7. C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. (i) Remedial Actions Relating to Hazardous Materials Activities. Company shall promptly undertake, and shall cause each of its Restricted Subsidiaries promptly to undertake, any and all investigations, studies, sampling, testing, abatement, cleanup, removal, remediation or other response actions necessary to remove, remediate, clean up or abate any Hazardous Materials Activity on, under or about any Facility that is in violation of any Environmental Laws or that presents a risk of giving rise to a Material Environmental Claim. In the event Company or any of its Restricted Subsidiaries undertakes any such action with respect to any Hazardous Materials, Company or such Restricted Subsidiary shall conduct and complete such action in compliance with all applicable Environmental Laws and in accordance with the policies, orders and directives of all Governmental Entities except when, and only to the extent that, Company's or such Restricted Subsidiary's liability with respect to such Hazardous Materials Activity is being contested in good faith by Company or such Restricted Subsidiary. (ii) Actions with Respect to Environmental Claims and Violations of Environmental Laws. Company shall promptly take, and shall cause each of its Restricted Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Restricted Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Restricted Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 85 86 5.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL DOCUMENTS BY CERTAIN SUBSIDIARIES AND FUTURE SUBSIDIARIES; SECURITY INTEREST IN TRADEMARKS. A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL DOCUMENTS. In the event that (i) any Person becomes a Restricted Subsidiary which is a Significant Subsidiary of Company or any of its Restricted Subsidiaries after the date hereof other than any such Restricted Subsidiary which is a Regulated Subsidiary which is prohibited from undertaking the actions described below because of applicable regulatory restrictions, (ii) Company or any of its Restricted Subsidiaries transfers or causes to be transferred in one or a series of transactions (whether or not related), any assets, businesses, divisions, real property or equipment having an aggregate fair market value (as determined in good faith by the Board of Directors) in excess of $2,000,000 to any Restricted Subsidiary that is not a Subsidiary Guarantor or to any Regulated Subsidiary (other than in connection with a Permitted Investment) or (iii) any Restricted Subsidiary of Company that is not a Subsidiary Guarantor guarantees any Indebtedness of Company or pledges any of its assets to secure any Indebtedness of Company other than the Indebtedness under this Agreement, Company will promptly notify Facility Manager of that fact and (1) execute, or cause the applicable Restricted Subsidiary to execute, a Pledge Amendment (as such term is defined in the Company Pledge Agreement and Subsidiary Pledge Agreements) and (2) cause such new Restricted Subsidiary to execute and deliver to Facility Manager a counterpart of the Subsidiary Guaranty and a Subsidiary Pledge Agreement, a Subsidiary Security Agreement and a Subsidiary Trademark Security Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 3.1J) as may be necessary or, in the opinion of Facility Manager, desirable to create in favor of Facility Manager, for the benefit of Lenders, a valid and perfected First Priority Lien on all of the personal and mixed property assets of such Restricted Subsidiary described in the applicable forms of Collateral Documents. B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall deliver to Facility Manager, together with such Loan Documents, (i) certified copies of such Restricted Subsidiary's Certificate or Articles of Incorporation, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and each other state in which such Person is qualified as a foreign corporation to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Facility Manager, (ii) a copy of such Restricted Subsidiary's Bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to Facility Manager, (iii) a certificate executed by the secretary or an assistant secretary of such Restricted Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Restricted Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force 86 87 and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Restricted Subsidiary executing such Loan Documents, and (iv) a favorable opinion of counsel to such Restricted Subsidiary, in form and substance satisfactory to Facility Manager and its counsel, as to (a) the due organization and good standing of such Restricted Subsidiary, (b) the due authorization, execution and delivery by such Restricted Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Restricted Subsidiary, (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Facility Manager may reasonably request, all of the foregoing to be satisfactory in form and substance to Facility Manager and its counsel. C. COMPANY TRADEMARK SECURITY AGREEMENT. In the event that Company registers the name "Oxford" or "Oxford Health" or any similar trademark, trade name, service mark, corporate name or other intangible asset with the United States Patent & Trademark Office or otherwise acquires any material intellectual property rights, Company will promptly notify Facility Manager of that fact and execute the Company Trademark Security Agreement, or deliver an amended schedule to the Company Trademark Security Agreement to Facility Manager, and take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 3.1J) as may be necessary or, in the opinion of Facility Manager, desirable to create in favor of Facility Manager, for the benefit of Lenders, a valid and perfected First Priority Lien on all of such intellectual property assets of Company. 5.9 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL PROPERTY COLLATERAL. A. CONFORMING LEASEHOLD INTERESTS. If Company or any of its Restricted Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such Restricted Subsidiary to, use its best efforts (without requiring Company or such Restricted Subsidiary to relinquish any material rights or incur any material obligations or to expend more than a nominal amount of money over and above the reimbursement, if required, of the landlord's out-of-pocket costs, including attorneys fees) to cause such Leasehold Property to be a Conforming Leasehold Interest. B. ADDITIONAL MORTGAGES, ETC. From and after the Closing Date, in the event that (i) Company or any Subsidiary Guarantor which is a Significant Subsidiary acquires any fee interest in any Real Property Asset or any Leasehold Property or (ii) at the time any Person becomes a Subsidiary Guarantor which is a Significant Subsidiary, such Person holds or owns any fee interest in any Real Property Asset or any leasehold interest in any Leasehold Property, in either case excluding any Real Property Asset or Leasehold Property the encumbrancing of which is prohibited by regulatory restrictions applicable to such Subsidiary Guarantor or which 87 88 requires the consent of any applicable lessor or (in the case of clause (ii) above) then-existing senior lienholder, where Company and its Subsidiaries are unable to obtain such lessor's or senior lienholder's consent (any such non-excluded Real Property Asset or Leasehold Property described in the foregoing clause (i) or (ii) being an "ADDITIONAL MORTGAGED PROPERTY"), Company or such Subsidiary Guarantor shall promptly notify Facility Manager of the acquisition of such Additional Mortgaged Property or such Subsidiary Guarantor and, upon request, of Facility Manager, shall deliver to Facility Manager, as soon as practicable thereafter, the following: (i) Additional Mortgage. A fully executed and notarized Mortgage (an "ADDITIONAL MORTGAGE"), duly recorded in all appropriate places in all applicable jurisdictions, encumbering the interest of such Loan Party in such Additional Mortgaged Property; (ii) Opinions of Counsel. (a) A favorable opinion of counsel to such Loan Party, in form and substance reasonably satisfactory to Facility Manager and its counsel, as to the due authorization, execution and delivery by such Loan Party of such Additional Mortgage and such other matters as Facility Manager may reasonably request, and (b) if required by Facility Manager, an opinion of counsel (which counsel shall be reasonably satisfactory to Facility Manager) in the state in which such Additional Mortgaged Property is located with respect to the enforceability of such Additional Mortgage and such other matters (including any matters governed by the laws of such state regarding personal property security interests in respect of any Collateral) as Facility Manager may reasonably request, in each case in form and substance reasonably satisfactory to Facility Manager; (iii) Landlord Consent and Estoppel; Recorded Leasehold Interest. In the case of an Additional Mortgaged Property consisting of a Leasehold Property, (a) a Landlord Consent and Estoppel and (b) evidence that such Leasehold Property is a Recorded Leasehold Interest; (iv) Title Insurance. (a) If required by Facility Manager, an ALTA mortgagee title insurance policy or an unconditional commitment therefor (an "ADDITIONAL MORTGAGE POLICY") issued by the a title company satisfactory to Facility Manager with respect to such Additional Mortgaged Property, in an amount satisfactory to Facility Manager, insuring fee simple title to, or a valid leasehold interest in, such Additional Mortgaged Property vested in such Loan Party and assuring Facility Manager that such Additional Mortgage creates a valid and enforceable First Priority mortgage Lien on such Additional Mortgaged Property, subject only to a standard survey exception, which Additional Mortgage Policy (1) shall include an endorsement for mechanics' liens, for future advances under this Agreement and for any other matters reasonably requested by Facility Manager and (2) shall provide for affirmative insurance 88 89 and such reinsurance as Facility Manager may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Facility Manager; and (b) evidence satisfactory to Facility Manager that such Loan Party has (i) delivered to the Title Company all certificates and affidavits required by the Title Company in connection with the issuance of the Additional Mortgage Policy and (ii) paid to the Title Company or to the appropriate Governmental Entities all expenses and premiums of the Title Company in connection with the issuance of the Additional Mortgage Policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Additional Mortgage in the appropriate real estate records; (v) Title Report. If no Additional Mortgage Policy is required with respect to such Additional Mortgaged Property, a title report issued by the Title Company with respect thereto, dated not more than 30 days prior to the date such Additional Mortgage is to be recorded and satisfactory in form and substance to Facility Manager; (vi) Copies of Documents Relating to Title Exceptions. Copies of all recorded documents listed as exceptions to title or otherwise referred to in the Additional Mortgage Policy or title report delivered pursuant to clause (v) or (vi) above; and (vii) Environmental Audit. If required by Facility Manager, reports and other information, in form, scope and substance satisfactory to Facility Manager and prepared by environmental consultants satisfactory to Facility Manager, concerning any environmental hazards or liabilities to which Company or any of its Subsidiaries may be subject with respect to such Additional Mortgaged Property. 5.10 CERTAIN PRO FORMA CONSOLIDATING BALANCE SHEETS. Company shall deliver to Lenders no later than May 19, 1998, a pro forma consolidating balance sheet of Company and its Subsidiaries as at March 31, 1998, prepared in accordance with GAAP and reflecting the consummation of the transactions contemplated by the Loan Documents and the Related Agreements, which pro forma financial statements shall be in form and substance satisfactory to Lenders. SECTION 6. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Restricted Subsidiaries to perform, all covenants in this Section 6. 89 90 6.1 RESTRICTED PAYMENTS. (a) Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any payment or distribution on account of Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving Company (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Company or dividends or distributions payable to Company or any Wholly Owned Subsidiary of Company) or dividends payable in shares of Preferred Stock in accordance with the terms and conditions of the Preferred Stock as in effect on the Closing Date); or make any payment (other than in Equity Interests (other than Disqualified Stock)) in connection with any settlement or resolution of any Non-Insurance Litigation involving Company or any of its Restricted Subsidiaries (excluding Qualified Insurance Payments); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of Company or any Restricted Subsidiary of Company (other than any such Equity Interests owned by Company or, to the extent permitted under the definition of Permitted Investments, any other Restricted Subsidiary of Company); (iii) prepay, purchase, redeem, defease or otherwise acquire or retire for value prior to its stated maturity (x) any Indebtedness that is subordinated to the Loans, (y) any Senior Notes or (z) with respect to prepayments, purchases, redemptions, defeasance or other acquisitions or retirements for value by Company, any Indebtedness of any Restricted Subsidiary; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: (A) no Event of Default or Potential Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (B) (i) at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four Fiscal Quarter period, the Fixed Charge Coverage Ratio for Company's most recently ended four-full Fiscal Quarters for which internal financial statements are 90 91 available immediately preceding the date on which such Restricted Payment is made would have been at least 2.25:1.00; and (ii) such Restricted Payment, together with the aggregate of all other Restricted Payments made by Company and its Restricted Subsidiaries during such four-Fiscal Quarter period, shall not exceed 50% of Consolidated Net Income of Company for the most recently ended four-Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such Restricted Payment is made. (b) Subsection 6.1(a) shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Agreement; (ii) the making of any Restricted Payment (other than the payment of a dividend) in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of Company) of, or from substantially concurrent additional capital contributions in respect of, Equity Interests of Company (other than Disqualified Stock); (iii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of Company) of, or from substantially concurrent additional capital contributions in respect of, other Equity Interests of Company (other than any Disqualified Stock); (iv) the defeasance, redemption or repurchase of subordinated Indebtedness or any Senior Notes with the net cash proceeds from (x) an incurrence of Permitted Refinancing Indebtedness or (y) the substantially concurrent sale (other than to a Subsidiary of Company) of, or from substantially concurrent additional capital contributions in respect of, Equity Interests of Company (other than Disqualified Stock); (v) an exchange of Disqualified Stock for Disqualified Stock that constitutes Permitted Refinancing Indebtedness; and (vi) any dividend or other distribution made by any Wholly Owned Subsidiary of Company to Company; provided, however, that in the case of any transaction described in clauses (ii) through (vi) of this subsection 6.1(b) no Event of Default or Potential Event of Default shall have occurred and be continuing immediately after such transaction. 91 92 (c) The Board of Directors may designate any Subsidiary other than a Principal Subsidiary to be an Unrestricted Subsidiary if such designation would not cause an Event of Default or Potential Event of Default. For purposes of making such determination, all outstanding Investments after the Closing Date by Company and its Restricted Subsidiaries (except to the extent repaid in Cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under subsection 6.1(a). Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. (d) The amount of all Restricted Payments (other than Cash) will be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to Facility Manager) on the date of the Restricted Payment of the asset(s) proposed to be transferred by Company or the applicable Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, Company will deliver to Facility Manager an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this subsection 6.1 were computed, which calculations may be based upon Company's latest available financial statements. 6.2 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. (a) Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "INCUR") any Indebtedness (including Acquired Indebtedness) and Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that Company may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for Company's most recently ended four full Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00:1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; and (ii) no Event of Default or Potential Event of Default will have occurred and be continuing or would occur as a consequence thereof. (b) Subsection 6.2(a) shall not apply to: (i) the incurrence by Company of Indebtedness under this Agreement or by Subsidiary Guarantors under the Subsidiary Guaranty; 92 93 (ii) the incurrence by Company of Indebtedness represented by the Senior Notes in an original principal amount not in excess of $200,000,000 minus the amount of any prepayments, redemptions, repurchases, defeasances or other acquisitions or retirements for value by Company or any of its Restricted Subsidiaries of such Senior Notes (other than any exchanges of such Senior Notes made pursuant to the Registration Rights Agreement dated as of May 13, 1998 between Company and Donaldson, Lufkin & Jenrette Securities Corporation); (iii) all Existing Indebtedness; (iv) the incurrence by Company or its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, Purchase Money Obligations or similar financing transactions relating to its properties, assets and rights acquired after the Closing Date; provided that the aggregate principal amount of such Indebtedness under this clause does not exceed 100% of the cost of such properties, assets and rights; (v) the incurrence by Company or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness of such entity permitted under this Agreement; (vi) other than with respect to the incurrence of any Indebtedness which would constitute a Permitted Investment, the incurrence by Company or any Subsidiary Guarantors which are not Regulated Subsidiaries or, to the extent required to comply with applicable regulatory requirements, any other Restricted Subsidiary of intercompany Indebtedness between or among Company and any such Subsidiary Guarantors and any such Restricted Subsidiaries or between or among any such Subsidiary Guarantors and any such Restricted Subsidiaries; provided, however, that (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than a Subsidiary Guarantor which is not a Regulated Subsidiary or, unless required to comply with applicable regulatory requirements, other Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either Company or a Subsidiary Guarantor which is not a Regulated Subsidiary or, unless required to comply with applicable regulatory requirements, other Restricted Subsidiary will be deemed, in each case, to constitute an incurrence of such Indebtedness by Company or such Subsidiary Guarantor or such Restricted Subsidiary, as the case may be; (vii) the incurrence, assumption or creation of Hedging Obligations of Company or a Restricted Subsidiary pursuant to interest rate protection obligations, but only to the extent that the stated aggregate notional amounts of such obligations do not 93 94 exceed 100% of the aggregate principal amount of the Indebtedness covered by such interest rate protection obligations; (viii) the incurrence by Company or any Restricted Subsidiaries of Indebtedness in an aggregate amount of up to $10,000,000 constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement-type obligations regarding workers' compensation claims; (ix) the incurrence by Company or any Restricted Subsidiaries of obligations in an aggregate amount of up to $2,000,000 in respect of performance and surety bonds and completion guarantees provided by Company or any Restricted Subsidiaries in the ordinary course of business; (x) the incurrence or assumption by Company or any Restricted Subsidiaries of Indebtedness arising from agreements of Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed by Company or a Restricted Subsidiary in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition or otherwise; provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by Company and its Restricted Subsidiaries in connection with such disposition; and (xi) the incurrence by Company and any Subsidiary Guarantors which are not Regulated Subsidiaries and, to the extent required to comply with applicable regulatory requirements, other Restricted Subsidiaries, of Indebtedness in an aggregate principal amount of up to $25,000,000, which shall be in addition to amounts which may be incurred pursuant to clauses (i) through (x) of this subsection 6.2(b). (c) Notwithstanding any other provision of this subsection 6.2, a Guarantee of Indebtedness permitted under this Agreement at the time such Indebtedness was incurred will not constitute a separate incurrence of Indebtedness. (d) In the event that Indebtedness falls within more than one category of permitted Indebtedness under this Agreement, Company will determine the applicable category and such Indebtedness will only be counted once. If Indebtedness is issued at less than the principal amount thereof, the amount of such Indebtedness for purposes of the above limitations shall equal the amount of the liability as determined in accordance with GAAP. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional 94 95 Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. (e) Company shall not permit any Unrestricted Subsidiary to incur any Indebtedness other than Non-Recourse Debt; provided, however, if any such Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to constitute an incurrence of Indebtedness by Company or a Restricted Subsidiary. 6.3 SALE AND LEASEBACK TRANSACTIONS. Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided, however, that Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if (i) Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in subsection 6.2 and (b) incurred a Lien to secure such Indebtedness pursuant to subsection 6.4, (ii) the net cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to Facility Manager) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the proceeds of such transaction are applied in compliance with, subsection 6.9. 6.4 LIENS. Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien securing Indebtedness of any kind (other than Permitted Liens) upon any of its property or assets, now owned or hereafter acquired, or upon any income or profits therefrom, or assign or convey any right to receive income therefrom, unless contemporaneously therewith effective provision is made to secure the Obligations on an equal and ratable basis with the Indebtedness so secured for so long as such Indebtedness is secured by such Lien. 6.5 LIMITATION ON SALE OF STOCK OR ASSETS OF PRINCIPAL SUBSIDIARIES. (a) Company shall not, and shall not permit any Subsidiary to, directly or indirectly, sell, transfer, convey or otherwise dispose of (other than to Company or a Restricted Subsidiary that is a Wholly Owned Subsidiary of Company) any Capital Stock of a Principal Subsidiary or any Securities convertible into or warrants, rights or options to subscribe for Capital Stock of any Principal Subsidiary. (b) Company shall not permit any Principal Subsidiary to issue, sell, transfer, convey or otherwise dispose of (other than to Company or a Restricted Subsidiary that is a 95 96 Wholly Owned Subsidiary of Company) any of its Capital Stock or Securities convertible into, or rights, warrants or options to subscribe for, its Capital Stock. (c) Company shall not permit any Principal Subsidiary to sell, transfer, convey or otherwise dispose of any of its group contracts or subscriber contracts relating to commercial group health benefit plans, whether or not such sale, transfer, conveyance or other disposition may be otherwise permitted by any other provision of this Agreement. 6.6 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (i) (x) pay dividends or make any other distributions to Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to Company or any of its Restricted Subsidiaries; (ii) make loans or advances to Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (a) Existing Indebtedness as in effect on the Closing Date; (b) this Agreement and the other Loan Documents; (c) the Senior Note Indenture and the Senior Notes, in each case as in effect on the Closing Date; (d) any instrument governing Acquired Indebtedness or Capital Stock of a Person acquired by Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Acquired Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (e) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired; (f) customary non-assignment provisions in licenses, leases and agreements relating to intellectual property entered into in the ordinary course of business and consistent with past practices; 96 97 (g) agreements relating to the financing of the acquisition of real or tangible personal property acquired after the Closing Date; provided that such encumbrance or restriction relates only to the property which is acquired and in the case of any encumbrance or restriction that constitutes a Lien, such Lien constitutes a Purchase Money Lien; (h) any law or any governmental regulation or order or pursuant to any agreement or understanding with any Governmental Entity; provided that, if such order would prevent Company from making a payment under this Agreement, Company has used its reasonable efforts to have any such order diminished or removed by any Governmental Entity authorized to do so and to obtain any exemptive orders from the relevant Governmental Entity with respect to such encumbrance or restriction to the extent such exemptive orders are reasonably practicable under applicable laws and regulations; or (i) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary. 6.7 TRANSACTIONS WITH AFFILIATES. Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless: (i) such Affiliate Transaction is in the ordinary course of business; (ii) the terms of such Affiliate Transaction are fair and reasonable to Company or such Restricted Subsidiary, as the case may be, and are at least as favorable as the terms which could be obtained by Company or such Restricted Subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties; and (iii) Company delivers to Facility Manager: (a) with respect to any Affiliate Transaction entered into after the Closing Date involving aggregate consideration in excess of $1,000,000, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction 97 98 involving aggregate consideration in excess of $5,000,000, an opinion as to the fairness to Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an investment banking firm or appraisal firm of national standing; provided that the following will not be deemed to be Affiliate Transactions: (1) the transactions contemplated by the Investment Agreement and the TPG Securities or any exchange of Disqualified Stock under subsection 6.1(b)(v) or amendment to the Certificates of Designations in lieu of any such exchange; (2) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers and directors of Company or any Restricted Subsidiary as determined in good faith by the appropriate Board of Directors or senior management; (3) transactions with customers, clients, suppliers, Joint Venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to Joint Venture agreements) and otherwise in compliance with this Agreement and which comply with the terms of clause (ii) above; (4) transactions constituting Permitted Investments; (5) any employment agreement entered into by Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of Company or such Restricted Subsidiary (including, without limitation, any such employment agreements entered into prior to the Closing Date); and (6) transactions between or among Company and/or its Restricted Subsidiaries. 6.8 LIMITATION AS TO UNRESTRICTED SUBSIDIARIES. Company shall not permit any Unrestricted Subsidiary to create, assume, incur, guarantee or otherwise become liable in respect of any Indebtedness except Non-Recourse Debt; provided, however, if any such Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to constitute an issuance of Indebtedness by Company or a Restricted Subsidiary subject to subsection 6.2. Company and its Restricted Subsidiaries will not designate, create or purchase any Unrestricted Subsidiary, unless the Board of Directors shall have made a determination (as set forth in the resolution approving such designation, creation or purchase) that the designation, creation and operation of the Unrestricted Subsidiary is not reasonably expected to materially and adversely affect the financial condition, business or operations of Company and its Restricted Subsidiaries taken together as a whole (which resolution shall be conclusive evidence of compliance with this provision). 98 99 6.9 LIMITATION ON SALE OF ASSETS. (a) Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests sold or otherwise disposed of and, in the case of a lease of assets, a lease providing for rent and other conditions which are no less favorable to Company or such Restricted Subsidiary in any material respect than the then prevailing market conditions (evidenced in each case by a resolution of the Board of Directors of such entity set forth in an Officers' Certificate delivered to Facility Manager) and (ii) at least 75% (100% in the case of lease payments) of the consideration therefor received by Company or such Restricted Subsidiary is in the form of Cash or Cash Equivalents; provided that the amount of any liabilities (as shown on the most recent balance sheet of Company or such Restricted Subsidiary) of Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Obligations or to a Restricted Subsidiary's Subsidiary Guaranty thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Company or such Restricted Subsidiary from further liability shall be deemed to be Cash for the purposes of clause (ii). (b) With respect to the consideration Company or any of its Restricted Subsidiaries may receive in connection with any Asset Sale or Excluded Asset Sale: (1) Not less than 75% (100% in the case of lease payments) of the consideration received by Company or such Restricted Subsidiary in connection with such Asset Sale or Excluded Asset Sale is in the form of Cash or Cash Equivalents; provided, however, that (i) any sale by Company or any Restricted Subsidiary of the Capital Stock or assets of FPA Medical Management, Inc. shall be for Cash only; (ii) at least 50% of the consideration received by Company or any Restricted Subsidiary from the sale of the Capital Stock or assets of Oxford Specialty and Oxford Health Plans (NH), Inc. shall be Cash or Marketable Securities; (iii) there shall be no restrictions on the consideration received by Company or any of its Restricted Subsidiaries from the sale of the Capital Stock or assets of or Indebtedness issued by a Minority Investment or the New York, New Jersey, Florida or Pennsylvania Medicaid businesses, Oxford Health Plans (IL), Inc. or Oxford Health Plans (FL), Inc.; and (iv) the type of consideration received by Company or any of its Restricted Subsidiaries from all other Excluded Asset Sales shall be Cash only. (2) Company or the applicable Restricted Subsidiary shall sell for Cash all Marketable Securities received as consideration in an Asset Sale no later than the earlier of 60 days from receipt of such Marketable Securities and (y) the termination or expiration of any governmental limitation on such sale of Marketable Securities. 99 100 (3) Company shall cause its Restricted Subsidiaries to transfer to Company all Cash and non-cash consideration received by such Restricted Subsidiaries from Asset Sales and Excluded Asset Sales as promptly as practicable, except in the case of Asset Sales to the extent the proceeds thereof are applied pursuant to subsection 6.9(c)(1)(ii) or 6.9(c)(2); provided, however, that, with respect to any consideration received by Company (whether directly or from its Restricted Subsidiaries) in connection with any Asset Sale or Excluded Asset Sale, Company shall pledge such consideration pursuant to the Collateral Documents and shall take all actions necessary, including without limitation the execution and delivery of any amendments to any Collateral Documents and the filing of any UCC financing statements or amendments, to perfect or continue to perfect the security interests granted to Facility Manager on behalf of Lenders in such Collateral. (c) Within 364 days after the receipt of any Net Proceeds from an Asset Sale, Company or such Restricted Subsidiary, as the case may be, may (1) apply such Net Proceeds (i) to make an investment in, to make a capital expenditure relating to, or to acquire other tangible assets in, the commercial group health benefit business in New York, New Jersey or Connecticut, or (ii) to make capital contributions to Principal Subsidiaries covering commercial lives operating in New York, New Jersey or Connecticut, which contributions are required to be made under applicable Healthcare Regulations or requested in writing to be made by the applicable Healthcare Regulators, or (2) with respect to Net Proceeds received from an Asset Sale by a Regulated Subsidiary which are not permitted under applicable Healthcare Regulations to be distributed or otherwise transferred, to retain such Net Proceeds as capital of such Regulated Subsidiary. Any Net Proceeds from Asset Sales that are not applied or invested as provided in this subsection 6.9(c) shall, on the earlier of (i) the 365th day after such Asset Sale or (ii) such date as the Board of Directors of Company or such Restricted Subsidiary determines not to apply the Net Proceeds relating to such Asset Sale in the manner set forth above, be applied to the prepayment of the Loans at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of prepayment in accordance with the provisions of subsection 2.4B(ii). 6.10 LIMITATION ON BUSINESS ACTIVITIES. Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business other than (i) the Healthcare Service Business and such business activities incidental or related thereto and (ii) acting as a holding company for companies engaged in the business specified in (i) above. 6.11 MERGER, CONSOLIDATION OR SALE OF ASSETS. (a) Company shall not, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not Company is the surviving 100 101 corporation), or directly and/or indirectly through its Restricted Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets determined on a consolidated basis for Company and its Restricted Subsidiaries taken as a whole in one or more related transactions, to another corporation, Person or entity unless: (i) Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of one of the States of the United States of America or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations of Company under the Loan Documents pursuant to an agreement or instrument in a form reasonably satisfactory to Facility Manager; (iii) immediately after such transaction no Event of Default or Potential Event of Default will occur and be continuing or result as a consequence thereof; (iv) except in the case of a merger of Company with or into a Wholly Owned Subsidiary of Company that is a Restricted Subsidiary, Company or the entity or Person formed by or surviving any such consolidation or merger (if other than Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four Fiscal Quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in subsection 6.2; (v) if any of the property or assets of Company would thereupon become subject to any Lien, the Obligations shall be secured equally and ratably with the obligation or liability secured by such Lien, unless Company could create such Lien without equally and ratably securing the Obligations; (vi) each Subsidiary Guarantor, unless a party to the transactions described above, shall have by supplemental agreement confirmed that its Subsidiary Guaranty shall apply to Company's or the surviving Person's Obligations under the Loan Documents; 101 102 (vii) the surviving corporation or the entity or Person formed by or surviving such consolidation or merger (if other than Company) or to which such sale, assignment, transfer, lease, conveyance or disposition will have been made shall not be subject to any Healthcare Regulations other than those Healthcare Regulations which were applicable to such surviving corporation, entity or Person prior to such consolidation or merger or such sale, assignment, transfer, lease, conveyance or disposition; and (viii) Company delivers to Facility Manager an Officers' Certificate and a legal opinion from counsel reasonably satisfactory to Facility Manager addressed to Facility Manager with respect to the foregoing matters. (b) Company shall not, in a single transaction or series of related transactions, permit any Subsidiary Guarantor to consolidate or merge with or into (whether or not such Subsidiary Guarantor is the surviving corporation), or directly and/or indirectly to sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless: (i) such Subsidiary Guarantor is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of one of the states of the United States or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations of such Subsidiary Guarantor under the Subsidiary Guaranty and any other Loan Documents pursuant to an agreement or instrument in a form reasonably satisfactory to Facility Manager; (iii) immediately after such transaction no Event of Default or Potential Event of Default will occur and be continuing or result as a consequence thereof; (iv) such Subsidiary Guarantor or the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor), or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of such Subsidiary Guarantor immediately 102 103 preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four Fiscal Quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in subsection 6.2; (v) if any of the property or assets of such Subsidiary Guarantor would thereupon become subject to any Lien, the Obligations shall be secured equally and ratably with the obligation or liability secured by such Lien, unless such Subsidiary Guarantor could create such Lien without equally and ratably securing the Obligations; (vi) the surviving corporation or the entity or Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such sale, assignment, transfer, lease, conveyance or disposition will have been made shall not be subject to any Healthcare Regulations, other than those Healthcare Regulations which were applicable to such Subsidiary Guarantor prior to such consolidation or merger or such sale, assignment, transfer, lease, conveyance or disposition; and (vii) Company delivers to Facility Manager an Officers' Certificate and a legal opinion from counsel reasonably satisfactory to Facility Manager addressed to Facility Manager with respect to the foregoing matters. (c) In the event of a sale or disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise or a sale or other disposition of all of the Capital Stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of a merger, consolidation or otherwise, of all of the Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guaranty; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the provisions of subsection 6.9. 6.12 AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS; AMENDMENTS OF DOCUMENTS RELATING TO THE SENIOR NOTES. A. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. Neither Company nor any of its Restricted Subsidiaries will agree to any amendment to or waiver of its rights under, any Related Agreement (excluding any Related Agreement evidencing or governing the Senior Notes) after the Closing Date, which amendment or waiver, individually or in the aggregate with all other amendments and waivers, would reasonably be expected to have a material adverse effect on the Lenders under this Agreement, without in each case obtaining the prior written consent of Requisite Lenders to such amendment or waiver. 103 104 B. AMENDMENTS OF DOCUMENTS RELATING TO THE SENIOR NOTES. Company shall not, and shall not permit any of its Restricted Subsidiaries to, amend or otherwise change the terms of the Senior Notes, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Senior Notes, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the provisions of any guaranty thereof or change any collateral therefor (other than to release such guaranty or collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Senior Notes (or a trustee or other representative on their behalf) which would be adverse to Company or Lenders or to otherwise adversely affect the Lenders under this Agreement. 6.13 COMMERCIAL LIVES. Company shall not permit the aggregate number of individuals covered by group contracts or subscriber contracts relating to commercial group health benefit plans provided by the Principal Subsidiaries to be less than 800,000 at any time. SECTION 7. EVENTS OF DEFAULT If any of the following conditions or events ("EVENTS OF DEFAULT") shall occur and be continuing: 7.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay any installment of principal of or premium on any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within 5 days after the date due; or 104 105 7.2 DEFAULT IN OTHER AGREEMENTS. (i) Failure of Company or any of its Restricted Subsidiaries to pay when due any principal of or interest on one or more items of Indebtedness (other than Indebtedness referred to in subsection 7.1) in an aggregate principal amount of $10,000,000 or more; or (ii) breach or default by Company or any of its Restricted Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness in the aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders) to cause, that Indebtedness to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or 7.3 BREACH OF CERTAIN COVENANTS. Failure by Company to perform or comply with any term or condition contained in subsections 2.4B(ii)(a)-(d), 6.1, 6.9, 6.11 or 6.13; or 7.4 BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS. Company or any of its Restricted Subsidiaries shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 7, and such default shall not have been remedied or waived within 30 days after the earlier of (i) an officer of Company becoming aware of such default or (ii) receipt by Company of notice from Facility Manager or any Lender of such default; or 7.6 JUDGMENTS. Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $10,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has 105 106 acknowledged coverage) shall be entered or filed against Company or any of its Restricted Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 30 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 7.7 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries) that would constitute a Significant Subsidiary) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed within 20 consecutive days; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary), and any such event described in this clause (ii) shall continue for 20 consecutive days unless dismissed, bonded or discharged; or 106 107 7.8 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) shall make any assignment for the benefit of creditors; or (ii) Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Significant Subsidiaries (or group of Restricted Subsidiaries (as of the latest audited consolidated financial statements for Company and its Subsidiaries), would constitute a Significant Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 7.9 FAILURE TO MAINTAIN HEALTHCARE AUTHORIZATIONS. Any material Healthcare Authorization of Company or any of its Principal Subsidiaries is suspended, rescinded, revoked or terminated and Company or such Principal Subsidiary is unable to remedy or otherwise correct the situation within any permitted time; or 7.10 INVALIDITY OR REPUDIATION OF SUBSIDIARY GUARANTY; FAILURE OF SECURITY; REPUDIATION OF OBLIGATIONS. At any time after the execution and delivery thereof, (i) the Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Obligations or any other termination of such Collateral Documents in accordance with the terms hereof or thereof) or shall be declared null and void, or Facility Manager shall not have or shall cease to have a valid and perfected First Priority Lien in any significant part of the Collateral purported to be covered thereby or (iii) any Loan Party shall contest the validity 107 108 or enforceability of any Loan Document in writing or deny in writing that it has any further liability under any Loan Document to which it is a party: THEN: (i) upon the occurrence of any Event of Default described in subsection 7.7 or 7.8, each of (a) the unpaid principal amount of and premium, if any, and accrued interest on the Loans, and (b) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, and (ii) upon the occurrence and during the continuation of any other Event of Default, Facility Manager shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) and (b) above to be, and the same shall forthwith become, immediately due and payable. Notwithstanding anything contained in the preceding paragraph, if at any time within 30 days after an acceleration of the Loans pursuant to clause (ii) of such paragraph Company shall pay all arrears of interest and all payments on account of principal and premium which shall have become due otherwise than as a result of such acceleration (with interest on principal and premium and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and premium and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 9.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended, directly or indirectly, to benefit Company, and such provisions shall not at any time be construed so as to grant Company the right to require Lenders to rescind or annul any acceleration hereunder or to preclude Facility Manager or Lenders from exercising any of the rights or remedies available to them under any of the Loan Documents, even if the conditions set forth in this paragraph are met. 108 109 SECTION 8.THE AGENTS 8.1 APPOINTMENT. A. APPOINTMENT OF AGENT. Each Lender hereby appoints (i) DLJ Capital as Syndication Agent under this Agreement, and (ii) IBJ Schroder as Facility Manager under this Agreement. Each Lender hereby authorizes each Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents. Facility Manager agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 8 are solely for the benefit of the Agents and Lenders and Company shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Facility Manager deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Facility Manager appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS"). In the event that Facility Manager appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Facility Manager with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Facility Manager or such Supplemental Collateral Agent, and (ii) the provisions of this Section 8 and of subsections 9.2 and 9.3 that refer to Facility Manager shall inure to the benefit of such 109 110 Supplemental Collateral Agent and all references therein to Facility Manager shall be deemed to be references to Facility Manager and/or such Supplemental Collateral Agent, as the context may require. Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Agent so appointed by Facility Manager for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by Facility Manager. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Facility Manager until the appointment of a new Supplemental Collateral Agent. 8.2 POWERS AND DUTIES; GENERAL IMMUNITY. A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes Agents to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to each Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Agents shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Agents may exercise such powers, rights and remedies and perform such duties by or through their agents or employees. Agents shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agents any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agents shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Agents to Lenders or by or on behalf of Company to Agents or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Agents be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default. 110 111 Anything contained in this Agreement to the contrary notwithstanding, Agents shall not have any liability arising from confirmations of the amount of outstanding Loans. C. EXCULPATORY PROVISIONS. None of the Agents nor any of their respective officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by such Agents under or in connection with any of the Loan Documents except to the extent caused by Agent's gross negligence or willful misconduct. Agents shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Agents shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), Agents shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Agents shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agents as a result of Agents acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 9.6). D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, either Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include such Agent in its individual capacity. Each Agent and its respective Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 111 112 8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS. Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Agents shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and Agents shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 8.4 RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agents, to the extent that Agents shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agents in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in their capacity as Agents in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 112 113 8.5 SUCCESSOR AGENT. Either Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company, and either Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and such Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint an appropriate successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent and the retiring or removed Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 113 114 8.6 COLLATERAL DOCUMENTS AND SUBSIDIARY GUARANTY. Each Lender hereby further authorizes Facility Manager, on behalf of and for the benefit of Lenders, to enter into each Collateral Document as secured party and to be the agent for and representative of Lenders under the Subsidiary Guaranty, and each Lender agrees to be bound by the terms of each Collateral Document and the Subsidiary Guaranty; provided that Facility Manager shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or the Subsidiary Guaranty or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 9.6, all Lenders); provided further, however, that, without further written consent or authorization from Lenders, Facility Manager may execute any documents or instruments necessary to (a) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or to which Requisite Lenders have otherwise consented or (b) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital stock of such Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company) pursuant to a sale or other disposition permitted hereunder or to which Requisite Lenders have otherwise consented. Anything contained in any of the Loan Documents to the contrary notwithstanding, Company, Facility Manager and each Lender hereby agree that (x) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document or to enforce the Subsidiary Guaranty, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and the Subsidiary Guaranty may be exercised solely by Facility Manager for the benefit of Lenders in accordance with the terms thereof, and (y) in the event of a foreclosure by Facility Manager on any of the Collateral pursuant to a public or private sale, Facility Manager or any Lender may be the purchaser of any or all of such Collateral at any such sale and Facility Manager, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Facility Manager at such sale. 114 115 SECTION 9.MISCELLANEOUS 9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS. A. GENERAL. Subject to subsection 9.1B, each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or any other interest herein or in any other Obligations owed to it; provided that no such sale, assignment, transfer or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; provided further that no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Facility Manager and recorded in the Register as provided in subsection 9.1B(ii). Except as otherwise provided in this subsection 9.1, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or the Loans, or the other Obligations owed to such Lender. 115 116 B. ASSIGNMENTS. (i) Amounts and Terms of Assignments. Each Commitment, Loan or other Obligation may (a) be assigned in any amount to another Lender, to an Affiliate of the assigning Lender or another Lender or an Approved Fund, with the giving of notice to Company and Facility Manager or (b) be assigned in an aggregate amount of not less than $1,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitments, Loans and other Obligations of the assigning Lender) to any other Eligible Assignee with the consent of Company and Facility Manager (which consent of Company and Facility Manager shall not be unreasonably withheld or delayed). To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Facility Manager, for its acceptance and recording in the Register, an Assignment Agreement, together with a processing and recordation fee of $500 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Facility Manager pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance and recordation, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 9.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of any Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Note, if any, to Facility Manager for cancellation, and thereupon, unless otherwise requested by the assignee or the assigning Lender, new Notes shall be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit III annexed hereto with appropriate insertions, to reflect the outstanding Loans of the assignee and/or the assigning Lender. (ii) Acceptance by Facility Manager; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation 116 117 fee referred to in subsection 9.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Facility Manager pursuant to subsection 2.7B(iii)(a), Facility Manager shall, if Facility Manager and Company have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 9.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Facility Manager to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Facility Manager shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 9.1B(ii). C. PARTICIPATIONS. The holder of any participation, other than an Affiliate of the Lender granting such participation or an Approved Fund of such Lender, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including amounts payable to such Lender pursuant to subsections 2.6D and 2.7) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowledge and agree that, solely for purposes of subsections 9.4 and 9.5, (a) any participation will give rise to a direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 9.1, (i) any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank, (ii) any Lender that is an investment fund that invests in bank loans may, without the consent of the Facility Manager or Company, pledge all or any portion of its Loans and its Notes to any trustee or any other representative of holders of obligations owed or securities issued by such investment fund as security for such obligations or securities, and (iii) such pledge or assignment shall not be subject to the provisions of subsection 9.1B above; provided that (x) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (y) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants, but excluding participants that are 117 118 competitors of Company and its Restricted Subsidiaries in the Healthcare Service Business), subject to subsection 9.19. F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature pages hereof hereby represents and warrants (i) that it is an Eligible Assignee described in clause (A) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 9.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 118 119 9.2 EXPENSES. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) all the costs of furnishing all opinions by counsel for Company (including any opinions requested by Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents including with respect to confirming compliance with environmental, insurance and solvency requirements; (iii) the reasonable fees, expenses and disbursements of counsel (including allocated costs of internal counsel) to Syndication Agent and, with respect to such actions after the Closing Date, Facility Manager, in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Facility Manager on behalf of Lenders pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and disbursements of counsel to Syndication Agent and, with respect to such actions after the Closing Date, Facility Manager, and of counsel providing any opinions that Syndication Agent, Facility Manager or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (v) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents employed or retained by Syndication Agent and, with respect to such actions after the Closing Date, Facility Manager, or their respective counsel) of obtaining and reviewing any environmental audits or reports; (vi) the custody or preservation of any of the Collateral; (vii) all other actual and reasonable costs and expenses incurred by Syndication Agent in connection with the syndication of the Commitments and the negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (viii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Syndication Agent and, with respect to such actions after the Closing Date, Facility Manager, and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 119 120 9.3 INDEMNITY. In addition to the payment of expenses pursuant to subsection 9.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Facility Manager and Lenders, and the officers, directors, employees, agents and affiliates of Facility Manager and Lenders (collectively called the "INDEMNITEES"), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction. As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Release), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnities in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnities in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the Related Agreements or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty), (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect thereto, or (iii) any Environmental Claim or any Release relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 9.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnities or any of them. 120 121 9.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities of Company to that Lender under this Agreement and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Section 7 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Company hereby further grants to Facility Manager and each Lender a security interest in all deposits and accounts maintained with Facility Manager or such Lender as security for the Obligations. 121 122 9.5 RATABLE SHARING. Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, premium, interest, amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Facility Manager and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 122 123 9.6 AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of each Lender or, with respect to the following clause (a), each Lender with obligations directly affected thereby: (a) increase the amount of the Commitments of such Lender or reduce the principal amount of or premium on the Loans; postpone the scheduled final maturity date of the Loans; postpone the date on which any interest or any fees are payable; decrease the interest rate borne by any of the Loans (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder; or (b) release any Lien granted in favor of Facility Manager with respect to all or substantially all of the Collateral (it being understood and agreed that an increase in the amount of any Indebtedness of Company under this Agreement secured ratably by the Collateral shall not be deemed to be a release of Collateral), or release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty, in each case other than in accordance with the terms of the Loan Documents; change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders"; change in any manner any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders; or change in any manner the provisions contained in subsection 7.1 or this subsection 9.6. In addition, (i) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, and (ii) no amendment, modification, termination or waiver of any provision of Section 8 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Facility Manager or Syndication Agent shall be effective without the written concurrence of Facility Manager or Syndication Agent. Facility Manager may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company. 123 124 9.7 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 9.8 NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Facility Manager shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Facility Manager, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Facility Manager. 9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 9.2, 9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and 9.5 shall survive the payment of the Loans and the termination of this Agreement. 9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Facility Manager or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 124 125 9.11 MARSHALLING; PAYMENTS SET ASIDE. Neither Facility Manager nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Facility Manager or Lenders (or to Facility Manager for the benefit of Lenders), or Facility Manager or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 9.12 SEVERABILITY. In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 9.14 HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 125 126 9.15 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 9.16 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to subsection 9.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. 9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.8; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND 126 127 OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE. 9.18 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 9.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 127 128 9.19 CONFIDENTIALITY. Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking or lending practices, it being understood and agreed by Company that in any event a Lender may make disclosures to Affiliates of such Lender, to an Approved Fund or to the related investment advisor or disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein or disclosures required or requested by any Governmental Entity or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Governmental Entity or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such Governmental Entity) for disclosure of any such non-public information prior to disclosure of such information; and provided further that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. 9.20 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Facility Manager of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 128 129 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. OXFORD HEALTH PLANS, INC. By: Name: Title: Notice Address: 800 Connecticut Avenue Norwalk, Connecticut 06854 Attention: Jeffery H. Boyd, Executive Vice President and General Counsel Telephone: 203-852-1442 Fax: 203-852-2464 S-1 130 DLJ CAPITAL FUNDING, INC., as Syndication Agent and as a Lender By: Eric Swanson Managing Director Notice Address: 2121 Avenue of the Stars Los Angeles, California 90067 Attention: Eric Swanson Telephone: 310-282-7447 Fax: 310-282-6178 S-2 131 IBJ SCHRODER BANK & TRUST COMPANY, as Facility Manager By: Douglas Magnolia Vice President Notice Address: One State Street, 11th Floor New York, New York 10004 Attention: Douglas Magnolia, Vice President Telephone: 212-858-2743 Fax: 212-858-2895 S-3 132 O'M&M DRAFT 05/14/98 $150,000,000 TERM LOAN AGREEMENT DATED AS OF MAY 13, 1998 AMONG OXFORD HEALTH PLANS, INC., AS BORROWER, THE LENDERS LISTED HEREIN, AS LENDERS, DLJ CAPITAL FUNDING, INC., AS SYNDICATION AGENT, AND IBJ SCHRODER BANK & TRUST COMPANY, AS FACILITY MANAGER ARRANGED BY: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 133 OXFORD HEALTH PLANS, INC. $150,000,000 TERM LOAN AGREEMENT TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS 2 1.1 Certain Defined Terms 2 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement 32 1.3 Other Definitional Provisions and Rules of Construction 32 SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 33 2.1 Commitments; Making of Loans; the Register; Notes 33 2.2 Interest on the Loans 36 2.3 Fees 39 2.4 Repayments and Prepayments; General Provisions Regarding Payments 39 2.5 Use of Proceeds 45 2.6 Special Provisions Governing Eurodollar Rate Loans 46 2.7 Increased Costs; Taxes; Capital Adequacy 48 2.8 Obligation of Lenders to Mitigate; Replacement Lenders 52 SECTION 3. CONDITIONS TO LOANS 53 3.1 CONDITIONS TO LOANS 54 3.2 Additional Conditions 61 SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES 61 4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries 62 4.2 Authorization of Borrowing, etc. 63 4.3 Financial Condition 64 4.4 No Material Adverse Change 65 4.5 Title to Properties; Liens; Real Property 65 4.6 Litigation 66 4.7 Payment of Taxes 66 4.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts 66 4.9 Governmental Regulation 67 4.10 Securities Activities 67 4.11 Employee Benefit Plans 67 4.12 Certain Fees 68 4.13 Environmental Protection 68 4.14 Employee Matters 69
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Page 4.15 Solvency 69 4.16 Matters Relating to Collateral 69 4.17 Related Agreements 70 4.18 Disclosure 71 SECTION 5. COMPANY'S AFFIRMATIVE COVENANTS 71 5.1 Financial Statements and Other Reports 71 5.2 Corporate Existence, etc. 77 5.3 Payment of Taxes and Claims; Tax Consolidation 77 5.4 Maintenance of Properties; Insurance 78 5.5 Inspection Rights; Lender Meeting 78 5.6 Compliance with Laws, etc. 79 5.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS 79 5.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries and Future Subsidiaries; Security Interest in Trademarks 82 5.9 Conforming Leasehold Interests; Matters Relating to Additional Real Property Collateral 83 5.10 Certain Pro Forma Consolidating Balancing Sheets 85 SECTION 6. COMPANY'S NEGATIVE COVENANTS 85 6.1 Restricted Payments 86 6.2 Incurrence of Indebtedness and Issuance of Preferred Stock 88 6.3 Sale and Leaseback Transactions 91 6.4 Liens. 91 6.5 Limitation on Sale of Stock or Assets of Principal Subsidiaries 91 6.6 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries 92 6.7 Transactions with Affiliates 93 6.8 Limitation as to Unrestricted Subsidiaries 94 6.9 Limitation on Sale of Assets 94 6.10 Limitation on Business Activities 96 6.11 Merger, Consolidation or Sale of Assets 96 6.12 Amendments or Waivers of Certain Related Agreements; Amendments of Documents Relating to the Senior Notes 99 6.13 Commercial Lives. 100 SECTION 7. EVENTS OF DEFAULT 100 7.1 Failure to Make Payments When Due 100 7.2 Default in Other Agreements. 100 7.3 100 Breach of Certain Covenants 100 7.4 Breach of Warranty 100 7.5 Other Defaults Under Loan Documents 101 7.6 Judgments. 101
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Page 7.7 Involuntary Bankruptcy; Appointment of Receiver, etc. 101 7.8 Voluntary Bankruptcy; Appointment of Receiver, etc. 102 7.9 Failure to Maintain Healthcare Authorizations 102 7.10 Invalidity or Repudiation of Subsidiary Guaranty; Failure of Security; Repudiation of Obligations 102 SECTION 8. THE AGENTS 104 8.1 Appointment 104 8.2 Powers and Duties; General Immunity 105 8.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness 107 8.4 Right to Indemnity 107 8.6 Collateral Documents and Subsidiary Guaranty. 108 SECTION 9. MISCELLANEOUS 109 9.1 Assignments and Participations in Loans 109 9.2 Expenses 111 9.3 Indemnity 112 9.4 Set-Off; Security Interest in Deposit Accounts 113 9.5 Ratable Sharing 114 9.6 Amendments and Waivers 114 9.7 Independence of Covenants 115 9.8 Notices 115 9.9 Survival of Representations, Warranties and Agreements 116 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative 116 9.11 Marshalling; Payments Set Aside 116 9.12 Severability 117 9.13 Obligations Several; Independent Nature of Lenders' Rights 117 9.14 Headings 117 9.15 Applicable Law 117 9.16 Successors and Assigns 117 9.17 Consent to Jurisdiction and Service of Process 118 9.18 Waiver of Jury Trial 118 9.19 Confidentiality 119 9.20 Counterparts; Effectiveness 119 Signature pages S-1
(3) 136 EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF NOTE IV FORM OF COMPLIANCE CERTIFICATE V FORM OF OPINION OF SULLIVAN & CROMWELL VI FORM OF OPINION OF O'MELVENY & MYERS LLP VII FORM OF ASSIGNMENT AGREEMENT VIII FORM OF AUDITOR'S LETTER IX FORM OF COMPANY PLEDGE AGREEMENT X FORM OF COMPANY SECURITY AGREEMENT XI FORM OF COMPANY TRADEMARK SECURITY AGREEMENT XII FORM OF SUBSIDIARY GUARANTY XIII FORM OF SUBSIDIARY PLEDGE AGREEMENT XIV FORM OF SUBSIDIARY SECURITY AGREEMENT XV FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT XVI FORM OF COLLATERAL ACCOUNT AGREEMENT
(4) 137 SCHEDULES 1.1A EXCLUDED ASSET SALES 1.1B EXISTING INDEBTEDNESS 1.1C EXISTING INVESTMENTS 1.1D EXISTING LIENS 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1D SUBSIDIARIES OF COMPANY 4.5B FEE PROPERTIES AND LEASEHOLD PROPERTIES 4.6 LITIGATION 4.11 CERTAIN EMPLOYEE BENEFIT PLANS 4.13 ENVIRONMENTAL MATTERS
(5) EX-27 8 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACATED FROM the Consolidated Balance Sheet at March 31, 1998 (Unaudited) and the Consolidated Statement of Operations for the three months ended March 31, 1998 (Unaudited) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH financial statements. 0000865084 OXFORD HEALTH PLANS, INC. 1,000 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 61,053 635,270 304,549 15,000 0 1,163,674 171,801 139,999 1,491,730 1,176,338 14,123 0 0 795 300,474 1,491,730 1,218,087 1,229,623 1,066,437 1,292,470 0 0 6,849 (69,696) (24,394) (45,302) 0 0 0 0 0 0
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