-----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, Nv79vDanPjP87FWZIjAp0I+9AfPa+zdZNUfus9SmEW92aWfa9ix+wYWM4YVH1RSH sD2kX9tTbM8mn53gGPAF9w== 0000950123-99-008831.txt : 19990927 0000950123-99-008831.hdr.sgml : 19990927 ACCESSION NUMBER: 0000950123-99-008831 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990924 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: S-3/A SEC ACT: SEC FILE NUMBER: 333-77529 FILM NUMBER: 99716945 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 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 As filed with the Securities and Exchange Commission on September 24, 1999 Registration No. 333-77529 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ OXFORD HEALTH PLANS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1118515 (STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.) ORGANIZATION)
800 CONNECTICUT AVENUE NORWALK, CONNECTICUT 06854 (203) 852-1442 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------- JEFFERY H. BOYD, ESQ. EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY OXFORD HEALTH PLANS, INC. 800 CONNECTICUT AVENUE NORWALK, CONNECTICUT 06854 (203) 852-1442 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------- COPY TO: DANIEL DUNSON, ESQ. SULLIVAN & CROMWELL 125 BROAD STREET NEW YORK, NEW YORK 10004 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this registration statement. If the securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------- CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- TITLE OF SHARES AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM TO BE TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE(1) - --------------------------------------------------------------------------------------------------------------------------------- Common Stock.......................... 22,530,000(2) $17.96875(3) $404,835,937.50(3) $112,544.39 Series D Cumulative Preferred Stock... 277,629.157 $525(4) 145,755,307.43(4) 40,519.98 Series E Cumulative Preferred Stock... 132,808.069 $1,000(4) 132,808,069(4) 36,920.64 Series A Warrants..................... 15,800,000 -- -- 0(5) Series B Warrants..................... 6,730,000 -- -- 0(5) - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) Previously paid. (2) In accordance with Rule 416 under the Securities Act of 1933, this Registration Statement also covers an indeterminable number of shares of common stock, $.01 par value, as may become issuable upon exercise of the Series A Warrants or the Series B Warrants to prevent dilution resulting from stock splits, stock dividends, and similar transactions in accordance with the terms of the Series A Warrants and the Series B Warrants. (3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act based on the average high and low price of Oxford Health Plans, Inc. common stock $.01 par value, on April 23, 1999, as reported on the Nasdaq National Market. (4) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act. (5) Pursuant to Rule 457(g), no registration fee is required for the Series A Warrants and the Series B Warrants since the shares of Common Stock underlying such warrants are being registered hereby. ------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 SUBJECT TO COMPLETION, PROSPECTUS DATED SEPTEMBER --, 1999 [OXFORD HEALTH PLANS LOGO] 22,530,000 shares of Common Stock 277,629.157 shares of Series D Cumulative Preferred Stock 132,808.069 shares of Series E Cumulative Preferred Stock 15,800,000 Series A Warrants 6,730,000 Series B Warrants The shares of preferred stock, the warrants and the shares of common stock issuable upon exercise of the warrants are being offered under this prospectus by certain selling securityholders. The securities that were exchanged for the preferred stock and the warrants originally were issued in a private placement in May 1998. The shares of preferred stock listed above include 14,022.606 additional shares of Series D preferred stock and 16,908.793 additional shares of Series E preferred stock that we expect to issue as payment on May 13, 2000 in respect of dividends accrued on existing shares. We will not receive any of the proceeds from the sale of the preferred stock or the warrants by the selling securityholders. However, we will receive proceeds from any exercise of the warrants. You should read this prospectus and the prospectus supplement, if any, relating to the specific issue of preferred stock, warrants and shares of common stock issuable upon exercise of the warrants carefully before you invest. Our common stock is listed on the Nasdaq National Market under the symbol "OXHP." On September --, 1999, the last reported sale price of our common stock was $-- per share. We urge you to obtain a current sale price for our common stock before you buy any of the securities offered under this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE DATE OF THIS PROSPECTUS IS SEPTEMBER -- , 1999 3 TABLE OF CONTENTS Summary.......................... 1 Ratio of Earnings to Combined Fixed Charges and Preference Dividends...................... 8 Business......................... 9 Description of the Offered Preferred Stock................ 9 Description of the Warrants...... 23 Registration Rights Agreement.... 26 Use of Proceeds.................. 27 Material United States Federal Income Tax Consequences........ 28 Selling Securityholders.......... 41 Plan of Distribution............. 47 Validity of Securities........... 48 Experts.......................... 48 Where You Can Find More Information.................... 49 Forward-looking Statements....... 50
i 4 REFERENCES TO ADDITIONAL INFORMATION This prospectus incorporates important business and financial information about us from documents that are not included in or delivered with this document. You can obtain documents incorporated by reference in this prospectus, other than certain exhibits to those documents, by requesting them in writing or by telephone from us at the following address: Oxford Health Plans, Inc. 800 Connecticut Avenue Norwalk, Connecticut 06854 Attention: Investor Relations Telephone: (203) 852-1442 YOU WILL NOT BE CHARGED FOR ANY OF THE DOCUMENTS THAT YOU REQUEST. See "Where You Can Find More Information" on page 49. ii 5 SUMMARY This brief summary highlights selected information from this prospectus and documents we have incorporated in this prospectus by reference. It does not contain all of the information that is important to you. We urge you to read carefully the entire prospectus, the documents incorporated in this prospectus by reference and the other documents to which this prospectus refers, including our consolidated financial statements and the notes to those financial statements which are incorporated in this prospectus by reference. OXFORD HEALTH PLANS, INC. Oxford Health Plans, Inc. was incorporated under the laws of the State of Delaware on September 17, 1984. We are a health care company currently providing health care benefit plans primarily in New York, New Jersey and Connecticut. Our product line includes: - traditional health maintenance organizations which require the member to choose a health care provider from the network of providers under contract with us; - health care benefit plans for Medicare beneficiaries; - health care benefit plans, known as point-of-service plans, which provide the member with the option of using a provider who is under contract with us or one who is not under contract with us; - health care benefit plans, known as preferred provider organizations, which permit the member to choose any health care provider; - health care benefit plans for individuals; and - administrative services for groups that provide their own health care insurance, known as self-funded plans. We offer our products primarily through our health maintenance organization subsidiaries, Oxford Health Plans (NY), Inc., Oxford Health Plans (NJ), Inc. and Oxford Health Plans (CT), Inc., and through Oxford Health Insurance, Inc., our health insurance subsidiary. Our principal executive offices are located at 800 Connecticut Avenue, Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442. SECURITIES BEING OFFERED This prospectus covers the offer and sale of the following: - 277,629.157 shares of Series D Cumulative Preferred Stock, which we refer to as the "Series D preferred stock," and 132,808.069 shares of Series E Cumulative Preferred Stock, which we refer to as the "Series E preferred stock." We sometimes refer to the Series D preferred stock and the Series E preferred stock together as the "offered preferred stock." The terms of the Series D preferred stock and the Series E preferred stock are substantially similar except for their dividend rates and their use as consideration for exercise of the warrants. - 15,800,000 Series A Warrants, which we refer to as the "Series A warrants," and 6,730,000 Series B Warrants, which we refer to as the "Series B warrants." We sometimes refer to the Series A warrants and the Series B warrants together as the "warrants." - 22,530,000 shares of common stock, $.01 par value per share, issuable upon exercise of the Series A warrants and the Series B warrants. 1 6 We issued the warrants and the securities that were exchanged for the offered preferred stock in May 1998 to the selling securityholders named on pages 44 and 46 in a private placement. We made this private placement under an investment agreement, dated as of February 23, 1998, between Oxford and TPG Partners II, L.P., one of the selling securityholders. We have filed the investment agreement as an exhibit to the registration statement of which this prospectus is a part. TERMS OF THE OFFERED PREFERRED STOCK Stated Value.................... The stated value of each share of offered preferred stock is $1,000. Mandatory Redemption............ We must redeem all outstanding shares of Series D preferred stock and Series E preferred stock on May 13, 2008, at a redemption price for each share equal to all unpaid dividends accumulated to the date of payment of the redemption price, plus the stated value of the share, which is $1,000. Series D Dividends.............. Holders of the Series D preferred stock are entitled to receive dividends in the following amounts and form: BEFORE MAY 13, 2000: - shares of Series D preferred stock accumulate dividends at a rate of 5.319521% per year; - we may choose to make payments of dividends in cash or by the issuance of additional shares of Series D preferred stock; and - an annual dividend payment in the form of Series D preferred stock was made on May 13, 1999. ON OR AFTER MAY 13, 2000: - shares of Series D preferred stock accumulate dividends at a rate of 5.129810% per year; - we are required to make an annual dividend payment on May 13, 2000, and, after that date, we are required to pay dividends in equal quarterly installments on the last day of March, June, September and December of each year commencing June 2000; and - on May 13, 2000, we may choose to make payments of dividends in cash or by the issuance of additional shares of Series D preferred stock; after May 13, 2000, we are required to make payments of dividends in cash. 2 7 Series E Dividends.............. Holders of the Series E preferred stock are entitled to receive dividends in the following amounts and form: BEFORE MAY 13, 2000: - shares of Series E preferred stock accumulate dividends at a rate of 14.589214% per year; - we may choose to make payments of dividends in cash or by the issuance of additional shares of Series E preferred stock; and - an annual dividend payment in the form of Series E preferred stock was made on May 13, 1999. ON OR AFTER MAY 13, 2000: - shares of Series E preferred stock accumulate dividends at a rate of 14% per year; - we are required to make an annual dividend payment on May 13, 2000, and, after that date, we are required to pay dividends in equal quarterly installments on the last day of March, June, September and December of each year commencing June 2000; and - on May 13, 2000, we may choose to make payments of dividends in cash or by the issuance of additional shares of Series E preferred stock; after May 13, 2000, we are required to make payments of dividends in cash. Ranking......................... With respect to the right to receive dividends and payments upon the liquidation, dissolution or winding up of Oxford, the offered preferred stock ranks: - senior to our common stock and, except as specified below, any other class or series of capital stock that we issue in the future; - equally with each other class or series of preferred stock which provides that it ranks equally with the offered preferred stock; and - junior to each other class of preferred stock which provides that it ranks senior to the offered preferred stock. Currently, there are no classes of preferred stock issued or outstanding that rank senior to the Series D preferred stock or the Series E preferred stock. The Series D preferred stock and the 3 8 Series E preferred stock have the same ranking, and there are currently no other classes of preferred stock that have the same ranking as the Series D preferred stock and Series E preferred stock. The holders of each series of offered preferred stock must consent for Oxford to be able to create a class of preferred stock that ranks the same or that ranks senior to that class of offered preferred stock. Liquidation Preference.......... Upon liquidation, dissolution or winding up of Oxford, each holder of shares of offered preferred stock is entitled to receive the following amount before we make any payment on securities that rank junior to the offered preferred stock: - dividends, if any, accumulated or deemed to have accumulated on each share of offered preferred stock held by the holder to the date we make liquidation distributions, whether or not declared, and - the stated value of each share of offered preferred stock held by the holder, which is $1,000. If the assets or proceeds from a liquidation, dissolution or winding up of Oxford are insufficient to make these payments, then we will distribute the assets and proceeds ratably among holders of offered preferred stock and any securities that have the same ranking as the offered preferred stock. Optional Redemption............. We have the right to redeem all outstanding shares of a series of offered preferred stock on or after May 13, 2003, at a redemption price for each share of that series equal to all unpaid dividends accumulated to the date of payment of the redemption price, plus the stated value of the share, which is $1,000. Change of Control Redemption.... If a "change of control" occurs with respect to Oxford, holders of offered preferred stock may require us to redeem any or all of the shares of offered preferred stock they hold, at a redemption price for each share equal to all unpaid dividends accumulated to the date of payment of the redemption price, plus the stated value of the share, which is $1,000. Generally, a change of control may occur upon events such as: - a merger or consolidation of Oxford; - acquisition of majority control of Oxford by a person; 4 9 - a sale, lease or other transfer of substantially all of our assets; - a substantial change in our board of directors; or - adoption of a plan of liquidation or dissolution. For a more complete definition of a "change of control," please see the section of this prospectus entitled "Description of Offered Preferred Stock -- Change of Control Redemption" on page 14. Exchange........................ We have the right to exchange a series of offered preferred stock on any dividend payment date for junior subordinated debentures issued pursuant to an indenture. We may effect an exchange only if: - we have paid or set aside for payment full cumulative dividends on all outstanding shares of the series of offered preferred stock to be exchanged; - we have amended our certificate of incorporation to give holders of the debentures the same power to vote that they had as holders of offered preferred stock; and - the exchange could not result in any materially adverse tax consequences to TPG Partners II, one of the selling securityholders, or any of its affiliates. The indenture that will govern the junior subordinated debentures will have terms comparable to the terms of the series of offered preferred stock that is exchanged, including an interest rate that is the same as the dividend rate on the series of offered preferred stock that is exchanged. Limited Voting Rights........... Holders of offered preferred stock, other than TPG Partners II, one of the selling securityholders, and its affiliates, generally will not have the right to vote, unless: - dividends are in arrears and we have not paid dividends in full on May 13, 2000; - dividends are in arrears and we have not paid dividends in full for four consecutive quarters; or - we fail to redeem shares of offered preferred stock when required to do so. Generally, if any of the above events occur, then the number of directors on our board of directors automatically will be increased by two, and the 5 10 holders of a majority of the outstanding shares of offered preferred stock will have the right to vote, voting together as a single class, to elect the two new directors. However, there are limitations on this right, which are described in the section of this prospectus entitled "Description of Offered Preferred Stock -- Voting Rights" on page 20. We cannot take certain actions without the consent of holders of a majority of shares of each series of offered preferred stock, including the creation of any class of capital stock with a ranking equal to or senior to the offered preferred stock or that is redeemable on or before May 13, 2008. For detailed information regarding the offered preferred stock, you should refer to the section of this prospectus entitled "Description of the Offered Preferred Stock" beginning on page 9. TERMS OF THE WARRANTS Exercise........................ Each Series A warrant and Series B warrant entitles the holder to purchase one share of our common stock, par value $.01 per share, at an exercise price of $17.75 per share at any time until the expiration date. Expiration Date................. The expiration date for the Series A warrants is the earlier of May 13, 2008 and the date of redemption of all of the Series D preferred stock. The expiration date for the Series B warrants is the earlier of May 13, 2008 and the date of redemption of all of the Series E preferred stock. Adjustments..................... The warrants provide for adjustments to the exercise price and the number of shares of common stock that may be purchased upon exercise to protect against dilution. The warrants also provide for adjustments to the exercise price and number of shares that may be purchased upon exercise in the event of a merger, consolidation, recapitalization or other transaction that results in the conversion of our common stock into the right to receive other securities, property or cash. Warrant Agent................... ChaseMellon Shareholder Services, L.L.C. For detailed information regarding the warrants, you should refer to the section of this prospectus entitled "Description of the Warrants" beginning on page 24. 6 11 OTHER Use of Proceeds................. We will not receive any proceeds from the sale of the offered preferred stock or warrants covered by this prospectus; the selling securityholders will receive all proceeds. However, we will receive proceeds from any exercise of the warrants and we intend to use those proceeds for future capital contributions to our regulated subsidiaries, as necessary, for repayment of debt, and for general corporate purposes, or as otherwise described in a prospectus supplement. Shelf Registration Statement.... Under the registration rights agreement, dated as of February 23, 1998, between us and TPG Partners II, one of the selling securityholders, we have agreed to use our reasonable best efforts to keep effective a shelf registration statement under which the offered preferred stock, the warrants and the common stock issuable upon exercise of the warrants, which together we sometimes refer to as "registrable securities," may be sold. Generally, we are required to keep the shelf registration statement effective until: - 10 years after the date it is first declared effective; or - if earlier, the date that all registrable securities have been sold under the shelf registration statement or the date on which TPG Partners II and its assigns are no longer entitled to appoint directors to our board of directors under the investment agreement and are permitted to sell their registrable securities without registration under Rule 144(k) under the Securities Act. Generally, we intend the shelf registration statement to permit the selling securityholders named in this document and a limited group of their transferees to resell the registrable securities from time to time. Purchasers of the registrable securities offered by means of this prospectus will not have any rights under the registration rights agreement, although once sold under this registration statement the registrable securities should be freely tradeable except by purchasers who are our "affiliates" or are "underwriters" of the registrable securities for purposes of the Securities Act. We have filed the registration statement of which this prospectus is a part with the Securities and Exchange Commission in order to meet our obligations under the registration rights agreement. Trading......................... Our common stock currently trades on the Nasdaq National Market under the symbol "OXHP." 7 12 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS The ratio of earnings to combined fixed charges and preference dividends for each of the periods indicated is as follows:
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------ -------------------------------- 1999 1998 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- ---- ---- Ratio of Earnings to Combined Fixed Charges and Preference Dividends......................... * * * * 25.6 19.3 17.6 ==== ==== ==== ==== ==== ==== ====
- ------------------------- * Earnings were insufficient to cover fixed charges and preference dividends by $642.9 million for the year 1998, $431.6 million for the year 1997, $1.3 million for the six months ended June 30, 1999 and $577.1 million for the six months ended June 30, 1998. For purposes of computing these ratios, we increased our combined earnings before income taxes, as reported in our most recent annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3, and in our quarterly report on Form 10-Q for the quarter ended June 30, 1999, by the amount of our fixed charges. We then divided the amount of earnings by the amount of fixed charges and preference dividends, resulting in the ratio of earnings to combined fixed charges and preference dividends. Fixed charges represent interest expense plus the estimated interest factor in rental expense. We have not capitalized interest in any period. See "Where You Can Find Information" on page 49 for a description of how to obtain these documents. 8 13 BUSINESS We provide health care benefit plans through our HMO and insurance subsidiaries primarily in New York, New Jersey and Connecticut. Our product line includes: - traditional health maintenance organizations which require the member to choose a health care provider from the network of providers under contract with us; - health care benefit plans for Medicare beneficiaries; - health care benefit plans, known as point-of-service plans, which provide the member with the option of using a provider who is under contract with us or one who is not under contract with us; - health care benefit plans, known as preferred provider organizations, which permit the member to choose any health care provider; - health care benefit plans for individuals; and - administrative services for groups that provide their own health care insurance, known as self-funded plans. We distribute our products through several different internal channels, including direct sales representatives, business representatives, inbound telemarketing representatives and executive account representatives, as well as through external insurance agents, brokers and consultants. As of the date of this prospectus, we had a network of more than 50,000 providers under contract with us. The majority of the primary care physicians, specialists and hospitals in our network have contracted directly with us. We also have contracts with groups of providers such as physician hospital organizations, individual practice associations and other physician groups. We have entered into risk transfer agreements for the provision of health benefits to some of our Medicare beneficiaries as well as for pharmacy benefits management and laboratory and radiology services. For a fuller description of our business, including the risks involved in our business, refer to our most recently filed annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3, which is incorporated into this prospectus by reference. DESCRIPTION OF THE OFFERED PREFERRED STOCK The following summarizes certain terms and provisions of the Series D preferred stock and the Series E preferred stock. This summary is not complete and is subject to, and qualified in its entirety by reference to, applicable Delaware law and to the provisions of our certificate of incorporation, by-laws and the certificates of designations, designating the Series D preferred stock and the Series E preferred stock. These documents are filed as exhibits to the registration statement of which this prospectus is a part. AUTHORITY TO ISSUE PREFERRED STOCK Our certificate of incorporation authorizes our board of directors to issue, without the approval of the stockholders, up to 2,000,000 shares of preferred stock, $.01 par value. As of the date of this prospectus, we had designated 300,000 shares of Series D preferred stock and had issued 263,606.551 shares of Series D preferred stock and had designated 300,000 shares of Series E preferred stock and had issued 115,899.276 shares of Series E preferred stock. We expect to issue an additional 14,022.606 shares of Series D preferred 9 14 stock and 16,908.793 shares of Series E preferred stock as dividends on the existing shares of the offered preferred stock through May 13, 2000. Before issuing a series of preferred stock, our board of directors has the right to designate, for that series of preferred stock: - the serial designations; - dividend rates; - the offering price or prices; - provisions for redemption or purchase; - provisions for conversion; - voting rights; - special or relative rights in the event of a liquidation, distribution or sale of assets or dissolution or winding up; - provisions for a sinking fund; and - any other rights, obligations or provisions which may be so determined to the fullest extent permitted by Delaware law. As described below, our board of directors cannot create any class of capital stock with a ranking equal or senior to the offered preferred stock or that is redeemable on or before May 13, 2008, without the consent of holders of a majority of the shares of each series of the offered preferred stock. GENERAL The stated value of the offered preferred stock is $1,000 per share. The offered preferred stock does not provide holders with preemptive rights. The terms of the Series D preferred stock and Series E preferred stock are substantially similar except for their dividend rates and as noted specifically below. Under the investment agreement, the selling securityholders named in this prospectus purchased 245,000 shares of our Series A Cumulative Preferred Stock, which we refer to as the "Series A preferred stock," 105,000 shares of our Series B Cumulative Preferred Stock, which we refer to as the "Series B preferred stock," Series A Warrants to purchase 15,800,000 shares of our common stock, par value $.01 per share, and Series B Warrants to purchase 6,730,000 shares of our common stock for a total purchase price of $350 million. On February 13, 1999, we entered into a share exchange agreement with the selling securityholders to redistribute the total amount of dividends payable among the shares of Series A preferred stock and Series B preferred stock. Under the share exchange agreement, the 245,000 shares of Series A preferred stock were exchanged for 260,146.909 shares of Series D preferred stock, and the 105,000 shares of Series B preferred stock were exchanged for 111,820.831 shares of Series E preferred stock. The additional amounts of Series D preferred stock and Series E preferred stock issued in the exchange are attributable to dividends accrued on the Series A preferred stock and the Series B preferred stock, respectively, through February 13, 1999. As a result of the exchange, the selling securityholders hold only Series D preferred stock and Series E preferred stock and, following the exchange, all shares of the Series A preferred stock and Series B preferred stock were canceled. The terms of the Series D preferred stock are substantially similar to the terms of the Series A preferred stock and the terms of the Series E preferred stock are 10 15 substantially similar to the terms of the Series B preferred stock, except, in each case, with respect to applicable dividend rates and their use as consideration for exercise of the warrants. The exchange was effected primarily to facilitate the potential sale of the offered preferred stock by the selling securityholders. We conduct our operations primarily through subsidiaries. Therefore, our ability to make required dividend payments depends in part on the earnings of our subsidiaries and on our ability to receive funds from our subsidiaries through dividends or other payments. Because payments due on the offered preferred stock are obligations of Oxford alone, our subsidiaries are not obligated to pay any amount due under the offered preferred stock or to make funds available for dividends on the offered preferred stock in the form of dividends or advances to us. In addition, various insurance and health regulations applicable to our subsidiaries restrict their ability to pay dividends to us. If we incur operating losses, we may be required to make additional capital contributions to our subsidiaries in order to comply with statutory capital requirements and payment of dividends by those subsidiaries would likely not be permitted. In addition, the offered preferred stock effectively is subordinated to all outstanding indebtedness and other liabilities and commitments, including accounts payable and other accrued liabilities, of our subsidiaries. Any right we have to receive assets of one of our subsidiaries upon its liquidation or reorganization, and the resulting right of holders of the offered preferred stock to participate in those assets, effectively will be subordinated to the claims of that subsidiary's creditors, except to the extent we are recognized as a creditor of that subsidiary. If we are recognized as a creditor of that subsidiary our claims would still be subordinated to any security interest in the assets of the subsidiary and any indebtedness of the subsidiary that is senior to indebtedness held by us. ChaseMellon Shareholder Services, L.L.C. will be the transfer agent, dividend disbursing agent and registrar for the offered preferred stock unless otherwise specified in a prospectus supplement. RANKING With respect to the right to receive dividends and payments upon the liquidation, dissolution or winding up of Oxford, the offered preferred stock ranks: - senior to our common stock and, except as specified below, any other class or series of our capital stock we issue in the future; - equally with each other class or series of preferred stock which by its terms provides that it ranks equally with the offered preferred stock; and - junior to each other class of preferred stock which by its terms provides that it ranks senior to the offered preferred stock. Currently, there are no classes of preferred stock issued or outstanding that rank senior to the Series D preferred stock or the Series E preferred stock. The Series D preferred stock and the Series E preferred stock have the same ranking, and there are currently no other classes of preferred stock that have the same ranking as the Series D preferred stock and Series E preferred stock. The consent of holders of each series of offered preferred stock is required for Oxford to be able to create a class of preferred stock that has the same ranking or that is senior to that class of offered preferred stock. 11 16 MANDATORY REDEMPTION On May 13, 2008, we are required to redeem all outstanding shares of the offered preferred stock. For a description of the redemption price and redemption procedures, see "-- Redemption Price and Procedures" below. DIVIDENDS We are required to pay dividends to holders of Series D preferred stock and Series E preferred stock in the following amounts and manners:
SERIES D PREFERRED STOCK SERIES E PREFERRED STOCK ------------------------- ------------------------- BEFORE MAY 13, 2000: Dividend Rate Shares of Series D Shares of Series E preferred stock preferred stock accumulate dividends at a accumulate dividends at a rate of 5.319521% per rate of 14.589214% per year. year. Form of Payment We may choose to make We may choose to make payments of dividends in payments of dividends in cash or by the issuance cash or by the issuance of additional shares of of additional shares of Series D preferred stock. Series E preferred stock. ON OR AFTER MAY 13, 2000: Dividend Rate Shares of Series D Shares of Series E preferred stock preferred stock accumulate dividends at a accumulate dividends at a rate of 5.129810% per rate of 14% per year. year. Dividend Payment Dates We are required to make We are required to make an annual dividend an annual dividend payment on May 13, 2000, payment on May 13, 2000, and, after that date, we and, after that date, we are required to pay are required to pay dividends in equal dividends in equal quarterly installments on quarterly installments on the last day of March, the last day of March, June, September and June, September and December of each year, December of each year, commencing in June 2000. commencing in June 2000. Form of Payment On May 13, 2000, we may On May 13, 2000, we may choose to make payments choose to make payments of dividends in cash or of dividends in cash or by the issuance of by the issuance of additional shares of additional shares of Series D preferred stock; Series E preferred stock; after May 13, 2000, we after May 13, 2000, we are required to make are required to make payments of dividends in payments of dividends in cash. cash.
If any date specified as a dividend payment date is not a business day, we will pay the dividends due on the next business day, without interest. We will pay dividends to holders of record as they appear on our stock record books 15 days prior to the relevant dividend payment date. We will pay dividends only when, as and if declared by our board of directors, out of funds at the time legally available for the payment of dividends. 12 17 On May 13, 1999, we issued: (a) a dividend in the amount of $13.29880250 per share of Series D preferred stock in the form of 3,459.64236379 shares of Series D preferred stock to the holders of record as of April 28, 1999; and (b) a dividend in the amount of $36.47303500 per share of Series E preferred stock in the form of 4,078.44508277 shares of Series E preferred stock to the holders of record as of April 28, 1999. These payments reflected dividends accumulated from February 13, 1999, the date the offered preferred stock was issued in exchange for the Series A preferred stock and the Series B preferred stock. Dividends that accumulated on the Series A preferred stock and Series B preferred stock from May 13, 1998 through February 13, 1999, were satisfied by the issuance of additional shares of Series D preferred stock and Series E preferred stock in the exchange. We have paid all accrued dividends required to be paid on the offered preferred stock to the date of this prospectus. ACCUMULATION OF DIVIDENDS Dividends began to accumulate on outstanding shares of the offered preferred stock from the date of issuance, and accumulate day-to-day, whether or not earned or declared, until the dividends are paid. Dividends accumulate on the basis of a 360-day year consisting of twelve 30-day months and the actual number of days elapsed in the period for which payable. Dividends payable at more than one annual rate for any dividend period or partial dividend period will be pro rated based on the number of days in the dividend period or partial dividend period, and the actual number of days elapsed for which dividends are payable, at the applicable annual rate. ADDITIONAL DIVIDENDS Whenever we do not pay in full any dividend that has accumulated through any dividend payment date, or whenever we do not pay in full any redemption payment on any payment date set for a redemption, additional dividends will accumulate on the amount of the unpaid dividends or the unpaid redemption payment. An unpaid amount is referred to as an "arrearage." Additional dividends accumulate on an arrearage at the annual dividend rate then in effect or such lesser rate as may be the maximum rate that is then permitted by applicable law. Additional dividends in respect of any arrearage: - will accumulate day-to-day, whether or not earned or declared, until the arrearage is paid; and - will be calculated as of each successive dividend payment date and will constitute an additional arrearage from and after any dividend payment date to the extent not paid on that dividend payment date. We may declare and pay additional dividends in respect of any arrearage at any time, in whole or in part, without reference to any regular dividend payment date, to registered holders as they appear on our stock record books on the record date fixed by our board of directors. The record date must be at least 10 days before the corresponding payment date. Repayment of any arrearage must be made in cash. METHOD OF PAYMENT If we pay less than the total amount of accumulated dividends payable on all outstanding shares of a series of offered preferred stock, then we will allocate dividends pro 13 18 rata on a share-by-share basis among all outstanding shares of that series. Once dividends are payable in cash, dividends that we declare and pay in an amount less than the full amount of dividends accumulated on a series of the offered preferred stock and on any arrearage will be applied first to the earliest dividend that has not yet been paid. We will make all cash payments of dividends on the offered preferred stock in United States dollars. LIQUIDATION PREFERENCES In the event of any voluntary or involuntary liquidation, dissolution or winding up of Oxford, a holder of offered preferred stock will be entitled to receive out of the assets of Oxford, before we make any payment or distribute any assets to the holders of any securities that rank junior to the offered preferred stock, an amount per share equal to the sum of: (1) the dividends, if any, accumulated on the offered preferred stock to the date we make liquidation distributions, whether or not dividends have been declared; and (2) the stated value of the offered preferred stock, which is $1,000. If these assets or proceeds are insufficient to satisfy all claims with the same priority of payment as the offered preferred stock, then we will distribute the available assets and proceeds ratably among the holders of the offered preferred stock and any securities that have the same priority of payment as the offered preferred stock. After we pay holders the full amount of the liquidation preference to which they are entitled, they will not be entitled to participate in any further distribution of our assets. Neither a consolidation nor merger of Oxford nor a sale, conveyance, lease, exchange or transfer of all or part of Oxford's assets will be a liquidation, dissolution or winding up of Oxford. OPTIONAL REDEMPTION On and after May 13, 2003, we have the right to redeem all the outstanding shares of a series of the offered preferred stock, in whole but not in part in accordance with the procedures described below. CHANGE OF CONTROL REDEMPTION If a "change of control" occurs, then holders of offered preferred stock may require us to redeem any or all of their shares of offered preferred stock. A "change of control" means the time that any of the following occurs: (1) any person or group other than TPG Partners II, its affiliates, Oxford or any of our subsidiaries, or any group comprised of those persons, becomes, directly or indirectly, the beneficial owner, by way of merger, consolidation or otherwise, of a majority of the then-outstanding securities of Oxford entitled to vote in an election of directors. This determination will be made after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of Oxford convertible into or exercisable for securities of Oxford entitled to vote in an election of directors, whether or not the securities are then convertible or exercisable; or (2) the sale, lease, transfer or other disposition of all or substantially all of the assets of Oxford and our subsidiaries to any person or group; 14 19 (3) during any period of two consecutive calender years, the following individuals cease to constitute a majority of our directors then in office: (a) directors who constituted our board of directors at the beginning of the two-year period; together with (b) new directors whose election by our board of directors or whose nomination by stockholders was approved by at least a majority of the directors then still in office, which approving directors were directors: - at the beginning of the two-year period; or - whose election or nomination was previously approved by our board of directors; or - who were approved under the provisions of the investment agreement or the applicable certificate of designations; (4) Oxford consolidates or merges with or into another person, or any person consolidates or merges with or into Oxford, and immediately after the consolidation or merger, the persons who owned the outstanding voting securities of Oxford immediately before the consolidation or merger do not own, by reason of their prior ownership, a majority of the outstanding voting securities of Oxford or the surviving corporation; or (5) the adoption of a plan relating to the liquidation or dissolution of Oxford. The procedures for redemption are described below. REDEMPTION PRICE AND PROCEDURES REDEMPTION PRICE We will pay the redemption price of the offered preferred stock to be redeemed in cash out of funds legally available for the payment of the redemption price. The redemption price will be an amount per share equal to the sum of: (1) the amount, if any, of all unpaid dividends accumulated on the offered preferred stock to be redeemed to the date of actual payment of the redemption price, whether or not these dividends have been declared; and (2) the stated value of the offered preferred stock to be redeemed, which is $1,000. OPTIONAL REDEMPTION AND MANDATORY REDEMPTION PROCEDURES If we redeem shares of offered preferred stock, we are required to send notice of the redemption, including the redemption date, to the holders of record of the offered preferred stock to be redeemed by first class mail, postage prepaid, at each holder's address as it appears on our stock record books. We are required to send the notice not more than 120 nor fewer than 90 days before the date fixed for redemption. If we irrevocably deposit funds sufficient to pay the aggregate redemption price for the preferred stock to be redeemed, as described below under "-- Deposit of Funds," at the same time or prior to the delivery of a notice of redemption, then we are required to send the notice of redemption not more than 120 days nor fewer than 30 days before the fixed 15 20 redemption date. However, TPG Partners II or any of its affiliates has the option to request us to delay the fixed redemption date for a period of no more than 30 days, if: - the notice of redemption is delivered less than 60 days before the redemption date; and - TPG Partners II or any of its affiliates has used its reasonable best efforts to complete a sale of some or all of its shares of the series of offered preferred stock to be redeemed prior to the stated redemption date but has not completed the sale. We are required to notify the holders of the offered preferred stock to be redeemed about this delay within five days of receiving the request from TPG Partners II or its affiliates. We will not delay the redemption date in this manner more than once. Our board of directors may fix a record date to determine the holders of offered preferred stock to be redeemed. This record date will not be more than 30 days before the date that we mail the notice of redemption. On or after the redemption date, each holder of the shares called for redemption will be required to surrender the certificate evidencing shares to us at the place designated in the notice, and will be entitled to receive payment of the redemption price when they surrender their certificate. No dividends will accumulate after the redemption date, and after that date all rights of the holders of offered preferred stock that is redeemed will cease and terminate, except to the extent we default in payment on the redemption date. As long as TPG Partners II or its affiliates hold any shares of a series of the offered preferred stock, we may not deliver a notice of redemption with respect to that series unless: - the offered preferred stock is rated Baa or better by Moody's Investors Service, or BBB or better by Standard & Poor's Ratings Group or, if the offered preferred stock is not rated by Moody's and Standard & Poor's, our unsecured debt is rated Baa or better by Moody's or BBB or better by Standard & Poor's; or - we have sufficient funds reasonably available under committed lines of credit or other similar sources of financing established with financially sound financing providers to pay, on the redemption date, the aggregate redemption price and have reserved funds or availability for payment of the total redemption price. We may deliver a notice of redemption without complying with these two conditions if we irrevocably deposit funds sufficient to pay the total redemption price for the offered preferred stock to be redeemed, as described below under "-- Deposit of Funds," before or at the same time we deliver the notice of redemption. Prior to any redemption date, other than in a mandatory redemption, we will take all measures reasonably requested by TPG Partners II or its affiliates to facilitate their sale or other disposition of the offered preferred stock to be redeemed before the redemption date, including: - participation in due diligence sessions and provision of information about our management, business and financial condition; - preparation of offering memoranda, private placement memoranda and other similar documents; and - preparation and delivery of other certificates or documents that TPG Partners II or any of its affiliates reasonably requests. 16 21 CHANGE OF CONTROL REDEMPTION PROCEDURES We are required to send notice of any change of control to the holders of record of the outstanding offered preferred stock not more than five days following a change of control. This notice will describe the transaction constituting such change of control and will set forth: - each holder's right to require us to redeem any or all shares of offered preferred stock held by him or her out of legally available funds; - the redemption date, which will not be more than 30 days from the date of the notice of the change of control; and - the procedures to be followed by holders in exercising their right to have their shares of offered preferred stock redeemed. If more than 50 holders or groups of affiliated holders own shares of a series of offered preferred stock and if the series of offered preferred stock is listed on any national securities exchange or quoted on any national quotation system, we also are required to give notice of a change of control by publication in a newspaper of general circulation in the Borough of Manhattan, The City of New York, within 30 days following the change of control. Our failure to give a notice of a change of control, or the formal insufficiency of any notice, will not prejudice the rights of holders of offered preferred stock to have us redeem their shares. If a holder of offered preferred stock elects to require us to redeem his or her shares of offered preferred stock following a change of control, the holder must deliver a written notice to us, in the form specified by us if we did in fact give notice of a change of control as required, stating that the holder wants us to redeem his or her shares, and specifying the number of shares to be redeemed. This notice must be delivered prior to the redemption date set forth in the notice of a change of control, or, if the notice of a change of control is not given, at any time following the last day we were required to give the notice of a change of control. If we do not give the required notice, the redemption date for any holder that elects to redeem shares of offered preferred stock will be the date that is the later of (x) 30 days following the last day we were required to give the notice of change of control and (y) 15 days following the delivery of a notice of election by that holder. If 50 or fewer holders or groups of affiliated holders own all of the shares of a series of the offered preferred stock, the holders or groups of holders of that series may deliver a notice or an election to redeem at any time within 90 days following the occurrence of a change of control without awaiting receipt of a notice of a change of control or the expiration of the time allowed for the delivery of a notice of a change of control. We are required to comply with the requirements of Rules 13e-4 and 14e-1 under the Securities Exchange Act of 1934 and any other securities laws and regulations to the extent such laws and regulations are applicable in connection with the repurchase of the shares of the offered preferred stock as a result of a change of control. To the extent that the provisions of any securities laws or regulations conflict with the redemption procedures described above, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations to the holders of offered preferred stock. DEPOSIT OF FUNDS On or prior to any redemption date, we are required to deposit with our transfer agent or other redemption agent, as a trust fund for the benefit of the holders of the shares of 17 22 the offered preferred stock to be redeemed, an amount of cash that is sufficient to complete the redemption. We also are required to provide irrevocable instructions and authority to the transfer agent or other redemption agent to pay the redemption price to those holders whose shares are to be redeemed. This deposit will constitute full payment to the holders, and from and after the date of this deposit, all rights of the holders with respect to the shares of the offered preferred stock that are to be redeemed, except the right to receive the redemption price upon the surrender of their respective certificates, will cease and terminate. Dividends will not accumulate on any shares of offered preferred stock after the redemption date for those shares unless we fail to deposit cash sufficient to redeem those shares. If the holders of any shares of offered preferred stock to be redeemed do not claim the cash deposited for redemption within two years after the deposit, the transfer agent or other redemption agent will pay the balance to us. Upon this payment, the transfer agent or other redemption agent will be relieved of all responsibility to holders and the sole right of holders, with respect to shares to be redeemed, will be to receive the redemption price as our general creditors. Any interest accrued on the deposited funds will belong to us and will be paid to us from time to time on demand. EXCHANGE We may exchange either or both series of offered preferred stock at any time, to the extent permitted by applicable law, in whole but not in part, for junior subordinated debentures issued pursuant to an indenture that will be prepared in accordance with the investment agreement. We would issue a debenture in principal amount of $1,000 in exchange for each share of the series of offered preferred stock exchanged. The debentures would have terms comparable to the terms of the offered preferred stock exchanged, including interest rates that are the same as the dividend rates on the offered preferred stock to be exchanged. The exchange may take place on any dividend payment date. The exchange may take place at our offices and at any other place that our board of directors designates. Unless we receive the prior written consent of the holders of all outstanding shares of the series of offered preferred stock to be exchanged, we may not exchange any shares if: (a) any dividends, to the extent payable or deemed payable through the date of exchange, have not been paid or set aside for payment on all outstanding shares of that series; (b) we have failed to amend our certificate of incorporation pursuant to Delaware law to give holders of the debentures the same power to vote that they had as holders of offered preferred stock; or (c) the exchange could result in any materially adverse tax consequence to TPG Partners II or any of its affiliates. In order to prevent an exchange of shares of offered preferred stock because it could result in a material adverse tax consequence to TPG Partners II or any of its affiliates, TPG Partners II or one of its affiliates must deliver a written notice to us specifying in reasonable detail the nature of the tax consequence, which must be a tax consequence other than the difference between the tax treatment of distributions on the offered preferred stock and interest payments on the debentures. TPG Partners II or one of its affiliates must deliver that notice by the fifteenth day after it received the notice of exchange. TPG Partners II and its affiliates have agreed not to deliver this notice unless at 18 23 the time, TPG Partners II and its affiliates beneficially own a total of at least 1,000 shares of the series of offered preferred stock to be exchanged. If we receive an objection notice, then we will not exchange the shares of offered preferred stock held by TPG Partners II and its affiliates, and we will mail, within 15 days after receipt of the notice, written notice that we are canceling the proposed exchange of shares of offered preferred stock to each holder of record of shares of offered preferred stock to which we mailed the notice of exchange. Before giving notice of our intention to exchange, we will execute and deliver the indenture to a bank or trust company selected by our board of directors and, if required by applicable law, will qualify the indenture under the Trust Indenture Act of 1939. We are required to mail written notice of our intention to exchange the offered preferred stock for debentures to each holder of record of shares of the series of offered preferred stock to be exchanged not less than 90 nor more than 120 days prior to the date fixed for exchange. Prior to effecting any exchange, we are required to deliver to each holder of shares of the series of offered preferred stock to be exchanged an opinion of nationally recognized legal counsel which states that: (1) each of the indenture and the debentures have been duly authorized and executed by Oxford and, when delivered by us in exchange for shares of offered preferred stock, will constitute valid and legally binding obligations of Oxford enforceable against Oxford in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity; (2) the exchange of debentures for the shares of offered preferred stock will not violate the provisions of the applicable certificate of designations that govern the proposed exchange or of the Delaware General Corporation Law; and (3) the exchange of the debentures for the shares of offered preferred stock is exempt from the registration requirements of the Securities Act or, if no such exemption is available, that the debentures have been duly registered for exchange under the Securities Act. Upon the exchange of a series of offered preferred stock for debentures, the rights of the holders of that series of offered preferred stock as our stockholders will terminate, and the offered preferred stock will no longer be outstanding. Before any holder of offered preferred stock will be entitled to receive debentures, a holder must surrender his or her certificates at our office or at any other place that our board of directors may designate, and must state in writing the name or names with addresses in which he or she wishes the certificates for the debentures to be issued. After the surrender of certificates, we will issue and deliver certificates for the debentures to the holder, or to his or her nominee, at our office or other designated place. We will exchange shares of offered preferred stock as of the close of business on the date fixed for exchange as provided above, and the person entitled to receive the debentures issuable upon exchange will be treated for all purposes, including the accrual and payment of interest, as the record holder or holders of debentures as of the close of business on that date. 19 24 VOTING RIGHTS RIGHTS OF TPG PARTNERS II Under the terms of the offered preferred stock, TPG Partners II and its affiliates have a right to vote their shares of offered preferred stock on all matters voted on by holders of common stock. In those circumstances, TPG Partners II and its affiliates vote together with the holders of common stock as a single class. However, no other holder of offered preferred stock has those voting rights and they are not transferable by TPG Partners II or its affiliates to any subsequent holder of offered preferred stock. If TPG Partners II or its affiliates transfer shares of offered preferred stock to an unaffiliated person, and subsequently reacquire such shares, TPG Partners II and its affiliates would not reacquire the right to vote such shares of offered preferred stock with holders of common stock. Under the investment agreement, TPG Partners II and its affiliates are permitted to designate members of our board of directors. The number of directors TPG Partners II and its affiliates are permitted to designate at any time is dependent on the number of shares of common stock issued or issuable upon exercise of warrants held by TPG Partners II and its affiliates. In addition to the other voting rights described in this section, if at any time the number of directors on our board of directors designated by TPG Partners II and its affiliates is less than the number they are entitled to designate under the investment agreement, TPG Partners II and its affiliates, voting separately as a single class, are entitled to elect a number of additional directors to our board of directors equal to the deficiency. This right terminates at the time the requisite number of directors on our board of directors are designated by TPG Partners II and its affiliates. RIGHTS OF ALL HOLDERS All holders of offered preferred stock, including TPG Partners II and its affiliates, have the voting rights described below. If: (1) dividends payable on either series of offered preferred stock have been in arrears and not paid in full for four consecutive quarterly periods or if dividends on either series of offered preferred stock have been in arrears and not paid in full on May 13, 2000; or (2) we fail to satisfy our obligation to redeem shares of either series of offered preferred stock under the relevant certificate of designations, then the number of directors constituting our board of directors automatically will be increased by two, and the holders of a majority of the outstanding shares of offered preferred stock will have the exclusive right, voting together as a single class, to elect the two additional directors, except under the circumstances described below. Under the investment agreement, TPG Partners II and its affiliates are permitted to designate directors to our board of directors. However, TPG Partners II and its affiliates are not permitted to elect and/or designate a total of more than four directors to our board of directors. If at the time holders of offered preferred stock have the right to elect additional directors, (1) TPG Partners II and its affiliates together beneficially own a majority of the outstanding shares of offered preferred stock; and 20 25 (2) TPG Partners II and its affiliates are not permitted to elect one or both of the additional directors because of the restrictions described above, then the holders of offered preferred stock, other than TPG Partners II and its affiliates, will have the right to elect, voting together as a single class, only one additional director. Any additional director will continue as a director, and these additional voting rights will continue until: (1) we pay all dividends accumulated on the offered preferred stock in full; and (2) we satisfy any obligation to redeem the offered preferred stock that has become due, or we set aside all necessary funds for the redemption payment. Upon the occurrence of these events, any additional director will cease to be a director and the additional voting rights of the holders of offered preferred stock will terminate subject to revesting if any subsequent failure to pay dividends or redeem shares as described above occurs and subject to any rights to elect directors of holders of any other series of our preferred stock. The holders of offered preferred stock may exercise their right to elect additional directors at any annual meeting of stockholders, at a special meeting of stockholders held for this purpose, or by the written consent of the holders of the minimum number of shares required to take action. As long as this right to vote continues, and unless this right has been exercised by written consent of the minimum number of shares required to take action, the chairman of our board of directors may call, and upon the written request of holders of record of 20% of the outstanding shares of either the Series D preferred stock or the Series E preferred stock, addressed to our secretary at our principal office, will call a special meeting of the holders of shares entitled to vote as described above. This meeting will be held within 60 days after delivery of a request to the secretary, at the place and upon the notice provided by law and in the by-laws for meetings of stockholders. Each director elected as described above will serve until the next annual meeting or until his or her successor is elected and qualified, unless the director's term of office has terminated as described above. If any vacancy occurs among the directors elected as described above, the vacancy may be filled for the unexpired portion of the term by the remaining director or directors elected by the holders entitled to vote for directors as described above, or their successor or successors in office, if any. If the vacancy is not filled within 20 days after it is created or if all of the remaining directors elected by the holders of offered preferred stock as described in this section cease to serve as directors before their term expires, the holders of the shares then outstanding and entitled to vote for the director as described above may elect successors to hold office for the unexpired terms of any vacant directorships. The holders of a majority of the shares entitled to vote for directors as described above will have the right to remove with or without cause at any time and replace any directors that they have elected, by written consent or at a special meeting of the holders entitled to vote for directors as described above. We may not take the following actions, without the consent or affirmative vote of the holders of at least a majority of the outstanding shares of a series of offered preferred stock, voting separately as a class: - authorize, create or issue, or increase the authorized amount of any securities that rank senior or equal to the offered preferred stock for the purpose of receiving dividends or distributions upon the liquidation, dissolution or winding-up of Oxford; 21 26 - authorize, create or issue, or increase the authorized amount of any class or series of capital stock or any security convertible into or exercisable for any class or series of capital stock, redeemable mandatorily or redeemable at the option of the holder at any time on or prior to May 13, 2008, whether or not redemption may occur only upon the occurrence of a specified event; - amend, alter or repeal any provision of our certificate of incorporation or our by-laws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the applicable series of offered preferred stock so as to affect them materially and adversely; or - authorize or take any other action if such action alters or changes any of the rights of the applicable series of offered preferred stock in any respect or otherwise would be inconsistent with the provisions of the applicable certificate of designations and the holders of any class or series of our capital stock are entitled to vote on that action. No consent or vote of the holders of the outstanding shares of offered preferred stock is required: - for the creation or issuance by a trust formed at our direction of any series of preferred securities of such trust for financing purposes in an aggregate amount not to exceed $250,000,000; or - to authorize, create or issue, or increase the authorized amount of, any class or series of securities that rank junior to the offered preferred stock, or any security convertible into a stock of any class or series of securities that rank junior to the offered preferred stock, except to the extent such action would violate the relevant certificate of designations. RESTRICTION ON DIVIDENDS As long as any shares of offered preferred stock are outstanding, our board of directors: - may not declare, and we may not pay or set apart for payment any dividend on any securities that rank junior to the offered preferred stock; - may not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any securities that rank junior or equal to the offered preferred stock or any warrants, rights or options exercisable for or convertible into any securities that rank junior or equal to the offered preferred stock, other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for any securities that rank junior or equal to the offered preferred stock; - may not make any distribution in respect of the securities that rank junior to the offered preferred stock, either directly or indirectly, and whether in cash, obligations, shares or other property, other than distributions or dividends in securities that rank junior to the offered preferred stock to the holders of securities that rank junior to the offered preferred stock; and - may not permit any corporation or other entities directly or indirectly controlled by us to purchase or redeem any securities that rank junior or equal to the offered preferred stock or any warrants, rights, calls or options exercisable for or convertible 22 27 into any securities that rank junior or equal to the offered preferred stock, other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for any securities that rank junior or equal to the offered preferred stock unless before or at the same time we take action, all accumulated and unpaid dividends on shares of offered preferred stock not paid on the applicable dates, including arrearages and accumulated dividends, have been paid. When dividends are not paid in full upon the offered preferred stock, all dividends declared on the offered preferred stock and any other series of securities that ranks equally with the offered preferred stock, with respect to dividends, will be declared and paid pro rata so that the amount of dividends declared and paid will bear to each other the same ratio that accumulated dividends, including interest accrued in respect of such accumulated dividends, on the shares of offered preferred stock and those other securities bear to each other. The following actions are not prohibited by the restrictions described above: (1) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value of shares of offered preferred stock or any security that ranks equal to the offered preferred stock with respect to dividends or of any shares of preferred securities of a trust as referred to above; or (2) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value by us of any securities that rank junior to the offered preferred stock with respect to dividends in accordance with any obligation in existence at the time of original issuance of the offered preferred stock. NO INCONSISTENT OBLIGATIONS We are not permitted to enter into any agreement or issue any security that prohibits, conflicts or is inconsistent with, or would be breached by, our performance of our obligations with respect to the offered preferred stock. USE OF THE OFFERED PREFERRED STOCK FOR EXERCISE OF WARRANTS Shares of offered preferred stock may be used as consideration for exercise of the Series A warrants and the Series B warrants. For limitations on the ability to use shares of offered preferred stock in this manner, see below under "Description of Warrants -- Limitations on Use of the Offered Preferred Stock for Exercise of Warrants." DESCRIPTION OF THE WARRANTS The following summarizes certain terms and provisions of the Series A warrants and the Series B warrants. This summary is not complete and is subject to, and qualified in its entirety by reference to, the warrant certificates, applicable Delaware law, the provisions of our certificate of incorporation, by-laws and the form of warrant agreement, pursuant to which the warrants will be issued. These documents are filed as exhibits to the registration statement of which this prospectus is a part. GENERAL The selling securityholders initially purchased the Series A warrants and the Series B warrants in a private placement on May 13, 1998. At the date of this prospectus, 23 28 15,800,000 Series A warrants and 6,730,000 Series B warrants were outstanding. The warrant agent for the Series A warrants and the Series B warrants is ChaseMellon Shareholder Services, L.L.C. Any warrants sold by selling securityholders under this prospectus will be covered by a warrant agreement that will be entered into between Oxford and ChaseMellon Shareholder Services, L.L.C., as warrant agent. The warrant agent will act solely as an agent of Oxford in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any holder of warrants or beneficial owners of warrants. A copy of the form of warrant agreement has been filed as an exhibit to the registration statement of which this prospectus is a part. EXERCISE Each warrant entitles its holder to purchase one share of common stock at an exercise price of $17.75 per share at any time until the expiration of the warrants. The exercise price of the warrants was determined by negotiation between us and TPG Partners II and its affiliates and should not be construed as an estimate of the value of our common stock or to imply that the price of our common stock will increase or decrease. We have reserved from our authorized but unissued shares a sufficient number of shares of common stock for issuance upon the exercise of warrants. The warrants provide for adjustment of their exercise price and for a change in the number of shares that may be purchased upon exercise to protect holders against dilution in the event of a stock dividend, stock split or reverse split, upon issuance of shares of common stock at prices lower than the market price of the common stock, upon distribution of a special dividend, or upon a tender or exchange offer. The warrants also provide for adjustments to the exercise price and number of shares that may be purchased upon exercise in the event of a merger, consolidation, recapitalization or other transaction that results in the conversion of our common stock into the right to receive other securities, property or cash. EXPIRATION OF WARRANTS The Series A warrants expire on the earlier of: - May 13, 2008; and - the redemption of all of the Series D preferred stock, which we can do only after May 13, 2003. The Series B warrants expire until the earlier of: - May 13, 2008; and - the redemption of all of the Series E preferred stock, which we can do only after May 13, 2003. PROCEDURES FOR EXERCISE You may exercise a warrant by surrendering the warrant certificate on or before its expiration date, with the form of "Election to Exercise" on the reverse side of the warrant certificate completed and executed, accompanied by payment of the full exercise price for the number of shares for which the warrant is being exercised. 24 29 You may make payment of the exercise price: - in cash; - by certified or official bank check; - by an exchange with us of a number of shares of offered preferred stock having a total stated value plus accumulated and unpaid dividends equal to the total exercise price (for limitations on the ability to use the offered preferred stock in this manner, see below under "-- Limitations on Use of the Offered Preferred Stock for Exercise of Warrants"); - by an exchange with us of outstanding warrants, other than the warrants being exercised, the value of each of which will be determined by subtracting the exercise price from the average closing price of our common stock for the 10 trading days ending on the trading day before the day the exercise occurs; or - by any combination of the above. Upon the surrender of the warrant certificate and payment of the exercise price, we will promptly deliver the appropriate number of shares of common stock to the holder, or to the persons designated by the holder in writing. If you exercise fewer than all of the warrants represented by a certificate we will issue, a new certificate for the remaining number of warrants. LIMITATIONS ON USE OF THE OFFERED PREFERRED STOCK FOR EXERCISE OF WARRANTS Holders of warrants may use shares of offered preferred stock as consideration for the exercise of the warrants. However, before May 13, 2000, holders of warrants may not use shares of Series D preferred stock as consideration for exercise of warrants unless they use a percentage of the total number of shares of the Series D preferred stock issued by us on February 13, 1999 that does not exceed the percentage of the total number of shares of Series E preferred stock issued by us on February 13, 1999 that have been: - redeemed by us; - repurchased by us as a result of a change of control or otherwise; - used as consideration in connection with the exercise of the warrants; or - otherwise retired by us. NO FRACTIONAL SHARES We are not required to issue fractional shares of common stock. If any fractional share would be issuable on the exercise of a warrant, instead of issuing the fractional share we will pay the holder an amount in cash equal to the market value of the fractional share. NO RIGHTS AS A STOCKHOLDER Holders of warrants do not have rights as stockholders of Oxford. For instance, they do not have the right to vote, to receive dividends or to receive notices of stockholder meetings. OTHER The holders of warrants have the opportunity to profit from a rise in the market value of the common stock, with a resulting dilution in the interest of all other stockholders. As a result, so long as the warrants are outstanding, the terms on which we can obtain 25 30 additional capital may be adversely affected. We expect the holders of the warrants to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favorable than those provided for by the warrants. REGISTRATION RIGHTS AGREEMENT The summary of certain provisions of the registration rights agreement set out below is subject to, and is qualified in its entirety by reference to, all of the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. We are a party to a registration rights agreement with TPG Partners II. Under the registration rights agreement, we agreed to use our reasonable best efforts to keep effective a shelf registration statement at our expense, covering offers and sales of the offered preferred stock, the warrants, the common stock issuable upon the exercise of the warrants and any debentures issued in respect of the offered preferred stock. We sometimes refer to the securities covered by the registration rights agreement as the "registrable securities." We filed the registration statement of which this prospectus is a part with the SEC to comply with our obligations under the registration rights agreement. Under the registration rights agreement, we are required to keep the shelf registration statement effective until 10 years after the date it is declared effective or, if earlier, the date that all registrable securities have been sold under the shelf registration statement or on which TPG Partners II and its affiliates are no longer entitled to board representation under the investment agreement and are permitted to sell their registrable securities without registration pursuant to Rule 144(k) under the Securities Act. We will provide each holder of the registrable securities with copies of this prospectus, notify each holder when the shelf registration statement has been effective and take other actions described in the registration rights agreement as are required to permit unrestricted sales of the registrable securities. A holder that sells registrable securities under the shelf registration statement is required to be named as a selling securityholder in this prospectus and to deliver this prospectus to purchasers. Those holders also will be subject to certain civil liability provisions under the Securities Act in connection with these sales and are bound by the provisions of the registration rights agreement, including certain indemnification obligations. We also have agreed in the registration rights agreement to use our reasonable best efforts to cause the offered preferred stock and warrants to be listed on each securities exchange on which our securities are listed or quoted and on each inter-dealer quotation system on which any of our securities are quoted, in each case, at the time the registrable securities are sold. If we file a registration statement under the Securities Act for an underwritten offering of our securities for our own account or for the account of holders, or if we offer securities convertible into or exchangeable for any of our equity securities, the holders of registrable securities have agreed, if requested, not to publicly sell or distribute any securities that are the same as or similar to those being registered by us in connection with its sale, or any securities convertible or exchangeable or exercisable for any such securities during the period beginning 7 days before and ending no more than 90 days after the effective date of the registration statement filed by us. 26 31 We have agreed, in the case of an underwritten offering of registrable securities, if requested, not to effect any public sale or distribution of any securities the same as or similar to those being sold in the underwritten offering, or any securities convertible into or exchangeable or exercisable for securities that are the same as or similar to those being sold, during the period beginning 7 days before and ending no more than 90 days after the date of the related underwriting agreement. Purchasers of the registrable securities offered by means of this prospectus will not have any rights under the registration rights agreement, although once sold under this registration statement, the registrable securities should be freely tradeable except by purchasers that are our "affiliates" or are "underwriters" of the registrable securities for purposes of the Securities Act. USE OF PROCEEDS We will not receive any of the proceeds from any sale of the offered preferred stock or warrants, all of which will be received by the selling securityholders. The proceeds from the original sale of the securities that were exchanged for the offered preferred stock and warrants on May 13, 1998 were utilized, in part, to retire outstanding bridge notes, make capital contributions to regulated subsidiaries and pay fees and expenses approximating $39 million related to the sale of the securities that were exchanged for the offered preferred stock and warrants. We have used and will use the balance for subsidiary capital contributions, as necessary, and for general corporate purposes, or as otherwise described in a prospectus supplement. We will receive proceeds upon exercise of the Series A warrants and the Series B warrants. In the event that all of the 15,800,000 outstanding Series A warrants and 6,730,000 outstanding Series B warrants are exercised, we would receive proceeds of approximately $399,907,500, excluding the expenses related to the resale of the warrants under this prospectus. The exercise price of the Series A warrants and the Series B warrants was determined by negotiation between us and TPG Partners II and its affiliates based on the trading range of our common stock during the negotiations.
WARRANT EXERCISE PROCEEDS TO PRICE COMPANY(1) -------- ------------ Per Series A Warrant........................... $17.75 $280,450,000 Per Series B Warrant........................... $17.75 $119,457,500 ------------ Total.......................................... $399,907,500 ============
- ------------------------- (1) Assumes the exercise of all outstanding Series A warrants and Series B warrants. As of the date of this prospectus, none of the warrants had been exercised. Selling securityholders holding warrants are not obligated to exercise their warrants. We cannot be certain that holders of the warrants will choose to exercise all or any of their warrants. We intend to use the net proceeds received upon exercise of the warrants, if any, for future capital contributions to our regulated subsidiaries, as necessary, for repayment of debt and for general corporate purposes, or as otherwise described in a prospectus supplement. 27 32 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following describes the principal United States federal income tax consequences of owning shares of offered preferred stock, warrants, shares of common stock issuable upon exercise of the warrants, which we refer to as the "warrant stock" and the junior subordinated debentures that you would receive if we elected to exchange the offered preferred stock for debentures. It is the opinion of Sullivan & Cromwell, our counsel. It applies to you only if you are holding shares of offered preferred stock, warrants, shares of warrant stock and the debentures as capital assets and you purchased shares of offered preferred stock, warrants or shares of warrant stock in the offering at the offering price. This discussion does not apply to you if you are a member of a class of holders subject to special rules such as: - a dealer in securities or currencies, - a trader in securities that elects to mark to market, - a bank, - a tax-exempt organization, - a life insurance company, - a person that holds shares of offered preferred stock, warrants, shares of warrant stock or the debentures as a hedge, or is hedged, against currency or interest rate risks or that are part of a straddle or conversion transaction, or - a person whose functional currency is not the U.S. dollar. This discussion is based on the Internal Revenue Code of 1986, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. When we refer to a "United States holder" we mean a beneficial owner of shares of offered preferred stock, warrants, shares of warrant stock or debentures that is: (1) a citizen or resident of the United States; (2) a corporation organized under the laws of the United States or any State; (3) an estate the income of which is subject to United States federal income taxation regardless of its source; or (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. You are a "non-United States holder" if you are a beneficial owner of shares of offered preferred stock, warrants, shares of warrant stock or debentures and are not a United States holder. PROSPECTIVE PURCHASERS OF SHARES OF OFFERED PREFERRED STOCK, WARRANTS, SHARES OF WARRANT STOCK OR DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION, OF THE OWNERSHIP OF SHARES OF OFFERED PREFERRED STOCK, WARRANTS, SHARES OF WARRANT STOCK AND DEBENTURES. 28 33 TAXATION OF UNITED STATES HOLDERS This section describes the tax consequences to a United States holder. If you are not a United States holder, this section does not apply to you. THE OFFERED PREFERRED STOCK Distributions on the Offered Preferred Stock -- General We do not have any accumulated earnings and profits as determined for United States federal tax purposes, and there can be no assurance that we will have earnings and profits in this or future tax years. If we do not have any current or accumulated earnings and profits, as determined for United States federal income tax purposes, in a given tax year, any distribution on the offered preferred stock, including any distributions of additional shares of offered preferred stock, generally would not be subject to United States federal income taxation if your tax basis in the offered preferred stock is greater than or equal to the amount of the distribution. However, the distribution would reduce your tax basis in the offered preferred stock, but not below zero. If any portion of the distribution exceeds your tax basis in the offered preferred stock, that portion would be subject to United States federal income taxation as capital gain that is recognized in the taxable year in which you received the distribution. Until we have earnings and profits, no distribution is eligible for the 70% dividends-received deduction allowable to corporations. If we have current or accumulated earnings and profits in a given tax year, distributions on the offered preferred stock, including any distributions of additional shares of offered preferred stock, would be taxable to you as ordinary dividend income to the extent they are paid out of our current or accumulated earnings and profits. Any portion of the distribution not paid out of current or accumulated earnings and profits would be taxed as described in the previous paragraph. Dividends would be eligible for the 70% dividends- received deduction allowable to corporations, subject to the limitations described below. Distributions on the Offered Preferred Stock -- The Offered Preferred Stock "Paid in Kind" Until May 13, 2000, we may, at our option, pay dividends on the offered preferred stock "in kind" through the issuance of additional offered preferred stock. Dividends "paid in kind" will be treated as a distribution of an amount equal to the fair market value of the additional offered preferred stock as of the date of distribution, and will be taxed as described above under "-- Distributions on Offered Preferred Stock -- General." This amount will also be the initial issue price and tax basis of the newly distributed offered preferred stock for United States federal income tax purposes. If the redemption price of the offered preferred stock exceeds its offering price, or the redemption price of the offered preferred stock issued as an "in-kind" distribution exceeds its fair market value at the time the dividend is "paid in kind," which we refer to, in either case, as a "redemption premium," by one-fourth of one percent of the offered preferred stock's mandatory redemption price multiplied by the number of complete years to its mandatory redemption, you will be considered to have constructively received the entire amount of such excess as a distribution over the period between issuance and redemption under a constant yield method. If you purchased shares of offered preferred stock as a unit together with the warrants, you must allocate your purchase price between the offered preferred stock and the warrants based on their relative fair market values to determine the offering price of the offered preferred stock. The constant yield method would result in 29 34 increasing accruals of income over the term of the offered preferred stock under rules similar to those for accruing original issue discount on the debentures, as described under "-- Debentures -- Original Issue Discount" beginning on page 33. The constructive distribution would be a dividend in the year such distribution is considered to be received to the extent of our current and accumulated earnings and profits. Your tax basis in the offered preferred stock would be increased by the amount of any redemption premium included in income. In addition, each issuance of the offered preferred stock with more than a de minimis redemption premium might not be fungible with the other offered preferred stock, which might adversely affect the liquidity of the offered preferred stock. Distributions on the Offered Preferred Stock -- Dividends-Received Deduction If we have current or accumulated earnings and profits, amounts treated as dividends would be eligible for the 70% dividends-received deduction allowable to corporations, subject to the limitations described below. If you are a corporation considering investing in the offered preferred stock you should consider the effect of: (1) Section 246A of the Internal Revenue Code, which reduces the dividends- received deduction allowed to a corporate shareholder that has incurred indebtedness that is "directly attributable" to an investment in portfolio stock such as the offered preferred stock; (2) Section 246(c) of the Internal Revenue Code, which, among other things, disallows the dividends-received deduction in respect of any dividend on a share of stock that is held for less than the minimum holding period (generally at least 46 days during the 90-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend); and (3) Section 1059 of the Internal Revenue Code, which, under certain circumstances, reduces the basis of stock for purposes of calculating gain or loss in a subsequent disposition by the portion of any "extraordinary dividend" (as defined below) that is eligible for the dividends-received deduction. The President has currently proposed legislation that would eliminate the 70% dividends-received deduction for dividends on the offered preferred stock. There can be no certainty whether, or in what form, such legislation will be enacted or what its effective date would be. Distributions on the Offered Preferred Stock -- Extraordinary Dividends If you are a corporate United States holder, you are required to reduce your tax basis, but not below zero, in the offered preferred stock by the nontaxed portion of any "extraordinary dividend" if you did not hold the offered preferred stock for more than two years before the earliest of the date the dividend is declared, announced or agreed to. Generally, the nontaxed portion of an extraordinary dividend is the amount excluded from income by operation of the dividends-received deduction. An extraordinary dividend on the offered preferred stock generally would be a dividend that: (1) equals or exceeds 5% of your adjusted tax basis in the offered preferred stock, treating all dividends having ex-dividend dates within an 85-day period as one dividend; or (2) exceeds 20% of your adjusted tax basis in the offered preferred stock, treating all dividends having ex-dividend dates within a 365-day period as one dividend. 30 35 In determining whether a dividend paid on the offered preferred stock is an extraordinary dividend, you may elect to substitute the fair market value of the stock for your tax basis for purposes of applying these tests, provided that the fair market value as of the day before the ex-dividend date is established to the satisfaction of the Secretary of the Treasury. An extraordinary dividend also includes any amount treated as a dividend in the case of a redemption that is either non-pro rata as to all stockholders or in partial liquidation, regardless of your holding period and regardless of the size of the dividend. If any part of the nontaxed portion of an extraordinary dividend is not applied to reduce your tax basis as a result of the limitation on reducing your basis below zero, that part would be treated as capital gain and would be recognized in the taxable year in which the extraordinary dividend is received. CORPORATE UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP OR DISPOSITION OF SHARES OF OFFERED PREFERRED STOCK. Sale or Exchange of the Offered Preferred Stock Other Than by Redemption Upon the sale or other disposition of shares of offered preferred stock, other than by redemption, you will generally recognize capital gain or loss equal to the difference between the amount you realized upon the disposition and your adjusted tax basis in the shares of offered preferred stock. This gain or loss would be long-term capital gain or loss if at the time of sale, exchange or other disposition you held the shares of offered preferred stock for more than one year. Long-term capital gain of a non-corporate United States holder is generally subject to a maximum tax rate of 20%. The deductibility of capital losses is subject to limitations. Redemption of the Offered Preferred Stock A redemption of your shares of offered preferred stock generally would be a taxable event and would be treated as if you sold the shares of offered preferred stock if the redemption: (1) results in a "complete termination" of your stock interest; (2) is "substantially disproportionate"; or (3) is "not essentially equivalent to a dividend." In determining whether any of these tests has been met, you must take into account the shares of offered preferred stock you actually own and the shares of offered preferred stock you constructively own by reason of certain constructive ownership rules set forth in Section 318 of the Internal Revenue Code. If your shares of offered preferred stock are redeemed in a redemption that meets one of the tests described above, you generally would recognize taxable gain or loss equal to the difference between the amount of cash and the fair market value of property, other than our stock or stock of our successor, you received and your tax basis in the shares of offered preferred stock redeemed. See below under "-- Special Rules Regarding the Redemption of the Offered Preferred Stock For Debentures" for a description of the rules applicable to a redemption in which you receive debentures. This gain or loss would be long-term capital gain or capital loss if you held the shares of offered preferred stock for more than one year. If a redemption does not meet any of the tests described above, the cash and the fair market value of property you receive generally would be taxed as a dividend to the extent paid out of our current or accumulated earnings and profits. Any amount in excess of our current or accumulated earnings and profits would first reduce your tax basis in the shares 31 36 of offered preferred stock and thereafter would be treated as capital gain. If a redemption of the offered preferred stock is treated as a distribution that is taxable as a dividend, your basis in the redeemed shares of offered preferred stock would be transferred to your remaining shares of offered preferred stock, if any. Special Rules Regarding the Redemption of the Offered Preferred Stock For Debentures Pursuant to the rules discussed above under "-- Redemption of the Offered Preferred Stock," if we redeem the offered preferred stock for debentures, it will be treated either as an exchange giving rise to capital gain or loss or as a dividend. In the case of an exchange of the offered preferred stock for debentures that would be treated as a redemption giving rise to capital gain or loss, the amount realized on the exchange would be equal to the "issue price" of the debentures plus any cash received on the exchange. The issue price of a debenture will be: (1) its fair market value as of the exchange date if the debentures are traded on an established securities market at any time during the 60-day period ending 30 days after the exchange date; or (2) the fair market value of the offered preferred stock as of the exchange date if such offered preferred stock is traded on an established securities market at any time during the 60-day period ending 30 days after the exchange date, but the debentures are not. If neither the offered preferred stock nor the debentures are so traded, the issue price of the debentures will be determined under Section 1274 of the Internal Revenue Code, in which case the issue price will be the stated principal amount of the debentures, provided that the yield on the debentures is equal to or greater than the "applicable federal rate" in effect at the time the debentures are issued. If the yield on the debentures is less than the applicable federal rate, its issue price under Section 1274 of the Internal Revenue Code will be equal to the present value as of the issue date of all payments to be made on the debentures, discounted at the applicable federal rate. It cannot be determined at the present time whether the offered preferred stock or the debentures will, at the relevant time, be traded on an established securities market within the meaning of the Treasury regulations or whether the yield on the debentures will equal or exceed the applicable federal rate, as discussed above. If a redemption of the offered preferred stock for cash or an exchange of the offered preferred stock for debentures is treated as a dividend, you: (1) would not recognize any loss on the exchange; (2) (A) would recognize dividend income, rather than capital gain, in an amount equal to the fair market value of the debentures received without regard to your basis in the shares of offered preferred stock surrendered in the exchange, but only to the extent of its proportionate share of our current or accumulated earnings and profits and (B) would first reduce your tax basis in the shares of offered preferred stock and thereafter would recognize capital gain, to the extent that the distribution is not made out of our current or accumulated earnings or profits; and (3) the holding period for the debentures would begin on the day after the day on which you acquired the debentures. 32 37 YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO WHETHER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, THE EXCHANGE WOULD BE TREATED AS A DIVIDEND OR AS A SALE OR EXCHANGE. ADDITIONALLY, CORPORATE UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE AVAILABILITY OF THE CORPORATE DIVIDENDS-RECEIVED DEDUCTION AND THE POSSIBLE APPLICATION OF THE EXTRAORDINARY DIVIDEND RULES OF SECTION 1059 OF THE INTERNAL REVENUE CODE TO AN EXCHANGE IF THE DISTRIBUTION IS TAXABLE AS A DIVIDEND. Depending upon your particular circumstances, the tax consequences of holding debentures may be less advantageous than the tax consequences of holding shares of offered preferred stock because, for example, payments of interest on the debentures would be taxable as ordinary income, regardless of whether we have current or accumulated earnings and profits, while distributions on the offered preferred stock would not be immediately subject to United States federal taxation if we do not have current or accumulated earnings and profits in a given year and such distribution does not reduce your basis in the shares of offered preferred stock below zero, and because, as discussed below under "Debentures -- Original Issue Discount," debentures may be issued with greater amounts of OID than the Redemption Premium with respect to the offered preferred stock. DEBENTURES Original Issue Discount Unless the debentures have a term of one year or less, the debentures would be treated as issued at an original issue discount if the excess of the debentures' "stated redemption price at maturity" over their issue price is more than a "de minimis amount," as defined below. The manner in which the issue price of the debentures would be determined is discussed under "The Offered Preferred Stock -- Special Rules Regarding the Redemption of the Offered Preferred Stock For Debentures." The stated redemption price at maturity of the debentures is the total of all payments provided by the debenture other than the stated interest payments. In general, if the excess of the debenture's stated redemption price at maturity over its issue price is less than one-fourth of one percent of the debenture's stated redemption price at maturity multiplied by the number of complete years to its maturity (the "de minimis amount"), then such excess, if any, constitutes "de minimis original issue discount" and the debenture is not issued with original issue discount ("OID"). In general, the debentures would have OID if: (1) the debentures are traded on an established securities market at any time during the 60-day period ending 30 days after the exchange date, and the fair market value of the securities is less than the stated redemption price at maturity by more than the applicable de minimis amount; (2) the offered preferred stock is traded on an established securities market at any time during the 60-day period ending 30 days after the exchange date, and the debentures are not, and the fair market value of the offered preferred stock is less than the debentures' stated redemption price at maturity by more than the applicable de minimis amount; or (3) neither the debentures nor the offered preferred stock are traded on an established securities market at any time during the 60-day period ending 30 days 33 38 after the exchange date, the yield on the debentures is less than the applicable federal rate by more than the applicable de minimis amount, and the present value as of the issue date of all payments to be made on the debentures, discounted at the applicable federal rate, is less than the debentures' stated redemption price at maturity by more than the applicable de minimis amount. Unless you elect to treat all interest as original issue discount as described below under "-- Election to Treat All Interest as Original Issue Discount," you must include the de minimis OID in income as stated principal payments on the debenture are made. Generally, if your debenture matures more than one year from its date of issue, you must include OID in income calculated on a constant-yield method without regard to the receipt of cash attributable to such income, and generally you will have to include in income increasingly greater amounts of OID over the life of the debenture. The amount of OID includible in income is the sum of the daily portions of OID with respect to the debenture for each day during the taxable year or portion of the taxable year on which you hold the debenture, which we refer to as "accrued OID." The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that accrual period. You may select an accrual period of any length with respect to your debenture and you may vary the length of each accrual period over the term of the debenture as long as: (1) no accrual period is longer than one year; and (2) each scheduled payment of interest or principal on the debenture occurs on either the final or first day of an accrual period. The amount of OID allocable to an accrual period equals the excess of: (a) the product of the debenture's adjusted issue price at the beginning of the accrual period and the debenture's yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), over (b) the sum of the payments of qualified stated interest on the debenture allocable to the accrual period. The "adjusted issue price" of a debenture at the beginning of any accrual period is the issue price of the debenture increased by: (x) the amount of accrued OID for each prior accrual period, and decreased by (y) the amount of any payments previously made on the debenture that were not qualified stated interest payments. For purposes of determining the amount of OID allocable to an accrual period, if an interval between payments of qualified stated interest on your debenture contains more than one accrual period, the amount of qualified stated interest payable at the end of the interval (including any qualified stated interest that is payable on the first day of the accrual period immediately following the interval) is allocated pro rata on the basis of relative lengths to each accrual period in the interval, and the adjusted issue price at the beginning of each accrual period in the interval must be increased by the amount of any qualified stated interest that has accrued prior to the first day of the accrual period but that is not payable until the end of the interval. The amount of OID allocable to an initial short accrual period may be computed using any reasonable method if all other accrual 34 39 periods other than a final short accrual period are of equal length. The amount of OID allocable to the final accrual period is the difference between: (x) the amount payable at the maturity of the debenture (other than any payment of qualified stated interest), and (y) the debenture's adjusted issue price as of the beginning of the final accrual period. Election to Treat All Interest as Original Issue Discount You may elect to include in gross income all interest that accrues on your debenture using the constant-yield method described above under the heading "Original Issue Discount," with the modifications described below. For purposes of this election, interest includes stated interest, OID, de minimis original issue discount and unstated interest. If you make this election for your debenture, then, when you apply the constant-yield method: - the issue price of the debenture would equal the issue price as determined under "The Offered Preferred Stock -- Special Rules Regarding the Redemption of the Offered Preferred Stock For Debentures" beginning on page 32, - the issue date of the debenture would be the exchange date, - and no payments on the debenture would be treated as payments of qualified stated interest. This election would generally apply only to the debenture with respect to which it is made and may not be revoked without the consent of the Internal Revenue Service. Pursuant to section 163 of the Internal Revenue Code, the "disqualified portion" of the OID accruing on certain debt instruments may be treated as a dividend eligible for the dividend-received deduction. The corporation issuing such debt instruments is not allowed to deduct the "disqualified portion" of the OID accruing on the debt instrument and is allowed to deduct the remainder of the OID only when paid. This treatment will apply to "applicable high yield discount obligations" or "AHYDOs", which, generally, are debt instruments that have a term of more than five years, have a yield to maturity that equals or exceeds five percentage points above the "applicable federal rate" and have "significant" OID. A debt instrument is treated as having "significant" OID if the aggregate amount that would be includible in gross income with respect to such debt instrument for periods before the close of any accrual period ending five years or more after the date of issue exceeds the sum of: (1) the aggregate amount of interest to be paid in cash under the debt instrument before the close of such accrual period, and (2) the product of the initial issue price of such debt instrument and its yield to maturity. For purposes of determining whether a debenture is an AHYDO, holders are bound by the issuer's determination of the appropriate accrual period. It is impossible to determine at the present time whether a debenture will be treated as an AHYDO. If a debenture is treated as an AHYDO, a corporate United States holder would be treated as receiving dividend income, to the extent of our current and accumulated earnings and profits, solely for purposes of the dividend-received deduction, in an amount 35 40 equal to the "dividend equivalent portion" of the "disqualified portion" of the OID. The "disqualified portion" of the OID is equal to the lesser of: (1) the amount of OID, or (2) the portion of the "total return", that is, the excess of all payments to be made with respect to such obligation over its issue price, on the obligation that bears the same ratio to the obligation's total return as the "disqualified yield", that is, the extent to which the yield exceeds the applicable federal rate plus 6%, bears to the obligation's yield to maturity. The dividend equivalent portion of the disqualified portion is the amount that would have been treated as a dividend if we had distributed it with respect to our stock. Our deduction for OID will be substantially deferred with respect to a debenture that is treated as an AHYDO. In addition, such deduction will be disallowed if and to the extent that the yield on such AHYDO exceeds the applicable federal rate by more than 6%. Purchase, Sale, Retirement and Other Disposition of the Debentures Your adjusted tax basis in the debentures you receive in exchange for shares of offered preferred stock will, in general, be equal to the initial tax basis of such debentures, that is, the issue price of the debentures, if the exchange is treated as a redemption giving rise to capital gain or the fair market value of the debentures on the exchange date, if the exchange is treated as a dividend, increased by OID you previously included in your income. Upon the sale, exchange or retirement of a debenture, you will generally recognize capital gain or loss equal to the difference between the amount realized, not including any amounts attributable to accrued and unpaid interest, and your tax basis in the debenture. OWNERSHIP AND DISPOSITION OF WARRANTS The warrants may be sold individually or as a unit. Each unit is comprised of one or more shares of offered preferred stock and one or more warrants. If you purchase a unit you must allocate your purchase price between the offered preferred stock and the warrants based on their relative fair market values to determine your tax basis in the shares of offered preferred stock and the warrants and the amount of redemption premium, if any, on the offered preferred stock. If the warrant is sold individually, your tax basis in a warrant will be its purchase price. Sale of a Warrant Generally, you will recognize gain or loss upon the sale of a warrant in an amount equal to the difference between the amount realized on the sale and your adjusted tax basis in the warrant. Your adjusted tax basis in a warrant purchased in the offering as a unit will be the portion of the initial offering price allocable to a warrant, adjusted as described below under "-- Adjustments Under the Warrants." Gain or loss attributable to the sale of the warrants will constitute capital gain or loss if you would have held the warrant stock as a capital asset and will be long-term capital gain or loss if you held the warrants for more than one year. 36 41 Exercise of a Warrant, Disposition of Common Shares, and Dividends In general, you will not recognize gain or loss upon the exercise of a warrant, except with respect to cash, if any, paid in lieu of the issuance of fractional shares. Upon exercise of a warrant with cash, your tax basis in the shares of warrant stock acquired will be the sum of: (a) your adjusted tax basis in the warrant, and (b) the cash paid upon exercise of the warrant. If you receive any cash in lieu of fractional shares of warrant stock, you will recognize gain or loss, and the character and amount of gain or loss will be determined as if you had received such fractional shares and then immediately sold them for cash. Your holding period of the stock acquired upon exercise of a warrant begins on the day following the day of exercise. Expiration of the Warrants Upon the expiration of an unexercised warrant, you will recognize a loss equal to your adjusted tax basis of the warrant. A loss realized upon expiration of the warrant will be capital loss if you would have held the warrant stock as a capital asset and will be long-term capital loss if you held the warrant for more than one year. Adjustments Under the Warrants Pursuant to the terms of the warrants, the number of shares of warrant stock you may purchase upon exercise of the warrants is subject to adjustment from time to time upon the occurrence of certain events. In certain circumstances, a change in conversion ratio or any transaction having a similar effect may be treated as a distribution if your proportionate interest in the earnings and profits of the issuer is increased by such change or transaction. Thus, under certain future circumstances which may or may not occur, an adjustment pursuant to the terms of the warrants may be treated as a taxable distribution to the extent of our current or accumulated earnings and profits, without regard to whether you receive any cash or other property. If you receive such a taxable distribution, your tax basis in the warrants will be increased by an amount equal to the taxable distribution. WARRANT STOCK Any distributions you receive on the warrant stock will be taxable as ordinary income to the extent of our current and accumulated earnings and profits. If we do not have current or accumulated earnings or profits, the payment will first offset your basis in the warrant stock and any amount that exceeds your basis will be treated as capital gain. Any gain or loss upon the sale or exchange of shares of warrant stock will be capital gain or loss, and will be long-term capital gain or loss if you owned the shares of warrant stock for more than one year. TAXATION OF NON-UNITED STATES HOLDERS This section describes the tax consequences to non-United States holders. If you are a United States holder, this section does not apply to you. 37 42 INTEREST PAYMENTS Under present United States federal income tax law, and subject to the discussion of backup withholding below, if you are the beneficial owner of a debenture and we or our paying agents make payments to you of principal, premium, if any, and interest, including OID, you will not be subject to United States federal withholding tax if, in the case of interest or OID: (a) you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote; (b) you are not a controlled foreign corporation that is related to us through stock ownership; and (c) either: (1) you certify to us or our agent, under penalties of perjury, that you are not a United States holder and provide your name and address; or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the debenture certifies to us or our agent under penalties of perjury that it, or a financial institution between it and you, has received such statement from you and furnishes the payor with a copy thereof. Recently finalized United States Treasury Regulations, which we refer to as the "Final Withholding Regulations," would provide for alternative methods for satisfying the certification requirement. The Final Withholding Regulations also would require, in the case of debentures held by a foreign partnership, that: (1) the certification be provided by the partners rather than by the partnership; and (2) the partnership provide certain information, including a United States taxpayer identification number. A look-through rule would apply in the case of tiered partnerships. The Final Regulations are effective for payments made after December 31, 2000. DIVIDEND INCOME Dividends paid to you will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are "effectively connected" with your conduct of a trade or business within the United States, and they are attributable to your United States permanent establishment, if an applicable income tax treaty so requires as a condition for subjecting you to United States income tax on a net income basis. Such "effectively connected" dividends, generally, are not subject to withholding tax if you satisfy certain certification requirements. Instead, "effectively connected" dividends are taxed at rates applicable to United States citizens, resident aliens and domestic United States corporations. In addition, if you are a non-United States corporation, you may, under certain circumstances, be subject to an additional "branch profits tax" on "effectively connected" dividends at a 30% rate or at a lower rate if you are eligible for the benefits of an applicable income tax treaty. Under current United States Treasury Regulations, dividends paid to an address in a foreign country are presumed to be paid to a resident of that country, unless the payor has 38 43 knowledge to the contrary, for purposes of the 30% withholding discussed above. Under current interpretations of United States Treasury Regulations, this presumption also applies for purposes of determining whether a lower withholding rate applies under an income tax treaty. Under the Final Withholding Regulations, you must satisfy certain certification requirements in order to claim the benefit of a lower treaty rate. See "-- Taxation of Non-United States Holders -- Interest Payments" beginning on page 37. If you are eligible for a reduced rate of United States withholding tax under a tax treaty, you may obtain a refund of any amount withheld in excess of that rate by filing a refund claim with the United States Internal Revenue Service. SALE OR DISPOSITION You will not be subject to United States federal income tax in respect of a sale or disposition of shares of offered preferred stock or shares of warrant stock, or, to the extent of your basis in the shares of offered preferred stock or shares of warrant stock, on distributions paid on the offered preferred stock or warrant stock if we do not have current or accumulated earnings and profits, warrants or debentures unless: (1) the gain is effectively connected with your trade or business in the United States, and is attributable to your permanent establishment maintained in the United States, if an applicable income tax treaty so requires as a condition for you to be subject to United States taxation on a net income basis in respect of capital gain; (2) if you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions apply; or (3) we are or have been a "United States real property holding corporation" for federal income tax purposes. We have not been, are not and do not anticipate becoming a "United States real property holding corporation" for federal income tax purposes. If you are a corporation, your "effectively connected" gains may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. ESTATE TAXES If you are an individual who at death is not a citizen or resident of the United States, your debenture will not be includible in your gross estate for purposes of the United States federal estate tax as a result of your death if: (a) you did not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote; and (b) the income on the debenture would not have been effectively connected with your United States trade or business at your death. If you are a non-United States holder of shares of offered preferred stock, warrants or shares of warrant stock at the time of your death, they will be included in your gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. 39 44 BACKUP WITHHOLDING AND INFORMATION REPORTING UNITED STATES HOLDERS In general, if you are a United States holder, other than certain exempt recipients, such as corporations, information reporting requirements will apply to dividends paid in respect of your shares of offered preferred stock and warrant stock, including the accrual of the redemption premium, to principal and interest paid in respect of your debentures, and to the proceeds received on the sale, exchange or redemption of your shares of offered preferred stock, debentures, warrants or warrant stock, and "backup withholding" at a rate of 31% will apply to the payments if you fail to provide an accurate taxpayer identification number or you are notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns. You should consult your tax advisor concerning the application of information reporting and backup withholding to the preferred stock, debentures, warrants or warrant stock. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the IRS. NON-UNITED STATES HOLDERS Under current law, if you are a non-United States holder of a debenture, information reporting on Internal Revenue Service Form 1099 and backup withholding will not apply to payments of principal, premium, if any, and interest, including OID, made by us or a paying agent; provided, that you certify to us or our agent, under penalties of perjury, that you are not a United States holder and provide your name and address, or a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the debenture, certifies to us or our agent, under penalties of perjury, that such statement has been received from you or by a financial institution between it and you and furnishes as the payor with a copy thereof; and provided further that the payor does not have actual knowledge that you are a United States person. We or a paying agent, however, may report, on Internal Revenue Service Form 1042-S, payments of interest, including OID, on the debentures. See above, "Taxation of Non-United States Holders -- Interest Payments" with respect to the rules under the Final Withholding Regulations. In general, if you are a non-United States holder, dividends paid to you are not subject to United States information reporting requirements and backup withholding tax if you are either subject to the 30% withholding tax, discussed above, or are not subject to the 30% withholding tax because you are eligible for the benefits of an income tax treaty. However, dividend payments will be reported for purposes of the 30% withholding tax discussed above. If you do not meet any of the requirements listed above to exempt you from backup withholding tax and fail to provide certain information, including a United States taxpayer identification number, or otherwise establish a status as an "exempt recipient," you may be subject to backup withholding of United States federal income tax at a rate of 31% on dividends paid. Under current law, dividends paid to an address in a foreign country are generally treated as exempt from backup withholding and information reporting unless the person making the payment has definite knowledge that the recipient is a United States person. However, under the Final Withholding Regulations discussed above, dividend payments generally will be subject to information reporting and backup withholding unless certain certification requirements are met. 40 45 In general, United States information reporting and backup withholding requirements also will not apply to a payment made outside the United States of the proceeds of a sale of shares of offered preferred stock or warrant stock through an office outside the United States of a non-United States broker. However, United States information reporting, but not backup withholding, requirements will apply to a payment made outside the United States of the proceeds of a sale of shares of offered preferred stock or warrant stock through an office outside the United States of a broker: (1) that is a United States person; (2) that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States; (3) that is a "controlled foreign corporation" as to the United States; or (4) with respect to payments made after December 31, 2000, that is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, the foreign partnership is engaged in a United States trade or business, unless the broker has documentary evidence in its records that the holder or beneficial owner is a non-United States person or the holder or beneficial owner otherwise establishes an exemption. Payment of the proceeds of the sale of shares of offered preferred stock and shares of warrant stock to or through a United States office of a broker is currently subject to both United States backup withholding and information reporting unless the holder certifies its non-United States status under penalties of perjury or otherwise establishes an exemption. A non-United States holder generally may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the United States Internal Revenue Service. SELLING SECURITYHOLDERS This section sets forth information with respect to each selling securityholder for whom we are registering securities for offer and sale to the public under the registration statement of which this prospectus is a part. The securities offered hereby are comprised of: - 277,629.157 shares of Series D preferred stock, including 14,022.606 additional shares of Series D preferred stock that we expect to issue as dividends on existing shares through May 13, 2000; - 132,808.069 shares of Series E preferred stock, including 16,908.793 additional shares of Series E preferred stock that we expect to issue as dividends on existing shares through May 13, 2000; - 15,800,000 Series A warrants; - 6,730,000 Series B warrants; - 15,800,000 shares of common stock issuable upon exercise of the Series A warrants; and - 6,730,000 shares of common stock issuable upon exercise of the Series B warrants. 41 46 In addition to the information included in this section, if shares of offered preferred stock, warrants or common stock are offered by a selling securityholder under this prospectus, a prospectus supplement, if required, will include the following information: - the amount of shares of offered preferred stock, warrants or shares of common stock to be offered for the selling securityholder's account; - the amount of shares of offered preferred stock, warrants or shares of common stock to be owned by the selling securityholder after completion of the offering; and - the percentage of the series of offered preferred stock, warrants or common stock, if one percent or more, to be owned by the selling securityholder after completion of the offering. Under the investment agreement, the selling securityholders named in this prospectus purchased 245,000 shares of our Series A preferred stock, 105,000 shares of our Series B preferred stock and the warrants for a total sum of $350 million. On February 13, 1999, we entered into a share exchange agreement with the selling securityholders to redistribute the total amount of the dividends payable among the shares of Series A preferred stock and Series B preferred stock. Under the share exchange agreement, the 245,000 shares of Series A preferred stock were exchanged for 260,146.909 shares of Series D preferred stock, and the 105,000 shares of Series B preferred stock were exchanged for 111,820.831 shares of Series E preferred stock. The additional amounts of Series D preferred stock and Series E preferred stock issued in the exchange are attributable to dividends accrued on the offered preferred stock through February 13, 1999. As a result of the exchange, the selling securityholders hold only Series D preferred stock and Series E preferred stock and following the exchange all shares of the Series A preferred stock and Series B preferred stock were cancelled. The terms of the Series D preferred stock are substantially similar to the terms of the Series A preferred stock and the terms of the Series E preferred stock are substantially similar to the terms of the Series B preferred stock, except with respect to applicable dividend rates. The exchange was effected primarily to facilitate the potential sale of shares of offered preferred stock by the selling securityholders. As of the date of this prospectus, the selling securityholders held a total of 263,606.551 shares of Series D preferred stock and 115,899.276 shares of Series E preferred stock. Through May 13, 2000, we expect to issue an additional 14,022.606 shares of Series D preferred stock and 16,908.793 shares of Series E preferred stock to satisfy our obligation to pay dividends on the outstanding shares of offered preferred stock. Under the investment agreement, we agreed to increase the number of our directors to a minimum of 11 directors and a maximum of 13 directors and to appoint Norman C. Payson, M.D., as our chief executive officer and as a director. We also agreed that TPG Partners II and its affiliates would be entitled to nominate four directors to our board of directors. Dr. Payson was elected chief executive officer and joined the board of directors in May 1998. David Bonderman, Jonathan J. Coslet and James G. Coulter were nominated by TPG Partners II and its affiliates pursuant to the investment agreement and joined the board of directors in May 1998. Kent J. Thiry was also nominated by TPG Partners II and its affiliates pursuant to the investment agreement and joined the board of directors in August 1998. Mr. Bonderman is a director and president, Mr. Coulter is a director and vice president, and Mr. Coslet is an executive of TPG Advisors II, Inc. TPG Advisors II, Inc. is the general partner of TPG GenPar II, L.P., which is the general partner of selling securityholders TPG Partners II, L.P., TPG Parallel II, L.P. and TPG Investors II, L.P. 42 47 The investment agreement also contains covenants which restrict our ability to take significant actions without the consent of TPG Partners II and its affiliates, including mergers, consolidations and certain issuances of equity securities. In connection with the investment agreement, we also entered into a registration rights agreement in which we agreed to register the offered preferred stock, the warrants, the common stock issuable upon exercise of the warrants and any debentures issued in respect of the offered preferred stock under the Securities Act for offer and sale by the selling securityholders and certain holders to whom they may transfer those securities. For a summary of certain provisions of the registration rights agreement, see "Registration Rights Agreement" beginning on page 26. We have filed with the SEC under the Securities Act a Registration Statement on Form S-3, of which this prospectus forms a part, with respect to the offer and sale of the securities described in this prospectus. We have agreed, among other things, to bear certain expenses in connection with the registration and sale of the securities being offered by the selling securityholders. For more information regarding these expenses see "Plan of Distribution" beginning on page 47. The following table provides the name of each selling securityholder and the number of shares of offered preferred stock and warrants held by each selling securityholder as of the date of this prospectus. All these securities have been registered for offer and sale under the registration statement of which this prospectus is a part. As noted in the table, we expect to issue additional shares of offered preferred stock as dividends on existing shares of offered preferred stock through May 13, 2000. Those additional shares have been registered for offer and sale by the selling securityholders under the registration statement of which this prospectus is a part. 43 48
# OF SHARES OFFERED PREFERRED STOCK HELD ----------------------------------------- NAME OF BENEFICIAL OWNER SERIES D SERIES E - ------------------------ ------------------- ------------------ TPG Partners II, L.P.(1)................................. 179,851.36901207 79,074.83089156 TPG Parallel II, L.P.(2)................................. 12,273.52103150 5,396.27029441 TPG Investors II, L.P.(3)................................ 18,760.35104746 8,248.31968026 Chase Equity Associates, L.P.(4)......................... 11,297.42362988 4,967.11183212 Oxford Acquisition Corp.(5).............................. 3,765.80787663 1,655.70394404 DLJ Merchant Banking Partners II, L.P.(6)................ 18,977.51980797 8,343.64407533 DLJ Merchant Banking Partners II-A, L.P.(7).............. 755.31346554 332.24459144 DLJ Offshore Partners II, C.V.(8)........................ 932.84440829 410.61457812 DLJ Diversified Partners, L.P.(9)........................ 1,109.29940595 487.88076218 DLJ Diversified Partners-A, L.P.(10)..................... 412.08697621 181.02363122 DLJMB Funding II, Inc.(11)............................... 3,369.86007703 1,481.30312860 DLJ Millennium Partners, L.P.(12)........................ 306.64435566 134.66392078 DLJ Millennium Partners-A, L.P.(13)...................... 60.25292603 26.49126311 DLJ EAB Partners, L.P.(14)............................... 84.99966350 37.52928940 UK Investment Plan 1997 Partners(15)..................... 502.46636526 220.76052587 DLJ ESC II L.P.(16)...................................... 4,124.09759745 1,813.54772003 DLJ First ESC, L.P.(17).................................. 36.58213365 16.55703944 DLJ Capital Corporation(18).............................. 100.06289501 44.15210517 Sprout Growth II, L.P.(19)............................... 4,617.95640185 2,030.99683802 The Sprout CEO Fund, L.P.(20)............................ 76.39210264 34.21788151 Sprout Capital VIII, L.P.(21)............................ 2,066.89055171 907.32576134 Sprout Venture Capital, L.P.(22)......................... 124.80963248 54.08632884
- --------------- (1) We expect to issue 9,567.23134338 additional shares of Series D preferred stock and 11,536.39629891 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (2) We expect to issue 652.89252871 additional shares of Series D preferred stock and 787.27342127 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (3) We expect to issue 997.96081364 additional shares of Series D preferred stock and 1,203.36500956 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (4) We expect to issue 600.96882245 additional shares of Series D preferred stock and 724.66257481 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (5) We expect to issue 200.32294082 additional shares of Series D preferred stock and 241.55419160 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (6) We expect to issue 1,009.51315146 additional shares of Series D preferred stock and 1,217.27208955 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. 44 49 (7) We expect to issue 40.17905842 additional shares of Series D preferred stock and 48.47187445 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (8) We expect to issue 49.62285420 additional shares of Series D preferred stock and 59.90543952 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (9) We expect to issue 59.00941485 additional shares of Series D preferred stock and 71.17796846 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (10) We expect to issue 21.92105324 additional shares of Series D preferred stock and 26.40992495 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (11) We expect to issue 179.26041447 additional shares of Series D preferred stock and 216.11048342 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (12) We expect to issue 16.31201089 additional shares of Series D preferred stock and 19.64640758 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (13) We expect to issue 3.20516705 additional shares of Series D preferred stock and 3.86486707 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (14) We expect to issue 4.52157495 additional shares of Series D preferred stock and 5.47522834 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (15) We expect to issue 26.72880382 additional shares of Series D preferred stock and 32.20722555 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (16) We expect to issue 219.38223776 additional shares of Series D preferred stock and 264.58235787 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (17) We expect to issue 1.94599428 additional shares of Series D preferred stock and 2.41554192 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (18) We expect to issue 5.32286671 additional shares of Series D preferred stock and 6.44144511 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (19) We expect to issue 245.65316057 additional shares of Series D preferred stock and 296.30647503 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (20) We expect to issue 4.06369394 additional shares of Series D preferred stock and 4.99211996 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. (21) We expect to issue 109.94867695 additional shares of Series D preferred stock and 132.37169700 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000. 45 50 (22) We expect to issue 6.63927461 additional shares of Series D preferred stock and 7.89077026 additional shares of Series E preferred stock as dividends on the existing shares through May 13, 2000.
# OF WARRANTS HELD -------------------------------------- NAME OF BENEFICIAL OWNER SERIES A WARRANTS SERIES B WARRANTS - ------------------------ ----------------- ----------------- TPG Partners II, L.P. ...................................... 10,779,898 4,591,691 TPG Parallel II, L.P. ...................................... 735,648 313,349 TPG Investors II, L.P. ..................................... 1,124,455 478,961 Chase Equity Associates, L.P. .............................. 677,142 288,428 Oxford Acquisition Corp. ................................... 225,714 96,142 DLJ Merchant Banking Partners II, L.P. ..................... 1,137,465 484,503 DLJ Merchant Banking Partners II-A, L.P. ................... 45,299 19,295 DLJ Offshore Partners II, C.V. ............................. 55,935 23,825 DLJ Diversified Partners, L.P. ............................. 66,501 28,326 DLJ Diversified Partners-A, L.P. ........................... 24,696 10,519 DLJMB Funding II, Inc. ..................................... 201,951 86,022 DLJ Millennium Partners, L.P. .............................. 18,392 7,834 DLJ Millennium Partners-A, L.P. ............................ 3,587 1,528 DLJ EAB Partners, L.P. ..................................... 5,107 2,175 UK Investment Plan 1997 Partners............................ 30,095 12,819 DLJ ESC II L.P. ............................................ 247,193 105,292 DLJ First ESC, L.P. ........................................ 2,189 932 DLJ Capital Corporation..................................... 5,998 2,555 Sprout Growth II, L.P. ..................................... 276,790 117,899 The Sprout CEO Fund, L.P. .................................. 4,579 1,950 Sprout Capital VIII, L.P. .................................. 123,885 52,769 Sprout Venture Capital, L.P. ............................... 7,481 3,186
46 51 PLAN OF DISTRIBUTION The selling securityholders now hold shares of offered preferred stock and the warrants covered by this prospectus. As used in the rest of this section of the prospectus, the term "selling securityholders" includes the selling securityholders named in the table under "Selling Securityholders" in this prospectus and some of their pledgees, donees, transferees or other successors in interest selling securities received from a named selling securityholder after the date of this prospectus. The shares of offered preferred stock, the warrants and the shares of common stock covered by this prospectus are referred to in this section as the "securities." The selling securityholders may offer and sell, from time to time, some or all of the securities under this prospectus. We have registered the securities for offer and sale by the selling securityholders so that the securities will be freely tradeable by them. Registration of the securities does not mean, however, that the securities necessarily will be offered or sold. We will not receive any proceeds from any sale by the selling securityholders of the securities. See "Use of Proceeds" on page 27 for information about the use of proceeds from the original sale of the securities. We will pay all costs, expenses and fees in connection with the registration of the securities, including fees of our counsel and accountants, fees payable to the SEC, listing fees, and the reasonable fees and disbursements of one law firm selected as counsel for the selling securityholders in connection with the registration. The selling securityholders will pay all underwriting discounts and commissions and similar selling expenses, if any, attributable to the sale of the securities. The selling securityholders may sell the securities from time to time, at market prices prevailing at the time of sale, at prices related to market prices, at a fixed price, at prices subject to change or at negotiated prices, by a variety of methods including the following: - on markets where our securities are traded or on an exchange in accordance with the rules of the exchange; - in privately negotiated transactions; - through broker-dealers, which may act as agents or principals; - in a block trade in which a broker-dealer will attempt to sell a block of securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; - through one or more underwriters on a firm commitment or best-efforts basis; - directly to one or more purchasers; - through agents; - through option transactions, forward contracts, equity swaps or other derivative transactions relating to the securities; - through short sales of the securities; - in any combination of the above; or - by any other legally available means. In effecting sales, brokers or dealers engaged by the selling securityholders may arrange for other brokers or dealers to participate. Broker-dealer transactions may include: - purchases of the securities by a broker-dealer as principal and resales of the securities by the broker-dealer for its account pursuant to this prospectus; - ordinary brokerage transactions; or - transactions in which the broker-dealer solicits purchasers. 47 52 If we or the selling securityholders enter into a material arrangement with any underwriter, broker, dealer or other agent for the sale of any securities through a secondary distribution or a purchase by a broker or dealer, or if we or the selling securityholders make other material changes in the plan of distribution of the securities, we will file a prospectus supplement, if necessary, under the Securities Act disclosing the material terms and conditions of such arrangement. If we or the selling securityholders use an underwriter or underwriters in the sale of securities, we and the selling securityholders expect to execute an underwriting agreement with the underwriter or underwriters at the time an agreement for the sale is reached. We will set forth the underwriter or underwriters with respect to an underwritten offering of securities and the other material terms and conditions of the underwriting in a prospectus supplement relating to such offering and, if we or the selling securityholders use an underwriting syndicate, we will set forth the managing underwriter or underwriters on the cover of the prospectus supplement. In connection with the sale of securities, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of securities for whom they may act as agent. Underwriters may sell to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the securities by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting commissions under the Securities Act. We agreed to indemnify the selling securityholders and each person or entity which participates as or may be deemed to be an underwriter in the offering or sale of the selling securityholders' securities against certain liabilities (and to contribute to payments in respect those liabilities), including liabilities arising under the Securities Act. The selling securityholders may agree to indemnify any agent or broker-dealer that participates in transactions involving offers or sales of the securities against certain liabilities, including liabilities arising under the Securities Act. VALIDITY OF SECURITIES The validity of the shares of offered preferred stock, the warrants, and the shares of common stock offered hereby will be passed upon for us by Sullivan & Cromwell, New York, New York. EXPERTS The consolidated financial statements of Oxford Health Plans, Inc. at December 31, 1998, and for the year then ended, included in Oxford Health Plans, Inc.'s annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3, for the fiscal year ended December 31, 1998, which is incorporated in this prospectus by reference, have been audited by Ernst & Young LLP, independent auditors, and at December 31, 1997, and for each of the years in the two-year period ended December 31, 1997, by KPMG LLP, independent auditors, as set forth in their respective reports thereon included therein and incorporated in this prospectus by reference. These consolidated financial statements are incorporated in this prospectus by reference in reliance upon such reports given on the authority of these firms as experts in accounting and auditing. 48 53 With respect to the unaudited condensed consolidated interim financial information for the three-month period ended March 31, 1999 and the three-month and six-month periods ended June 30, 1999 and 1998 incorporated by reference in this prospectus, Ernst & Young LLP has reported that it has applied limited procedures in accordance with professional standards for a review of such information. Ernst & Young LLP's separate reports, included in Oxford Health Plans, Inc.'s quarterly report on Form 10-Q/A No. 2 for the quarter ended March 31, 1999, and Oxford Health Plans, Inc. quarterly report on Form 10-Q for the quarter ended June 30, 1999 and incorporated in this prospectus by reference, states that it did not audit and it does not express an opinion on that interim financial information. Accordingly, the degree of reliance on its reports on such information should be restricted considering the limited nature of the review procedures applied. The independent auditors are not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its reports on the unaudited interim financial information because those reports are not a "report" or a "part" of the registration statement prepared or certified by the auditors within the meaning of Sections 7 and 11 of the Securities Act of 1933. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-3 to register these securities. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information about Oxford and the securities offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy any document we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. We file our SEC materials electronically with the SEC, so you can also review our filings by accessing the web site maintained by the SEC at http://www.sec.gov. This site contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our principal executive offices are located at 800 Connecticut Avenue, Norwalk, Connecticut 06854, and our main telephone number is (203) 852-1442. The SEC allows us to "incorporate by reference" the information we file with them, which means we can disclose important information to you by referring you to those documents. The information included in the following documents is incorporated by reference and is considered to be a part of this prospectus. The most recent information that we file with the SEC automatically updates and supersedes more dated information. We have previously filed the following documents with the SEC and are incorporating them by reference into this prospectus: - Our annual report on Form 10-K/A No. 2 for the fiscal year ended December 31, 1998, filed on August 26, 1999, as amended by our Form 10-K/A No. 3, filed on August 30, 1999 (File No. 0-19442); - Our quarterly report on Form 10-Q/A No. 2 for the quarter ended March 31, 1999, filed on August 26, 1999 (File No. 0-19442); 49 54 - Our quarterly report on Form 10 -Q for the quarter ended June 30, 1999, filed on August 16, 1999 (file No. 0-19442); and - Our current reports on Form 8-K dated January 8, 1999 (filed on January 8, 1999), January 29, 1999 (filed on January 29, 1999), February 25, 1999 (filed on February 25, 1999 and amended on March 19, 1999), April 29, 1999 (filed on April 29, 1999), May 12, 1999 (filed on May 13, 1999), June 30, 1999 (filed on July 1, 1999), July 20, 1999 (filed on July 22, 1999) and July 29, 1999 (filed on August 2, 1999) (File No. 0-19442); and - The description of our common stock contained in the Registration Statement on Form 8-A dated August 1, 1991, filed pursuant to Section 12 of the Exchange Act (File No. 0-19442). We also are incorporating into this prospectus all documents subsequently filed by us pursuant to Section 13(a), 13(c) 14 or 15(d) of the Securities Exchange Act of 1934. We will provide without charge to each person, including any person having a control relationship with that person, to whom a prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus. If you would like to obtain this information from us, please direct your request, either in writing or by telephone, to: Investor Relations Oxford Health Plans, Inc. 800 Connecticut Avenue Norwalk, Connecticut 06854 (203) 852-1442 FORWARD-LOOKING STATEMENTS Some statements and information contained in this prospectus are not historical facts, but are "forward-looking statements," as such term is defined in the Private Securities Litigation Reform Act of 1995. We wish to caution you that these forward-looking statements are only predictions, and actual events or results may differ materially as a result of risks that we face, including those risks set forth in our annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3, for the fiscal year ended December 31, 1998, under the heading "Cautionary Statement Regarding Forward-Looking Statements", and any risks set forth in any prospectus supplement. These forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "plans," "may," "will," "would," "could," "should," or "anticipates" or the negative of these words or other variations of these words or other comparable words, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements include, but are not limited to statements concerning: - future results of operations or financial position; - future ability to make required payments on the preferred stock; and - future tax treatment of the offered preferred stock, warrants and debentures. 50 55 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING, COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF COMMON STOCK, SHARES OF OFFERED PREFERRED STOCK, AND/OR WARRANTS IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE HEREOF. ------------------------- TABLE OF CONTENTS
PAGE ---- Summary............................. 1 Ratio of Earnings to Combined Fixed Charges and Preference Dividends......................... 8 Business............................ 9 Description of the Offered Preferred Stock............................. 9 Description of the Warrants......... 23 Registration Rights Agreement....... 26 Use of Proceeds..................... 27 Material United States Federal Income Tax Consequences........... 28 Selling Securityholders............. 41 Plan of Distribution................ 47 Validity of Securities.............. 48 Experts............................. 48 Where You Can Find More Information....................... 49 Forward-Looking Statements.......... 50
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ [OXFORD HEALTH PLANS LOGO] 22,530,000 shares of Common Stock 277,629.157 shares of Series D Cumulative Preferred Stock 132,808.069 shares of Series E Cumulative Preferred Stock 15,800,000 Series A Warrants 6,730,000 Series B Warrants ------------- Prospectus ------------- September -- , 1999 - ------------------------------------------------------ - ------------------------------------------------------ 56 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses in connection with the issuance and distribution of the securities being registered are: Registration Fee.......................................... $189,985.01 Fees and Expenses of Accountants.......................... -- Fees and Expenses of Counsel.............................. -- Blue Sky Fees and Expenses................................ -- Printing and Engraving Expenses........................... -- Rating Agency Fees........................................ -- Agent's Fees.............................................. -- Miscellaneous............................................. -- ----------- Total........................................... $ -- ===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law permits indemnification against expenses, fines, judgments and settlements incurred by any director, officer or employee of Oxford in the event of pending or threatened civil, criminal, administrative or investigative proceedings, if such person was, or was threatened to be made, a party by reason of the fact that he is or was a director, officer or employee of Oxford. Section 145 also provides that the indemnification provided for therein shall not be deemed exclusive of any other rights to which those seeking indemnification may otherwise be entitled. Article Eighth of the Second Amended and Restated Certificate of Incorporation, as amended, of Oxford provides that Oxford shall indemnify its officers and directors to the fullest extent permitted by law. Article Ninth of the Second Amended and Restated Certification of Incorporation, as amended, of Oxford provides that to the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of Oxford shall not be liable to Oxford or its stockholders for monetary damages for breach of fiduciary duty as a director. Section 6.4 of the Amended and Restated By-laws of Oxford states: Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, including any action instituted by or on behalf of the Corporation, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation or serves or served at the request of the Corporation any other enterprise as a director or officer. Expenses incurred by any such person in defending any such actions, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expense if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment of this II-1 57 by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. To the extent permitted by Delaware law, the Board may cause the Corporation to indemnify and reimburse other employees of the Corporation as it deems appropriate. For purposes of this by-law, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director or officer of the Corporation, which imposes duties on, or involves services by, such director or officer with respect to any other enterprise or any employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan, shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 145 of the Delaware General Corporation Law permits the indemnification provided for by the above by-law provision. The statute further permits Oxford to insure itself for such indemnification. Oxford maintains insurance coverage for its directors and officers with respect to certain liabilities incurred in their capacities as such and for Oxford with respect to any payments which it becomes obligated to make to such persons under the foregoing by-law and statutory provisions. II-2 58 ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION - ------- ----------- 2 Investment Agreement, dated February 23, 1998, between Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1 Second Amended and Restated Certificate of Incorporation, as amended, of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1(a) Certificate of Designations for the Series D Preferred Stock of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1(b) Certificate of Designations for the Series E Preferred Stock of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.2 Form of Series A Warrant Certificate, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.3 Form of Series B Warrant Certificate, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.4 Amended and Restated By-laws of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(b) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.5 Form of Warrant Agreement* 5 Opinion of Sullivan & Cromwell as to Legality* 8 Opinion of Sullivan & Cromwell as to Tax Matters* 10 Registration Rights Agreement, dated February 23, 1998, between Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated by reference to Exhibit 10(s) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preference Dividends* 15 Letter of Ernst & Young LLP Re Unaudited Condensed Consolidated Interim Financial Information* 23.1 Consent of Ernst & Young LLP* 23.2 Consent of KPMG LLP* 23.3 Consent of Sullivan & Cromwell (included in their opinion filed as Exhibit 5)
- ------------------------- * Filed herewith II-3 59 ITEM 17. UNDERTAKINGS 1. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification by the registrant against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in II-4 60 connection with the securities being registered, the registrant will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 4. The undersigned registrant hereby undertakes that: (a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 61 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Norwalk, State of Connecticut, on September 24, 1999. Oxford Health Plans, Inc. By: /s/ NORMAN C. PAYSON, M.D. ----------------------------------- Norman C. Payson, M.D. Chief Executive Officer II-6 62 Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ NORMAN C. PAYSON, M.D. Principal Executive September 24, 1999 - ------------------------------------------------ Officer, and Norman C. Payson, M.D. Director /s/ YON Y. JORDEN Principal Financial September 24, 1999 - ------------------------------------------------ Officer Yon Y. Jorden /s/ KURT B. THOMPSON Principal Accounting September 24, 1999 - ------------------------------------------------ Officer Kurt B. Thompson /s/ FRED F. NAZEM Chairman of the Board September 24, 1999 - ------------------------------------------------ Fred F. Nazem /s/ DAVID BONDERMAN Director September 24, 1999 - ------------------------------------------------ David Bonderman Director - ------------------------------------------------ Jonathan J. Coslet /s/ JAMES G. COULTER Director September 24, 1999 - ------------------------------------------------ James G. Coulter /s/ ROBERT B. MILLIGAN, JR. Director September 24, 1999 - ------------------------------------------------ Robert B. Milligan, Jr. /s/ MARCIA J. RADOSEVICH, PH.D. Director September 24, 1999 - ------------------------------------------------ Marcia J. Radosevich, Ph.D. /s/ BENJAMIN H. SAFIRSTEIN, M.D. Director September 24, 1999 - ------------------------------------------------ Benjamin H. Safirstein, M.D. /s/ THOMAS A. SCULLY Director September 24, 1999 - ------------------------------------------------ Thomas A. Scully /s/ KENT J. THIRY Director September 24, 1999 - ------------------------------------------------ Kent J. Thiry /s/ STEPHEN F. WIGGINS Director September 24, 1999 - ------------------------------------------------ Stephen F. Wiggins
II-7 63 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2 Investment Agreement, dated February 23, 1998, between Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1 Second Amended and Restated Certificate of Incorporation, as amended, of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1(a) Certificate of Designations for the Series D Preferred Stock of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.1(b) Certificate of Designations for the Series E Preferred Stock of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(a) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.2 Form of Series A Warrant Certificate, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.3 Form of Series B Warrant Certificate, incorporated by reference to Exhibit 10(r) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.4 Amended and Restated By-laws of Oxford Health Plans, Inc., incorporated by reference to Exhibit 3(b) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 4.5 Form of Warrant Agreement* 5 Opinion of Sullivan & Cromwell as to Legality* 8 Opinion of Sullivan & Cromwell as to Tax Matters* 10 Registration Rights Agreement, dated February 23, 1998, between Oxford Health Plans, Inc. and TPG Oxford LLC, incorporated by reference to Exhibit 10(s) of Oxford's Annual Report on Form 10-K/A for the period ended December 31, 1998 (File No. 0-19442) 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preference Dividends* 15 Letter of Ernst & Young LLP Re Unaudited Condensed Consolidated Interim Financial Information* 23.1 Consent of Ernst & Young LLP* 23.2 Consent of KPMG LLP* 23.3 Consent of Sullivan & Cromwell (included in their opinion filed as exhibit 5)
- ------------------------- * Filed herewith EX-4.5 2 FORM OF WARRANT AGREEMENT 1 - -------------------------------------------------------------------------------- WARRANT AGREEMENT dated as of September -, 1999 between OXFORD HEALTH PLANS, INC. and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Warrant Agent ----------------------------------------------------- Series A Warrants and Series B Warrants - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- PARTIES.................................................................................................. 1 RECITALS................................................................................................. 1 ARTICLE I DEFINITIONS SECTION 1.1. Definitions................................................................................ 1 SECTION 1.2. Other Obligations.......................................................................... 3 ARTICLE II TRANSFERABILITY SECTION 2.1. Registration............................................................................... 3 SECTION 2.2. Form, Execution and Delivery of Warrant Certificates....................................... 3 SECTION 2.3. Transfer................................................................................... 5 SECTION 2.4. Legend on Warrant Shares................................................................... 5 SECTION 2.5. Exchange of Warrant Certificate............................................................ 5 SECTION 2.6. Cancellation of Warrant Certificates....................................................... 5 SECTION 2.7. Treatment of Holders of Warrant Certificates............................................... 6 ARTICLE III EXERCISE OF WARRANTS SECTION 3.1. Exercise of Warrants....................................................................... 6 ARTICLE IV PAYMENT OF TAXES SECTION 4.1. Payment of Taxes........................................................................... 7
i 3 ARTICLE V MUTILATED OR MISSING WARRANT SECTION 5.1. Mutilated or Missing Warrant............................................................... 8 ARTICLE VI CONCERNING THE WARRANT AGENT SECTION 6.1. Warrant Agent.............................................................................. 8 SECTION 6.2. Limitations on Warrant Agent's Obligations................................................. 9 SECTION 6.3. Compliance with Applicable Laws............................................................ 11 SECTION 6.4. Appointment, Resignation and Appointment of Successor...................................... 11 ARTICLE VII MISCELLANEOUS SECTION 7.1. Amendments................................................................................. 12 SECTION 7.2. Notices and Demands to the Company and Warrant Agent....................................... 13 SECTION 7.3. Successors................................................................................. 13 SECTION 7.4. Governing Law; Choice of Forum; Etc........................................................ 13 SECTION 7.5. Delivery of Prospectus..................................................................... 14 SECTION 7.6. Obtaining of Governmental Approvals........................................................ 14 SECTION 7.7. Benefits of Warrant Agreement.............................................................. 14 SECTION 7.8. Headings................................................................................... 14 SECTION 7.9. Severability............................................................................... 15 SECTION 7.10. Counterparts............................................................................... 15 SECTION 7.11. Inspection of Agreement.................................................................... 15 EXHIBITS EXHIBIT A. Form of Series A Warrant Certificate EXHIBIT B. Form of Series B Warrant Certificate
ii 4 WARRANT AGREEMENT WARRANT AGREEMENT, dated as of -, 1999 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between Oxford Health Plans, Inc., a Delaware corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company, as Warrant Agent (the "Warrant Agent"). W I T N E S S E T H: WHEREAS, the holders named on Schedule A hereto (the "Existing Holders") purchased the Series A Warrants (the "Series A Warrants") to purchase Warrant Shares and the Series B Warrants (the "Series B Warrants", and together with the Series A Warrants, the "Warrants") to purchase Warrants Shares on May 13, 1998 pursuant to an Investment Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Investment Agreement"), by and between the Company and TPG Partners II, L.P.; WHEREAS, the Existing Holders may sell the Warrants evidenced by warrant certificates issued pursuant to this Agreement (the "Warrant Certificates"); WHEREAS, nothing in this Agreement is intended to alter or reduce the existing rights of the Existing Holders; and WHEREAS, the Warrant Agent has acted on behalf of the Company, and the Company desires the Warrant Agent to continue to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, transfer, exchange, exercise and cancellation of the Warrants; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Board of Directors" means the board of directors of the Company. 5 "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Common Stock" means the Company's common stock, $.01 par value per share. "Company" has the meaning set forth in the preamble hereto. "Existing Holders" has the meaning set forth in the preamble hereto. "Expiration Date" means the earlier of (i) May 13, 2008, and (ii) the date of an Optional Redemption. "Expiration Time" means 5:00 P.M., New York City time, on the Expiration Date. "Investment Agreement" has the meaning set forth in the preamble hereto. "Optional Redemption" means, with respect to the Series A Warrants, a redemption of the Series D Preferred Stock pursuant to Article V, Section A of the Series D Certificate of Designations, and, with respect to the Series B Warrants, a redemption of the Series E Preferred Stock pursuant to Article V, Section A of the Series E Certificate of Designations. "Person" means any individual, firm, corporation, company, limited liability company, association, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Series D Certificate of Designations" means the Certificate of Designations for the Series D Preferred Stock filed by the Company with the Secretary of State of the State of Delaware. "Series E Certificate of Designations" means the Certificate of Designations for the Series E Preferred Stock filed by the Company with the Secretary of State of the State of Delaware. "Series D Preferred Stock" means the Series D Cumulative Preferred Stock, par value $0.01 per share, of the Company. 2 6 "Series E Preferred Stock" means the Series E Cumulative Preferred Stock, par value $0.01 per share, of the Company. "Warrant" has the meaning set forth in the preamble hereto. "Warrant Agent" has the meaning set forth in the preamble hereto. "Warrant Certificate" has the meaning in the preamble hereto. "Warrantholder" has the meaning set forth in Section 2.1. "Warrant Register" has the meaning set forth in Section 2.1 hereof. "Warrant Shares" means the shares of Common Stock issued, or issuable upon, exercise of the Warrants. SECTION 1.2. Other Obligations. Nothing in this Agreement shall permit the Company or the Warrant Agent to authorize or take any action that alters or reduces the rights of the Existing Holders under the Investment Agreement or the Warrants and in the event of any inconsistency between the provisions of this Agreement, on the one hand, and the Warrants or the Investment Agreement, on the other hand, the provisions of the Warrants, and/or in the case of the Existing Holders, the Investment Agreement, shall control. ARTICLE II TRANSFERABILITY SECTION 2.1. Registration. The Warrants shall be issued only in registered form. The Warrant Agent shall keep, at its corporate trust office, books (the "Warrant Register") in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates in accordance with Section 2.2 including transfers, exchanges, exercises and cancellations of outstanding Warrant Certificates. Whenever any Warrant Certificates are surrendered for transfer or exchange in accordance with Section 2.3 or Section 2.5, an authorized officer of the Warrant Agent shall manually countersign and deliver the Warrant Certificates which the holder thereof (the "Warrantholder") making the transfer or exchange is entitled to receive. SECTION 2.2. Form, Execution and Delivery of Warrant Certificates. (a) One or more certificates evidencing Series A Warrants to purchase not more than 15,800,000 Warrant Shares and one or more certificates evidencing Series B Warrants to purchase not more than 6,730,000 Warrant Shares may be executed by the Company and delivered 3 7 to the Warrant Agent upon the execution of this Warrant Agreement or from time to time thereafter. The Warrants shall be issued pursuant to this Agreement only in exchange for Warrants held by Existing Holders or upon transfer of Warrants by the Existing Holders pursuant to the Company's registration statement on Form S-3 (File No. 333-77529) or upon any subsequent transfer of Warrants. (b) Each Warrant Certificate, whenever issued hereunder, shall be in registered form substantially in the form set forth in Exhibit A hereto, in the case of Series A Warrants, or in the form set forth in Exhibit B hereto, in the case of Series B Warrants, which Exhibits are hereby incorporated herein by reference, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement. Each Warrant Certificate shall be printed, lithographed, typewritten, mimeographed or engraved or otherwise reproduced in any other manner as may be approved by the officers executing the same (such execution to be conclusive evidence of such approval) and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the officers of the Company executing the same may approve (such execution to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Agreement, the Investment Agreement or the Warrants or as may be required to comply with any law or with any rule or regulation made pursuant thereto, or with any regulation of any stock exchange on which the Warrants or the Warrant Shares may be listed, or to conform to usage. Each Warrant Certificate shall be signed on behalf of the Company by its chairman or vice-chairman of the board of directors, or its president or vice-president, and by its treasurer or an assistant treasurer, or its secretary or an assistant secretary. The signature of any such officer on any Warrant Certificate may be manual or by facsimile. Each Warrant Certificate, when so signed on behalf of the Company, shall be delivered to the Warrant Agent together with an order for the countersignature and delivery of such Warrants by the Warrant Agent. (c) The Warrant Agent shall, upon receipt of any Warrant Certificate duly executed on behalf of the Company, countersign such Warrant Certificate and deliver such Warrant Certificate to or upon the order of the Company. Each Warrant Certificate shall be dated the date of its countersignature. (d) No Warrant Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, and no Warrant evidenced thereby may be exercised, unless such Warrant Certificate has been countersigned by the manual signature of the Warrant Agent. Such signature by the Warrant Agent upon any Warrant Certificate executed by the Company shall be conclusive evidence that such Warrant Certificate has been duly issued under the terms of this Agreement. (e) If any officer of the Company who has signed any Warrant Certificate either manually or by facsimile signature shall cease to be such officer before such Warrant 4 8 Certificate shall have been countersigned and delivered by the Warrant Agent, such Warrant Certificate nevertheless may be countersigned and delivered as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper officers of the Company as specified in this Section 2.2, regardless of whether at the date of the execution of this Agreement any such person was such officer. (f) The Warrantholders shall be entitled to receive Warrants in physical, certificated registered form. SECTION 2.3. Transfer. A Warrant Certificate may be sold or otherwise transferred at any time (except as such sale or transfer may be restricted pursuant to the Securities Act or any applicable state securities laws) and any such sale or transfer shall be effected on the Warrant Register upon surrender of such Warrant Certificate at the corporate trust office of the Warrant Agent, duly endorsed by the Warrantholder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, as provided in Section 2.2, a new Warrant Certificate or Warrant Certificates in appropriate denomination to the Person or Persons entitled thereto. SECTION 2.4. Legend on Warrant Shares. If and for so long as required by the Investment Agreement, the Warrant Certificates shall contain a legend as set forth in Section 8.10 of the Investment Agreement. Such legend may be changed only upon notice by the Company to the Warrant Agent, which notice will be given in accordance with Section 8.10 of the Investment Agreement. SECTION 2.5. Exchange of Warrant Certificate. Any Warrant Certificate may be exchanged for another certificate or certificates of like tenor entitling the Warrantholder to purchase a like aggregate number of Warrant Shares as the certificate or certificates surrendered then entitles such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant Certificate shall make such request in writing delivered to the Warrant Agent, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute, and the Warrant Agent shall countersign and deliver, as provided in Section 2.2., to the Person entitled thereto a new Warrant Certificate or Certificates as so requested. SECTION 2.6. Cancellation of Warrant Certificates. Any Warrant Certificate surrendered to the Warrant Agent for transfer, exchange or exercise of the Warrants evidenced thereby shall be promptly canceled by the Warrant Agent and shall not be reissued and, except as expressly permitted by this Agreement, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to the 5 9 Company from time to time or otherwise dispose of canceled Warrant Certificates in a manner satisfactory to the Company. Any Warrant Certificate surrendered to the Company for transfer, exchange or exercise of the Warrants evidenced thereby shall be promptly delivered to the Warrant Agent and such transfer, exchange or exercise shall not be effective until such Warrant Certificate has been received by the Warrant Agent. SECTION 2.7. Treatment of Holders of Warrant Certificates. Every Warrantholder consents and agrees with the Company, the Warrant Agent and with every subsequent Warrantholder that until the Warrant Certificate is transferred on the books of the Warrant Agent, the Company and the Warrant Agent may treat the registered Warrantholder of such Warrant Certificate as the absolute owner of the Warrants evidenced thereby for any purpose and as the person entitled to exercise the rights attaching to the Warrants evidenced thereby, any notice to the contrary notwithstanding. ARTICLE III EXERCISE OF WARRANTS SECTION 3.1. (a) A Warrantholder may exercise the Warrants, in whole or in part, by presentation and surrender to the Warrant Agent of the Warrant Certificate together with the attached Election to Exercise, in accordance with Section 4.2 of the Warrant Certificate. If the date specified as the exercise date is not a Business Day, the Warrants will be deemed to be received and exercised on the next succeeding day which is a Business Day. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the Warrantholder as soon as practicable. In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. The validity of any exercise of Warrants will be determined by the Warrant Agent in its sole discretion and such determination will be final and binding upon the Warrantholder and the Company. Neither the Company nor the Warrant Agent shall have any obligation to inform a Warrantholder of the invalidity of any exercise of Warrants. The Warrant Agent shall deposit all funds received by it in payment of the Exercise Price in the account of the Company maintained with the Warrant Agent for such purpose and shall advise the Company upon its request by telephone at the end of each day on which funds for the exercise of the Warrants are received of the amount so deposited to its account. The Warrant Agent shall promptly confirm such telephonic advice to the Company in writing. (b) The Warrant Agent shall, by 11:00 A.M. on the second Business Day following the exercise date of any Warrant, advise the Company and the transfer agent and registrar in respect of the Warrant Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this 6 10 Agreement, the instructions of each Warrantholder with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant Certificates evidencing the balance, if any, of the Warrants remaining after such exercise, and such other information as the Company or such transfer agent and registrar shall reasonably require. (c) On the terms and subject to the conditions set forth in this Agreement and in the Warrant Certificate, upon presentation and surrender of the Warrant Certificate and payment of the aggregate Exercise Price as set forth in Section 4.2 of the Warrant Certificate, the Company shall promptly issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) for the specified number of duly authorized, fully paid and non-assessable Warrant Shares issuable upon exercise, and shall deliver to the Warrantholder cash, as provided in Section 11 of the Warrant Certificate, with respect to any Fractional Warrant Shares otherwise issuable upon such surrender. Upon receipt of such Warrant Shares, the Warrant Agent shall transmit such Warrant Shares to the Warrantholder, or to such Persons as the Warrantholder may designate in writing together with, or preceded by, the prospectus in accordance with Section 7.5 hereof. The Company agrees that it will provide such information and documents to the Warrant Agent as may be necessary for the Warrant Agent to fulfill its obligations under this Agreement. In the event that the Warrants are exercised in part prior to the Expiration Time, the Company shall issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) evidencing any remaining unexercised Warrants. Upon receipt of such Warrant Certificate, the Warrant Agent shall countersign and deliver such Warrant Certificate to the Warrantholder, or to such persons as the Warrantholder may designate in writing. ARTICLE IV PAYMENT OF TAXES SECTION 4.1. Payment of Taxes. The Company shall pay any and all documentary stamp or similar issue or transfer taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of any issue or delivery of Warrant Shares or of other securities or property deliverable upon exercise of the Warrants evidenced by this Warrant Certificate or certificates representing such shares or securities (other than income taxes imposed on the Warrantholder); provided that the Company shall not be required to pay any such tax or other charge that may be imposed in connection with any transfer involved in the issue of any certificate for Warrant Shares or other securities or property, or payment of cash, to any Person other than the holder of the Warrant Certificate surrendered upon exercise, and in case of any such tax or charge, the Warrant Agent and the Company shall not be required to issue any security or 7 11 property or pay any cash until such tax or charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no such tax or charge is payable. ARTICLE V MUTILATED OR MISSING WARRANT SECTION 5.1. Mutilated or Missing Warrant. If any Warrant Certificate is lost, stolen, mutilated or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, upon receipt of a proper affidavit or other evidence reasonably satisfactory to the Company and the Warrant Agent (and surrender of any mutilated Warrant Certificate) and bond of indemnity in form and amount and with corporate surety reasonably satisfactory to the Company and the Warrant Agent in each instance protecting the Company and the Warrant Agent, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants as the Warrant Certificate so lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time enforceable by anyone. An applicant for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. All Warrant Certificates shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement of lost, stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without their surrender. ARTICLE VI CONCERNING THE WARRANT AGENT SECTION 6.1. Warrant Agent. The Company hereby appoints ChaseMellon Shareholder Services, L.L.C. as Warrant Agent of the Company in respect of the Warrants upon the terms and subject to the conditions herein set forth, and ChaseMellon Shareholder Services, L.L.C. hereby accepts such appointment. The Warrant Agent shall have the powers and authority granted to and conferred upon it hereby and such further powers and authority to act on behalf of the Company as the Company may hereafter grant to or confer upon it. 8 12 SECTION 6.2. Limitations on Warrant Agent's Obligations. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which the Company agrees: (a) Compensation and Indemnification. The Company agrees to pay the Warrant Agent compensation to be agreed upon with the Company for all services rendered by the Warrant Agent and to reimburse the Warrant Agent for all reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by the Warrant Agent in connection with the services rendered by it hereunder. The Company also agrees to indemnify the Warrant Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence, bad faith or willful misconduct on the part of the Warrant Agent, arising out of or in connection with its acting as Warrant Agent hereunder. Anything to the contrary notwithstanding, in no event shall the Warrant Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of such loss or damage. (b) Agent for the Company. In acting in the capacity of Warrant Agent under this Agreement, the Warrant Agent is acting solely as agent of the Company and does not assume any obligation or relationship of agency or trust with any of the owners or holders of the Warrants. (c) Counsel. The Warrant Agent may consult with counsel satisfactory to it (which may be counsel to the Company), and the written advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the written advice or opinion of such counsel. (d) Documents. The Warrant Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in reliance upon any notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) Certain Transactions. The Warrant Agent, and its officers, directors and employees, may become the owner of, or acquire any interest in, any Warrant, with the same rights that it or they would have were it not the Warrant Agent hereunder, and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with the Company and may act on, or as a depositary, trustee or agent for, any committee or body of holders of Warrants or Warrant Shares, or other securities or obligations of the Company as freely as if it were not the Warrant Agent hereunder. Nothing in this Agreement 9 13 shall be deemed to prevent the Warrant Agent from acting as trustee under either Indenture. (f) No Liability for Interest. The Warrant Agent shall not be under any liability for interest on any monies at any time received by it pursuant to any of the provisions of this Agreement. (g) No Liability for Invalidity. The Warrant Agent shall not be under any responsibility with respect to the validity or sufficiency of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Warrant Agent) or with respect to the validity or execution of the Warrant Certificates (except its countersignature thereon). (h) No Responsibility for Recitals. The recitals contained in this Agreement and in the Warrant Certificates (except as to the Warrant Agent's countersignature thereon) shall be taken as the statements of the Company and the Warrant Agent assumes no responsibility hereby for the correctness of the same. (i) No Implied Obligations. The Warrant Agent shall be obligated to perform such duties as are specifically set forth herein and no implied duties or obligations shall be read into this Agreement against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its opinion, assured to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any Warrant Certificate authenticated by the Warrant Agent and delivered by it to the Company pursuant to this Agreement or for the application by the Company of the proceeds of the issue and sale, or exercise, of the Warrants. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained in this Agreement or in any Warrant Certificate or in the case of the receipt of any written demand from a Warrantholder with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or, except as provided in Section 7.2 hereof, to make any demand upon the Company. (j) Instructions from Company. The Warrant Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Chief Financial Officer or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and shall not be liable for any action taken, suffered or omitted to be taken by it in good faith in accordance with instructions of any such officers. 10 14 (k) Delegation. The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it to perform any duty hereunder either itself or by or through its attorneys or agents. SECTION 6.3. Compliance with Applicable Laws. The Warrant Agent agrees to comply with all applicable federal and state laws imposing obligations on it in respect of the services rendered by it under this Agreement and in connection with the Warrants, including (but not limited to) the provisions of United States federal income tax laws regarding information reporting and backup withholding. The Warrant Agent shall be responsible for its failure to comply with any such laws imposing obligations on it, including (but not limited to) any liability for its failure to comply with any applicable provisions of United States federal income tax laws regarding information reporting and backup withholding. SECTION 6.4. Appointment, Resignation and Appointment of Successor. (a) The Company agrees, for the benefit of the Warrantholders from time to time, that there shall at all times be a Warrant Agent hereunder until all the Warrants issued hereunder have been exercised or have expired in accordance with their terms, which Warrant Agent shall be appointed in the Borough of Manhattan, The City of New York, and shall have a capital and surplus of at least $50,000,000. (b) The Warrant Agent may at any time resign as such agent by giving written notice to the Company of such intention on its part, specifying the date on which it desires such resignation to become effective; provided that such date shall not be less than three months after the date on which such notice is given, unless the Company agrees to accept such notice less than three months prior to such date of effectiveness. The Company may remove the Warrant Agent at any time by giving written notice to the Warrant Agent of such removal, specifying the date on which it desires such removal to become effective. Such resignation or removal shall take effect upon the appointment by the Company, as hereinafter provided, of a successor Warrant Agent (as set forth in subsection (a)) and the acceptance of such appointment by such successor Warrant Agent. The obligation of the Company under Section 6.2(a) shall continue to the extent set forth therein notwithstanding the resignation or removal of the Warrant Agent. (c) If at any time the Warrant Agent shall resign, or shall cease to be qualified as set forth in subsection (a), or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall file a petition seeking relief under any applicable Federal or State bankruptcy or insolvency law or similar law, or make an assignment for the benefit of its creditors or consent to the appointment of a receiver, conservator or custodian of all or any substantial part of its property, or shall admit in writing its inability to pay or to meet its debts as they mature, or if a receiver or custodian of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered for relief against it under the provisions of any applicable Federal 11 15 or State bankruptcy or similar law, or if any public officer shall have taken charge or control of the Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Warrant Agent, qualified as set forth in subsection (a), shall be appointed by the Company by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as herein provided of a successor Warrant Agent and acceptance by the latter of such appointment, the Warrant Agent so superseded shall cease to be Warrant Agent under this Agreement. (d) Any successor Warrant Agent appointed under this Agreement shall execute, acknowledge and deliver to its predecessor and to the Company an instrument accepting such appointment, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Warrant Agent under this Agreement, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent under this Agreement. (e) Any Person into which the Warrant Agent may be merged or converted or any Person with which the Warrant Agent may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any Person to which the Warrant Agent shall sell or otherwise transfer all or substantially all the assets and business of the Warrant Agent, in each case provided that it shall be qualified as set forth in subsection (a), shall be the successor Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, including, without limitation, any successor to the Warrant Agent first named above. ARTICLE VII MISCELLANEOUS SECTION 7.1. Amendments. (a) This Agreement and any Warrant Certificate may be amended by the parties hereto by executing a supplemental warrant agreement (a "Supplemental Agreement"), without the consent of the Warrantholder of any Warrant, for the purpose of (i) curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein, or making any other provisions with respect to matters or questions arising under this Agreement that is not inconsistent with the provisions of this Agreement, the Warrant Certificates or the Investment Agreement, (ii) evidencing the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained in this Agreement and the 12 16 Warrants, (iii) evidencing and providing for the acceptance of appointment by a successor Warrant Agent with respect to the Warrants, (iv) adding to the covenants of the Company for the benefit of the Warrantholders or surrendering any right or power conferred upon the Company under this Agreement, (v) appointing a successor Warrant Agent, or (vi) amending this Agreement and the Warrants in any manner that the Company may deem to be necessary or desirable and that will not adversely affect the interests of the Warrantholders. (b) Without the consent of each Warrantholder of Warrants affected thereby, no amendment may be made that (i) changes the Warrants so as to reduce the number of Warrant Shares purchasable upon exercise of the Warrants or so as to increase the exercise price, (ii) shortens the period of time during which the Warrants may be exercised, (iii) otherwise adversely affects the exercise rights of the Warrantholders in any material respect, or (iv) reduces the number of unexercised Warrants the consent of the Warrantholders of which is required for amendment of this Agreement or the Warrants. (c) Notwithstanding anything contained herein to the contrary, the Warrant Agent may, but shall not be required to, enter any supplement or amendment that affects the Warrant Agent's own rights, duties, obligations or immunities under this Agreement. SECTION 7.2. Notices and Demands to the Company and Warrant Agent. If the Warrant Agent shall receive any notice or demand addressed to the Company by the Warrantholder, the Warrant Agent shall promptly forward such notice or demand to the Company. SECTION 7.3. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrantholder shall bind and inure to the benefit of their respective successors and permitted assigns hereunder. SECTION 7.4. Governing Law; Choice of Forum; Etc. The validity, construction and performance of Agreement shall be governed by, and interpreted in accordance with, the laws of New York without reference to its conflict of laws rules. The Company and the Warrantholder (the "parties hereto") agree that the appropriate and exclusive forum for any disputes arising out of this Agreement solely between or among any or all of the Company, the Warrant Agent and the Existing Holders and/or any Person who has become a Warrantholder shall be the United States District Court for the Southern District of New York, and, if such court will not hear any such suit, the courts of the state of the Company's incorporation, and the parties hereto irrevocably consent to the exclusive jurisdiction of such courts, and agree to comply with all requirements necessary to give such courts jurisdiction. The parties hereto further agree that the parties will not bring suit with respect to any disputes, except as expressly set forth below, arising out of this Agreement for the execution or enforcement of judgment, in any jurisdiction other 13 17 than the above specified courts. Each of the parties hereto irrevocably consents to the service of process in any action or proceeding hereunder by the mailing of copies thereof by registered or certified airmail, postage prepaid, if to (i) the Warrant Agent, at 111 Founders Plaza, Suite 1100, East Hartford, CT 06108, Attention: Joan Hayes; (ii) the Company, at 800 Connecticut Avenue, Norwalk, Connecticut, 06854, Attention: General Counsel, or at such other address specified by the Company in writing to the Warrant Agent and (iii) any Warrantholder, at the address of such Warrantholder specified in the Warrant Register. The foregoing shall not limit the rights of any party hereto to serve process in any other manner permitted by the law or to obtain execution of judgment in any other jurisdiction. The parties further agree, to the extent permitted by law, that final and unappealable judgment against any of them in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of indebtedness. The parties agree to waive any and all rights that they may have to a jury trial with respect to disputes arising out of this Agreement. SECTION 7.5. Delivery of Prospectus. The Company shall furnish to the Warrant Agent sufficient copies of a prospectus relating to the Warrant Shares deliverable upon exercise of Warrants and complying in all material respects with the Securities Act of 1933, as amended (the "Prospectus"), and the Warrant Agent agrees that upon the exercise of any Warrant, the Warrant Agent shall deliver a Prospectus to the Warrantholder of such Warrant, prior to or concurrently with the delivery of the Warrant Shares issued upon such exercise. SECTION 7.6. Obtaining of Governmental Approvals. The Company shall from time to time take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and securities acts filings under United States Federal and state laws, which the Company may deem necessary or appropriate in connection with the issuance, sale, transfer and delivery of the Warrants, the exercise of the Warrants, the issuance, sale, transfer and delivery of the Warrant Shares to be issued upon exercise of Warrants or upon the expiration of the period during which the Warrants are exercisable. SECTION 7.7. Benefits of Warrant Agreement. Nothing in this Agreement or any Warrant Certificate shall be construed to give to any Person other than the Company, the Warrant Agent and the Warrantholders any legal or equitable right, remedy or claim under this Agreement or any Warrant Certificate and this Agreement or any Warrant Certificate shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Warrantholders. SECTION 7.8. Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 14 18 SECTION 7.9. Severability. If any provision in this Agreement or in any Warrant Certificate shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provisions in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 7.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 7.11. Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the corporate trust office of the Warrant Agent and at the office of the Company at 800 Connecticut Avenue, Norwalk, CT 06854, for inspection by any Warrantholder. The Warrant Agent may require any such Warrantholder to submit satisfactory proof of ownership for inspection by it. 15 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. OXFORD HEALTH PLANS, INC. By: __________________________ Name: Title: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By: __________________________ Name: Title: 16 20 Exhibit A Form of Series A Warrant Certificate 21 No. [Number of Warrants] SERIES A WARRANTS Exercisable commencing May 13, 1998; Void after Expiration Time (as defined herein) OXFORD HEALTH PLANS, INC., a Delaware corporation (the "Company"), hereby certifies that, for value received, ____________________, or registered assigns (the "Warrantholder"), is the owner of ______________Warrants (as defined below), each of which entitles the Warrantholder to purchase from the Company one fully paid, duly authorized and nonassessable share of Common Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any time from and after May 13, 1998 (the "Issue Date") and continuing up to the Expiration Time (as defined herein) at a per share exercise price determined according to the terms and subject to the conditions set forth in this certificate (the "Warrant Certificate"). The number of shares of Common Stock issuable upon exercise of each such Warrant and the exercise price per share of Common Stock are subject to adjustment from time to time pursuant to the provisions of Sections 8 and 9 of this Warrant Certificate. The Warrants evidenced by this Warrant Certificate are part of a series of warrants to purchase up to 15,800,000 shares of Common Stock (collectively, the "Warrants"), issued pursuant to an Investment Agreement, dated as of February 23, 1998 (as it may be amended, supplemented or otherwise modified from time to time, the "Investment Agreement"), by and between TPG Oxford LLC, a Delaware limited liability company (the "Investor"), and the Company, or pursuant to the Warrant Agreement, dated as of ________, 1999 (as it may be amended, supplemented or otherwise modified from time to time, the "Warrant Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C., as Warrant Agent. Section 1.1. Other Obligations. The parties hereby acknowledge that, pursuant to the Warrant Agreement, nothing in the Warrant Agreement shall permit the Company or the Warrant Agent to authorize or take action that alters or reduces the rights of the Existing Holders (as defined therein) under the Investment Agreement or the Warrants and, in the event of any inconsistency between the provisions of the Warrant Agreement, on the one hand, and this Warrant Certificate or the Investment Agreement, on the other hand, the provisions of this Warrant Certificate and/or, in the case of the Existing Holders, the Investment Agreement shall control. Section 1.2. Definitions. As used in this Warrant Certificate, the following terms shall have the meanings set forth below: "Board of Directors" means the board of directors of the Company. A-2 22 "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Certificate of Designations" means the Certificate of Designations therefor, with respect to the Series D Preferred Stock or the Series E Preferred Stock, as the case may be, filed by the Company with the Secretary of State of the State of Delaware. "Certificate of Incorporation" means the Second Amended and Restated Certificate of Incorporation of the Company, as amended from time to time. "Closing Price" with respect to a share of Common Stock on any day means, subject to Section 9.1(f) hereof, the last reported sale price on that day or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices, regular way, on that day, in either case, as reported in the consolidated transaction reporting system with respect to securities quoted on Nasdaq or, if the shares of Common Stock are not quoted on Nasdaq, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not quoted on Nasdaq and not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices on such other nationally recognized quotation system then in use, or, if on any such day the shares of Common Stock are not quoted on any such quotation system, the average of the closing bid and asked prices as furnished by a professional market maker selected by the Board of Directors making a market in the shares of Common Stock. If the shares of Common Stock are not publicly held or so listed, quoted or publicly traded, the "Closing Price" means the fair market value of a share of Common Stock, as determined in good faith by the Board of Directors. "Common Stock" has the meaning set forth in the preamble hereto. "Company" has the meaning set forth in the preamble hereto. "Equity Securities" of any Person means any and all common stock, preferred stock, any other class of capital stock and partnership or limited liability company interests of such Person or any other similar interests of any Person that is not a corporation, partnership or limited liability company. "Exercise Price" has the meaning set forth in Section 8 hereof. A-3 23 "Expiration Date" means the earlier of (i) May 13, 2008, and (ii) the date of an Optional Redemption. "Expiration Time" means 5:00 P.M., New York City time, on the Expiration Date. "Fractional Warrant Share" means any fraction of a whole share of Common Stock issued, or issuable upon, exercise of the Warrants. "Investment Agreement" has the meaning set forth in the preamble hereto. "Investor" has the meaning set forth in the preamble hereto. "Issue Date" has the meaning set forth in the preamble hereto. "Nasdaq" means The Nasdaq Stock Market's National Market. "Offer Time" has the meaning set forth in Section 9.1(e) hereof. "Optional Redemption" means a redemption of the Series D Preferred Stock pursuant to Article V, Section A of the Certificate of Designations therefor. "Organic Change" means, with respect to any Person, any transaction (including without limitation any recapitalization, capital reorganization or reclassification of any class or series of Equity Securities, any consolidation of such Person with, or merger of such Person into, any other Person, any merger of another Person into such Person (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of capital stock of such Person), and any sale or transfer or lease of all or substantially all of the assets of such Person, but not including any stock split, combination or subdivision which is the subject of Section 9.1(b)) pursuant to which any class or series of Equity Securities of such Person is converted into the right to receive other securities, cash or other property. "Person" means any individual, firm, corporation, company, limited liability company, association, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Senior Preferred Stock" means the Series D Preferred Stock and Series E Preferred Stock. A-4 24 "Series D Preferred Stock" means the Series D Cumulative Preferred Stock, par value $0.01 per share, of the Company. "Series E Preferred Stock" means the Series E Cumulative Preferred Stock, par value $0.01 per share, of the Company. "Stated Value" means the stated value of the Series D Preferred Stock or the Series E Preferred Stock, as the case may be, in each case as set forth in the Certificate of Designations therefor. "Trading Day" means any day on which Nasdaq is open for trading, or if the shares of Common Stock are not quoted on Nasdaq, any day on which the principal national securities exchange or national quotation system on which the shares of Common Stock are listed, admitted to trading or quoted is open for trading, or if the shares of Common Stock are not so listed, admitted to trading or quoted, any Business Day. "Warrant" has the meaning set forth in the preamble hereto. "Warrant Agent" means the Person named or otherwise appointed as such as set forth in Section 10 hereof. "Warrant Agreement" has the meaning set forth in the preamble hereto. "Warrant Certificate" has the meaning in the preamble hereto. "Warrant Market Price" means the average of the Closing Prices of a share of Common Stock for the ten consecutive Trading Days ending on the Trading Day immediately prior to the day on which the Election to Exercise is delivered. "Warrant Register" has the meaning set forth in Section 2.2 hereof. "Warrant Shares" means the shares of Common Stock issued, or issuable upon, exercise of the Warrants. "Warrantholder" has the meaning set forth in the preamble hereto. Section 2. Transferability. 2.1 Registration. The Warrants shall be issued only in registered form. 2.2 Transfer. The Warrants evidenced by this Warrant Certificate may be sold or otherwise transferred at any time (except as such sale or transfer may be A-5 25 restricted pursuant to the Securities Act or any applicable state securities laws) and any such sale or transfer shall be effected on the books of the Company (the "Warrant Register") maintained at the corporate trust office of the Warrant Agent upon surrender of this Warrant Certificate at the corporate trust office of the Warrant Agent for registration of transfer duly endorsed by the Warrantholder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver a new Warrant Certificate or Certificates in appropriate denominations to the Person or Persons entitled thereto. 2.3. Legend on Warrant Shares. If and for so long as required by the Investment Agreement, this Warrant Certificate shall contain a legend as set forth in Section 8.10 of the Investment Agreement. Section 3. Exchange of Warrant Certificate. Any Warrant Certificate may be exchanged for another certificate or certificates of like tenor entitling the Warrantholder to purchase a like aggregate number of Warrant Shares as the certificate or certificates surrendered then entitles such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant Certificate shall make such request in writing delivered to the Warrant Agent, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute, and the Warrant Agent shall countersign and deliver to the Person entitled thereto a new Warrant Certificate or certificates as so requested. Section 4. Term of Warrants; Exercise of Warrants. 4.1. Duration of Warrant. On the terms and subject to the conditions set forth in this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced hereby, in whole or in part, at any time and from time to time after the Issue Date and before the Expiration Time. If the Warrants evidenced hereby are not exercised by the Expiration Time, they shall become void, and all rights hereunder shall thereupon cease. 4.2. Exercise of Warrant. (a) On the terms and subject to the conditions set forth in this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced hereby, in whole or in part, by presentation and surrender to the Warrant Agent of this Warrant Certificate together with the attached Election to Exercise duly filled in and signed, and accompanied by payment to the Company of the Exercise Price for the number of Warrant Shares specified in such Election to Exercise. Payment of the aggregate Exercise Price shall be made (i) in cash in an amount equal to the aggregate Exercise Price; (ii) by certified or official bank check in an amount equal to the aggregate Exercise Price; (iii) by A-6 26 an exchange (which shall be treated as a recapitalization) with the Company of a number of shares of Senior Preferred Stock having an aggregate Stated Value plus accumulated and unpaid dividends thereon equal to the aggregate Exercise Price; (iv) by an exchange (which shall be treated as a recapitalization) with the Company of outstanding Warrants (other than the Warrants being exercised) having an aggregate Warrant Market Price which, after subtracting the aggregate Exercise Prices thereof, equals the aggregate Exercise Price of the Warrants being exercised; or (v) by any combination of the foregoing; provided, however, that (except to the extent expressly permitted by the proviso in Section 5(b) of the Share Exchange Agreement, dated as of February 13, 1999, by and among the Company and the investors named therein) the Warrantholders may not use shares of Series D Preferred Stock pursuant to clause (iii) or (v) in connection with any exercise prior to May 13, 2000. (b) On the terms and subject to the conditions set forth in this Warrant Certificate, upon such presentation and surrender of this Warrant Certificate and payment of such aggregate Exercise Price as set forth in paragraph (a) hereof, the Company shall promptly issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) for the specified number of duly authorized, fully paid and non-assessable Warrant Shares issuable upon exercise, and shall deliver to the Warrantholder cash, as provided in Section 11 hereof, with respect to any Fractional Warrant Shares otherwise issuable upon such surrender. Upon receipt of such Warrant Shares, the Warrant Agent shall transmit such Warrant Shares to the Warrantholder, or to such Persons as the Warrantholder may designate in writing. In the event that the Warrants evidenced by this Warrant Certificate are exercised in part prior to the Expiration Time, the Company shall issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) evidencing any remaining unexercised Warrants. Upon receipt of such Warrant Certificate, the Warrant Agent shall countersign and deliver such Warrant Certificate to the Warrantholder, or to such persons as the Warrantholder may designate in writing. (c) Each Person in whose name any certificate for Warrant Shares is issued shall for all purposes be deemed to have become the holder of record of the Warrant Shares represented thereby on the first date on which both the Warrant Certificate evidencing the respective Warrants was surrendered and payment of the Exercise Price and any applicable taxes was made, irrespective of date of issue or delivery of such certificate. Section 5. Payment of Taxes. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of any issue or delivery of Warrant Shares or of other securities or property deliverable upon exercise of the A-7 27 Warrants evidenced by this Warrant Certificate or Certificates representing such shares or securities (other than income taxes imposed on the Warrantholder); provided that the Company shall not be required to pay any such tax or other charge that may be imposed in connection with any transfer involved in the issue of any certificate for Warrant Shares or other securities or property, or payment of cash, to any Person other than the holder of the Warrant Certificate surrendered upon exercise, and in case of any such tax or charge, the Warrant Agent and the Company shall not be required to issue any security or property or pay any cash until such tax or charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no such tax or charge is payable. Section 6. Mutilated or Missing Warrant. If any Warrant Certificate is lost, stolen, mutilated or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, upon receipt of a proper affidavit or other evidence reasonably satisfactory to the Company and the Warrant Agent (and surrender of any mutilated Warrant Certificate) and bond of indemnity in form and amount and with corporate surety reasonably satisfactory to the Company and the Warrant Agent in each instance protecting the Company and the Warrant Agent, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants as the Warrant Certificate so lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time enforceable by anyone. An applicant for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. All Warrant Certificates shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement of lost, stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without their surrender. Section 7. Reservation of Shares. The Company hereby agrees that there shall be reserved for issuance and delivery upon exercise of this Warrant, free from preemptive rights, the number of shares of authorized but unissued shares of Common Stock as shall be required for issuance or delivery upon exercise of the Warrants evidenced by this Warrant Certificate. The Company further agrees that it will not, by amendment of its Certificate of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company. Without limiting the generality of the foregoing, the Company agrees that before taking any action which would cause an A-8 28 adjustment reducing the Exercise Price below the then-par value of Warrant Shares issuable upon exercise hereof, the Company shall from time to time take all such action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted. Section 8. Exercise Price. The price per share (the "Exercise Price") at which Warrant Shares shall be purchasable upon the exercise of the Warrants evidenced by this Warrant Certificate shall be $17.75, subject to adjustment pursuant to Section 9 hereof. Section 9. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of the Warrants evidenced by this Warrant Certificate and the Exercise Price thereof shall be subject to adjustment from time to time after the date hereof upon the happening of certain events, as follows: 9.1. Adjustments to Exercise Price. The Exercise Price shall be subject to adjustment as follows: (a) Stock Dividends. In case the Company after the date hereof shall pay a dividend or make a distribution to all holders of shares of Common Stock in shares of Common Stock, then in any such case the Exercise Price in effect at the opening of business on the day following the record date for the determination of stockholders entitled to receive such dividend or distribution shall be reduced to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the number of shares of Common Stock outstanding at the close of business on such record date and (y) the denominator shall be the sum of such number of shares of Common Stock outstanding and the total number of shares of Common Stock constituting such dividend or distribution, such reduction to become effective immediately after the opening of business on the day following such record date. For purposes of this subsection (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (b) Stock Splits and Reverse Splits. In case after the date hereof outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case after the date hereof outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Price in effect at the opening of business A-9 29 on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (c) Issuances Below Market. In case the Company after the date hereof shall issue rights or warrants to holders of shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Closing Price per share on the record date for the determination of stockholders entitled to receive such rights or warrants, the Exercise Price in effect at the opening of business on the day following such record date shall be adjusted to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of shares of Common Stock that the aggregate offering price of the total number of shares so to be offered would purchase at such Closing Price and (y) the denominator shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of additional shares of Common Stock so to be offered for subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following such record date; provided, however, that no adjustment shall be made if the Company issues or distributes to each Warrantholder the rights or warrants that each Warrantholder would have been entitled to receive had the Warrants held by such Warrantholder been exercised prior to such record date; and provided, further, that in no event shall the fact that the Series B Warrants of the Company become exercisable for shares of Common Stock upon occurrence of the Shareholder Approval (as defined in the Investment Agreement) constitute an issuance of rights or warrants pursuant to this Section 9.1(c). For purposes of this subsection (c), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. Rights or warrants issued by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase Equity Securities, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, including shares of Common Stock issued upon exercise of the Warrants evidenced by this Warrant Certificate, in each case in clauses (i) through (iii) until the occurrence of a specified event or events (a "Trigger Event"), shall for purposes of this subsection (c) not be deemed issued until the occurrence of the earliest Trigger Event. A-10 30 (d) Special Dividends. In case the Company after the date hereof shall distribute to all holders of shares of Common Stock evidences of its indebtedness or assets (excluding any regular periodic cash dividend), Equity Securities (other than Common Stock) or rights to subscribe (excluding those referred to in subsection (c) above) for Equity Securities other than Common Stock, in each such case the Exercise Price in effect immediately prior to the close of business on the record date for the determination of stockholders entitled to receive such distribution shall be adjusted to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the Closing Price per share of Common Stock on such record date, less the then-current fair market value as of such record date (as determined by the Board of Directors in its good faith judgment) of the portion of assets or evidences of indebtedness or Equity Securities or subscription rights so distributed applicable to one share of Common Stock, and (y) the denominator shall be such Closing Price, such adjustment to become effective immediately prior to the opening of business on the day following such record date; provided, however, that no adjustment shall be made (1) if the Company issues or distributes to each Warrantholder the subscription rights referred to above that each Warrantholder would have been entitled to receive had the Warrants held by such Warrantholder been exercised prior to such record date or (2) if the Company grants to each Warrantholder the right to receive, upon the exercise of the Warrants held by such Warrantholder at any time after the distribution of the evidences of indebtedness or assets or Equity Securities referred to above, the evidences of indebtedness or assets or Equity Securities that such Warrantholder would have been entitled to receive had such Warrants been exercised prior to such record date. The Company shall provide any Warrantholder, upon receipt of a written request therefor, with any indenture or other instrument defining the rights of the holders of any indebtedness, assets, subscription rights or Equity Securities referred to in this subsection (d). Rights or warrants issued by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase Equity Securities, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, including shares of Common Stock issued upon exercise of the Warrants evidenced by this Warrant Certificate, in each case in clauses (i) through (iii) until the occurrence of a Trigger Event, shall for purposes of this subsection (d) not be deemed issued until the occurrence of the earliest Trigger Event. (e) Tender or Exchange Offer. In case a tender or exchange offer made by the Company or any subsidiary of the Company for all or any portion of the Common Stock shall be consummated and such tender offer shall involve an aggregate consideration having a fair market value (as determined by the Board of Directors in its good faith judgment) at the last time (the "Offer Time") tenders A-11 31 may be made pursuant to such tender or exchange offer (as it may be amended) that, together with the aggregate of the cash plus the fair market value (as determined by the Board of Directors in its good faith judgment), as of the Offer Time, of consideration payable in respect of any tender or exchange offer by the Company or any such subsidiary for all or any portion of the Common Stock consummated preceding the Offer Time and in respect of which no Exercise Price adjustment pursuant to this subsection (e) has been made, exceeds 5% of the product of the Closing Price of the Common Stock at the Offer Time multiplied by the number of shares of Common Stock outstanding (including any tendered shares) at the Offer Time, the Exercise Price shall be reduced so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the Offer Time by a fraction of which (x) the numerator shall be (i) the product of the Closing Price of the Common Stock at the Offer Time multiplied by the number of shares of Common Stock outstanding (including any tendered shares) at the Offer Time minus (ii) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered and not withdrawn as of the Offer Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the denominator shall be the product of (i) such Closing Price at the Offer Time multiplied by (ii) such number of outstanding shares at the Offer Time minus the number of Purchased Shares, such reduction to become effective immediately prior to the opening of business on the day following the Offer Time. For purposes of this subsection (e), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (f) Closing Price Determination. For the purpose of any computation under subsections (c) and (d) of this Section 9.1, the Closing Price of Common Stock on any date shall be deemed to be the average of the Closing Prices for the five consecutive Trading Days ending not later than the day in question and commencing on a day selected at random in good faith by the Company which is not more than 20 Trading Days before the day in question, provided, however, that (i) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Exercise Price pursuant to this Section 9 occurs on or after the 20th Trading Day prior to the day in question and prior to the "ex" date for the issuance or distribution requiring such computation, the Closing Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the same fraction which the Exercise Price is so required to be adjusted as a result of such other event, (ii) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the A-12 32 Exercise Price pursuant to this Section 9 occurs on or after the "ex" date for the issuance or distribution requiring such computation and on or prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Exercise Price is so required to be adjusted as a result of such other event, and (iii) if the "ex" date for the issuance or distribution requiring such computation is on or prior to the day in question, after taking into account any adjustment required pursuant to clause (ii) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the fair market value on the day in question (as determined by the Board of Directors in a manner consistent with any determination of such value for the purposes of subsection (d) of this Section 9.1) of the assets, evidences of indebtedness, Equity Securities or subscription rights being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For the purposes of any computation under subsection (e) of this Section 9.1, the Closing Price on any date shall be deemed to be the average of the daily Closing Prices for the five consecutive Trading Days ending not later than the Offer Time of such tender or exchange offer and commencing on a day selected at random in good faith by the Company which date shall be on or after the latest (the "Commencement Date") of (i) the date 20 Trading Days before the date in question, (ii) the date of commencement of the tender or exchange offer requiring such computation and (iii) the date of the last amendment, if any, of such tender or exchange offer involving a change in the maximum number of shares for which tenders are sought or a change in the consideration offered; provided, however, that if the "ex" date for any event (other than the tender or exchange offer requiring such computation) that requires an adjustment to the Exercise Price pursuant to this Section 9 occurs on or after the Commencement Date and prior to the Offer Time for the tender or exchange offer requiring such computation, the Closing Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the Exercise Price is so required to be adjusted as a result of such other event. For purposes of this subsection (f), the term "ex" date, (i) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on Nasdaq or on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution, (ii) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on Nasdaq or such exchange or in such market after the time at which such subdivision or combination becomes effective, and (iii) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on Nasdaq or such exchange or in such market after the Offer Time of such tender or exchange offer. A-13 33 (g) Minimum Adjustment Requirement. No adjustment shall be required unless such adjustment would result in an increase or decrease of at least $0.01 in the Exercise Price then subject to adjustment; provided, however, that any adjustments that are not made by reason of this subsection (g) shall be carried forward and taken into account in any subsequent adjustment. In case the Company shall at any time issue shares of Common Stock by way of dividend on any stock of the Company or subdivide or combine the outstanding shares of Common Stock, said amount of $0.01 specified in the preceding sentence (as theretofore increased or decreased, if said amount shall have been adjusted in accordance with the provisions of this subsection (g)) shall forthwith be proportionately increased in the case of such a combination or decreased in the case of such a subdivision or stock dividend so as appropriately to reflect the same. (h) Calculations. All calculations under this Section 9.1 shall be made to the nearest $0.01. (i) Certificate. Whenever an adjustment in the Exercise Price is made as required or permitted by the provisions of this Section 9.1, the Company shall promptly file with the Warrant Agent a certificate of its chief financial officer setting forth (A) the adjusted Exercise Price as provided in this Section 9.1 and a brief statement of the facts requiring such adjustment and the computation thereof and (B) the number of shares of Common Stock (or portions thereof) purchasable upon exercise of a Warrant after such adjustment in the Exercise Price in accordance with Section 9.2 hereof and the record date therefor, and promptly after such filing shall mail or cause to be mailed a notice of such adjustment to each Warrantholder at his or her last address as the same appears on the Warrant Register. Such certificate, in the absence of manifest error, shall be conclusive and final evidence of the correctness of such adjustment. The Warrant Agent shall be entitled to rely upon such certificate, and shall be under no duty or responsibility with respect to any such certificate except to exhibit the same to any Warrantholder desiring inspection thereof. (j) Notice. In case: (i) the Company shall declare any dividend or any distribution of any kind or character (whether in cash, securities or other property) on or in respect of shares of Common Stock or to the stockholders of the Company (in their capacity as such), excluding any regular periodic cash dividend paid out of current or retained earnings (as such terms are used in generally accepted accounting principles); or A-14 34 (ii) the Company shall authorize the granting to the holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock or of any other right; or (iii) of any reclassification of shares of Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Warrant Agent and shall mail or cause to be mailed to the Warrantholders, at their last addresses as they shall appear upon the Warrant Register, at least 30 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and, if applicable, the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property (including cash) deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give any such notice, or any defect therein, shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. (k) Section 305. Anything in this Section 9.1 to the contrary notwithstanding, the Company shall be entitled, but not required, to make such reductions in the Exercise Price, in addition to those required by this Section 9.1, as it in its discretion shall determine to be advisable, including, without limitation, in order that any dividend in or distribution of shares of Common Stock or shares of capital stock of any class other than Common Stock, subdivision, reclassification or combination of shares of Common Stock, issuance of rights or warrants, or any other transaction having a similar effect, shall not be treated as a distribution of property by the Company to its stockholders under Section 305 of the Internal Revenue Code of 1986, as amended, or any successor provision and shall not be taxable to them. (l) No Adjustment. Anything to the contrary herein notwithstanding, no adjustment to the Exercise Price or the number of shares of Common Stock A-15 35 purchasable upon exercise of a Warrant shall be made pursuant to this Section 9.1 or Section 9.2 as a result of, or in connection with, the issuance of options or rights to purchase Common Stock issued to employees of the Company or its Subsidiaries pursuant to a stock option or other similar plan adopted by the Board of Directors or an employment agreement approved by the Board of Directors, or the modification, renewal or extension of any such plan or agreement if approved by the Board of Directors. (m) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for purposes of taking any action that requires an adjustment of the Exercise Price under this Section 9, and shall, thereafter and before the effective date of such action, legally abandon its plan to take such action, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. 9.2. Adjustment to Number of Warrant Shares. Upon each adjustment of the Exercise Price pursuant to Section 9.1 hereof the number of Warrant Shares purchasable upon exercise of a Warrant outstanding prior to the effectiveness of such adjustment shall be adjusted to the number, calculated to the nearest one-hundredth of a share, obtained by (x) multiplying the number of Warrant Shares purchasable immediately prior to such adjustment upon the exercise of a Warrant by the Exercise Price in effect prior to such adjustment and (y) dividing the product so obtained by the Exercise Price in effect after such adjustment of the Exercise Price. 9.3. Organic Change. (a) Company Survives. Upon the consummation of an Organic Change (other than a transaction in which the Company is not the surviving entity), lawful provision shall be made as part of the terms of such transaction whereby the terms of the Warrant Certificates shall be modified, without payment of any additional consideration therefor, so as to provide that upon exercise of Warrants following the consummation of such Organic Change, the Warrantholders of such Warrants shall have the right to purchase only the kind and amount of securities, cash and other property receivable upon such Organic Change by a holder of the number of Warrant Shares into which such Warrants might have been exercised immediately prior to such Organic Change, assuming such holder of Warrant Shares (i) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which a sale, transfer or lease of all or substantially all of the assets of the Company was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person, and (ii) failed to exercise his rights of election, if any, as to the kind and amount of securities, cash and other property receivable upon such Organic Change (provided that if the kind and amount of securities, cash and other property receivable A-16 36 upon such Organic Change is not the same for each share of Common Stock held immediately prior to such Organic Change by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing shares"), then for the purpose of this subsection (a) the kind and amount of securities, cash and other property receivable upon such Organic Change by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares); provided, however, that no adjustment shall be made as a result of such Organic Change to the Exercise Price or the number of Warrant Shares notwithstanding any provision of Section 9 hereof unless any event requiring any such adjustment shall have occurred or shall occur prior to, upon or after such Organic Change. Lawful provision also shall be made as part of the terms of the Organic Change so that all other terms of the Warrant Certificates shall remain in full force and effect following such an Organic Change. The provisions of this Section 9.3(a) shall similarly apply to successive Organic Changes. (b) Company Does Not Survive. The Company shall not enter into an Organic Change that is a transaction in which the Company is not the surviving entity unless lawful provision shall be made as part of the terms of such transaction whereby the surviving entity shall issue new securities to each Warrantholder, without payment of any additional consideration therefor, with terms that provide that upon the exercise of the Warrants, the Warrantholders of such Warrants shall have the right to purchase only the kind and amount of securities, cash and other property receivable upon such Organic Change by a holder of the number of Warrant Shares into which such Warrants might have been exercised immediately prior to such Organic Change, assuming such holder of Warrant Shares (i) is not a Constituent Person or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind and amount of securities, cash and other property receivable upon such Organic Change (provided that if the kind and amount of securities, cash and other property receivable upon such Organic Change is not the same for each non-electing share, then for the purpose of this subsection (b) the kind and amount of securities, cash and other property receivable upon such Organic Change by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares); provided, however, that no adjustment shall be made as a result of such Organic Change to the Exercise Price or the number of Warrant Shares notwithstanding any provision of Section 9 hereof unless any event requiring any such adjustment shall have occurred or shall occur prior to, upon or after such Organic Change. The certificate or articles of incorporation or other constituent document of the surviving entity shall provide for such adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be equivalent to the adjustments provided for in Section 9.1 hereof. 9.4. Statement on Warrants. The form of Warrant Certificate need not be changed because of any adjustment made pursuant to Section 8, Section 9.1 or Section A-17 37 9.2 hereof, and Warrants issued after such adjustment may state the same Exercise Price and the same number of Warrant Shares as are stated in this Warrant Certificate. Section 10. Warrant Agent. The Company shall cause to be appointed in the Borough of Manhattan, The City of New York, a Warrant Agent, having a capital and surplus of at least $50,000,000. Initially, Chase Mellon Shareholder Services, L.L.C. will act as Warrant Agent. Section 11. Fractional Interests. The Company shall not be required to issue Fractional Warrant Shares on the exercise of the Warrants evidenced by this Warrant Certificate. If any Fractional Warrant Share would, but for the provisions of this Section 11, be issuable on the exercise of the Warrants evidenced by this Warrant Certificate (or specified portions thereof), the Company shall pay an amount in cash equal to the fraction of a Warrant Share represented by such Fractional Warrant Share multiplied by the Closing Price on the day of such exercise. Section 12. No Rights as Shareholder. Nothing in this Warrant Certificate shall be construed as conferring upon the Warrantholder or its transferees any rights as a shareholder of the Company, including the right to vote, receive dividends, consent or receive notices as a shareholder with respect to any meeting of shareholders for the election of directors of the Company or any other matter. Section 13. Successors. All the covenants and provisions of this Warrant Certificate by or for the benefit of the Company or the Warrantholder shall bind and inure to the benefit of their respective successors and permitted assigns hereunder. Section 14. Governing Law; Choice of Forum, Etc. The validity, construction and performance of this Warrant Certificate shall be governed by, and interpreted in accordance with, the laws of New York without reference to its conflict of laws rules. The Company and the Warrantholder (the "parties hereto") agree that the appropriate and exclusive forum for any disputes arising out of this Warrant Certificate solely between or among any or all of the Company, on the one hand, and the Investor and/or any Person who has become a Warrantholder, on the other, shall be the United States District Court for the Southern District of New York, and, if such court will not hear any such suit, the courts of the state of the Company's incorporation, and the parties hereto irrevocably consent to the exclusive jurisdiction of such courts, and agree to comply with all requirements necessary to give such courts jurisdiction. The parties hereto further agree that the parties will not bring suit with respect to any disputes, except as expressly set forth below, arising out of this Warrant Certificate for the execution or enforcement of judgment, in any jurisdiction other than the above specified courts. Each of the parties hereto irrevocably consents to the service of process in any action or proceeding hereunder by the mailing of copies thereof by registered or certified airmail, A-18 38 postage prepaid, if to (i) the Company, at 800 Connecticut Avenue, Norwalk, Connecticut, 06854, Attention: General Counsel, or at such other address specified by the Company in writing to the Warrant Agent, and (ii) any Warrantholder, at the address of such Warrantholder specified in the Warrant Register. The foregoing shall not limit the rights of any party hereto to serve process in any other manner permitted by the law or to obtain execution of judgment in any other jurisdiction. The parties further agree, to the extent permitted by law, that final and unappealable judgment against any of them in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of indebtedness. The parties agree to waive any and all rights that they may have to a jury trial with respect to disputes arising out of this Agreement. Section 15. Benefits of this Agreement. Nothing in this Warrant Certificate shall be construed to give to any Person other than the Company and the Warrantholder any legal or equitable right, remedy or claim under this Warrant Certificate, and this Warrant Certificate shall be for the sole and exclusive benefit of the Company and the Warrantholder. This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent. A-19 39 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of this __ day of ________________, ______________. OXFORD HEALTH PLANS, INC. By:__________________________ Name: Title: Attest: __________________________ Countersigned: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Warrant Agent By:__________________________ Name: Title: A-20 40 ELECTION TO EXERCISE (To be executed upon exercise of Warrants) To OXFORD HEALTH PLANS, INC.: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, Warrant Shares, as provided for therein, and tenders herewith payment of the purchase price in full in the form of [COMPLETE WHERE APPLICABLE]: cash or a certified or official bank check in the amount of $__________; and/or $__________ Stated Value of Senior Preferred Stock (as to which $ of accumulated dividends are unpaid), of which $____________ Stated Value and the corresponding accumulated dividends should be applied toward the payment of such Warrant Shares; and/or _______ number of Warrants, valued at $__________ each (such value arrived at by subtracting the Exercise Price of $__________ from the Warrant Market Price of $__________, both the Exercise Price and Warrant Market Price determined in accordance with the provisions of the Warrant Certificate); For a total purchase price of $__________. If the Stated Value and accumulated and unpaid dividends of the shares of Senior Preferred Stock or the value of the Warrants evidenced by the Warrant Certificate delivered herewith exceeds that portion of the payment which is to be paid by the surrender of such shares or Warrants, you are authorized, as agent of the undersigned, to deliver to the Company such shares or Warrant Certificate delivered herewith for exchange into smaller denominations in order that you may deliver to the undersigned new shares of Senior Preferred Stock or Warrant Certificates, in Stated Value or number as the case may be, equal to the difference between the Stated Value or number as the case may be, of the Senior Preferred Stock or Warrants surrendered, less the Stated Value or number as the case may be, thereof, used to purchase Warrant Shares. A-21 41 Please issue a certificate or certificates for such Warrant Shares in the name of, and pay any cash for any Fractional Warrant Shares to (please print name address and social security or other identifying number)*: Name: Address: Soc. Sec. #: AND, if said number of Warrant Shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of the undersigned for the balance remaining of the Warrant Shares purchasable thereunder rounded up to the next higher whole number of Warrant Shares. Signature:** * The Warrant Certificate and the Investment Agreement contain restrictions on the sale and other transfer of the Warrants evidenced by such Warrant Certificate. ** The above signature should correspond exactly with the name on the face of this Warrant Certificate or with the name of the assignee appearing in the assignment form below. A-22 42 ASSIGNMENT FORM (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (Name and Address of Assignee must be Printed or Typewritten) Warrants to purchase ______ Warrant Shares of the Company, evidenced by the within Warrant Certificate hereby irrevocably constituting and appointing _________________ Attorney to transfer said Warrants on the books of the Company, with full power of substitution in the premises. Dated: , Signature of Registered Holder* Signature Guaranteed: Signature of Guarantor * The above signature should correspond exactly with the name on the face of this Warrant Certificate. A-23 43 Exhibit B Form of Series B Warrant Certificate B-1 44 No. [Number of Warrants] SERIES B WARRANTS Exercisable commencing May 13, 1998; Void after Expiration Time (as defined herein) OXFORD HEALTH PLANS, INC., a Delaware corporation (the "Company"), hereby certifies that, for value received, ____________________, or registered assigns (the "Warrantholder"), is the owner of ______________Warrants (as defined below), each of which entitles the Warrantholder to purchase from the Company one fully paid, duly authorized and nonassessable share of Common Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any time from and after May 13, 1998 (the "Issue Date") and continuing up to the Expiration Time (as defined herein) at a per share exercise price determined according to the terms and subject to the conditions set forth in this certificate (the "Warrant Certificate"). The number of shares of Common Stock issuable upon exercise of each such Warrant and the exercise price per share of Common Stock are subject to adjustment from time to time pursuant to the provisions of Sections 8 and 9 of this Warrant Certificate. The Warrants evidenced by this Warrant Certificate are part of a series of warrants to purchase up to 6,730,000 shares of Common Stock (collectively, the "Warrants"), issued pursuant to an Investment Agreement, dated as of February 23, 1998 (as it may be amended, supplemented or otherwise modified from time to time, the "Investment Agreement"), by and between TPG Oxford LLC, a Delaware limited liability company (the "Investor"), and the Company, or pursuant to the Warrant Agreement, dated as of ________, 1999 (as it may be amended, supplemented or otherwise modified from time to time, the "Warrant Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C., as Warrant Agent. Section 1.1. Other Obligations. The parties hereby acknowledge that, pursuant to the Warrant Agreement, nothing in the Warrant Agreement shall permit the Company or the Warrant Agent to authorize or take action that alters or reduces the rights of the Existing Holders (as defined therein) under the Investment Agreement or the Warrants and, in the event of any inconsistency between the provisions of the Warrant Agreement, on the one hand, and this Warrant Certificate or the Investment Agreement, on the other hand, the provisions of this Warrant Agreement and/or, in the case of the Existing Holders, the Investment Agreement shall control. Section 1.2 Definitions. As used in this Warrant Certificate, the following terms shall have the meanings set forth below: "Board of Directors" means the board of directors of the Company. B-2 45 "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Certificate of Designations" means, with respect to the Series D Preferred Stock or the Series E Preferred Stock, as the case may be, the Certificate of Designations therefor filed by the Company with the Secretary of State of the State of Delaware. "Certificate of Incorporation" means the Second Amended and Restated Certificate of Incorporation of the Company, as amended from time to time. "Closing Price" with respect to a share of Common Stock on any day means, subject to Section 9.1(f) hereof, the last reported sale price on that day or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices, regular way, on that day, in either case, as reported in the consolidated transaction reporting system with respect to securities quoted on Nasdaq or, if the shares of Common Stock are not quoted on Nasdaq, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not quoted on Nasdaq and not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices on such other nationally recognized quotation system then in use, or, if on any such day the shares of Common Stock are not quoted on any such quotation system, the average of the closing bid and asked prices as furnished by a professional market maker selected by the Board of Directors making a market in the shares of Common Stock. If the shares of Common Stock are not publicly held or so listed, quoted or publicly traded, the "Closing Price" means the fair market value of a share of Common Stock, as determined in good faith by the Board of Directors. "Common Stock" has the meaning set forth in the preamble hereto. "Company" has the meaning set forth in the preamble hereto. "Equity Securities" of any Person means any and all common stock, preferred stock, any other class of capital stock and partnership or limited liability company interests of such Person or any other similar interests of any Person that is not a corporation, partnership or limited liability company. "Exercise Price" has the meaning set forth in Section 8 hereof. "Expiration Date" means the earlier of (i) May 13, 2008, and (ii) the date of an Optional Redemption. B-3 46 "Expiration Time" means 5:00 P.M., New York City time, on the Expiration Date. "Fractional Warrant Share" means any fraction of a whole share of Common Stock issued, or issuable upon, exercise of the Warrants. "Investment Agreement" has the meaning set forth in the preamble hereto. "Investor" has the meaning set forth in the preamble hereto. "Issue Date" has the meaning set forth in the preamble hereto. "Nasdaq" means The Nasdaq Stock Market's National Market. "Offer Time" has the meaning set forth in Section 9.1(e) hereof. "Optional Redemption" means a redemption of the Series E Preferred Stock pursuant to Article V, Section A of the Certificate of Designations therefor. "Organic Change" means, with respect to any Person, any transaction (including without limitation any recapitalization, capital reorganization or reclassification of any class or series of Equity Securities, any consolidation of such Person with, or merger of such Person into, any other Person, any merger of another Person into such Person (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of capital stock of such Person), and any sale or transfer or lease of all or substantially all of the assets of such Person, but not including any stock split, combination or subdivision which is the subject of Section 9.1(b)) pursuant to which any class or series of Equity Securities of such Person is converted into the right to receive other securities, cash or other property. "Person" means any individual, firm, corporation, company, limited liability company, association, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Senior Preferred Stock" means the Series D Preferred Stock and Series E Preferred Stock. "Series D Preferred Stock" means the Series D Cumulative Preferred Stock, par value $0.01 per share, of the Company. B-4 47 "Series E Preferred Stock" means the Series E Cumulative Preferred Stock, par value $0.01 per share, of the Company. "Stated Value" means the stated value of the Series D Preferred Stock or the Series E Preferred Stock , as the case may be, as set forth in the Certificate of Designations therefor. "Trading Day" means any day on which Nasdaq is open for trading, or if the shares of Common Stock are not quoted on Nasdaq, any day on which the principal national securities exchange or national quotation system on which the shares of Common Stock are listed, admitted to trading or quoted is open for trading, or if the shares of Common Stock are not so listed, admitted to trading or quoted, any Business Day. "Warrant" has the meaning set forth in the preamble hereto. "Warrant Agent" means the Person named or otherwise appointed as such as set forth in Section 10 hereof. "Warrant Agreement" has the meaning set forth in the preamble hereto. "Warrant Certificate" has the meaning in the preamble hereto. "Warrant Market Price" means the average of the Closing Prices of a share of Common Stock for the ten consecutive Trading Days ending on the Trading Day immediately prior to the day on which the Election to Exercise is delivered. "Warrant Register" has the meaning set forth in Section 2.2 hereof. "Warrant Shares" means the shares of Common Stock issued, or issuable upon, exercise of the Warrants. "Warrantholder" has the meaning set forth in the preamble hereto. Section 2. Transferability. 2.1 Registration. The Warrants shall be issued only in registered form. 2.2 Transfer. The Warrants evidenced by this Warrant Certificate may be sold or otherwise transferred at any time (except as such sale or transfer may be restricted pursuant to the Securities Act or any applicable state securities laws) and any such sale or transfer shall be effected on the books of the Company (the "Warrant Register") maintained at the corporate trust office of the Warrant Agent upon surrender of this Warrant Certificate at the corporate trust B-5 48 office of the Warrant Agent for registration of transfer duly endorsed by the Warrantholder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver a new Warrant Certificate or Certificates in appropriate denominations to the Person or Persons entitled thereto. 2.3. Legend on Warrant Shares. If and for so long as required by the Investment Agreement, this Warrant Certificate shall contain a legend as set forth in Section 8.10 of the Investment Agreement. Section 3. Exchange of Warrant Certificate. Any Warrant Certificate may be exchanged for another certificate or certificates of like tenor entitling the Warrantholder to purchase a like aggregate number of Warrant Shares as the certificate or certificates surrendered then entitles such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant Certificate shall make such request in writing delivered to the Warrant Agent, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute, and the Warrant Agent shall countersign and deliver to the Person entitled thereto a new Warrant certificate or certificates as so requested. Section 4. Term of Warrants; Exercise of Warrants. 4.1. Duration of Warrant. On the terms and subject to the conditions set forth in this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced hereby, in whole or in part, at any time and from time to time after the Issue Date and before the Expiration Time. If the Warrants evidenced hereby are not exercised by the Expiration Time, they shall become void, and all rights hereunder shall thereupon cease. 4.2. Exercise of Warrant. (a) On the terms and subject to the conditions set forth in this Warrant Certificate, the Warrantholder may exercise the Warrants evidenced hereby, in whole or in part, by presentation and surrender to the Warrant Agent of this Warrant Certificate together with the attached Election to Exercise duly filled in and signed, and accompanied by payment to the Company of the Exercise Price for the number of Warrant Shares specified in such Election to Exercise. Payment of the aggregate Exercise Price shall be made (i) in cash in an amount equal to the aggregate Exercise Price; (ii) by certified or official bank check in an amount equal to the aggregate Exercise Price; (iii) by an exchange (which shall be treated as a recapitalization) with the Company of a number of shares of Senior Preferred Stock having an aggregate Stated Value plus accumulated and unpaid dividends thereon equal to the aggregate Exercise Price; (iv) by an exchange (which shall be treated as a recapitalization) with the Company of outstanding Warrants (other than the Warrants being exercised) having an aggregate Warrant Market Price which, after subtracting the aggregate Exercise Prices thereof, equals the aggregate Exercise Price of the Warrants being exercised; or (v) by any combination of the foregoing; provided, B-6 49 however, that (except to the extent expressly permitted by the proviso in Section 5(b) of the Share Exchange Agreement, dated as of February 13, 1999, by and among the Company and the investors named therein) the Warrantholders may not use shares of Series D Preferred Stock pursuant to clause (iii) or (v) in connection with any exercise prior to May 13, 2000. (b) On the terms and subject to the conditions set forth in this Warrant Certificate, upon such presentation and surrender of this Warrant Certificate and payment of such aggregate Exercise Price as set forth in paragraph (a) hereof, the Company shall promptly issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) for the specified number of duly authorized, fully paid and non-assessable Warrant Shares issuable upon exercise, and shall deliver to the Warrantholder cash, as provided in Section 11 hereof, with respect to any Fractional Warrant Shares otherwise issuable upon such surrender. Upon receipt of such Warrant Shares, the Warrant Agent shall transmit such Warrant Shares to the Warrantholder, or to such Persons as the Warrantholder may designate in writing. In the event that the Warrants evidenced by this Warrant Certificate are exercised in part prior to the Expiration Time, the Company shall issue and cause to be delivered to the Warrant Agent a certificate or certificates (in such name or names as the Warrantholder may designate in writing) evidencing any remaining unexercised Warrants. Upon receipt of such Warrant Certificate, the Warrant Agent shall countersign and deliver such Warrant Certificate to the Warrantholder, or to such persons as the Warrantholder may designate in writing. (c) Each Person in whose name any certificate for Warrant Shares is issued shall for all purposes be deemed to have become the holder of record of the Warrant Shares represented thereby on the first date on which both the Warrant Certificate evidencing the respective Warrants was surrendered and payment of the Exercise Price and any applicable taxes was made, irrespective of date of issue or delivery of such certificate. Section 5. Payment of Taxes. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of any issue or delivery of Warrant Shares or of other securities or property deliverable upon exercise of the Warrants evidenced by this Warrant Certificate or certificates representing such shares or securities (other than income taxes imposed on the Warrantholder); provided that the Company shall not be required to pay any such tax or other charge that may be imposed in connection with any transfer involved in the issue of any certificate for Warrant Shares or other securities or property, or payment of cash, to any Person other than the holder of the Warrant Certificate surrendered upon exercise, and in case of any such tax or charge, the Warrant Agent and the Company shall not be required to issue any security or property or pay any cash until such tax or charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no such tax or charge is payable. B-7 50 Section 6. Mutilated or Missing Warrant. If any Warrant Certificate is lost, stolen, mutilated or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, upon receipt of a proper affidavit or other evidence reasonably satisfactory to the Company and the Warrant Agent (and surrender of any mutilated Warrant Certificate) and bond of indemnity in form and amount and with corporate surety reasonably satisfactory to the Company and the Warrant Agent in each instance protecting the Company and the Warrant Agent, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants as the Warrant Certificate so lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time enforceable by anyone. An applicant for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. All Warrant Certificates shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement of lost, stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without their surrender. Section 7. Reservation of Shares. The Company hereby agrees that there shall be reserved for issuance and delivery upon exercise of this Warrant, free from preemptive rights, the number of shares of authorized but unissued shares of Common Stock as shall be required for issuance or delivery upon exercise of the Warrants evidenced by this Warrant Certificate. The Company further agrees that it will not, by amendment of its Certificate of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company. Without limiting the generality of the foregoing, the Company agrees that before taking any action which would cause an adjustment reducing the Exercise Price below the then-par value of Warrant Shares issuable upon exercise hereof, the Company shall from time to time take all such action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted. Section 8. Exercise Price. The price per share (the "Exercise Price") at which Warrant Shares shall be purchasable upon the exercise of the Warrants evidenced by this Warrant Certificate shall be $17.75, subject to adjustment pursuant to Section 9 hereof. Section 9. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of the Warrants evidenced by this Warrant Certificate and the Exercise Price thereof shall be subject to adjustment from time to time after the date hereof upon the happening of certain events, as follows: B-8 51 9.1. Adjustments to Exercise Price. The Exercise Price shall be subject to adjustment as follows: (a) Stock Dividends. In case the Company after the date hereof shall pay a dividend or make a distribution to all holders of shares of Common Stock in shares of Common Stock, then in any such case the Exercise Price in effect at the opening of business on the day following the record date for the determination of stockholders entitled to receive such dividend or distribution shall be reduced to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the number of shares of Common Stock outstanding at the close of business on such record date and (y) the denominator shall be the sum of such number of shares of Common Stock outstanding and the total number of shares of Common Stock constituting such dividend or distribution, such reduction to become effective immediately after the opening of business on the day following such record date. For purposes of this subsection (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (b) Stock Splits and Reverse Splits. In case after the date hereof outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case after the date hereof outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (c) Issuances Below Market. In case the Company after the date hereof shall issue rights or warrants to holders of shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Closing Price per share on the record date for the determination of stockholders entitled to receive such rights or warrants, the Exercise Price in effect at the opening of business on the day following such record date shall be adjusted to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of shares of Common Stock that the aggregate offering price of the total number of shares so to be offered would purchase at such Closing Price and (y) the denominator shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of additional shares of Common Stock so to be offered for B-9 52 subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following such record date; provided, however, that no adjustment shall be made if the Company issues or distributes to each Warrantholder the rights or warrants that each Warrantholder would have been entitled to receive had the Warrants held by such Warrantholder been exercised prior to such record date; and provided, further, that in no event shall the fact that the Series B Warrants of the Company become exercisable for shares of Common Stock upon occurrence of the Shareholder Approval (as defined in the Investment Agreement) constitute an issuance of rights or warrants pursuant to this Section 9.1(c). For purposes of this subsection (c), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. Rights or warrants issued by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase Equity Securities, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, including shares of Common Stock issued upon exercise of the Warrants evidenced by this Warrant Certificate, in each case in clauses (i) through (iii) until the occurrence of a specified event or events (a "Trigger Event"), shall for purposes of this subsection (c) not be deemed issued until the occurrence of the earliest Trigger Event. (d) Special Dividends. In case the Company after the date hereof shall distribute to all holders of shares of Common Stock evidences of its indebtedness or assets (excluding any regular periodic cash dividend), Equity Securities (other than Common Stock) or rights to subscribe (excluding those referred to in subsection (c) above) for Equity Securities other than Common Stock, in each such case the Exercise Price in effect immediately prior to the close of business on the record date for the determination of stockholders entitled to receive such distribution shall be adjusted to a price obtained by multiplying such Exercise Price by a fraction of which (x) the numerator shall be the Closing Price per share of Common Stock on such record date, less the then-current fair market value as of such record date (as determined by the Board of Directors in its good faith judgment) of the portion of assets or evidences of indebtedness or Equity Securities or subscription rights so distributed applicable to one share of Common Stock, and (y) the denominator shall be such Closing Price, such adjustment to become effective immediately prior to the opening of business on the day following such record date; provided, however, that no adjustment shall be made (1) if the Company issues or distributes to each Warrantholder the subscription rights referred to above that each Warrantholder would have been entitled to receive had the Warrants held by such Warrantholder been exercised prior to such record date or (2) if the Company grants to each Warrantholder the right to receive, upon the exercise of the Warrants held by such Warrantholder at any time after the distribution of the evidences of indebtedness or assets or Equity Securities referred to above, the evidences of B-10 53 indebtedness or assets or Equity Securities that such Warrantholder would have been entitled to receive had such Warrants been exercised prior to such record date. The Company shall provide any Warrantholder, upon receipt of a written request therefor, with any indenture or other instrument defining the rights of the holders of any indebtedness, assets, subscription rights or Equity Securities referred to in this subsection (d). Rights or warrants issued by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase Equity Securities, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, including shares of Common Stock issued upon exercise of the Warrants evidenced by this Warrant Certificate, in each case in clauses (i) through (iii) until the occurrence of a Trigger Event, shall for purposes of this subsection (d) not be deemed issued until the occurrence of the earliest Trigger Event. (e) Tender or Exchange Offer. In case a tender or exchange offer made by the Company or any subsidiary of the Company for all or any portion of the Common Stock shall be consummated and such tender offer shall involve an aggregate consideration having a fair market value (as determined by the Board of Directors in its good faith judgment) at the last time (the "Offer Time") tenders may be made pursuant to such tender or exchange offer (as it may be amended) that, together with the aggregate of the cash plus the fair market value (as determined by the Board of Directors in its good faith judgment), as of the Offer Time, of consideration payable in respect of any tender or exchange offer by the Company or any such subsidiary for all or any portion of the Common Stock consummated preceding the Offer Time and in respect of which no Exercise Price adjustment pursuant to this subsection (e) has been made, exceeds 5% of the product of the Closing Price of the Common Stock at the Offer Time multiplied by the number of shares of Common Stock outstanding (including any tendered shares) at the Offer Time, the Exercise Price shall be reduced so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the Offer Time by a fraction of which (x) the numerator shall be (i) the product of the Closing Price of the Common Stock at the Offer Time multiplied by the number of shares of Common Stock outstanding (including any tendered shares) at the Offer Time minus (ii) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered and not withdrawn as of the Offer Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the denominator shall be the product of (i) such Closing Price at the Offer Time multiplied by (ii) such number of outstanding shares at the Offer Time minus the number of Purchased Shares, such reduction to become effective immediately prior to the opening of business on the day following the Offer Time. For purposes of this subsection (e), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include B-11 54 shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (f) Closing Price Determination. For the purpose of any computation under subsections (c) and (d) of this Section 9.1, the Closing Price of Common Stock on any date shall be deemed to be the average of the Closing Prices for the five consecutive Trading Days ending not later than the day in question and commencing on a day selected at random in good faith by the Company which is not more than 20 Trading Days before the day in question, provided, however, that (i) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Exercise Price pursuant to this Section 9 occurs on or after the 20th Trading Day prior to the day in question and prior to the "ex" date for the issuance or distribution requiring such computation, the Closing Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the same fraction which the Exercise Price is so required to be adjusted as a result of such other event, (ii) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Exercise Price pursuant to this Section 9 occurs on or after the "ex" date for the issuance or distribution requiring such computation and on or prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Exercise Price is so required to be adjusted as a result of such other event, and (iii) if the "ex" date for the issuance or distribution requiring such computation is on or prior to the day in question, after taking into account any adjustment required pursuant to clause (ii) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the fair market value on the day in question (as determined by the Board of Directors in a manner consistent with any determination of such value for the purposes of subsection (d) of this Section 9.1) of the assets, evidences of indebtedness, Equity Securities or subscription rights being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For the purposes of any computation under subsection (e) of this Section 9.1, the Closing Price on any date shall be deemed to be the average of the daily Closing Prices for the five consecutive Trading Days ending not later than the Offer Time of such tender or exchange offer and commencing on a day selected at random in good faith by the Company which date shall be on or after the latest (the "Commencement Date") of (i) the date 20 Trading Days before the date in question, (ii) the date of commencement of the tender or exchange offer requiring such computation and (iii) the date of the last amendment, if any, of such tender or exchange offer involving a change in the maximum number of shares for which tenders are sought or a change in the consideration offered; provided, however, that if the "ex" date for any event (other than the tender or exchange offer requiring such computation) that requires an adjustment to the Exercise Price pursuant to this Section 9 occurs on or after the Commencement Date and prior to the Offer Time for the tender or exchange offer requiring such computation, the Closing Price for each Trading Day prior to the "ex" date B-12 55 for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the Exercise Price is so required to be adjusted as a result of such other event. For purposes of this subsection (f), the term "ex" date, (i) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on Nasdaq or on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution, (ii) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on Nasdaq or such exchange or in such market after the time at which such subdivision or combination becomes effective, and (iii) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on Nasdaq or such exchange or in such market after the Offer Time of such tender or exchange offer. (g) Minimum Adjustment Requirement. No adjustment shall be required unless such adjustment would result in an increase or decrease of at least $0.01 in the Exercise Price then subject to adjustment; provided, however, that any adjustments that are not made by reason of this subsection (g) shall be carried forward and taken into account in any subsequent adjustment. In case the Company shall at any time issue shares of Common Stock by way of dividend on any stock of the Company or subdivide or combine the outstanding shares of Common Stock, said amount of $0.01 specified in the preceding sentence (as theretofore increased or decreased, if said amount shall have been adjusted in accordance with the provisions of this subsection (g)) shall forthwith be proportionately increased in the case of such a combination or decreased in the case of such a subdivision or stock dividend so as appropriately to reflect the same. (h) Calculations. All calculations under this Section 9.1 shall be made to the nearest $0.01. (i) Certificate. Whenever an adjustment in the Exercise Price is made as required or permitted by the provisions of this Section 9.1, the Company shall promptly file with the Warrant Agent a certificate of its chief financial officer setting forth (A) the adjusted Exercise Price as provided in this Section 9.1 and a brief statement of the facts requiring such adjustment and the computation thereof and (B) the number of shares of Common Stock (or portions thereof) purchasable upon exercise of a Warrant after such adjustment in the Exercise Price in accordance with Section 9.2 hereof and the record date therefor, and promptly after such filing shall mail or cause to be mailed a notice of such adjustment to each Warrantholder at his or her last address as the same appears on the Warrant Register. Such certificate, in the absence of manifest error, shall be conclusive and final evidence of the correctness of such adjustment. The Warrant Agent shall be entitled to rely upon such certificate, and shall be under no duty or responsibility with respect to any such certificate except to exhibit the same to any Warrantholder desiring inspection thereof. B-13 56 (j) Notice. In case: (a) the Company shall declare any dividend or any distribution of any kind or character (whether in cash, securities or other property) on or in respect of shares of Common Stock or to the stockholders of the Company (in their capacity as such), excluding any regular periodic cash dividend paid out of current or retained earnings (as such terms are used in generally accepted accounting principles); or (b) the Company shall authorize the granting to the holders of shares of Common Stock of rights to subscribe for or purchase any shares of capital stock or of any other right; or (c) of any reclassification of shares of Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Warrant Agent and shall mail or cause to be mailed to the Warrantholders, at their last addresses as they shall appear upon the Warrant Register, at least 30 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and, if applicable, the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property (including cash) deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give any such notice, or any defect therein, shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. (k) Section 305. Anything in this Section 9.1 to the contrary notwithstanding, the Company shall be entitled, but not required, to make such reductions in the Exercise Price, in addition to those required by this Section 9.1, as it in its discretion shall determine to be advisable, including, without limitation, in order that any dividend in or distribution of shares of Common Stock or shares of capital stock of any class other than Common Stock, subdivision, reclassification or combination of shares of Common Stock, issuance of rights or warrants, or any other transaction having a similar effect, shall not be B-14 57 treated as a distribution of property by the Company to its stockholders under Section 305 of the Internal Revenue Code of 1986, as amended, or any successor provision and shall not be taxable to them. (l) No Adjustment. Anything to the contrary herein notwithstanding, no adjustment to the Exercise Price or the number of shares of Common Stock purchasable upon exercise of a Warrant shall be made pursuant to this Section 9.1 or Section 9.2 as a result of, or in connection with, the issuance of options or rights to purchase Common Stock issued to employees of the Company or its Subsidiaries pursuant to a stock option or other similar plan adopted by the Board of Directors or an employment agreement approved by the Board of Directors, or the modification, renewal or extension of any such plan or agreement if approved by the Board of Directors. (m) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for purposes of taking any action that requires an adjustment of the Exercise Price under this Section 9, and shall, thereafter and before the effective date of such action, legally abandon its plan to take such action, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. 9.2. Adjustment to Number of Warrant Shares. Upon each adjustment of the Exercise Price pursuant to Section 9.1 hereof the number of Warrant Shares purchasable upon exercise of a Warrant outstanding prior to the effectiveness of such adjustment shall be adjusted to the number, calculated to the nearest one-hundredth of a share, obtained by (x) multiplying the number of Warrant Shares purchasable immediately prior to such adjustment upon the exercise of a Warrant by the Exercise Price in effect prior to such adjustment and (y) dividing the product so obtained by the Exercise Price in effect after such adjustment of the Exercise Price. 9.3. Organic Change. (a) Company Survives. Upon the consummation of an Organic Change (other than a transaction in which the Company is not the surviving entity), lawful provision shall be made as part of the terms of such transaction whereby the terms of the Warrant Certificates shall be modified, without payment of any additional consideration therefor, so as to provide that upon exercise of Warrants following the consummation of such Organic Change, the Warrantholders of such Warrants shall have the right to purchase only the kind and amount of securities, cash and other property receivable upon such Organic Change by a holder of the number of Warrant Shares into which such Warrants might have been exercised immediately prior to such Organic Change, assuming such holder of Warrant Shares (i) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which a sale, transfer or lease of all or substantially all of the assets of the Company was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person, and (ii) failed to exercise his rights of election, if any, as to the kind and amount of securities, cash and other property receivable upon such Organic Change (provided that if the kind and amount of securities, cash and other B-15 58 property receivable upon such Organic Change is not the same for each share of Common Stock held immediately prior to such Organic Change by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing shares"), then for the purpose of this subsection (a) the kind and amount of securities, cash and other property receivable upon such Organic Change by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares); provided, however, that no adjustment shall be made as a result of such Organic Change to the Exercise Price or the number of Warrant Shares notwithstanding any provision of Section 9 hereof unless any event requiring any such adjustment shall have occurred or shall occur prior to, upon or after such Organic Change. Lawful provision also shall be made as part of the terms of the Organic Change so that all other terms of the Warrant Certificates shall remain in full force and effect following such an Organic Change. The provisions of this Section 9.3(a) shall similarly apply to successive Organic Changes. (b) Company Does Not Survive. The Company shall not enter into an Organic Change that is a transaction in which the Company is not the surviving entity unless lawful provision shall be made as part of the terms of such transaction whereby the surviving entity shall issue new securities to each Warrantholder, without payment of any additional consideration therefor, with terms that provide that upon the exercise of the Warrants, the Warrantholders of such Warrants shall have the right to purchase only the kind and amount of securities, cash and other property receivable upon such Organic Change by a holder of the number of Warrant Shares into which such Warrants might have been exercised immediately prior to such Organic Change, assuming such holder of Warrant Shares (i) is not a Constituent Person or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind and amount of securities, cash and other property receivable upon such Organic Change (provided that if the kind and amount of securities, cash and other property receivable upon such Organic Change is not the same for each non-electing share, then for the purpose of this subsection (b) the kind and amount of securities, cash and other property receivable upon such Organic Change by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares); provided, however, that no adjustment shall be made as a result of such Organic Change to the Exercise Price or the number of Warrant Shares notwithstanding any provision of Section 9 hereof unless any event requiring any such adjustment shall have occurred or shall occur prior to, upon or after such Organic Change. The certificate or articles of incorporation or other constituent document of the surviving entity shall provide for such adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be equivalent to the adjustments provided for in Section 9.1 hereof. 9.4. Statement on Warrants. The form of Warrant Certificate need not be changed because of any adjustment made pursuant to Section 8, Section 9.1 or Section 9.2 B-16 59 hereof, and Warrants issued after such adjustment may state the same Exercise Price and the same number of Warrant Shares as are stated in this Warrant Certificate. Section 10. Warrant Agent. The Company shall cause to be appointed in the Borough of Manhattan, The City of New York, a Warrant Agent, having a capital and surplus of at least $50,000,000. Initially, ChaseMellon Shareholder Services, L.L.C., will act as Warrant Agent. Section 11. Fractional Interests. The Company shall not be required to issue Fractional Warrant Shares on the exercise of the Warrants evidenced by this Warrant Certificate. If any Fractional Warrant Share would, but for the provisions of this Section 11, be issuable on the exercise of the Warrants evidenced by this Warrant Certificate (or specified portions thereof), the Company shall pay an amount in cash equal to the fraction of a Warrant Share represented by such Fractional Warrant Share multiplied by the Closing Price on the day of such exercise. Section 12. No Rights as Shareholder. Nothing in this Warrant Certificate shall be construed as conferring upon the Warrantholder or its transferees any rights as a shareholder of the Company, including the right to vote, receive dividends, consent or receive notices as a shareholder with respect to any meeting of shareholders for the election of directors of the Company or any other matter. Section 13. Successors. All the covenants and provisions of this Warrant Certificate by or for the benefit of the Company or the Warrantholder shall bind and inure to the benefit of their respective successors and permitted assigns hereunder. Section 14. Governing Law; Choice of Forum, Etc. The validity, construction and performance of this Warrant Certificate shall be governed by, and interpreted in accordance with, the laws of New York without reference to its conflict of laws rules. The Company and the Warrantholders (the "parties hereto") agree that the appropriate and exclusive forum for any disputes arising out of this Warrant Certificate solely between or among any or all of the Company, on the one hand, and the Investor and/or any Person who has become a Warrantholder, on the other, shall be the United States District Court for the Southern District of New York, and, if such court will not hear any such suit, the courts of the state of the Company's incorporation, and the parties hereto irrevocably consent to the exclusive jurisdiction of such courts, and agree to comply with all requirements necessary to give such courts jurisdiction. The parties hereto further agree that the parties will not bring suit with respect to any disputes, except as expressly set forth below, arising out of this Warrant Certificate for the execution or enforcement of judgment, in any jurisdiction other than the above specified courts. Each of the parties hereto irrevocably consents to the service of process in any action or proceeding hereunder by the mailing of copies thereof by registered or certified airmail, postage prepaid, if to (i) the Company, at 800 Connecticut Avenue, Norwalk, Connecticut, 06854, Attention: General Counsel, or at such other address specified by the Company in writing to the Warrant Agent, and (ii) any Warrantholder, at the address of such Warrantholder specified in the Warrant Register. B-17 60 The foregoing shall not limit the rights of any party hereto to serve process in any other manner permitted by the law or to obtain execution of judgment in any other jurisdiction. The parties further agree, to the extent permitted by law, that final and unappealable judgment against any of them in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of indebtedness. The parties agree to waive any and all rights that they may have to a jury trial with respect to disputes arising out of this Agreement. Section 15. Benefits of this Agreement. Nothing in this Warrant Certificate shall be construed to give to any Person other than the Company and the Warrantholder any legal or equitable right, remedy or claim under this Warrant Certificate, and this Warrant Certificate shall be for the sole and exclusive benefit of the Company and the Warrantholder. This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent. B-18 61 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of this __ day of __________________, _____________________. OXFORD HEALTH PLANS, INC. By:______________________ Name: Title: Attest: ______________________ Countersigned: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. , as Warrant Agent By:______________________ Name: Title: B-19 62 ELECTION TO EXERCISE (To be executed upon exercise of Warrants) To OXFORD HEALTH PLANS, INC.: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, Warrant Shares, as provided for therein, and tenders herewith payment of the purchase price in full in the form of [COMPLETE WHERE APPLICABLE]: cash or a certified or official bank check in the amount of $__________; and/or $__________ Stated Value of Senior Preferred Stock (as to which $__________ of accumulated dividends are unpaid), of which $____________ Stated Value and the corresponding accumulated dividends should be applied toward the payment of such Warrant Shares; and/or _______ number of Warrants, valued at $__________ each (such value arrived at by subtracting the Exercise Price of $__________ from the Warrant Market Price of $__________, both the Exercise Price and Warrant Market Price determined in accordance with the provisions of the Warrant Certificate); For a total purchase price of $__________. If the Stated Value and accumulated and unpaid dividends of the shares of Senior Preferred Stock or the value of the Warrants evidenced by the Warrant Certificate delivered herewith exceeds that portion of the payment which is to be paid by the surrender of such shares or Warrants, you are authorized, as agent of the undersigned, to deliver to the Company such shares or Warrant Certificate delivered herewith for exchange into smaller denominations in order that you may deliver to the undersigned new shares of Senior Preferred Stock or Warrant Certificates, in Stated Value or number as the case may be, equal to the difference between the Stated Value or number as the case may be, of the Senior Preferred Stock or Warrants surrendered, less the Stated Value or number as the case may be, thereof, used to purchase Warrant Shares. B-20 63 Please issue a certificate or certificates for such Warrant Shares in the name of, and pay any cash for any Fractional Warrant Shares to (please print name address and social security or other identifying number)*: Name: Address: Soc. Sec. #: AND, if said number of Warrant Shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of the undersigned for the balance remaining of the Warrant Shares purchasable thereunder rounded up to the next higher whole number of Warrant Shares. Signature:** * The Warrant Certificate and the Investment Agreement contain restrictions on the sale and other transfer of the Warrants evidenced by such Warrant Certificate. ** The above signature should correspond exactly with the name on the face of this Warrant Certificate or with the name of the assignee appearing in the assignment form below. B-21 64 ASSIGNMENT FORM (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (Name and Address of Assignee must be Printed or Typewritten) Warrants to purchase ______ Warrant Shares of the Company, evidenced by the within Warrant Certificate hereby irrevocably constituting and appointing _________________ Attorney to transfer said Warrants on the books of the Company, with full power of substitution in the premises. Dated: , Signature of Registered Holder* Signature Guaranteed: Signature of Guarantor * The above signature should correspond exactly with the name on the face of this Warrant Certificate. B-22 EX-5 3 OPINION RE LEGALITY 1 EXHIBIT 5 September *, 1999 Oxford Health Plans, Inc., 800 Connecticut Avenue, Norwalk, Connecticut 06854 Dear Sirs: In connection with the registration under the Securities Act of 1933 (the "Act") of 277,629.157 shares of Series D Cumulative Preferred Stock, without par value (the "Series D Preferred"), of Oxford Health Plans, Inc., a Delaware corporation (the "Company"); 132,808.069 shares of Series E Cumulative Preferred Stock, without par value (the "Series E Preferred"), of the Company; 15,800,000 Series A Warrants and 6,730,000 Series B Warrants (together the "Warrants") of the Company, and the 22,530,000 shares of Common Stock, par value $.01 per share, of the Company initially issuable upon exercise of the Warrants (the "Shares") (the Series D Preferred, the Series E Preferred, the Warrants and the Shares collectively, the "Securities"), we, as your counsel, have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, we advise you that, in our opinion, when the registration statement on Form S-3 (File No. 333-77529), as amended (the "Registration Statement"), relating to the Securities has become effective under the Act and the Securities have been duly issued and sold as contemplated by the Registration Statement, the Series D Preferred, the Series E Preferred and the Warrants will be validly issued, fully paid and nonassessable, and the Shares, when duly issued upon exercise of the Warrants, will be validly issued, fully paid and nonassessable. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. We have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by us to be responsible. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Validity of Securities" in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, EX-8 4 OPINON RE TAX MATTERS 1 Exhibit 8 September *, 1999 Oxford Health Plans, Inc., 800 Connecticut Avenue, Norwalk, Connecticut 06854. Ladies and Gentlemen: We have acted as your counsel in connection with the registration under the Securities Act of 1933 (the "Act") of 277,629.157 shares of Series D Cumulative Preferred Stock, without par value, of Oxford Health Plans, Inc., a Delaware corporation (the "Company"), 132,808.069 shares of Series E Preferred Stock, without par value, of the Company, 15,800,000 Series A Warrants of the Company, 6,730,000 Series B Warrants of the Company and 22,530,000 shares of common stock, par value $.01 per share, of the Company. We hereby confirm to you that our opinion is as set forth under the caption "Material United States Federal Income Tax Consequences" in the prospectus, dated September *, 1999 (the "Prospectus"), included in the related Registration Statement on Form S-3, as amended, that you filed with the Securities and Exchange Commission (the "Registration Statement"). We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Material United States Federal Income Tax Consequences." In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, EX-12 5 COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12 OXFORD HEALTH PLANS, INC. & SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS (IN THOUSANDS, EXCEPT RATIOS)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31 --------------------- ---------------------------------------------------- 1999 1998 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- ---- ---- Earnings (loss) before income taxes.............. $ 21,200 $(571,359) $(615,229) $(431,611) $172,049 $91,501 $49,926 Add back fixed charges...... 25,211 30,677 59,030 8,000 7,000 5,000 3,000 --------- --------- --------- --------- -------- ------- ------- Total earnings (loss)....... $ 46,411 $(540,682) $(556,199) $(423,611) $179,049 $96,501 $52,926 ========= ========= ========= ========= ======== ======= ======= Fixed charges: Interest (none capitalized)............ $ 20,211 $ 22,677 $ 43,030 $ -- $ -- $ -- $ -- Interest component of rental payments......... 5,000 8,000 16,000 8,000 7,000 5,000 3,000 --------- --------- --------- --------- -------- ------- ------- Total fixed charges..... $ 25,211 $ 30,677 $ 59,030 $ 8,000 $ 7,000 $ 5,000 $ 3,000 Preference dividends and amortization.............. $ 22,459 $ 5,718 $ 27,668 -- -- -- -- --------- --------- --------- --------- -------- ------- ------- Total fixed charges and preference dividends............. $ 47,670 $ 36,395 $ 86,698 $ 8,000 $ 7,000 $ 5,000 $ 3,000 ========= ========= ========= ========= ======== ======= ======= Ratio of earnings to fixed charges and preference dividends................. * * * * 25.6 19.3 17.6 ========= ========= ========= ========= ======== ======= =======
- ------------------------- * Earnings were insufficient to cover fixed charges and preference dividends by $642.9 million for the year 1998, $431.6 million for the year 1997, $1.3 million for the six months ended June 30, 1999 and $577.1 million for the six months ended June 30, 1998. For purposes of computing these ratios, we increased our combined earnings before income taxes, as reported in our most recent annual report on Form 10-K/A No. 2, as amended by our Form 10-K/A No. 3, and in our quarterly report on Form 10-Q for the quarter ended June 30, 1999, by the amount of our fixed charges. We then divided the amount of earnings by the amount of fixed charges and preference dividends, resulting in the ratio of earnings to combined fixed charges and preference dividends. Fixed charges represent interest expense plus the estimated interest factor in rental expense. We have not capitalized interest in any period. EX-15 6 LETTER RE INTERIM FINANCIAL INFORMATION 1 Exhibit 15 Letter of Ernst & Young LLP Re Unaudited Condensed Consolidated Interim Financial Information To Oxford Health Plans, Inc.: We are aware of the incorporation by reference in the Registration Statement (Form S-3 No. 333-77529) of Oxford Health Plans, Inc. for the registration of 22,530,000 shares of its common stock, 277,629.157 shares of Series D Cumulative Preferred Stock, 132,808.069 shares of Series E Cumulative Preferred Stock, 15,800,000 Series A Warrants and 6,730,000 Series B Warrants of our report dated May 5, 1999 relating to the unaudited condensed consolidated interim financial statements of Oxford Health Plans, Inc. that are included in its Form 10-Q/A No. 2 for the quarter ended March 31, 1999, and our report dated August 6, 1999 relating to the unaudited condensed consolidated interim financial statements of Oxford Health Plans, Inc. that are included in its Form 10-Q for the quarter ended June 30, 1999. /s/ Ernst & Young LLP Stamford, Connecticut September 24, 1999 EX-23.1 7 CONSENT OF ERNST & YOUNG LLP 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors Oxford Health Plans, Inc.: We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 No. 333-77529) and the related Prospectus of Oxford Health Plans, Inc. for the registration of 22,530,000 shares of its common stock, 277,629.157 shares of Series D Cumulative Preferred Stock, 132,808.069 shares of Series E Cumulative Preferred Stock, 15,800,000 Series A Warrants and 6,730,000 Series B Warrants and to the incorporation by reference therein of our report dated March 9, 1999, with respect to the consolidated financial statements and schedules of Oxford Health Plans, Inc. included in its Annual Report on Form 10-K/A No. 2, as amended by Form 10-K/A No. 3, for the year ended December 31, 1998, filed with Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Stamford, Connecticut September 24, 1999 EX-23.2 8 CONSENT OF KPMG LLP 1 Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT The Board of Directors Oxford Health Plans, Inc.: We consent to incorporation by reference in the Registration Statement on Form S-3 of Oxford Health Plans, Inc., related to the registration of common stock, Series D and Series E Cumulative Preferred Stock and Series A and Series B Warrants, of our reports dated February 23, 1998, relating to the consolidated balance sheet of Oxford Health Plans, Inc. and subsidiaries as of December 31, 1997, and the related statements of operations, shareholders' equity (deficit) and comprehensive earnings (loss), and cash flows for each of the years in the two-year period ended December 31, 1997, and the related consolidated financial statement schedules, which reports appear in the December 31, 1998 annual report on Form 10-K/A No. 2, as amended by Form 10-K/A No.3, of Oxford Health Plans, Inc. and subsidiaries. We also consent to the reference to our firm under the heading "Experts" in the prospectus. /S/ KPMG LLP Stamford, Connecticut September 24, 1999 -----END PRIVACY-ENHANCED MESSAGE-----