OXFORD HEALTH PLANS INC, PRE 14A, 1998-05-27

OXFORD HEALTH PLANS INC
PRE 14A, 1998-05-27
HOSPITAL & MEDICAL SERVICE PLANS

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<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( X ) Preliminary Proxy Statement
( ) Confidential, For use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

OXFORD HEALTH PLANS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):

- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

(5) Total fee paid:

- --------------------------------------------------------------------------------

( ) Fee paid previously with preliminary materials.

( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

- --------------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------

(3) Filing Party:

- --------------------------------------------------------------------------------

(4) Date Filed: May 22, 1998

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<PAGE> 2
May XX, 1998

Dear Stockholder:

You are cordially invited to attend the 1998 Annual Meeting of
Stockholders (the "Meeting") of Oxford Health Plans, Inc. (the "Company") to be
held on July XX, 1998 at 10:00 a.m., local time, at the Hyatt Regency Greenwich,
1800 East Putnam Avenue, Old Greenwich, Connecticut 06870.

This year, four directors are nominated for election to the Board. At the
Meeting you will be asked to elect four Class I Directors to serve until the
2001 Annual Meeting. You will also be asked to consider proposals to (i) approve
the vesting of voting rights in respect of the Company's Series B Cumulative
Preferred Stock, par value $0.01 per share, and the issuance, subject to
adjustment, of up to 6,730,000 shares of the Company's common stock, par value
$0.01 per share ("Common Stock") upon exercise of the Company's Series B
Warrants; (ii) amend the Oxford Health Plans, Inc. 1991 Stock Option Plan, as
amended (the "1991 Stock Option Plan"), to, among other things, increase the
number of shares of the Common Stock that can be issued under the 1991 Stock
Option Plan from 21,580,000 shares to 25,580,000 shares; and (iii) act on two
shareholder proposals.

The accompanying Proxy Statement provides a detailed description of these
proposals. You are urged to read the accompanying materials so that you may be
informed about the business to come before the Meeting.

It is important that your shares be represented at the Meeting.
Accordingly, we urge you, whether or not you plan to attend the Meeting, to
complete, sign and date your proxy and return it to us promptly in the enclosed
envelope. If you attend the Meeting, you may vote in person, even if you have
previously mailed in your proxy.

We look forward to seeing you at the Meeting.

Sincerely,

Norman C. Payson, M.D.
Chief Executive Officer
<PAGE> 3
OXFORD HEALTH PLANS, INC.
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
----------------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY XX, 1998
-----------------------------------------

To the Stockholders of Oxford Health Plans, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Oxford Health Plans, Inc. (the "Company") will be held on July XX,
1998 at 10:00 a.m., local time, at the Hyatt Regency Greenwich, 1800 East Putnam
Avenue, Old Greenwich, Connecticut 06870, for the following purposes:

1. To elect four directors to serve as Class I Directors of the
Company for a term ending at the 2001 Annual Meeting.

2. To approve the vesting of voting rights in respect of the
Company's Series B Cumulative Preferred Stock, par value $0.01
per share ("Series B Preferred Stock"), and the issuance,
subject to adjustment, of up to 6,730,000 shares of the
Company's Common Stock, par value $0.01 per share ("Common
Stock"), upon exercise of the Company's Series B Warrants (the
"Series B Warrants") issued to TPG Oxford LLC ("TPG Oxford")
and certain assignee purchasers (collectively with TPG Oxford,
the "Investors"), pursuant to the Investment Agreement, dated
as of February 23, 1998 (the "Investment Agreement"), between
TPG Oxford and the Company, at an exercise price, subject to
adjustment, of $17.75 per share of Common Stock, on the terms
and subject to the conditions set forth in the Series B
Warrants (the "Common Stock Issuance Proposal");

3. To amend the Oxford Health Plans, Inc. 1991 Stock Option Plan,
as amended, to increase the number of shares of Common Stock
issuable thereunder from 21,580,000 shares to 25,580,000
shares and effect certain other changes specified herein.

4. To act on two shareholder proposals.

5. To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.

Only holders of record of outstanding shares of Common Stock and the
Company's Series A Cumulative Preferred Stock, par value $0.01 per share (the
"Series A Preferred Stock"), at the close of business May XX, 1998 will be
entitled to notice of, and to vote at, the Meeting or any adjournment or
postponement thereof.

By Order of the Board of Directors

JEFFERY H. BOYD
Executive Vice President, General Counsel
and Secretary

Norwalk, Connecticut
May XX, 1998

--------------------------
<PAGE> 4
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 5
OXFORD HEALTH PLANS, INC.
800 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
----------------------------------

PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD JULY XX, 1998
-----------------------------------

INTRODUCTION

This Proxy Statement is being furnished to stockholders of Oxford Health
Plans, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on July XX, 1998, at 10:00 a.m., local
time, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich,
Connecticut 06870, and any adjournment or postponement thereof (the "Meeting").

At the Meeting, stockholders will be asked to consider and vote upon five
proposals: (1) to elect four directors to serve as Class I Directors of the
Company until the 2001 Annual Meeting; (2) to approve the vesting of voting
rights in respect of the Company's Series B Cumulative Preferred Stock, par
value $0.01 per share ("Series B Preferred Stock"), and the issuance, subject to
adjustment, of up to 6,730,000 shares of the Company's Common Stock, par value
$0.01 per share ("Common Stock"), upon exercise of the Company's Series B
Warrants (the "Series B Warrants") ("Proposal Number Two"); (3) to amend the
Oxford Health Plans, Inc. 1991 Stock Option Plan, as amended (the "1991 Stock
Option Plan"), to increase the number of shares of Common Stock issuable
thereunder from 21,580,000 shares to 25,580,000 shares and to effect certain
other changes described herein ("Proposal Number Three"), (4) to request that
the Board of Directors take the necessary steps to declassify the Board of
Directors so that directors are elected annually ("Proposal Number Four"); (5)
to prohibit the Company from investing in certain tobacco producing companies
("Proposal Number Five").

This Proxy Statement is dated May XX, 1998 and is first being mailed to
stockholders along with the related form of proxy on or about June XX, 1998.

If a proxy in the accompanying form is properly executed and returned to
the Company in time for the Meeting and is not revoked prior to the time it is
exercised, the shares represented by the proxy will be voted in accordance with
the directions specified therein for the matters listed on the proxy card.
Unless the proxy specifies otherwise proxies will be voted (a) FOR Proposal
Number One, Proposal Number Two and Proposal Number Three, (b) AGAINST Proposal
Number Four, (c) ABSTAIN for Proposal Number Five, and (d) otherwise in the
discretion of the proxy holders as to any other matter that may come before the
Meeting.

Votes are counted by tellers of the Company's transfer agent. These
tellers will canvas the stockholders present at the meeting, count their votes
and count the votes represented by proxies presented. Abstentions and broker
nonvotes are counted for purposes of determining the number of shares
represented at the Meeting, but are deemed not to have voted on the proposal.
Broker nonvotes occur when a broker nominee, holding shares in street name for
the beneficial owner thereof, has not received voting instructions from the
beneficial owner and does not have discretionary authority to vote.

REVOCABILITY OF PROXY

Any stockholder of the Company who has given a proxy has the power to
revoke such proxy at any time before it is voted either (i) by filing a written
revocation or a duly executed proxy bearing a later date with Jeffery H. Boyd,
Executive Vice President, General Counsel and Secretary of the Company, at
Oxford Health Plans, Inc., 800 Connecticut Avenue, Norwalk, Connecticut 06854,
or (ii) by appearing at the Meeting and voting in person. Attendance at the
Meeting will not in and of itself constitute the revocation of a proxy. Voting
by those present during the conduct of the Meeting will be by ballot.

RECORD DATE, OUTSTANDING SECURITIES AND VOTES REQUIRED

1
<PAGE> 6
The Board of Directors of the Company has fixed the close of business on
May XX, 1998 as the record date (the "Record Date") for determining holders of
outstanding shares of Common Stock and the Company's Series A Cumulative
Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), who are
entitled to notice of and to vote at the Meeting. As of the Record Date, there
were [ ] holders of record of the Company's Common Stock and [ ] shares of
Common Stock issued and outstanding, and [ ] holders of record of the
Company's Series A Cumulative Preferred Stock, par value $0.01 per share
("Series A Preferred Stock"), and 245,000 shares of Series A Preferred Stock
issued and outstanding. Each share of Common Stock is entitled to one vote, and
the shares of Series A Preferred Stock, in the aggregate, are entitled to
15,800,000 votes.

The approval of Proposal Number One requires the affirmative vote of a
plurality of the votes attributable to shares of Common Stock and Series A
Preferred Stock which are present in person or by proxy at the Meeting, the
approval of Proposal Number Two requires the affirmative vote of a majority of
the outstanding shares of Common Stock which are present in person or by proxy
at the Meeting and the approval of each of Proposal Number Three, Proposal
Number Four and Proposal Number Five requires the affirmative vote of a majority
of the votes attributable to outstanding shares of Common Stock.

The Company expects that the officers and directors of the Company will
vote the shares of Common Stock held by them (representing approximately 3.2% of
the shares of Common Stock issued and outstanding as of May 15, 1998) in favor
of Proposal Number One, Proposal Number Two and Proposal Number Three,
against Proposal Number Four and abstain with respect to Proposal Number Five.

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<PAGE> 7
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS

The Company's Second Amended and Restated Certificate of Incorporation, as
amended, provides for a Board of Directors divided into three classes, as nearly
equal in number as the then total number of directors constituting the entire
Board permits, with the term of office of one class expiring each year at the
Annual Meeting. Each class of directors is elected for a term of three years
except in the case of elections to fill vacancies or newly created
directorships.

The Board of Directors presently consists of eleven persons: Fred N.
Nazem, Norman C. Payson, M.D., James B. Adamson, David Bonderman, Jonathan J.
Coslet, James G. Coulter, Robert B. Milligan, Jr., Marcia J. Radosevich, Ph.D.,
Benjamin H. Safirstein, M.D., Thomas A. Scully and Stephen F. Wiggins.

Four individuals are to be elected to serve as Class I Directors for a
term of three years and until the election and qualification of their successor.
Unless a stockholder WITHHOLDS AUTHORITY, the holders of proxies representing
shares of Common Stock will vote FOR the election of James B. Adamson, David
Bonderman, Jonathan J. Coslet and Benjamin H. Safirstein, M.D. The Board of
Directors has no reason to believe that any nominee will decline or be unable to
serve as a Director of the Company. However, if a nominee shall be unavailable
for any reason, then the proxies may be voted for the election of such person as
may be recommended by the Board of Directors. Messrs. Nazem, Coulter and Scully
serve as Class II Directors and Dr. Payson, Mr. Milligan, Dr. Radosevich and Mr.
Wiggins serve as Class III Directors. These directors are not standing for
reelection because their terms as directors extend past the Meeting.

Pursuant to the terms of the Investment Agreement dated as of February 23,
1998 (the "Investment Agreement") by and between the Company and TPG Oxford LLC,
an affiliate of Texas Pacific Group ("TPG"), affiliates of TPG and certain
assignees of TPG Oxford LLC purchased $350 million in shares of senior preferred
stock and warrants to purchase Common Stock and Junior Preferred Stock. In the
Investment Agreement, the Company agreed to appoint Norman C. Payson, M.D. as
its Chief Executive Officer and as a director and agreed that TPG would be
entitled to nominate four additional directors. Dr. Payson was elected Chief
Executive Officer and joined the Board of Directors in May 1998. Messrs.
Bonderman, Coslet and Coulter were nominated by TPG pursuant to the Investment
Agreement and joined the Board of Directors in May 1998. TPG is entitled to
nominate one additional director. For a more detailed description of the
Investment Agreement, see "Proposal Number Two".

The following table sets forth the age and title of each nominee director,
each director continuing in office and each executive officer of the Company who
is not a director, followed by descriptions of such person's additional business
experience during the past five years.

NOMINEES FOR ELECTION AS CLASS I DIRECTORS

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James B. Adamson 50 Director
David Bonderman 55 Director
Jonathan J. Coslet 33 Director
Benjamin H. Safirstein, M.D. 59 Director
</TABLE>

DIRECTORS WHOSE TERMS HAVE NOT EXPIRED

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Fred F. Nazem 57 Chairman of the Board of Directors
Norman C. Payson, M.D. 50 Chief Executive Officer, Director
James G. Coulter 38 Director
Robert B. Milligan, Jr. 48 Director
Marcia J. Radosevich, Ph.D. 45 Director
Thomas A. Scully 40 Director
Stephen F. Wiggins 41 Director
</TABLE>

3
<PAGE> 8
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>

William M. Sullivan 34 President
Marvin P. Rich 52 Executive Vice President, Chief
Administrative Officer
Albert A. Koch 55 Chief Financial Officer
Jeffery H. Boyd 41 Executive Vice President and General
Counsel
Alan Muney, M.D., M.H.A. 44 Executive Vice President, Chief
Medical Officer
Brendan R. Shanahan 36 Vice President and Controller
</TABLE>

Fred F. Nazem has served as a Director of the Company since June 1990. He
was elected non-executive Chairman of the Board in February 1998. Since 1981,
Mr. Nazem has been President of Nazem, Inc. and Managing General Partner of the
general partner of several Nazem & Company limited partnerships which are
affiliated venture capital funds. Mr. Nazem is a director of two public
companies, Tegal Corporation and Spatial Technologies, Inc., as well as a number
of privately held firms.

Norman C. Payson, M.D. became the Chief Executive Officer and a Director
of the Company in May 1998. Dr. Payson co-founded Healthsource, Inc. in 1985, a
health maintenance organization in Hooksett, New Hampshire, and served as
President and Chief Executive Officer of Healthsource until its sale to Cigna
Corporation in August of 1997 for $1.7 billion. From 1980 until 1984, Dr. Payson
was the Chief Executive Officer of the Hawthorne Community Medical Group, Inc.,
a multi-specialty physician group with a primary HMO practice of approximately
100,000 members. From 1975 to 1980, Dr. Payson was a family practitioner and
involved in HMOs.

James B. Adamson has been a Director of the Company since January 1996.
Since May 1995, he has been Chairman, President and Chief Executive Officer of
Advantica Restaurant Group (formerly Flagstar Companies, Inc.), one of the
nation's largest restaurant companies, which is headquartered in Spartanburg,
South Carolina. From January 1992 until February 1995, Mr. Adamson served in
several senior executive capacities with The Burger King Corporation, most
recently as Chief Executive Officer. From 1988 to 1991, he was Executive Vice
President, Marketing of Revco, Inc., a national drugstore chain. Mr. Adamson is
also a director of Kmart Corporation.

David Bonderman joined the Board of Directors in May 1998. Mr. Bonderman
is a principal of TPG, a partnership he co-founded in 1992. Mr. Bonderman serves
on the Boards of Directors of J. Crew Group, Inc., Continental Airlines, Inc.,
Bell & Howell Company, Virgin Entertainment, Beringer Wine Estates, Inc.,
Denbury Resources, Inc., Ducati Motor Holdings, S.p.A., Washington Mutual, Inc.,
and is Chairman of the Board of Ryanair, PLC. Mr. Bonderman also serves in
general partner advisory board roles for Newbridge Investment Partners, L.P.,
Newbridge Latin America, L.P. and Aqua International, L.P.

Jonathan J. Coslet joined the Board of Directors in May 1998. Mr. Coslet
has been an executive of TPG since 1993. Prior to joining TPG, Mr. Coslet was in
the Investment Banking Department of Donaldson, Lufkin & Jenrette, specializing
in leveraged acquisitions and high yield finance from September 1991 to February
1993. Mr. Coslet serves on the Board of Directors of PPOM, L.P. and Genesis
ElderCare Corp.

James G. Coulter joined the Board of Directors in May 1998. Mr. Coulter is
a principal of TPG, a partnership he co-founded in 1992. Mr. Coulter serves on
the Boards of Directors of J. Crew Group, Inc., America West Airlines, Inc.,
Virgin Entertainment, Beringer Wine Estates, Inc., Genesis ElderCare Corp. and
Paradyne Partners, L.P. and was formerly on the Board of Directors of Allied
Waste Industries, Inc. and Continental Airlines, Inc. Mr. Coulter also serves in
general partner advisory roles for Newbridge Investment Partners, L.P.,
Newbridge Latin America, L.P. and Aqua International, L.P.

4
<PAGE> 9
Robert B. Milligan, Jr. has been a Director of the Company since July
1992. Mr. Milligan is Chairman of Wyndam Capital, L.P., a registered
broker-dealer, and, through December 1997, was Director, President and Chief
Executive Officer of Verigen Inc., a biopharmaceutical company. Mr. Milligan
currently engages in business and financial consulting as President and Chief
Executive Officer of Fairchester, Inc. Mr. Milligan has been an officer and has
served on the boards of several private and public companies.

Marcia J. Radosevich, Ph.D. was elected a Director in July 1994. Dr.
Radosevich has been acting as a consultant to Boston University's Health Policy
Institute since March 1998. From April 1992 until December 1997, Dr. Radosevich
was the Chairman, President and Chief Executive Officer of HPR Inc. (formerly,
Health Payment Review, Inc.), a software company headquartered in Cambridge,
Massachusetts, which develops and markets cost management, provider profiling
and information systems for the health care industry. From December 1997 until
March 1998, Dr. Radosevich worked as a consultant to HPR Inc. From July 1988 to
April 1992, Dr. Radosevich served as the President and Chief Executive Officer
of HPR Inc. which she co-founded in 1988.

Benjamin H. Safirstein, M.D. has been a Director since 1985. Dr.
Safirstein has been Oxford's New York Regional Vice President and Medical
Director since January 1996 after serving as the Senior Medical Director of the
Company from 1985 to September 1992. Dr. Safirstein is a Clinical Associate
Professor of Medicine and is the Director of Pulmonary Medicine at Saint
Michael's Medical Center, Newark, New Jersey. He is board certified in internal
medicine and pulmonary medicine. Dr. Safirstein also is in private practice with
the Montclair Medical Group, Montclair, New Jersey. Dr. Safirstein is a graduate
of the Chicago Medical School and the Mount Sinai Hospital residency program,
where he was Chief Resident of Medicine.

Thomas A. Scully was elected a Director in September 1993. Since January
1995, he has been President of the Federation of American Health Systems in
Washington, D.C. From 1992 until the end of 1994, he was a partner in the
Washington D. C. law firm of Patton, Boggs & Blow. Prior to that, Mr. Scully
served for four years on the White House staff. During 1992, he was Deputy
Assistant for Domestic Policy to President Bush. From 1989 to 1992, he served as
counselor to the Director of OMB and as the Associate Director of OMB for Human
Resources, Veterans and Labor. He also participated in the formulation of
President Bush's comprehensive Health Care Reform Plan. Prior to his White House
appointment, Mr. Scully was an attorney with the law firm Akin, Gump, Strauss,
Hauer & Feld.

Stephen F. Wiggins, the founder of the Company, served as Chairman of the
Board of Directors and Chief Executive Officer of the Company since its
formation in 1984 until August 1997. He retained the title of Chairman of the
Board until February 1998. Since February 1998 Mr. Wiggins has been a Director
of the Company.

William M. Sullivan joined the Company as Director of Sales in August of
1988, was appointed Vice President, Sales in January 1990, was elected Executive
Vice President in December 1994 and was appointed to the additional position of
Chief Executive Officer of the Company's New York region in October 1995. He was
appointed President and Chief Operating Officer in July 1996 and was elected
Chief Executive Officer of the Company in August 1997. In May 1998, Mr. Sullivan
became President of the Company. From April 1984 to August 1988, Mr. Sullivan
was the Manager of Employee Benefit Marketing for the Northeast regional office
of Lincoln National Life Insurance Company.

Marvin P. Rich joined the Company as Executive Vice President and Chief
Administrative Officer in March 1998. Previously, Mr. Rich was Executive Vice
President, Strategic Planning, Finance & Administration for Kmart Corporation
from October 1994 to March 1998. From 1989 through 1994, Mr. Rich was Executive
Vice President at Wellpoint Health Networks, Inc. in charge of specialty
companies and financial and information services.

Albert A. Koch has been a financial consultant to the Company acting in
the capacity of the Company's Chief Financial Officer since December 1997. Mr.
Koch has been the Chief Operating Officer of Jay Alix & Associates, a management
consulting firm, since February 1995. Prior thereto, Mr. Koch was a managing
director of Equity Partners of America from January 1988 until January 1995.

Jeffery H. Boyd joined the Company as Executive Vice President and General
Counsel in June 1995. Prior to joining the Company, Mr. Boyd was Assistant
General Counsel of Lord, Abbett & Co., a private investment management firm,
from July 1994 to May 1995. From March 1988 to June 1994, Mr. Boyd was a partner
with the law firm of Robinson & Cole.

5
<PAGE> 10
Alan Muney, M.D., M.H.A. joined the Company as Vice President/Chief
Medical Officer in April 1998. Prior thereto, Dr. Muney was the Senior Vice
President of Medical Affairs/Chief Medical Officer of Avanti Health Systems and
NYLCare Health Plans from December 1995 until April 1998. From 1988 until 1995,
Dr. Muney held a number of positions with Mulliken Managed Care, his most recent
position being Regional Medical Director.

Brendan R. Shanahan joined the Company as Controller in July 1991 and was
elected Vice President and Controller in October 1995. From July 1984 to July
1991, Mr. Shanahan was an auditor with KPMG Peat Marwick LLP in the firm's New
York health care practice audit department, most recently as a Senior Audit
Manager.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Audit Committee, the current
members of which are Messrs. Nazem (Chairman) Coslet, Milligan and Scully, a
Compensation Committee currently comprised of Messrs. Milligan (Chairman),
Coulter and Scully, a Nominating Committee currently comprised of Messrs.
Bonderman (Chairman), Milligan and Nazem and Dr. Payson, an Ethics and
Business Practices Committee, the current members of which are Messrs. Adamson
(Chairman), Coslet, Wiggins, Nazem and Scully and Dr. Radosevich and a Special
Litigation Committee, the current members of which are Messrs. Bonderman
(Chairman) and Coslet and Dr. Payson. On January 6, 1998, the Board of
Directors established an Executive Committee, the members of which were Messrs.
Nazem, Adamson and Wiggins. The Executive Committee was disbanded on February
23, 1998.

The functions of the Audit Committee are to recommend annually to the
Board of Directors the appointment of the independent certified public
accountants for the Company, discuss and review the scope and the fees of the
prospective annual audit and review the results thereof with the independent
certified public accountants, review and approve nonaudit services of the
independent certified public accountants, review compliance with existing major
accounting and financial policies of the Company, review the adequacy of the
financial organization of the Company, and review management's procedures and
policies relative to the adequacy of the Company's internal accounting controls
and compliance with federal and state laws relating to accounting practices.

The Compensation Committee consists entirely of independent directors and
administers the Company's 1991 Stock Option Plan, the Oxford Health Plans, Inc.
1997 Independent Contractor Plan (the "Independent Contractor Plan") and the
1996 Management Incentive Compensation Plan of Oxford Health Plans, Inc. (the
"Incentive Compensation Plan") and oversees administration of the Company's 401k
Plan. The Committee also reviews and recommends from time to time amendments to
compensation plans, such as the amendment to the 1991 Stock Option Plan which is
the subject of a proposal in this proxy statement and new compensation plans.
The Compensation Committee also considers and makes recommendations with respect
to the compensation of the Company's Chief Executive Officer and other members
of senior management and makes recommendations to the Board of Directors
generally on organization, succession, salary and incentive compensation, and
other grants and awards under the Company's compensation and benefit plans.

The Nominating Committee consists of a majority of independent directors
and was established in 1995 to consider and make recommendations on nominations
for membership in the Company's Board of Directors. The Committee will consider
nominees recommended by stockholders upon submission in writing to the Secretary
of the Company of the names of such nominees, together with their qualifications
for service as a director of the Company.

The Ethics and Business Practices Committee was established in 1997 to
supervise the development of comprehensive programs to promote and monitor the
Company's compliance with applicable legal and regulatory requirements and the
development of value-based business practice guidelines for the Company. The
Committee works directly with the Company's Vice President - Compliance and also
oversees the Company's responses to regulatory examinations and inquiries.

In May 1998, the Board of Directors established a Special Litigation
Committee to oversee and direct the Company's position and responses with
respect to pending class action and derivative litigation and related
regulatory investigations and proceedings. The members of the Special
Litigation Committee all were appointed to the Board of Directors after the
events which have given rise to the litigation.

In January 1998, the Board of Directors established an Executive Committee
to supervise certain aspects of the Company's operations, the members of which
were James B. Adamson, Fred F. Nazem and Stephen F. Wiggins, with Mr. Nazem
acting as Chairman of the Committee. The Executive Committee was disbanded in
February 1998.

During 1997, the Board of Directors held [seven] meetings, the Audit
Committee held four meetings, the Compensation Committee held four meetings and
the Ethics and Business Practices Committee held two meetings. The Nominating
Committee did not hold any meetings in 1997. During 1997, each Director of the
Company attended at least 75% of the meetings of the Board of Directors and 75%
of the meetings of any committees upon which he or she served.

6
<PAGE> 11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers, Inc. Officers, directors and greater than ten
percent stockholders are required by the Commission to furnish the Company with
copies of all Section 16(a) forms that they file.

Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no reports on Form 5 were
required for those persons, the Company believes all filing requirements
applicable to its officers, directors and greater than ten percent stockholders
were complied with, except as follows: (i) Mr. Cassidy - two Form 4s for six
gifts of the Company's securities to his daughters and one Form 4 for three
subsequent sales of the Company's securities by his daughters, all prior to
1997; (ii) Dr. Safirstein - five Form 4s for eleven gifts of the company's
securities and one transfer of the Company's securities from direct to indirect
beneficial ownership in 1994, 1995, 1996 and 1997; (iii) Mr. Snow - one Form 4
for one sale of the Company's securities prior to 1997; (iv) Mr. Sullivan - five
Form 4s for thirteen gifts of the Company's securities in 1995, 1996 and 1997;
(v) Dr. Thomas Travers - two Form 4s for four gifts of the Company's securities
prior to 1997; and (vi) Ms. Jeanne Wisniewski - two Form 4s for eight gifts of
the Company's securities prior to 1997. The appropriate Form 4s have been filed.

7
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation of Stephen F. Wiggins and
William M. Sullivan, each of whom served as Chief Executive Officer of the
Company during 1997, and the five most highly compensated executive officers of
the Company in 1997.

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPEN- ALL OTHER
NAME AND PRINCIPAL ---------------------- SATION AWARDS- COMPENSA-
POSITION YEAR SALARY BONUS OTHER OPTIONS(2) TION(3)
----------- ---- ------ ----- ----- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
STEPHEN F. WIGGINS 1997 $623,077 $ -- $56,343 70,000 $2,673
CHAIRMAN AND CHIEF 1996 600,000 1,080,000 57,641 100,000 3,958
EXECUTIVE OFFICER (4) 1995 600,000 161,540 47,323 200,000 4,465

WILLIAM M. SULLIVAN 1997 492,692 -- 32,048 100,000 1,915
PRESIDENT AND CHIEF 1996 259,616 250,000 32,085 35,000 2,375
EXECUTIVE OFFICER (5) 1995 247,981 67,810 25,973 60,000 2,316

JEFFERY H. BOYD 1997 320,567 250,000 32,827 70,000 3,971
EXECUTIVE VICE PRESIDENT 1996 259,616 130,000 32,835 35,000 4,113
AND GENERAL COUNSEL 1995 171,126 42,550 29,780 180,000 --

DAVID B. SNOW, JR 1997 303,308 -- 32,273 70,000 3,896
EXECUTIVE VICE PRESIDENT, 1996 259,616 130,000 32,085 35,000 4,750
MEDICAL DELIVERY SYSTEMS 1995 250,000 67,310 25,973 60,000 4,620
AND GOVERNMENT PROGRAMS(6)

ROBERT M. SMOLER 1997 295,000 -- 32,373 60,000 3,136
EXECUTIVE VICE PRESIDENT, 1996 259,616 130,000 34,963 35,000 3,393
AND CHIEF EXECUTIVE 1995 250,000 67,310 25,973 60,000 3,300
OFFICER - NEW YORK REGION(7)

ANDREW B. CASSIDY 1997 286,923 -- 31,598 60,000 3,988
EXECUTIVE VICE PRESIDENT 1996 259,616 130,000 32,085 35,000 3,988
AND CHIEF FINANCIAL OFFICER(8) 1995 189,177 51,340 25,793 60,000 3,850

PAUL RICKER 1997 281,154 -- 37,468 60,000 1,381
VICE PRESIDENT AND CHIEF 1996 259,616 130,000 29,780 45,000 --
INFORMATION OFFICER(9) 1995 -- -- -- -- --
</TABLE>

(1) Amounts shown include payments by the Company to the named officers
pursuant to the Company's Incentive Compensation Plan. Includes amounts of
compensation deferred by the named officers pursuant to the Company's
qualified defined contribution plan (the "Savings Plan").

(2) All option grants have been adjusted for the Company's two-for-one stock
splits effected in March 1995 and March 1996.

(3) Matching contributions made by the Company pursuant to the Savings Plan.

(4) Mr. Wiggins served as Chief Executive Officer until August 1997. Mr.
Wiggins resigned from his position as Chairman effective February 23,
1998.

(5) Mr. Sullivan was elected Chief Executive Officer in August 1997.

(6) Mr. Snow resigned from his position with the Company effective April 10,
1998.

(7) Mr. Smoler resigned from his position with the Company effective April 10,
1998.

(8) Mr. Cassidy resigned from his position with the Company effective December
22, 1997.

(9) Mr. Ricker resigned from his position with the Company effective March 17,
1998

8
<PAGE> 13
OPTIONS GRANTED IN 1997

The following table sets forth certain information regarding stock options
granted in 1997 to the seven individuals named in the Summary Compensation
Table. In addition, in accordance with the Commission's rules, the table also
shows a hypothetical potential realizable value of such options based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the date
the options were granted over the full option term. The assumed rates of growth
were selected by the Commission for illustrative purposes only, and are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. In addition, the
closing price of the Company's Common Stock on December 31, 1997 was $15.562.
Based on that price and assumed stock price appreciation of 10% per year over
the option term, the potential realized value for such options over their term
would be zero. Based upon the closing stock price and the number of shares of
Common Stock outstanding at the end of 1997, an assumed annual stock price
appreciation of 10% would produce a corresponding aggregate pretax gain over the
full option term of approximately $755,092,000 for the Company's common
shareholders.

<TABLE>
<CAPTION>
Potential
Number of % of Total Realizable Value at Assumed
Securities Options Per Annual Rates of Stock Price
Underlying Granted to Share Appreciation For Option Term
Options Employees Exercise Expiration ----------------------------
Name Granted (1) In Fiscal Year Price (2) Date 5% 10%
- -------------------- ----------- -------------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
STEPHEN F. WIGGINS 70,000 2.1% $ 74.00 8/8/2002 $1,431,000 $3,162,000

WILLIAM M. SULLIVAN 100,000 3.1% $ 74.00 8/8/2002 $2,044,000 $4,518,000

JEFFERY H. BOYD 70,000 2.1% $ 74.00 8/8/2002 $1,431,000 $3,162,000

DAVID B. SNOW, JR 70,000 2.1% $ 74.00 8/8/2002 $1,431,000 $3,162,000

ROBERT M. SMOLER 60,000 2.1% $ 74.00 8/8/2002 $1,227,000 $2,711,000

ANDREW B. CASSIDY 60,000 1.8% $ 74.00 8/8/2002 $1,227,000 $2,711,000

PAUL E. RICKER 60,000 1.8% $ 74.00 8/8/2002 $1,227,000 $2,711,000
</TABLE>

(1) All options granted and reported in this table were made pursuant to the
Oxford Health Plans, Inc. 1991 Stock Option Plan, as amended (the "1991 Stock
Option Plan"), and have the following material terms: options may be either (i)
"incentive stock options" under Section 422 of the Internal Revenue Code of 1986
or (ii) nonqualified stock options; all options expire not more than seven years
from the date of grant, or not more than five years from the date of grant in
the case of incentive stock options granted to an employee holding 10% or more
of the voting stock of the Company; the aggregate fair market value (determined
at the time of grant) of shares issuable pursuant to incentive stock options
which become exercisable in any calendar year by an employee may not exceed
$100,000. For all of the above-named executive officers, 25% of options granted
under the 1991 Stock Option Plan vest on each of the first four anniversaries
following the date of grant. The Committee may provide for accelerated
exercisability of options upon the optionee's death, retirement, disability (or
other events), upon a Change in Control (as defined in the 1991 Stock Option
Plan) or the reasonable possibility of a Change in Control during the succeeding
six-month period. The Committee has determined that all of the above named
officers' options shall vest upon a Change of Control. Pursuant to the terms of
Mr. Wiggins' Retirement, Consulting and Non-Competition Agreement (described
below), all of Mr. Wiggins' options vested effective February 23, 1998.

(2) Exercise price is the fair market value of the Common Stock at the date of
grant.

9
<PAGE> 14
AGGREGATE OPTION EXERCISES IN 1997
AND OPTION VALUES AT DECEMBER 31, 1997

The following table sets forth certain information concerning stock option
exercises by the seven individuals named in the Summary Compensation Table
during 1997, including the aggregate value of gains on the date of exercise. In
addition, this table includes the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1997. Also reported are the
values for "in-the-money" options which represent the excess of the closing
market price of the Common Stock at December 31, 1997 over the exercise price of
any such existing stock options. All exercises have been adjusted for the
Company's two-for-one stock splits effected in 1993, 1995 and 1996.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
Shares Acquired Value At December 31, 1997(#) At December 31, 1997($)
----------------------- -----------------------
Name On Exercise Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------- --------------- ---------- ------------------------------ -------------------------

<S> <C> <C> <C> <C> <C>
STEPHEN F. WIGGINS 420,000 $ 30,053,000 1,063,608 / 305,000(1) $ 7,223,000 / $ --

WILLIAM M. SULLIVAN 12,568 $ 865,000 342,382/ 186,250 $ 2,573,000 / $ --

JEFFERY H. BOYD 4,176 $ 206,000 68,898/ 186,250 $ -- / $ --

DAVID B. SNOW, JR. 35,000 $ 2,496,000 307,218 / 244,240 $ 1,543,000 / $ 978,780

ROBERT M. SMOLER 122,568 $ 6,588,000 124,790 / 146,250 $ 285,000 / $ --

ANDREW B. CASSIDY 68,000 $ 1,682,000 63,750 / 141,250 $ -- / $ --

PAUL E. RICKER -- $ -- 18,748 / -- $ -- / $ --
</TABLE>

(1) Pursuant to the terms of Mr. Wiggins' Retirement, Consulting and
Non-Competition Agreement (described below), all of Mr. Wiggins' options
vested effective February 23, 1998.

DIRECTORS' COMPENSATION

Each non-employee director of the Company receives an annual retainer of
$38,000. In addition, each non-employee director is entitled to receive $1,000
plus expenses for each meeting of the Board of Directors and for each committee
meeting attended and $500 for each meeting attended by telephone. Directors who
are not employees of the Company may participate in the Non-Employee Directors
Stock Option Plan, as amended (the "Plan") and be awarded nonqualified stock
options. The Plan currently provides that each year, on the first Friday
following the Company's Annual Meeting of Stockholders, each individual elected,
reelected or continuing as a Non-Employee Director will automatically receive a
nonqualified stock option for 5,000 shares of the Company's Common Stock. The
exercise price for such options is either the average of the high and low prices
at which the Common Stock traded on the Nasdaq National Market on the date of
grant or the last sale price of Common Stock on the Nasdaq National Market on
the date of grant, whichever is higher. The Plan provides that one-fourth of the
options granted under the Plan vest on each of the date of grant and the Friday
prior to the first, second and third Annual Meeting of Stockholders following
the date of grant. Pursuant to the Plan, on April 25, 1997, Dr. Radosevich and
Messrs. Nazem, Adamson, Milligan and Scully were each granted options to
purchase 5,000 shares at an exercise price of $59.375 per share.

In January 1998, the Board of Directors established an Executive Committee to
supervise certain aspects of the Company's operations the members of which were
James B. Adamson, Fred F. Nazem and Stephen F. Wiggins, with Mr. Nazem acting as
Chairman of the Executive Committee. The Executive Committee was disbanded in
February 1998. In recognition of the responsibilities assumed by Mr. Adamson and
Mr. Nazem in serving on the Executive Committee, the Compensation Committee
recommended, and the Board determined, that Mr. Adamson and Mr. Nazem be awarded
cash compensation of $100,000 and $125,000, respectively, and options to acquire
20,000 and 75,000 shares, respectively, of the Company's Common Stock. In the
first quarter of 1998, Mr. Milligan, Mr. Scully and Dr. Radosevich each received
a payment of $30,000 in lieu of Board and Committee meeting fees for a
substantial number of meetings and telephone conferences held through February
1998. Mr. Milligan received

10
<PAGE> 15
an additional payment of $70,000 as compensation for substantial time devoted by
Mr. Milligan in recruiting new management personnel and preparation and
negotiations relating to agreements with management personnel. Effective
February 23, 1997, Mr. Nazem agreed to serve as Chairman of the Board of
Directors. As compensation for his service as such, the Board of Directors
approved payment of an annual retainer of $250,000 and on March 30, 1998 Mr.
Nazem was granted options to acquire 250,000 shares of the Company's Common
Stock, subject to approval of the Company's shareholders of the amendments to
the Company's 1991 Stock Option Plan referred to below. These options vest in
two tranches of 100,000 and 150,000. The first tranche vested on May 13, 1998
upon the closing of the Company's financing and the second tranche vests upon
the earlier of (i) the average closing price of the Company's Common Stock for
any 20 day period preceding the second anniversary of the grant being equal to
or greater than twice the exercise price or (ii) March 30, 2003. The vesting of
these options would be accelerated upon a change of control (as defined in the
agreement) or upon Mr. Nazem's ceasing to act as Chairman.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

In 1996, Mr. Sullivan and Mr. Boyd entered into employment agreements
with the Company both of which were amended in February 1998. The agreements are
for initial two-year terms and automatically renew for an additional two years
upon each second anniversary of their effective dates, unless prior notice to
not renew is given. Upon a Change in Control of the Company (as defined in the
agreements), the agreements automatically extend to a two-year term. Mr.
Sullivan's annual base salary is $600,000. In addition, Mr. Sullivan is eligible
to receive an annual bonus which is set at a target level equal to 100% of his
base salary (subject to the Compensation Committee's discretion) and shall be
payable in the event certain performance criteria are met. Under the terms of
the February 1998 amendment, Mr. Sullivan received a cash payment of $250,000 on
March 31, 1998 and is entitled to a payment of $250,000 on May 31, 1998. Mr.
Boyd's base salary is subject to annual review by the Company's Compensation
Committee, and may be increased at the discretion of the Compensation Committee.
In addition, under the terms of the February 1998 amendment, on March 31, 1998,
Mr. Boyd received a cash payment of $250,000. If prior to (or more than two
years following) a Change in Control, Mr. Boyd or Mr. Sullivan is terminated
without "Cause" or terminates employment for "Good Reason" (as such terms are
defined in the agreements), or if Mr. Boyd's or Mr. Sullivan's agreement is not
renewed, then Mr. Boyd would receive a lump sum payment equal to the sum of his
highest annual bonus earned in respect of the two fiscal years prior to the date
of termination and his base salary during the prior twelve months, and Mr.
Sullivan would receive a cash payment equal to two times the sum of his target
bonus for the year in which his employment is terminated plus his base salary
for the twelve month period prior to the date of termination. In addition, if
such an event were to occur in 1998, Mr. Boyd would receive a lump sum payment
of $1,200,000 and Mr. Sullivan would receive a lump sum payment of $2,400,000
and all of his outstanding stock options would vest immediately.

If during the two-year period following a Change in Control, Mr. Boyd
or Mr. Sullivan is terminated without Cause or terminates employment for Good
Reason, he would receive a lump sum payment equal to two times the sum of his
highest annual rate of base salary during the thirty-six-month period
immediately prior to the date of termination and his highest annual bonus earned
during the three fiscal years immediately preceding the date of termination, and
continued welfare benefits for two years.

If any payments made to Mr. Boyd or Mr. Sullivan pursuant to the
agreements or otherwise would be subject to any excise tax under Section 4999 of
the Internal Revenue Code, the Company will provide him with an additional
payment such that he retains a net amount equal to the payments he would have
retained if such excise tax had not applied.

Each of Mr. Boyd and Mr. Sullivan is subject to a one-year non-compete
provision if he voluntarily terminates employment prior to the end of the
employment term, unless such termination is approved by the Board of Directors
or is within the two-year period following a Change in Control. If Mr.
Sullivan's agreement terminates prior to a Change in Control or following the
two-year period immediately subsequent to a Change in Control as the result of
termination for Good Reason, termination without Cause or the Company's failure
to renew his agreement, Mr. Sullivan is subject to a two-year non-compete
provision.

In addition, the Compensation Committee of the Board of Directors has
determined that Messrs. Boyd's and Sullivan's options shall vest upon a Change
of Control (as defined in the 1991 Stock Option Plan).

On February 23, 1998 Mr. Wiggins and the Company entered into a three
year Retirement, Consulting and Non-Competition Agreement (the "Retirement
Agreement") pursuant to which Mr. Wiggins retired from his position as Chairman
of the Board and agreed to continue to act as a consultant to the Company for a
period of three years. Under the terms of the Retirement Agreement, the Company
agreed to pay Mr. Wiggins a lump sum cash payment of $3,600,000 and, during the
term of the Retirement Agreement, an annual amount of $1,800,000, payable
monthly. In addition, the Retirement Agreement provides that all of Mr. Wiggins'
options vested immediately upon the effective date of the Retirement Agreement
and that the expiration

11
<PAGE> 16
dates of the options are extended and shall continue to be exercisable until
February 2002. In addition, Mr. Wiggins agreed to a three year non-compete and
non-solicitation provision.

Following disclosure of the terms of the Retirement Agreement, certain
regulators, including, the New York State Insurance Department, expressed
concern that the cost of the Retirement Agreement would raise costs for the
Company's policyholders. The Company has confirmed that the cost of the
Retirement Agreement will be paid by the Company and will not be allocated
directly or indirectly to its regulated subsidiaries and will have no impact on
premiums for employer groups and members. The Company has suspended payments
under the Retirement Agreement pending further discussions with these officials.

The above notwithstanding, the Board of Directors carefully considered the
need for a smooth management transition (including Mr. Wiggins' standing with
employees as founder of the Company), Mr. Wiggins' pre-existing contractual
rights and the value of an ongoing non-competition and non-solicitation
agreement with Mr. Wiggins. The Board's assessment, with the advice of outside
experts, was that the aforementioned agreements were reasonable. These
agreements were structured not to affect the regulated subsidiaries and
individual consumers and were in the best interests of the Company, its
policyholders and its shareholders.

In December 1997, Mr. Cassidy resigned from his position with the Company.
Upon his resignation, the Company agreed to pay him an amount equal to his base
salary during the twelve months preceding the date of his resignation in twelve
equal monthly installments. Contemporaneous with Mr. Cassidy's resignation, he
entered into a service agreement with the Company pursuant to which the Company
will pay him on a per diem basis for consulting services for a period of twelve
months. Unless the services agreement is terminated for cause or Mr. Cassidy
voluntary terminates the agreement, Mr. Cassidy's outstanding stock options will
vest immediately upon the termination of the services agreement.

Mr. Snow resigned from his position with the Company effective April 10,
1998. Pursuant to the terms of his severance agreement, the Company agreed to
pay Mr. Snow, in twelve equal monthly installments, the sum of his base salary
earned during the twelve month period immediately preceding date of his
resignation plus a bonus equal to 50% of his base salary on December 31, 1997.
Mr. Snow also agreed to continue to act as a consultant to the Company on an as
needed basis at a per diem rate for a period of twelve months. Mr. Snow's
options will continue to vest during this consulting period.

Mr. Smoler resigned from his position with the Company effective April 10,
1998. Pursuant to the terms of his severance agreement, the Company agreed to
pay Mr. Smoler, in twelve equal monthly installments, the sum of his base salary
earned during the twelve month period immediately preceding the date of his
resignation plus a bonus equal to 50% of his base salary on December 31, 1997.
Mr. Smoler also agreed to continue to act as a consultant to the Company on an
as needed basis at a per diem rate for a period of twelve months. Mr. Smoler's
options will continue to vest during this consulting period.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In October 1997, the Company disposed of its 47% interest in Health
Partners, Inc. ("Health Partners"), a physician management company. The Company
received 2,090,109 shares of FPA Medical Management, Inc. ("FPAM") common stock
in exchange for its interest in Health Partners. The Company contracts with
provider groups managed by Health Partners, which is now a subsidiary of FPAM,
in the Company's service area. Any significant agreements between the Company
and Health Partners have been subject to review by the independent committee or
its designee.

In February 1998, Dr. Payson entered into an employment agreement with
the Company (the "Payson Agreement") for an initial four-year term, with an
automatic one year renewal on the fourth anniversary of the effective date and
on each anniversary thereafter, unless one year's prior notice not to renew is
given. Pursuant to the Payson Agreement, Dr. Payson served the Company initially
in a consulting capacity and, as of May 13, 1998, the closing date (the
"Financing Effective Date") of the financings pursuant to the Investment
Agreement (the "TPG Financing"), he became Chief Executive Officer (and was also
appointed a director) of the Company. Dr. Payson receives a base salary of
$350,000 and is eligible to receive an annual incentive award under the
Company's incentive compensation plans, with a guaranteed minimum bonus of
$350,000 for the period ending December 31, 1998. Upon consummation of the
Payson Agreement, Dr. Payson received a nonrefundable payment of $700,000 that
will offset any payments of base salary and bonus.

In addition, Dr. Payson was granted a nonqualified stock option (the
"Option") to purchase 2,000,000 shares of Company Common Stock, and a
nonqualified stock option (the "Additional Option") to purchase an additional
1,000,000 shares of Company Common Stock under the Company's 1991 Stock Option
Plan. The Option generally provides that 800,000 shares will vest on February
23, 1999, and that the remaining 1,200,000 shares will vest ratably on a monthly
basis over the 36-month period ending February 23, 2002, provided in each case
that Dr. Payson is employed by the Company on the applicable vesting date. The
Option also provides for acceleration of vesting and extended exercisability
periods in certain circumstances, including certain terminations of employment
and a change in control ( as defined in the 1991 Stock Option Plan) of the
Company. The Additional Option (i) is subject to the approval by the Company's
stockholders of certain amendments (the "Amendments") to the 1991 Stock Option
Plan (see "Proposal Number Three"), (ii) has an exercise price equal to the
closing price of the Company's Common Stock on the date of the 1998 annual
shareholder's meeting, (iii) will generally vest ratably over the four years
from the date of grant, and (iv) will otherwise be subject to the terms and
conditions of the 1991 Stock Option Plan. In the event that the Company's
stockholders fail to approve the Amendments at the annual meeting, the Company
and Dr. Payson will negotiate in good faith a mutually acceptable alternative
compensation arrangement. The Additional Option also provides for accelerated
vesting following a change in control (as defined in the 1991 Stock Option
Plan).

Pursuant to the Payson Agreement, upon the Financing Effective Date,
Dr. Payson purchased 644,330 shares of Company Common Stock (the "Purchased
Shares") at a cost of $10 million based on a purchase price of $15.52 per share.
The Purchased Shares and the shares acquired pursuant to exercise of the Option
and the Additional Option are subject to certain restrictions on transfer and
disposition during the term of the Payson Agreement, which restriction lapse
upon a change in control of the Company.

Pursuant to the Payson Agreement, if Dr. Payson is terminated by the
Company for Cause (as defined in the Payson Agreement) or if he voluntarily
terminates other than for Good Reason (as defined in the Payson Agreement), he
has agreed (i) not to compete with the Company for a period of six months
following such termination, if such termination occurs before the first
anniversary of the Payson Agreement, or for a period of one year following such
termination, if such termination occurs after the first anniversary of the
Payson Agreement, and (ii) not to solicit the Company's employees, customer and
providers for a period of six months following such termination. The
noncompetition and nonsolicitation covenants cease to apply following a change
of control of the Company.

The Company has entered into employment agreements with Mr. Rich and Dr.
Muney. Dr. Muney's agreement provides for an initial two-year term and Mr.
Rich's agreement provides for an initial four-year term. Each agreement provides
for automatic renewal for an additional two years upon each second anniversary
(initially on the fourth anniversary, in the case of Mr. Rich) of their
effective dates, unless prior notice to not renew is given.

Under the terms of their respective agreements, Mr. Rich will receive an
annual base salary of $600,000 a minimum annual performance bonus of $600,000, a
sign-on bonus of $300,000, and an option to acquire 800,000 shares of Company
common stock and Dr. Muney will receive an annual base salary of $350,000, a
sign-on bonus of $60,000, and annual performance bonus of a minimum of 50
percent of annual base salary, and an option to acquire 100,000 shares of
Company common stock under the 1991 Stock Option Plan. In addition, under Mr.
Rich's agreement, the Company agreed to loan Mr. Rich $600,000 upon the
following terms: (i) interest at the lowest rate to avoid imputed income; (ii)
four (4) year term; (iii) interest only annually; and (iv) principal only at the
end of four (4) year term or earlier at Mr. Rich's option or upon termination of
Mr. Rich's employment with the Company.

The agreements generally provide that Mr. Rich's and Dr. Muney's base
salary is subject to annual review by the Company's Compensation Committee, and
may be increased at the discretion of the Compensation Committee and that upon a
Change in Control of the Company (as defined in the Agreements), the Agreements
automatically extend to at least a two-year term. If prior to (or more than two
years following) a Change in Control, Mr. Rich or Dr. Muney is terminated
without "Cause" or terminates employment for "Good Reason" (as such terms are
defined in the Agreements), or if Mr. Rich's or Dr. Muney's Agreement is not
renewed, he would receive a lump sum payment equal to the sum of his annual
bonus during the fiscal year prior to the date of termination and his base
salary during the prior twelve months, provided that Mr. Rich would receive an
amount no less than $2,400,000 over twenty-four months.

The agreements generally provide that if, during the two-year period
following a Change in Control, Mr. Rich or Dr. Muney is terminated without Cause
or terminates employment for Good Reason, he would receive a lump sum payment
equal to two times the sum of his highest annual rate of base salary during the
thirty-six month period immediately prior to the date of termination and his
highest annual bonus earned during the three fiscal years immediately preceding
the date of termination, and continued welfare benefits for two years. Mr.
Rich's agreement provides for full vesting of his outstanding stock options and
for the continuation of welfare benefits for only one year.

The agreements also provide that if any payments made to Mr. Rich or Dr.
Muney pursuant to the agreements or otherwise would be subject to any excise tax
under Section 4999 of the Internal Revenue Code, the Company will provide him
with an additional payment such that he retains a net amount equal to the
payments he would have retained if such excise tax had not applied.

The agreements further provide that Mr. Rich and Dr. Muney agree not to
compete with the Company for a period of one year if he voluntarily terminates
employment prior to the end of the employment term, unless such termination is
for Good Reason, is approved by the Company's Board of Directors or is within
the two-year period following a Change in Control.

12
<PAGE> 17
M.D. as its Chief Executive Officer and as a director and agreed that TPG would
be entitled to nominate four additional directors. Messrs. Bonderman, Coslet and
Coulter were nominated by TPG pursuant to the Investment Agreement. TPG is
entitled to nominate one additional director. TPG is entitled to nominate one
additional director. For a more detailed description of the Investment
Agreement, see "Proposal Number Two".

13
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with regard to the beneficial
ownership of the Common Stock of the Company as of May 15, 1998, unless
otherwise indicated, by (i) each stockholder who is known by the Company to
beneficially own in excess of 5% of the outstanding shares of Common Stock, (ii)
each director and the nominees for director, (iii) each of the executive
officers named in the Summary Compensation Table and (iv) the directors and all
executive officers as a group.

<TABLE>
<CAPTION>
OWNERSHIP(1)
-------------------
NAME SHARES PERCENT
- ---- ---------- -------

<S> <C> <C>
TPG Partners II L.P., et. al. (2) 12,640,001 12.8%
201 Main Street
Fort Worth, TX 76102

Franklin Resources, Inc. (3) 4,331,300 4.4%
777 Mariners Island Boulevard
San Mateo, CA 94404-7777

William M. Sullivan (4) 610,167 *
Jeffery H. Boyd (5) 109,904 *
James B. Adamson (6) 26,250 *
Robert B. Milligan, Jr. (7) 4,375 *
Fred F. Nazem (8) 290,750 *
Marcia J. Radosevich, Ph.D. (9) 33,750 *
Benjamin H. Safirstein, M.D. (10) 106,819 *
Thomas A. Scully (11) 52,750 *
Stephen F. Wiggins (12) 3,005,840 3.1%
Norman C. Payson, M.D. (13) 644,330 *
David Bonderman (14) 12,640,001 12.8
James G. Coulter (14) 12,640,001 12.8
Jonathan J. Coslet 200 *
All Executive Officers and Directors as a 5,007,623 5.1%
Group (17 persons) (15)
</TABLE>

- -----------
*Less than one percent.

14
<PAGE> 19
(1) Includes shares which such persons have the right to acquire beneficial
ownership of within 60 days from the date hereof.

(2) On May 13, 1998, TPG Oxford LLC., TPG Parallel II, L.P. and TPG Investors
II, L.P. (the "TPG Entities") acquired warrants to purchase 12,640,001
shares of Common Stock and warrants to purchase (i) prior to Stockholder
Approval (as described in Proposal Number Two), 5,384 shares of the
Company's Series C Junior Participating Preferred Stock, par value $0.01
per share or (ii) following Stockholder Approval, 5,384,001 shares of
Common Stock. After giving effect to Proposal Number Two, the TPG
Entities' percentage beneficial ownership will be 17.1%.

(3) All information is as of December 31, 1997 and is furnished in reliance on
the Schedule 13G filed by Franklin Resources, Inc. with the Securities and
Exchange Commission in February 1998. After giving effect to Proposal
Number Two, Franklin Resources, Inc.'s percentage ownership will be 4.1%

(4) Includes 351,132 shares issuable upon exercise of stock options. Mr.
Sullivan currently holds unvested options to purchase 177,500 additional
shares of common stock.

(5) Includes 102,648 shares of common stock issuable upon exercise of options.
Mr. Boyd currently holds unvested options to purchase 152,500 additional
shares of common stock.

(6) Includes 26,250 shares issuable upon exercise of stock options. Mr.
Adamson currently holds unvested options to purchase 3,750 additional
shares of common stock.

(7) Includes 4,375 shares of common stock issuable upon exercise of options.
Mr. Milligan currently holds unvested options to purchase 6,250 additional
shares of common stock.

(8) Includes 288,750 shares of common stock issuable upon exercise of options.
Mr. Nazem currently holds unvested options to purchase 156,250 additional
shares of common stock.

(9) Includes 33,750 shares of common stock issuable upon exercise of options.
Dr. Radosevich currently holds unvested options to purchase 6,250
additional shares of common stock.

(10) Includes 80,000 shares of common stock issuable upon exercise of options,
18,937 shares of common stock held by Dr. Safirstein's spouse and children
and 3,664 shares of common stock held by the Safirstein Family Trust. Dr.
Safirstein disclaims beneficial ownership of the shares of common stock
held by his spouse and children and the Safirstein Family Trust. Dr.
Safirstein currently holds unvested options to purchase 35,000 additional
shares of common stock.

(11) Includes 52,750 shares of common stock issuable upon exercise of options.
Mr. Scully currently holds unvested options to purchase 6,250 additional
shares of common stock.

(12) Includes 1,356,040 shares of common stock issuable upon exercise of
options.

(13) Dr. Payson currently holds unvested options to purchase 2,000,000 shares.

(14) Includes shares purchased by TPG Partners II, L.P. ("TPG Partners"), TPG
Oxford LLC ("TPG Oxford"), TPG Parallel II, L.P. ("TPG Parallel") and TPG
Investors II, L.P. ("TPG Investors"). Messrs. Bonderman and Coulter,
directors of the Company, are directors, executive officers and
stockholders of TPG Advisors II, Inc. ("TPG Advisors"). TPG Advisors is
the general partner of TPG GenPar II, L.P., which is, in turn, the general
partner of each of TPG Partners, TPG Parallel and TPG Investors. TPG
Partners, TPG Parallel and TPG Investors own 85%, 6% and 9%, respectively,
of TPG Oxford.

(15) These numbers include 2,417,570 shares of common stock issuable upon
exercise of options but do not include shares attributed to Messrs.
Bonderman and Coulter as a result of their relationship to TPG Advisors
described above.

15
<PAGE> 20
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

REPORT OF COMPENSATION COMMITTEE

The Compensation Committee of the Board is responsible for reviewing the
Company's executive compensation program and policies each year and determining
the compensation of the Company's executive officers. The Company's compensation
programs and policies are designed to provide incentives that account for value
delivered to the Company's stockholders and that attract and retain individuals
of outstanding ability in key positions. The Company recognizes individual
performance and the performance of the Company relative to the performance of
other companies of comparable size, complexity and quality, and performance that
supports both the short-term and long-term goals of the Company. In addition to
exercising its business judgment, the Committee has also sought the advice of
nationally recognized consultants in developing its executive compensation
policies and agreements. The executive compensation program includes elements
which, taken together, constitute a flexible and balanced method of establishing
total compensation for senior management.

Compensation paid to the Company's executive officers for 1997 consisted
primarily of base salary, amounts deferred and matching contributions by the
Company under a long-term deferred compensation plan, and awards of stock
options pursuant to the Company's 1991 Stock Option Plan. Compensation under the
Company's 1991 Stock Option Plan constitutes a principal component of
compensation for senior executives, reflecting the Committee's desire to align
the interests of management with those of the Company's stockholders. Awards
under the 1991 Stock Option Plan were based upon individual executive
performance and contributions to the Company's performance. Stock options were
granted under the 1991 Stock Option Plan to all employees of the Company in
August 1997 with an exercise price of $74.00 per share. Subsequent to this
grant, the market price of the Company's common stock suffered a significant
decline as the result of financial losses announced by the Company. In order to
ensure that the options granted in August would provide a meaningful incentive
to motivate and retain employees, Company employees (except Messrs. Wiggins,
Sullivan, Boyd, Cassidy, Snow and Smoler) were given the opportunity to cancel
such options and receive in exchange a like number of options granted as of
January 2, 1998 with an exercise price of $17.125.

As a consequence of the losses incurred by the Company in 1997, executive
officers of the Company received no cash bonus or cash incentive compensation,
except for Mr. Boyd, the Company's General Counsel, relating to his efforts in
connection with the Company's response to legal and regulatory inquiries and
proceedings affecting the Company.

In connection with ongoing compensation plans and recent changes to the
Company's senior management, the Committee intends to continue to promote
compensation structures which, in the Committee's opinion, provide features
which properly align the Company's executive compensation with corporate
performance and the interest of its stockholders and which offer competitive
compensation relevant to comparable opportunities in the marketplace.

The Compensation Committee
Robert B. Milligan, Jr.
Thomas A. Scully
James B. Adamson

16
<PAGE> 21
PERFORMANCE GRAPH

The following graph compares the change in the Company's cumulative total
return on its Common Stock to (a) the change in the cumulative total return on
the stocks included in the NASDAQ Composite Index for U.S. Companies and (b) the
change in the cumulative total return on the stocks included in NASDAQ Health
Services Index assuming an investment of $100 made on December 31, 1991 and
comparing relative values on December 31, 1992, 1993, 1994, 1995, 1996 and 1997.
All of these cumulative total returns are computed assuming the reinvestment of
dividends at the frequency with which dividends were paid during the period.
Note that the Common Stock price performance shown below should not be viewed as
being indicative of future performance.

<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C> <C>
OXFORD HEALTH PLANS, INC. 100.00 262.76 492.93 737.07 1,374.16 2,178.68 578.96
NASDAQ STOCK MARKET INDEX 100.00 116.38 133.60 130.60 184.70 227.17 278.77
NASDAQ HEALTH SERVICES STOCK
INDEX 100.00 103.60 119.53 128.24 162.89 162.97 166.11

</TABLE>

17
<PAGE> 22
PROPOSAL NUMBER TWO

COMMON STOCK ISSUANCE PROPOSAL

DESCRIPTION OF PROPOSAL

Stockholders are being asked to consider and approve the vesting of voting
rights in respect of the Series B Preferred Stock (as defined below) and the
issuance, subject to adjustment, of up to 6,730,000 shares of Common Stock upon
exercise of the Series B Warrants issued to the Investors pursuant to the
Investment Agreement between TPG Oxford and the Company at an exercise price,
subject to adjustment, of $17.75 per share of Common Stock on the terms and
subject to the conditions set forth in the Investment Agreement and the Series B
Warrants. Approval of the proposal by the stockholders will result in a
reduction in the amount of dividends payable by the Company under the Series B
Preferred Stock of approximately $1,000,000 per year.

Pursuant to the Investment Agreement, on May 13, 1998, the Investors
purchased from the Company (i) 245,000 shares of the Company's Series A
Cumulative Preferred Stock, par value $0.01 per share (the "Series A Preferred
Stock"), together with detachable Series A Warrants (the "Series A Warrants") to
purchase, subject to adjustment, 15,800,000 shares of Common Stock and (ii)
105,000 shares of the Company's Series B Cumulative Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock," and together with the Series A
Preferred Stock, the "Senior Preferred Stock"), together with detachable Series
B Warrants (the Series B Warrants together with the Series A Warrants, the
"Warrants") to purchase, subject to adjustment (A) prior to Stockholder Approval
(as defined below), 6,730 shares of the Company's Series C Junior Participating
Preferred Stock, par value $0.01 per share (the "Junior Preferred Stock" and,
together with the Senior Preferred Stock, the "Preferred Stock") or (B)
following Stockholder Approval, 6,730,000 shares of Common Stock. Shares
issuable upon the exercise the Warrants are herein referred to as "Warrant
Shares". Under the Investment Agreement, Stockholder Approval means the approval
of stockholders of the Company, in accordance with and in satisfaction of Rule
4460(i)(1)(D) of the National Association of Securities Dealers, Inc. (the
"NASD") and interpretations thereunder, of the vesting of voting rights in
respect of the Series B Preferred Stock and the issuance of shares of Common
Stock upon exercise of the Series B Warrants. For purposes of the Investment
Agreement and the Series B Warrants, approval of the Common Stock Issuance
Proposal would constitute Stockholder Approval. The aggregate purchase price for
the Senior Preferred Stock and the Warrants was $350,000,000.

As more fully described below, until receipt of Stockholder Approval,
dividends accumulate on the Series B Preferred Stock at a higher rate than on
the Series A Preferred Stock. Approval of the proposal by the stockholders will
result in a reduction in the amount of dividends payable by the Company under
the Series B Preferred Stock of approximately $1,000,000 per year. In addition,
until Stockholder Approval is received, the Company has agreed to continue to
seek Stockholder Approval at each annual meeting of stockholders.

NASD Rule 4460(i)(1)(D) requires that each issuer of securities authorized
for quotation on the Nasdaq National Market shall require stockholder approval
prior to the issuance of such securities in connection with a transaction other
than a public offering involving the sale or issuance by the issuer of common
stock (or securities convertible into or exercisable for common stock) equal to
20% or more of the common stock or 20% or more of the voting power outstanding
before the issuance for less than the greater of book or market value of the
stock. Where stockholder approval is required, the minimum vote which will
constitute shareholder approval shall be a majority of the total votes cast on
the proposal by person or by proxy.

The Common Stock is authorized for quotation on the Nasdaq National Market
and, at the time of the execution of the Investment Agreement, (i) the aggregate
number of shares of Common Stock issuable upon exercise of the Series B Warrants
(when considered together with the number of shares of Common Stock issuable
upon exercise of the Series A Warrants) was in excess of 20% of the outstanding
shares of Common Stock and (ii) the issue price could be deemed to be less than
the current market value of the Common Stock. Accordingly, pursuant to the
Investment Agreement, the Company is seeking approval of the Common Stock
Issuance Proposal.

Approval of the Common Stock Issuance Proposal requires the affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting
assuming the presence of a quorum.

18
<PAGE> 23
The Preferred Stock and the Warrants

The following summary of certain provisions of the Preferred Stock, the
Warrants, the Investment Agreement and the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Preferred Stock, the Warrants, the
Investment Agreement and the Registration Rights Agreement which are
incorporated herein by reference.

Series A Preferred Stock. The Series A Preferred Stock has a liquidation
preference of $1,000 per share (plus accumulated and unpaid dividends), and will
accumulate cash dividends at a rate of 8% per annum, payable quarterly, provided
that prior to May 13, 2000, the Series A Preferred Stock will accumulate
dividends at a rate of 8.243216% per annum, payable annually in cash or
additional shares of Series A Preferred Stock, at the option of the Company. The
Series A Preferred Stock is mandatorily redeemable on May 13, 2008 at a price
equal to its liquidation preference, and may be redeemed for such price at the
option of the Company, in whole and not in part, after May 13, 2003. In
addition, the shares of Series A Preferred Stock may be exchanged in certain
circumstances at the option of the Company, in whole and not in part, for
debentures having terms and provisions comparable to those of the Series A
Preferred Stock.

While held by TPG Oxford and its affiliates, the Series A Preferred Stock
entitles TPG Oxford and its affiliates to vote together with holders of Common
Stock as a single class 15,800,000 votes (representing the number of Warrant
Shares issuable upon exercise of all Series A Warrants originally issued
(including Series A Warrants issued to persons other than TPG Oxford and its
affiliates)), multiplied by the lesser of (x) the percentage of the originally
issued Series A Warrants held by the original purchasers thereof (including
certain persons other than TPG Oxford and its affiliates) at the date of
determination and (y) the percentage of the originally issued shares of Series A
Preferred Stock held by the original purchasers thereof at the date of
determination. Holders of Series A Preferred Stock other than TPG Oxford and its
affiliates will have no general voting rights thereunder.

Series B Preferred Stock. The Series B Preferred Stock has a liquidation
preference of $1,000 per share (plus accumulated and unpaid dividends), and will
accumulate cash dividends at a rate of 9% per annum, payable quarterly, provided
that prior to May 13, 2000, the Series B Preferred Stock will accumulate
dividends at a rate of 9.308332% per annum, payable annually in cash or
additional shares of Series B Preferred Stock, at the option of the Company,
provided, further, that from and after the date of the Stockholder Approval,
such dividend rates will be identical to those applicable to the Series A
Preferred Stock (except that stock dividends will be payable in additional
shares of Series B Preferred Stock). Thus, the Stockholder Approval will result
in a reduction in dividends payable by the Company of approximately $1,000,000
per year. As in the case of the Series A Preferred Stock, the Series B Preferred
Stock will be mandatorily redeemable on May 13, 2008 at a price equal to its
liquidation preference plus accrued and unpaid dividends, and may be redeemed
for such price at the option of the Company, in whole and not in part, after May
13, 2003. In addition, the shares of Series B Preferred Stock may be exchanged
in certain circumstances at the option of the Company, in whole and not in part,
for debentures having terms and provisions comparable to those of the Series B
Preferred Stock.

Holders of shares of Series B Preferred Stock do not have general voting
rights unless and until the Stockholder Approval is obtained. Pursuant to the
Investment Agreement, the Company has agreed to seek Stockholder Approval at the
annual meeting of its stockholders to which this proxy statement relates and, if
the Stockholder Approval is not received at such meeting, at each meeting of its
stockholders thereafter until Stockholder Approval is obtained. Upon the receipt
of the Stockholder Approval, TPG Oxford and its affiliates will have, with
respect to the shares of Series B Preferred Stock, the right to vote together
with holders of Common Stock and Series A Preferred Stock as a single class
6,730,000 votes (representing the number of Warrant Shares issuable upon
exercise of all Series B Warrants originally issued (including Series B Warrants
issued to persons other than TPG Oxford and its affiliates)), multiplied by the
lesser of (x) the percentage of the originally issued Series B Warrants held by
the original purchasers thereof (including certain persons other than TPG Oxford
and its affiliates) at the date of determination and (y) the percentage of the
originally issued shares of Series B Preferred Stock held by the original
purchasers thereof at the date of determination. Holders of Series B Preferred
Stock other than TPG Oxford and its affiliates will have no general voting
rights thereunder.

Series A Warrants. Each Series A Warrant entitles the holder thereof to
purchase, upon exercise, at any time, in whole or in part, one share of Common
Stock for an exercise price of $17.75 per share. If, however, 115% of the
average closing price of the Common Stock during the 20 trading day period
commencing one trading day preceding the filing by the Company of its Annual
Report on Form 10-K for the year ending December 31, 1998 is lower than such
exercise price, the exercise price will be reduced to equal such lower amount.
The exercise price may be paid in cash, by surrender of shares of Preferred
Stock, by surrender of Warrants or by any combination of the foregoing. The
Series A Warrants contain customary antidilution protections with respect to
future stock dividends, stock splits, reverse splits, issuances of Common Stock
below the then-current market price,

19
<PAGE> 24
special dividends, tender or exchange offers and similar actions. The Series A
Warrants expire upon the earlier of (x) May 13, 2008 and (y) the redemption of
the Series A Preferred Stock.

Series B Warrants. Each Series B Warrant currently entitles the holder to
purchase, upon exercise, at any time, in whole or in part, 1/1000 of a share of
Junior Preferred Stock for an exercise price of $17.75, which exercise price is
subject to reduction in the circumstances and to the extent described above with
respect to the Series A Warrants. Each share of Junior Preferred Stock, in
general, entitles the holder to receive 1,000 times the amount of dividends and
assets upon liquidation of the Company as are paid or distributed in respect of
each share of Common Stock. However, unlike Common Stock, Junior Preferred Stock
does not have any general voting rights. Upon the occurrence of the Stockholder
Approval, each Series B Warrant will entitle the holder to purchase one share of
Common Stock, in lieu of Junior Preferred Stock, for the applicable exercise
price. Other provisions of the Series B Warrants will be substantially similar
to those described above with respect to the Series A Warrants (with all
references to the Series A Warrants and the Series A Preferred Stock being made
instead to the Series B Warrants and the Series B Preferred Stock,
respectively).

The Company has agreed with TPG Oxford to make an adjustment of the
dividends payable among the shares of Series A Preferred Stock and Series B
Preferred Stock in connection with the possible sale of shares of Preferred
Stock by the holders thereof to institutional holders. Pursuant to the
Agreement, the 245,000 shares of Series A Preferred Stock will be exchanged for
245,000 shares of a new Series D Preferred Stock (the "Series D Preferred
Stock") and the 105,000 shares of Series E Preferred Stock will be exchanged for
105,000 shares of a new Series B Preferred Stock (the "Series E Preferred
Stock"). The terms of the shares of the Series D Preferred Stock will be
identical to the terms of the Series A Preferred Stock, except that the Series D
Preferred Stock will accumulate cash dividends at a rate of 5.4325% (reduced to
4.9480% following the Stockholder Approval) per annum, payable quarterly,
provided that prior to May 13, 2000, the Series D Preferred Stock will
accumulate dividends at a rate of 5.8009% (reduced to 5.3305% following the
Stockholder Approval) per annum, payable annually in cash or additional shares
of Series D Preferred Stock, at the option of the Company. The terms of the
Series E Preferred Stock will be identical to the terms of the Series B
Preferred Stock, except that the Series E Preferred Stock will accumulate cash
dividends at a rate of 14% per annum, payable quarterly, provided that prior to
May 13, 2000, the Series E Preferred Stock will accumulate dividends at a rate
of 4.7523% per annum, payable annually in cash or additional shares of Series E
Preferred Stock, at the option of the Company. In addition, the Series D
Preferred Stock may not be surrendered in payment of the exercise price of any
Warrants until May 13, 2000.

The aggregate cost to the Company of dividends on the Series D Preferred
Stock and Series E Preferred Stock is the same as the aggregate cost to the
Company of dividends on the Series A Preferred Stock and Series B Preferred
Stock. The respective voting rights of the holders of the Series A Preferred
Stock and Series B Preferred Stock will not be changed as the result of the
exchange of such shares for shares of Series D Preferred Stock and Series E
Preferred Stock.

Governance Provisions. The Investment Agreement provides that the Company
will cause its Board of Directors to consist of between 11 and 13 members
(before giving effect to the rights of holders of Preferred Stock to elect
additional directors in the event of nonpayment of dividends or redemption
price, as described below), and to cause four individuals designated by TPG
Oxford (the "Investor Nominees") to be elected as directors of the Company. At
each annual meeting of the Company's stockholders following the issuance of the
Preferred Stock, the Company is required to use its best efforts, subject to the
fiduciary duties of the Board, to cause the election of Investor Nominees then
up for election. In addition, each committee of the Board will be required
generally to include among its members at least one Investor Nominee. The number
of Investor Nominees will be reduced to (w) three, in the event TPG Oxford and
its affiliates beneficially own (including by holding Warrants) at least 60%,
but less than 80%, of the Warrant Shares originally beneficially owned by them,
(x) two, in the event that TPG Oxford and its affiliates beneficially own at
least 40%, but less than 60%, of the Warrant Shares originally beneficially
owned by them, (y) one, in the event that TPG Oxford and its affiliates
beneficially own at least 20%, but less than 40%, of the Warrant Shares
originally beneficially owned by them, and (z) zero, in the event that TPG
Oxford and its affiliates beneficially own less than 20% of the Warrant Shares
originally beneficially owned by them. In the event that Investor Nominees are
not elected to the Board by the Company's stockholders, TPG Oxford and its
affiliates will have the ability to cause such election to occur by operation of
certain provisions of the Series A Preferred Stock. The rights of TPG Oxford to
designate and elect Investor Nominees are not assignable to persons other than
affiliates of TPG Oxford.

20
<PAGE> 25
In addition, the terms of the Senior Preferred Stock provide that if the
dividends thereon are in arrears for four consecutive quarterly periods or are
in arrears on May 13, 1999 or May 13, 2000 or if the Company fails to satisfy
its obligation to redeem shares of Preferred Stock, holders of the Preferred
Stock voting as a separate class will be entitled to elect two directors to the
Board (in addition to the rights of TPG Oxford to designate Investor Nominees).
Notwithstanding this right, at no time will TPG Oxford and its affiliates be
permitted to elect or designate for election more than four individuals as
members of the Board (including the Investor Nominees). If, at the time holders
of Preferred Stock have the right to elect additional directors, TPG Oxford and
its affiliates beneficially own, in the aggregate, a majority of the outstanding
shares of Preferred Stock and are not permitted to elect one or both of such
additional directors as described in the immediately preceding sentence, then
the holders of Preferred Stock other than TPG Oxford and its affiliates will be
entitled to elect, voting separately as a class, one additional director.

The Investment Agreement also contains covenants which restrict the
ability of the Company to take certain significant actions without the consent
of TPG Oxford, including mergers, consolidations and certain issuances of equity
securities. These restrictive covenants will terminate at such time as TPG
Oxford and its affiliates beneficially own less than 10% of the Warrant Shares
underlying the Warrants originally issued.

Standstill Provisions. The Investment Agreement also provides that for a
period of three years following the purchase and sale of the Preferred Stock and
Warrants, TPG Oxford and its affiliates will refrain from purchasing additional
shares of the Company's voting stock and from taking certain other actions
relating to a change in control of the Company, including the formation of a
"group" as defined in Section 13(d) of the Securities Exchange Act of 1934 and
the solicitation of proxies. Following such three year period, TPG Oxford and
its affiliates may acquire additional shares of the Company's voting stock only
in a Board-approved transaction in which all shareholders of the Company are
treated equally. The standstill provisions are subject to certain exceptions,
including in circumstances in which the Board has solicited the interest of a
third party with respect to a possible sale of the Company. In addition, the
standstill provisions will terminate at such time as TPG Oxford and its
affiliates beneficially own less than 10% of the Warrant Shares underlying the
Warrants originally issued.

Diminished Ability to Sell the Company. As a result of the Investors'
substantial beneficial ownership of Preferred Stock and Common Stock, it may be
more difficult for a third party to acquire control of the Company without the
Investor's approval.

Registration Rights Agreement. Concurrently with entering into the
Investment Agreement, the Company and TPG Oxford entered into a Registration
Rights Agreement dated as of February 23, 1998 (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to establish a shelf
registration statement for the resale of the Preferred Stock, the Warrants, the
Warrant Shares, the Junior Preferred Stock and any combination of the foregoing
(including in the form of units). In addition, the Company has granted certain
"demand" and "piggyback" registration rights with respect to such securities.
These registration rights are subject to certain customary blackout and cutback
provisions, and are accompanied by customary indemnification provisions.

None of the foregoing provisions of the Investment Agreement and the
Registration Rights Agreement is affected by the Stockholder Approval, and such
provisions will remain in effect regardless of whether stockholders approve
Proposal Number Two.

21
<PAGE> 26
In recommending stockholder approval of the Common Stock Issuance
Proposal, the Board of Directors considered the fact that it would cost the
Company approximately $1,000,000 per year if the higher dividend rate applicable
to the Series B Preferred Stock prior to Stockholder Approval continued to
apply. Moreover, the substantive corporate governance rights granted to TPG
Oxford are not affected by the Stockholder Approval.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
COMMON STOCK ISSUANCE PROPOSAL.

22
<PAGE> 27
PROPOSAL NUMBER THREE
AMENDMENT TO 1991 STOCK OPTION PLAN

On May 20, 1998, the Board of Directors adopted a resolution, subject to
stockholder approval, to amend the 1991 Stock Option Plan to increase the number
of shares issuable thereunder from 21,580,000 shares to 25,580,000 shares. The
Board also approved an amendment to the 1991 Stock Option Plan, subject to
stockholder approval: (i) to increase the amount of options that an optionee can
receive in any calendar year from 200,000 to 2,000,000; (ii) to provide that in
the event a stock option is subject to stockholder approval, the date of grant
of such option for purposes of the Plan shall be the date of such stockholder
approval; (iii) to provide the Compensation Committee the discretion to extend
the exercise period of an option; and (iv) to provide that the Compensation
Committee, rather than the full Board of Directors, shall approve stock option
agreements under the Plan.

The Board of Directors believes that stock options are valuable tools for
the recruitment, retention and motivation of qualified employees, including
officers, and other persons who can contribute materially to the Company's
success. In addition, in connection with the recruitment of new members of the
Company's senior management and other management employed to effect the
Company's turnaround plans, the Board of Directors believes it is in the
Company's best interest to use stock options as an incentive to join the Company
and to align the interests of new management with those of the Company's
stockholders. For those reasons, the Company agreed in the Investment Agreement
to seek the proposed increase in the number of shares issuable under the 1991
Stock Option Plan.

As of May 15, 1998, options to purchase 9,843,127 shares were
outstanding under the 1991 Stock Option Plan and predecessor plans and only
1,557,975 shares of the 21,580,000 shares originally available for grant under
the 1991 Stock Option Plan remained available for issuance pursuant to new
option grants. The material features of the 1991 Stock Option Plan, including
proposed amendments, are outlined below. The following summary is qualified in
its entirety by reference to the full text of the 1991 Stock Option Plan, as
amended, a copy of which has been filed with the Commission. Only the text of
the amendment requiring stockholder approval is included as Appendix A to this
Proxy Statement.

PURPOSE

The purpose of the 1991 Stock Option Plan is to provide an incentive to
key employees, directors and consultants who are in a position to contribute
materially to the long term success of the Company, to increase such person's
interest in the Company's welfare and to aid in attracting and retaining
individuals with outstanding ability.

ADMINISTRATION

The 1991 Stock Option Plan is administered by the Compensation Committee
of the Board of Directors.

ELIGIBILITY

The 1991 Stock Option Plan provides for grants to key employees (including
officers) of the Company and its subsidiaries of "incentive stock options"
within the meaning of Section 422 of the Code and for grants of nonqualified
options to key employees, directors (other than members of the Compensation
Committee), and consultants of the Company and its subsidiaries. The
Compensation Committee has the authority to determine the employees to whom
options will be granted, the number of shares to be subject to each option,
whether options will be incentive or nonqualified, and the manner of exercise.
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options which first become exercisable in
any calendar year by an employee may not exceed $100,000. No individual optionee
may be granted options to purchase more than 2,000,000 shares in any calendar
year.

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<PAGE> 28
TERMS OF OPTIONS

Each option issued pursuant to the 1991 Stock Option Plan is evidence by a
written stock option agreement between the Company and the optionee and is
generally subject to the terms and conditions listed below (prior to giving
effect to the amendments to the Plan proposed hereunder), but specific terms may
vary:

(i) Exercise of the Option. The Compensation Committee determines when
options granted under the 1991 Stock Option Plan may be exercised. An option is
exercised by giving written notice to the Company specifying the number of
shares to be purchased and tendering payment of the purchase price. Payment for
shares issued upon exercise of an option may consist of cash, check, exchange of
shares (which, if acquired pursuant to the prior exercise of stock option, must
be held for more than six months) or any combination thereof. An option may not
be exercised for a fraction of a share. Additionally, the Company will not
permit payment of the exercise price by a promissory note or a Company loan.

(ii) Option Price. Incentive stock options may not be granted at a price
less than the fair market value of the Common Stock on the date of grant (or
110% of fair market value in the case of employees or officers holding 10% or
more of the voting stock of the Company). Nonqualified stock options may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant.

(iii) Termination of Employment. Except as otherwise provided by the
Committee, if the optionee's employment with the Company or with a subsidiary of
the Company is terminated, the term of any then outstanding option held by such
optionee shall extend for a period ending on the earlier of the date on which
such option would otherwise expire or three months after such termination of
employment. Such option will only be exercisable to the extent it was
exercisable as of the last date of such optionee's employment. The
representative of a deceased optionee's estate or beneficiaries thereof to whom
the option has been transferred shall have the right during the three month
period following the death or, if lesser, the remaining term of the option, to
exercise any then outstanding option in whole or in part.

(iv) Termination of Options. All options expire not more than seven years
from the date of grant or not more than five years from the date of grant in the
case of incentive stock options granted to an employee holding 10% or more of
the voting stock of the Company.

(v) Nontransferability of Options. An option granted under the 1991 Stock
Option Plan is exercisable, during the optionee's lifetime, only by the optionee
and is not transferable except by will or by the laws of descent and
distribution.

(vi) Vesting. The Compensation Committee determines any vesting conditions
applicable to options granted under the 1991 Stock Option Plan. Vesting may be
accelerated in the event of the employee's death, disability or retirement, in
the event of a change in control with respect to the Company or upon other
events. Moreover, the Compensation Committee may determine that outstanding
options will become fully vested if it has concluded that there is a reasonable
possibility that a change in control will occur within six months thereafter.

For purposes of the Stock Option Plan, the term "change in control" is
defined as (1) the acquisition, directly or indirectly, of at least 30% of the
outstanding voting securities of the Company by a person other than the Company
or an employee benefit plan of the Company, (2) a greater than one-third change
in the composition of the Board over a period of 24 months (if such change was
not approved by a majority of the existing directors), (3) certain mergers and
consolidations involving the Company, (4) a liquidation of the Company or (5) a
sale of all or substantially all of the Company's assets.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

In the event of change in the Company's capitalization by reason of
split-up, merger, consolidation, reorganization, reclassification,
recapitalization, or any other capital adjustment, the Compensation Committee
shall make an adjustment to options outstanding under the 1991 Stock Option Plan
in an equitable manner.

AMENDMENT AND TERMINATION

The Board of Directors may, at any time, alter, amend, suspend,
discontinue or terminate the plan; provided, however,

24
<PAGE> 29
that such action does not adversely affect the right of the optionees to options
previously granted, and no amendment, without the approval of the stockholders,
shall increase the maximum number of shares which may be awarded under the plan,
materially increase benefits, change the class of employees eligible or
materially modify eligibility requirements. In any event, the 1991 Stock Option
Plan will terminate in 2001.

FEDERAL INCOME TAX INFORMATION

Options granted under the 1991 Stock Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonqualified options.

If an option granted under the 1991 Stock Option Plan is an incentive
stock option, the optionee will recognize no income upon grant of the incentive
stock option and incur no tax liability due to the exercise unless the optionee
is subject to the alternative minimum tax. The Company will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after transfer of the shares to the optionee by
the Company, any gain will be treated as long-term capital gain. If these
holding periods are not satisfied, the optionee will recognize ordinary income
equal to the excess of the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock over the exercise
price. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized as capital gain.

All other options which do not qualify as incentive stock options are
referred to as nonqualified options. An optionee will not recognize any taxable
income at the time he is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the option price.
The income recognized by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company by payment in cash or out of the
current earnings paid to the optionee. Upon resale of such shares by the
optionee, the excess of the sale price over the optionee's basis in the shares
will be treated as capital gain or loss.

The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonqualified option.

The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1991 Stock Option Plan and does not purport to be complete and
references should be made by the optionee to the applicable provisions of the
Code. In addition, this summary does not discuss the income tax laws of any
municipality, state or foreign country in which an optionee may reside.

25
<PAGE> 30
NEW PLAN BENEFITS

The following table reflects the number of shares of Common Stock
underlying options that would have been granted for the year ended December 31,
1997 under the 1991 Stock Option Plan as proposed to be amended.

NEW PLAN BENEFITS
1991 STOCK OPTION PLAN

<TABLE>
<CAPTION>
Number of Shares
Underlying Options
Name and Position Dollar Value (1) Granted (2)
----------------- ---------------- -----------
<S> <C> <C>
Stephen F. Wiggins
Chairman and Chief -- 70,000
Executive Officer (3)

William M. Sullivan
President and Chief -- 100,000
Executive Officer (4)

David B. Snow, Jr.
Executive Vice President, -- 70,000
Medical Delivery Systems
and Government Programs (5)

Jeffery H. Boyd
Executive Vice President -- 70,000
and General Counsel

Robert M. Smoler
Executive Vice President and -- 60,000
Chief Executive Officer -
New York Region (6)

Andrew B. Cassidy
Executive Vice President -- 60,000
and Chief Financial Officer (7)

Paul Ricker
Vice President and Chief -- 60,000
Information Officer (8)

All Executive Officers as --
a Group (7 persons) 490,000

All Non-Executive Directors
as a Group (11 person)(9) --

All Employees and Officers
who are not Executive -- 3,266,358
Officers as a Group (6,261 persons)
</TABLE>

(1) All options are granted at fair market value on the date of grant.

(2) Represents the number of shares underlying options actually granted under
the 1991 Stock Option Plan for the year ended December 31, 1997.

(3) Mr. Wiggins served as Chief Executive Officer until August 1997. Mr.
Wiggins resigned from his position as Chairman effective February 23,
1998.

(4) Mr. Sullivan served as Chief Executive Officer from August 1997 until May
13, 1998.

(5) Mr. Snow resigned from his position with the Company effective April 10,
1998.

(6) Mr. Smoler resigned from his position with the Company effective April 10,
1998.

(7) Mr. Cassidy resigned from his position with the Company effective December
22, 1997.

(8) Mr. Ricker resigned from his position with the Company effective March 17,
1998.

(9) Non-executive directors receive stock options under the Company's
Nonemployee Director Plan.

Pursuant to the Employment Agreement with Dr. Payson, the Company's Chief
Executive Officer, the Company has agreed to seek approval of the proposed
amendments in order to grant Dr. Payson non-qualified options to purchase
1,000,000

26
<PAGE> 31
shares of the Company's Common Stock under the 1991 Stock Option Plan, effective
on the date of the Annual Meeting. Such options will have seven-year terms and
vest as to 25% of such shares on each of the first four anniversaries of the
issue date.

On March 30, 1998, the Board of Directors of the Company approved the
grant of options to purchase 250,000 shares of the Company's Common Stock under
the 1991 Stock Option Plan to Fred F. Nazem, the Company's Chairman. Because of
a previous grant of options to purchase 75,000 shares to Mr. Nazem, only 125,000
additional options may be issued to Mr. Nazem in 1998 under the 200,000 share
limit on annual grants to an individual optionee contained in the 1991 Stock
Option Plan. Therefore, the grant of 125,000 of the options approved on March
30, 1998 is subject to stockholder approval of the proposed amendments to the
1991 Stock Option Plan.

The Company has agreed to issue an additional 1,200,000 options, including
the 1,000,000 options granted to Dr. Payson referred to above, to senior
management, conditioned on stockholder approval of the proposed amendments to
the 1991 Stock Option Plan. With respect to many of these options, the Company
has agreed to provide the optionee alternative compensation with comparable
economic value to the optionee if stockholder approval of the amendments is not
granted. It is likely that the alternative compensation would not benefit from
the same tax or accounting treatment for the Company applicable to options
issued under the 1991 Stock Option Plan and such alternative compensation may be
more costly to the Company.

The Company's Board of Directors believes that proposed amendments to the
1991 Stock Option Plan are an integral part of its efforts to recruit and
provide incentives for Dr. Payson, new members of senior management and other
new employees and to retain and provide incentives to existing management and
employees. The success of the Company's turnaround efforts will be substantially
impacted by the efforts of these individuals and the Board of Directors
therefore believes that these amendments are in the best interest of the Company
and its stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENTS TO THE 1991 STOCK OPTION PLAN.

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<PAGE> 32
PROPOSAL NUMBER FOUR
STOCKHOLDER PROPOSAL RELATING TO ANNUAL ELECTION OF DIRECTORS

Union of Needletrades, Industrial and Textile Employees, AFL-CIO, CLC of
2100 L. Street, N.W., Suite 210, Washington, D.C. 20037 is the holder of 2,700
shares of Common Stock and has caused the following proposal to be incorporated
in this Proxy Statement. The Company is not responsible for any of the contents
of the language of the proposal by the stockholder, which is set out below in
italic type and between quotation marks. The Board of Directors unanimously
opposes this proposal by the stockholder for the reasons set forth in
Management's Statement in Opposition to the Stockholder Proposal Relating to
Annual Election of Directors which follows the proposal by stockholder.

"RESOLVED: The shareholders of Oxford Health Plans [sic] Inc. ("Company")
request that our Board of Directors take the necessary steps in compliance with
state law to declassify the Board of Directors so that all directors are elected
annually, such declassification to be carried out in a manner that does not
affect the unexpired terms of directors previously elected.

Our Company has been experiencing serious operating and financial problems
related to its billing and payment systems. We are concerned that these problems
may be indications of a lack of adequate monitoring and control systems, and
believe that closer Board oversight is appropriate at this time. Given these
immediate problems, and broader concerns about fraud in the healthcare industry
generally, we believe it is in the best interests of shareholders to increase
the level of accountability of our board [sic] of Directors. One way to achieve
greater accountability is to have each board member stand for election every
year by eliminating staggered board terms.

Currently, our Company's Board of Directors is divided into three (3) classes
serving staggered, three-year terms. We believe the Company's classified Board
of Directors can be used to maintain the incumbency of the current Board and is
an anti-takeover device. There are indications from studies that classified
boards and other anti-takeover devices have an adverse impact on shareholder
value. In 1991 a study by Lilli Gordon of the Gordon Group and John Pound of
Harvard University found that companies with restrictive corporate governance
structures, including those with classified boards, are "significantly less
likely to exhibit outstanding long-term performance relative to their industry
peers."

The staggered board is also a shield to protect incumbent directors and
management from regular shareholder accountability. We believe that allowing
shareholders to annually register their views on the performance of the Board is
a good method of insuring that our Company will be managed in a manner that is
the best interests of the shareholders.

Classified boards like ours have become increasingly unpopular with shareholders
in recent years. In 1997, a majority of shareholders at Bausch & Lomb, Eastman
Kodak, Ogden and Reebok International, among other companies, voted in favor of
proposals asking management to repeal the classified board. Stock holders also
voted overwhelmingly in favor of company-sponsored resolution to declassify the
Board of directors at Time Warner, Fedders and Travelers Group.

Given the recent problems experienced by our Company, we believe now is an
appropriate time for the board [sic] to take the steps necessary to increase its
accountability to shareholders by standing for election annually.

We urge you to vote FOR this resolution."

THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL RELATING
TO ANNUAL ELECTION OF DIRECTORS

The Board opposes the proposal to elect directors on an annual basis. The
Company's Second Amended and Restated Certificate of Incorporation, as amended,
provides for a Board of Directors divided into three classes, as nearly equal in
number as the then total number of directors constituting the entire Board
permits, with the term of office of one class expiring each year at the Annual
Meeting. Each class of directors is elected for a term of three years except in
the case of elections to fill vacancies or newly created directorships. The
Board believes that a "staggered" Board of Directors provides important benefits
to both the Company and its shareholders. The Board believes that the staggered
election approach facilitates continuity and stability of leadership and policy
by helping ensure that at any given time a majority of the directors will have
prior experience as directors of the Company and will be familiar with its
business and operations. This permits more effective long-term strategic
planning. The

28
<PAGE> 33
Board believes that the continuity and quality of leadership promoted by a
staggered Board helps create long-term value for the shareholders of the
Company.

Additionally, the Board believes that the staggered election approach
affords the Company valuable protection against an inadequate unsolicited
proposal to take over the Company. In the event of a hostile takeover, the fact
that at least two shareholders' meetings will generally be required to effect a
change in control of the Board of Directors may encourage the person seeking to
obtain control of the Company to initiate arms-length discussions with
management and the Board. This will assist management and the Board in seeking
to assure that if a transaction is negotiated, it is on the most favorable terms
for the shareholders of the Company.

Approval of the proposal would not in itself declassify the Board of
Directors. Approval of the proposal would only serve as a request that the Board
of Directors take the necessary steps to end the staggered system of electing
Directors. Declassification of the Board would require an amendment to the
Company's Second Amended and Restated Certificate of Incorporation, as amended.
The Company's Second Amended and Restated Certificate of Incorporation, as
amended, requires the affirmative vote of 80% of the outstanding shares of the
Company's common stock to approve the amendment.

The affirmative vote of the holders of a majority of the shares of the
Company's common stock present in person or represented by proxy at the meeting
and entitled to vote is necessary for approval of the shareholder proposal
regarding the annual election of all directors. Proxies will be voted against
the shareholder proposal unless otherwise specified.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "AGAINST" THE
STOCKHOLDER PROPOSAL RELATING TO ANNUAL ELECTION OF DIRECTORS.

29
<PAGE> 34
PROPOSAL NUMBER FIVE
STOCKHOLDER PROPOSAL RELATING TO TOBACCO INVESTMENTS

Catholic Healthcare West of 1700 Montgomery Street, Suite 300, San
Francisco, California, is the holder of 37,400 Common Shares and has caused the
following proposal to be incorporated in this Proxy Statement. The Company is
not responsible for any of the contents of the language of the proposal by the
stockholder, which is set out below in italic type and between quotation marks.
The Board of Directors unanimously opposes this proposal by the stockholder for
the reasons set forth in Management's Statement in Opposition to the Stockholder
Proposal Relating to Tobacco Investments which follows the proposal by
stockholder.

"WHEREAS a July 7-9, 1995 editorial in USA Today declared:
Here's a grubby little health-care news item: according to a commentary in
the upcoming edition of the British medical journal Lancet, major U.S.
health insurers are large investors in major U.S. tobacco companies. In
other words, the nation's merchants of care are partners with the nation's
merchants of death.

...these investments grate and gall. Every year, tobacco use is fatal for
hundreds of thousands of Americans. For insurers to provide health care
for those suffering smokers with one hand while investing in the source of
their misery with the other unconscionable. And hypocritical.

- -- As shareholders, we are deeply concerned about the ethical implications of
investing in the tobacco industry by any health care institution, especially
when the negative health effects of smoking are so clearly experienced and
understood by health care providers.

- -- In 1994, the Centers for Disease Control and Prevention released an article
"Medical-Care Expenditures Attributable to Cigarette Smoking, United States -
1993." The study found that smoking-related disease in the United States has an
enormous economic impact. In 1993, it is estimated that the direct medical costs
associated with smoking totaled $30 billion.

- -- We believe it is inconsistent for a health care company to invest in tobacco
equities and yet proclaim a commitment to quality healthcare. This seems to be
sending mixed messages related to smoking. We believe our Company should
seriously review its stand related to its apparently contradictory positions on
tobacco and determine future options;

RESOLVED that shareholders request the Board to initiate a policy mandating no
further purchases of tobacco equities in any of our portfolios unless it can be
proven that cigarette smoking does not cause the illness and deaths attributed
to it. Furthermore, the company shall divest itself of all tobacco-related stock
by January 1, 1999.

SUPPORTING STATEMENT

Our Company exists to help people keep their health. We support people not using
cigarettes, yet we have no policy against investing in companies which produce
them. Institutions like Harvard and Johns Hopkins have divested from all tobacco
stocks. We believe adoption of this proposed policy will put our company's money
where its mouth is. If you agree that our Company, as a health-provider should
not contribute to their illness and death by tobacco/cigarette investments,
please vote "yes" for this resolution."

THE BOARD OF DIRECTORS TAKES NO POSITION WITH RESPECT TO THIS PROPOSAL AND WILL
ABSTAIN FROM VOTING ON IT. UNLESS A PROXY SPECIFIES OTHERWISE, IT WILL BE
TREATED AS AN ABSTENTION.

30
<PAGE> 35
GENERAL INFORMATION

INDEPENDENT ACCOUNTANTS

KPMG Peat Marwick LLP is the Company's independent public accounting firm
and has been since 1985. Representatives of KPMG Peat Marwick LLP are expected
to be present at the Meeting. They will be given an opportunity to make a
statement and will be available to respond to appropriate questions.

STOCKHOLDER PROPOSALS

In order to be considered for inclusion in the Proxy Statement relating to
the 1999 Annual Meeting, any proposal by a record holder of Common Stock must be
received by the Company at its principal offices in Norwalk, Connecticut on or
before March 17, 1999. A proponent of such a proposal must comply with the proxy
rules under the Securities Exchange Act of 1934, as amended.

SOLICITATION

All costs and expenses associated with soliciting proxies will be borne by
the Company, except for those relating to solicitation of proxies for Proposals
Numbers Four and Five. In addition to the use of the mails, proxies may be
solicited by the directors, officers and employees of the Company by personal
interview, telephone or telegram. Such directors, officers and employees will
not be additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Arrangements will also
be made with custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Common Stock held of record by
such persons, and the Company will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
therewith. In addition, the Company has retained Georgeson & Company Inc., a
proxy soliciting firm, to assist in the solicitation of proxies and will pay
such firm a fee, estimated not to exceed $10,000 plus expenses. The total amount
of such expenses will be borne by the Company.

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors is not aware
of any other business or matters to be presented for consideration at the
Meeting other than as set forth in the Notice of Meeting attached to this Proxy
Statement. However, if any other business shall come before the Meeting or any
adjournment or postponement thereof and be voted upon, the enclosed proxy shall
be deemed to confer discretionary authority on the individuals named to vote the
shares represented by such proxy as to any such matters.

INFORMATION INCORPORATED BY REFERENCE

The following information is incorporated by reference to the Company's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 1997 (the
"Form 10-K/A"), as filed with the Commission:

Consolidated financial statements of the Company and subsidiaries for the
three years ended December 31, 1997, on pages 38 to 56 of the Form 10-K/A;

Item 6, "Selected Consolidated Financial Data", on page 24 of the Form
10-K/A;

Item, 7, "Management's Discussion and Analysis of Financial Condition and
"Results of Operations", on pages 25 to 35 of the Form 10-K/A;

Investment Agreement, dated as of February 23, 1998, between TPG Oxford LLC
and the Company, filed as Exhibit 10(r) to the Form 10-K/A; and

Registration Rights Agreement, dated as of February 23, 1998, between TPG
Oxford LLC and the Company, filed as Exhibit 10(s) to the Form 10-K/A.

In addition, the following information is incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1998 (the "Form 10-Q"), as filed with the Commission:

Unaudited condensed consolidated financial statements of the Company and
subsidiaries for the three months ended March 31, 1998, on pages 3 to 6 of
the Form 10-Q; and

Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations", on pages 8 to 18 of the Form 10-Q.

ANNUAL REPORT ON FORM 10-K/A

The Company will provide without charge to each beneficial holder of its
Common Stock on the Record Date, upon the written request of any such person,
copies of the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1997, as filed with the Commission. Any such request should be made
in writing to Investor Relations Department, Oxford Health Plans, Inc., 800
Connecticut Avenue, Norwalk, Connecticut 06854.

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<PAGE> 36
APPENDIX A

RESOLVED, that, subject to the approval of the Company's stockholders, the
Company's 1991 Stock Option Plan (the "Plan") is hereby amended in the following
respects:

1. The first sentence of Paragraph 3 of Part I of the Plan is hereby
amended to read in its entirety as follows:

"3. Shares of Stock Subject to the Plan. Subject to the provisions of
Paragraph 2 of Part IV, the number of shares of Stock which may be
issued or transferred pursuant to Stock Options granted under the Plan
shall not exceed 25,580,000 shares in the aggregate."

2. Paragraph 7 of Part I of the Plan is hereby amended to read in its
entirety as follows:

"7. Limitation on Grants. Subject to the provisions of Paragraph 2 of
Part IV, no individual optionee may be granted Stock Options to
purchase more than 2,000,000 shares of Stock in any calendar year."

3. Paragraph 1(f) of Part III of the Plan is hereby amended to read in
its entirety as follows:

"No Non-Qualified Stock Option shall be exercisable more than ten years
from the date the Non-Qualified Stock Option was granted."

33
<PAGE> 37
(Continued from other side)

UNLESS THE SHAREHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS 1,
2, 3, 4 and 5 AS PROPOSED.

PLEASE DATE, SIGN AND RETURN TO PROXY SERVICES, BOSTON EQUISERVE, PO BOX 9379,
BOSTON, MA 02205-9954.

(Please sign in the same form as name Dated ____________________________, 1998
appears hereon. Executors and other
fiduciaries should indicate their __________________________________
titles. If signed on behalf of a
corporation, give title of officer __________________________________
signing). Signature of Shareholder(s)

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF SHAREHOLDERS.

<PAGE> 38
OXFORD HEALTH PLANS, INC.

PROXY PROXY

PROXY FOR 1998 ANNUAL MEETING ON [ ], 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Norman C. Payson, M.D., Chief Executive
Officer, and Jeffery H. Boyd, Executive Vice President and General Counsel, and
each of them, attorneys with full power of substitution, to vote as directed
below all shares of Common Stock of Oxford Health Plans, Inc. registered in the
name of the undersigned, or which the undersigned may be entitled to vote, at
the 1998 Annual Meeting to be held at [ ], on [ ], 1998, 10:00 a.m. and at
any adjournment or postponement thereof.

1. Election of Director FOR James B. Adamson WITHHOLD AUTHORITY to vote
for James B. Adamson
FOR David Bonderman WITHHOLD AUTHORITY to vote
for David Bonderman
FOR Jonathan J. Coslet WITHHOLD AUTHORITY to vote
for Jonathan J. Coslet
FOR Benjamin H. WITHHOLD AUTHORITY to vote
Safirstein, M.D. for Benjamin H.
Safirstein, M.D.

2. Approval of Vesting of Voting Rights in Respect of Company's Series B
Preferred Stock.

FOR AGAINST ABSTAIN

3. Approval of Amendment to Oxford Health Plans, Inc. 1991 Stock Option Plan.

FOR AGAINST ABSTAIN

4. Approval of Shareholder Proposal Relating to Annual Election of Directors.

FOR AGAINST ABSTAIN

5. Approval of Shareholder Proposal Relating to Tobacco Investments.

FOR AGAINST ABSTAIN

6. As such proxies may in their discretion determine in respect of any other
business properly to come before said meeting (the Board of Directors knowing
of no such other business).

The directors recommend a vote FOR items 1, 2 and 3 and AGAINST items 4 and 5.

(Continued on reverse side)