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As filed with the Securities and Exchange Commission on September 28, 1995
REGISTRATION NO. 33-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
__________
FOUNDATION HEALTH CORPORATION
(Exact name of registrant as specified in its charter)
__________
Delaware 68-0014772
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3400 Data Drive, Rancho Cordova, California 95670 (916) 631-5000
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive offices)
__________
ALLEN J. MARABITO, ESQ.
FOUNDATION HEALTH CORPORATION
3400 DATA DRIVE, RANCHO CORDOVA, CALIFORNIA 95670 (916) 631-5000
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
LINDA C. WILLIAMS, ESQ.
PILLSBURY MADISON & SUTRO
235 MONTGOMERY STREET, SAN FRANCISCO, CA 94104
(415) 983-1000
__________
Approximate date of commencement of proposed sale of the securities to
the public: From time to time after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. /x/
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class Proposed Maximum Proposed Amount of
of Securities to Amount to be Offering Price Aggregate Registration
be Registered Registered Per Unit Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share . . . . . . . . . . 1,000,000 shares $37.437(1) $37,437,000(1) $10,857(1)
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Rights to Purchase Series A
Participating Preferred Stock . . . . --(2) --(2) --(2) --(3)
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<FN>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) based upon the average of the high and low reported sales
prices of the Registrant's Common Stock, par value $.01 per share, as
reported on the New York Stock Exchange Composite Transactions Tape on
September 21, 1995.
(2) Such number of Rights as are associated with the shares of common stock
registered hereby from time to time pursuant to the terms of the
Registrant's Stockholder Rights Plan. Initially, the Rights are attached
to and trade with the shares of common stock.
(3) Pursuant to Rule 457, no additional registration fee is required for the
Rights.
__________
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
1,000,000 SHARES
FOUNDATION HEALTH CORPORATION
COMMON STOCK
This Prospectus is being furnished to certain employees of Foundation
Health Corporation affiliated medical groups, including Foundation Health
Medical Group, Inc. ("FHMG"), Thomas-Davis Medical Centers, P.C., ("TDMC"), and
certain professional medical corporations of which either FHMG or TDMC has at
least a 25% ownership interest (collectively, the "Medical Groups") in
connection with shares of the common stock, $.01 par value per share (the
"Common Stock"), of Foundation Health Corporation, a Delaware corporation (the
"Company"), to be offered and sold from time to time upon the exercise of stock
options granted under the 1993 Nonstatutory Stock Option Plan of Foundation
Health Corporation, effective October 1, 1993, as amended (the "Plan").
Each share of Common Stock to which this Prospectus relates will be offered
and sold at the exercise price for the related option granted under the Plan.
The exercise prices and other terms of such options will be determined in
accordance with the terms of the Plan. The Plan provides that the exercise
price of an option granted thereunder shall be no less than the fair market
value of the Common Stock on the date of grant. See "Description of the Plan."
On September 21, 1995, the closing price of the Common Stock on the New York
Stock Exchange Composite Transactions Tape was $37.125 per share.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH AN
INVESTMENT IN THE COMMON STOCK.
____________________
The date of this Prospectus is __________, 1995.
<PAGE>
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY ANY AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR AN OFFER TO OR A SOLICITATION OF ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL IMPLY
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files proxy statements, reports and other information with the
Securities and Exchange Commission (the "SEC"). This filed material can be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices in Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60621-2511) and in New York (Seven World Trade
Center, 13th Floor, New York, NY 10048) and copies of such material can be
obtained by mail from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common Stock
is listed on the New York Stock Exchange. Reports, proxy and information
statements and other information concerning the Company can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The Company has filed with the SEC a Registration Statement on Form S-3
(together with any amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock to be issued hereunder. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the SEC. Copies of the Registration Statement are available
from the SEC, upon payment of prescribed rates. For further information,
reference is hereby made to the Registration Statement. Statements contained in
this Prospectus or in any document incorporated by reference in this Prospectus
relating to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC are incorporated
by reference in this Prospectus: (i) Annual Report on Form 10-K for the year
ended June 30, 1995; (ii) the description of the Common Stock set forth in the
Registration Statement on Form 8-A dated May 21, 1990; and (iii) the description
of the Company's Rights to purchase Series A Participating Preferred Stock,
$1.00 par value per share, set forth in the Registration Statement on
Form 8-A dated September 27, 1991.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act prior to the date of termination of the
offering made hereby shall be deemed to be incorporated by reference into this
Prospectus from the dates of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
the Prospectus has been delivered, and who makes a written or oral request, a
copy of any and all of the information that has been incorporated by reference
in the Registration Statement, excluding exhibits (unless such exhibits are
specifically incorporated by reference into the information incorporated by
reference in this Prospectus). Requests should be directed to: Foundation
Health Corporation, Secretary's Office, 3400 Data Drive, Rancho Cordova,
California 95670 (telephone 916/631-5000).
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THE COMPANY
Foundation Health Corporation, a Delaware corporation (the "Company"), is
an integrated managed care organization which administers the delivery of
managed health care services. Through its subsidiaries, the Company offers
group, Medicaid, individual and Medicare health maintenance organization ("HMO")
and preferred provider organization ("PPO") plans; government sponsored managed
care plans; and managed care products related to workers' compensation
insurance, administration and cost-containment, behavioral health, dental,
vision and pharmaceutical products and services.
The Company's principal executive offices are located at 3400 Data Drive,
Rancho Cordova, California 95670, and its telephone number is (916) 631-5000.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION REGARDING THE COMPANY CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN THE COMMON STOCK. THESE
FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION INCLUDED
IN THIS PROSPECTUS.
HEALTH CARE REFORM
Numerous health care reform proposals have been introduced in Congress
during the past two years, including the Clinton Administration's Health
Security Act of 1993, which was not enacted in any form. The legislative
proposals have attempted to provide greater access to insurance and control
health care costs through a variety of means, including proposed reductions in
spending under the Medicare and Medicaid programs. In addition to federal
initiatives, states in which the Company conducts and expects to conduct
business have enacted various health care reform measures, and numerous
additional proposals have been and may be introduced, that could significantly
affect the Company's business. Certain states are considering forms of various
single-payer systems, restructuring of Medicaid programs and "any willing
provider" legislation that could require managed care companies to contract with
any medical provider who agrees to the terms of the company's standard provider
contract and payment schedule. The Company is unable to predict whether any of
such federal or state health care initiatives or proposed legislation will be
enacted and implemented; no assurance can be given that implementation of any
such proposed legislation will not have a material adverse effect on the
Company's business. The Company anticipates federal and state legislators will
continue to review and assess alternative health care systems and payment
methodologies.
COMMERCIAL ENROLLMENT AND PREMIUM GROWTH
Several recent trends are affecting the Company's commercial premium
growth. Some employer groups are decreasing benefits and choosing lower-cost
medical HMO coverage plans, which result in lower premiums to the Company's
medical HMOs; other large employers have consolidated and reduced the number and
scope of health care programs offered to employees or have adopted alternative
benefit plans, including self-funded plans. Many
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employer groups are seeking to limit premium increases or to obtain premium
decreases. Because of increased cost pressures on the Company, the Company
believes that its HMO medical loss ratio may be adversely affected if health
care cost containment measures cannot fully mitigate the effects of the lower
premiums. The Company has experienced intense competition for enrollees, which
has also tended to increase pricing pressures and marketing costs. There can be
no assurance that the current levels of enrollment can be maintained. The
Company believes that the above factors will continue to affect its operations
and that the future rate of premium growth may be lower than the rates achieved
in recent years.
PREDICTABILITY OF AND CONTROL OVER HEALTH CARE COSTS
The Company's ability to establish appropriate premium rates and sustain
favorable operating margins is dependent upon its ability to predict and control
health care expenditures, to manage effectively utilization of health care
services and to negotiate favorable provider contracts with health care
providers, including physicians and dentists, hospitals and ancillary providers
such as pharmaceutical suppliers, laboratories and non-physician specialists.
The payment and other terms of agreements with the Company's health care
providers are generally negotiated annually, and there can be no assurance that
provider agreements negotiated in the future will not result in substantially
higher health care costs or smaller networks of available providers for the
Company's enrollees. Inflation, advances in medical technologies, major
epidemics, military actions, natural disasters and numerous other external
factors, including the aging of the population and other demographic
characteristics relating to the delivery of health care services can adversely
affect the ability of managed care companies, including the Company, to predict
and control health care costs.
DEPENDENCE UPON HEALTH CARE PROVIDERS
The Company's profitability and the success of its long-range business
plans will depend upon its ability to attract and retain qualified health care
providers. In particular, the Company is dependent upon maintaining a network
of qualified primary care physicians for the provision of general medical care,
who are primarily responsible for hospital and specialty referrals and
preventive care. Many providers are consolidating into organized groups or
larger bargaining units and asserting greater bargaining power. In addition,
there is increasing competition from other HMOs, health care plans and hospitals
to retain the services of providers. The failure to retain key medical groups,
IPAs and hospitals could adversely affect the ability of the Company to retain
enrollees, which could adversely affect the Company's operating results. There
can be no assurance that the Company will successfully maintain a cost-
effective, stable provider network.
CONSTRUCTION AND MANAGEMENT OF HEALTH CARE CENTERS
As a result of the increasing competition for health care providers,
especially primary care physicians, and rising health care costs, the Company
is implementing a strategy to manage owned and leased health care centers.
The centers are staffed by physicians who are employed by Company-affiliated
professional medical corporations.
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The health care centers have required and will continue to require
significant capital expenditures and operating costs. There can be no
assurance that developing and managing health care centers will provide the
Company with the necessary providers to serve its enrollees, that the
Company's enrollees will select these providers for their primary care or
that health care costs will be reduced as a result of the Company's enrollees
utilizing these health care centers. In addition, the start-up operational
costs associated with these centers could adversely affect the Company's
future operating results.
The current operations of the affiliated medical groups are being funded
through lines of credit with the Company with business primarily in California.
Certain of these groups have incurred, and will continue to incur, substantial
losses from operations. Although the Company believes that these groups will be
able to meet their obligations under the credit facilities, there can be no
assurance as to the timing or amount of repayment of these obligations. If the
medical groups were unable to pay all or a significant part of these
obligations, such inability could have a material adverse effect on the
Company's operating results.
WORKERS' COMPENSATION INSURANCE
California Compensation Insurance Company ("CalComp") is the Company's
workers' compensation insurance company with business primarily in California
with business primarily in California. Significant state legislation has been
enacted in California during the past 18 months affecting, among other things,
workers' compensation minimum rates and the ability to introduce managed care
concepts in workers' compensation. Effective January 1, 1995, the minimum rate
law in California was abolished. No assurance can be given that the effects of
this legislation in the future would not adversely affect CalComp's
profitability. The profitability of CalComp may also be affected by a variety
of factors outside the Company's control, including competition, severity and
frequency of workers' compensation claims, interest rates, new state
regulations, court decisions and the judicial climate. CalComp is expanding its
workers' compensation business in other states and is subject to the regulations
of various states. There can be no assurance that CalComp will be successful in
operating in states outside California.
MEDICAID REIMBURSEMENT
The Company is reimbursed on a fixed monthly contract rate per enrollee for
the provision of services to its Medicaid eligible beneficiaries. In general,
state regulators have broad discretion in the determination of Medicaid HMO
contract rates, and there are ongoing budgetary pressures to reduce future
payments to HMOs. Such pressure may increase if health care costs continue to
rise or if national or state health care reforms change the benefits or payments
permitted under the Medicaid program. The Company is unable to assess the
impact, if any, such changes would have on its operations; however, any
significant change in Medicaid or its reimbursement rates could materially
affect the Company's operations.
Funds received under Medicaid are subject to audit with respect to the
proper application of various payment formulas, and therefore, retroactive
adjustments of revenue from these programs may occur. These programs are also
subject to many statutory and regulatory changes, and payment rates may be
reduced. There can be no assurance that payments under such programs will
remain at levels comparable to present levels or sufficient to cover costs for
the Company's Medicaid HMO enrollees or the operating and fixed costs of
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the Company's hospitals allocable to Medicaid patients. Certain states in which
the Company operates are considering restructuring the delivery of medical care
to Medicaid beneficiaries and the federal Medicaid reimbursement rates have been
decreased in certain of the areas in which the Company has Medicaid programs;
there can be no assurance that the Company will be able to retain this business,
or if retained, whether the current level of profitability will be maintained.
MERGERS, ACQUISITIONS AND EXPANSION
Mergers and acquisitions have played an important role in the
implementation of the Company's business strategy and are expected to continue
to be important to the Company's growth and development. The Company's product
offerings and HMO, PPO and specialty services enrollment have been expanded
through these acquisitions. As a result, the Company is subject to the
uncertainties and risks associated with any business that has grown rapidly and
has expanded into new product and geographic areas. These mergers and
acquisitions have placed substantial demands on the Company's management and
financial resources and the Company has not yet fully integrated all of the
acquired companies' operations. There can be no assurance that the combined
companies will realize the full cost savings or revenue enhancements the Company
expects to realize as a result of the recent acquisitions and the consolidation
of certain of the operations of the acquired companies or that such savings or
enhancements will be realized at the points in time currently anticipated.
Furthermore, there can be no assurance that any cost savings which are realized
will not be offset by increases in other expenses or operating losses. The
Company will encounter similar uncertainties and risks with respect to any
future acquisitions it may make.
The Company continues to expand its HMO and specialty services operations
in additional states, either through internally generated development or through
acquisitions, thereby subjecting the Company to different methods of operations
and management and the effect of varying state regulations. The Company has
start-up HMO and specialty services operations in a number of states and the
United Kingdom. These operations have required and will continue to require
significant costs related to creating the infrastructure for operations, hiring
and training personnel, obtaining necessary regulatory approvals and operating
until sufficient enrollment is obtained to offset the start-up costs. There can
be no assurance that the Company will be successful in managing HMOs at multiple
locations or in obtaining sufficient enrollment to be profitable.
The Company is engaged in an ongoing evaluation of potential acquisitions.
No assurance can be given as to the Company's ability to compete successfully at
favorable prices for available acquisition candidates or to complete future
acquisitions, or as to the financial effect on the Company of any acquired
business. Future acquisitions by the Company may involve significant cash
expenditures and may result in increased indebtedness and interest and
amortization expense or decreased operating income, which could have an adverse
impact on the Company's operating results.
COMPETITION
The managed health care industry is highly competitive and has experienced
significant changes in recent years. Large employer groups continue to demand a
variety of health care
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options, such as HMOs, point of service plans and PPO products, either insured
by third parties or self-funded. The Company competes with providers of all
these products, some of whom have substantially greater financial resources and
broader geographic coverage than the Company. The health care industry has
been subject to vigorous price competition with volatility in the industry
caused by regulatory changes and competitive market pricing pressures. These
factors are likely to continue and may become more severe in the future. Such
competition could adversely impact the Company's future results by reducing
margins or enrollment levels, or both.
GOVERNMENT CONTRACTS
The Company, through Foundation Health Federal Services, Inc. ("FHFS"), its
government contracts subsidiary, administers large, multi-year managed care
government contracts. FHFS subcontracts to affiliated and unrelated third
parties part of the administration and health care risk of these contracts.
Government contracts revenue is subject to semi-annual bid price adjustments,
annual price increases or decreases, risk sharing provisions and various other
price adjustments under the contracts. The contracts are also subject to
ongoing and retroactive allocations between FHFS and its subcontractors which
can have a positive or negative effect on the total contract price.
During fiscal year 1995, FHFS was awarded two large, multi-year government
contracts to provide health care services to over 800,000 CHAMPUS-eligible
beneficiaries in Washington, Oregon, Texas, Louisiana, Oklahoma and Arkansas.
On August 31, 1995, FHFS was notified of award by the Department of Defense of
the multi-year TRICARE managed care contract to provide services to
approximately 720,000 CHAMPUS-eligible beneficiaries in California and Hawaii.
FHFS had previously been the prime contractor under the predecessor contract to
the TRICARE program from 1988 through January 31, 1994. Delivery of health care
services is scheduled to commence April 1, 1996. There can be no assurance that
the Company will be successful in managing the implementation and delivery of
services under several large, multi-year government managed care contracts or
whether any of such contracts will provide the Company with an adequate level of
profitability.
The Company intends to compete for managed care contracts as they are
announced by federal and state agencies. The Company expects intense
competition for such contracts and there can be no assurance that it will be the
successful bidder for any such contracts or if successful, whether such
contracts will provide an adequate level of profitability. The design and
implementation of managed care government contracts may be affected by any
health care reforms and reductions in government spending considered by
government agencies and legislative bodies, and the Company is unable at the
present time to predict the effect of any such reforms or reductions on the
profitability of any contracts awarded.
GOVERNMENT REGULATION AND AUDITS
The operations of the Company are subject to extensive state and federal
regulation. Such regulation is subject to change, and the impact of potential
changes on the Company's business cannot be determined. There can be no
assurance that the Company will be able to obtain any necessary governmental
approvals to continue to implement its business strategy of developing or
acquiring complementary products and services or achieving geographic
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expansion. Certain of the Company's subsidiaries are subject to regulatory
restrictions on their ability to transfer funds to the Company. The Company's
HMO and insurance subsidiaries must maintain minimum levels of tangible net
equity or capital and surplus.
Federal and state agencies possess significant powers to review and control
the Company's operations and finances. Where the Company provides services
under a government contract, governmental agencies often possess expansive
powers to audit and control the relationship. The Company is subject to and
currently is undergoing extensive governmental audits and investigations with
respect to its government contracts. The results of such audits, which may
continue past the termination of such contracts, may result in reimbursement to
the governmental agencies of amounts previously paid by such governmental
agencies to the Company. The Company is also subject to regular and special
medical and financial audits and investigations by the various federal and
state regulatory agencies which oversee its programs and services with respect
to the operations of its HMO and insurance subsidiaries.
MARKET VOLATILITY
The stock market and the market for securities of health care companies
has from time to time experienced extreme price and volume fluctuations which
may be unrelated to the operating performance of particular companies. From
time to time analysts have issued market research opinions which have had a
negative impact on stock prices. In addition, various factors and events,
such as announcements by the Company or its competitors concerning operating
results, loss of a major employer group contract or provider contract,
governmental approvals, regulations or audits, acquisitions, new product
introductions, competitive pricing pressures and rising costs of health care
may also contribute to the price volatility of the Common Stock.
ANTI-TAKEOVER PROVISIONS
The ability of the Board of Directors of the Company to issue shares of
preferred stock without stockholder approval and a stockholder rights plan
adopted by the Company may, alone or in combination, have certain anti-takeover
effects. The Company also is subject to provisions of the Delaware General
Corporation Law which may make certain business combinations more difficult.
EXPOSURE TO EVOLVING THEORIES OF RECOVERY
The Company, like HMOs and health insurers generally, excludes certain
health care services from coverage under its HMO and indemnity plans. In the
ordinary course of its business, the Company is subject to the claims of its
respective enrollees arising out of decisions to restrict treatment or
reimbursement for certain services. Recently, in a proceeding filed against one
of the Company's competitors, Fox v. HealthNet, an enrollee successfully
challenged an HMO's decision to deny coverage of a treatment sought by the
enrollee. That enrollee, who suffered from breast cancer, died of her illness.
Following a jury trial, her spouse and her estate were awarded compensatory
damages (including damages for emotional distress) and punitive damages
totalling $89 million, which are not covered by insurance. The punitive damages
were awarded on the premise that the defendant HMO had, in bad faith, denied
coverage of the treatment sought. In April 1994, pending the court's ruling on
defendant's motion for a new trial, the case was settled for an undisclosed
amount. Although each lawsuit must succeed or fail on its own merits, the
Company anticipates that claims alleging bad faith may become more common in
enrollees' actions against HMOs. The loss of even one such coverage claim, if
it results in a punitive damage award, could have a significant adverse effect
on the Company. In addition, HMO enrollees are challenging certain features of
HMOs' financial arrangements with their contracting providers, in particular,
that these arrangements contain certain financial incentives to control
unnecessary referrals to specialists and unnecessary hospitalizations. The
enrollees contend that these financial arrangements, and the capitation system
for reimbursing providers as well, provide participating providers with improper
incentives to furnish less than adequate medical care to enrollees. State
legislatures are also considering managed care reimbursement methodologies and
their effect on access to, and quality of, medical care. The financial and
operational impact which such evolving theories of recovery and legislation, if
enacted, will have on the HMO industry generally, and the Company in particular,
is at present unknown. In addition, the risk of potential liability under
punitive damages theories may increase significantly the difficulty of obtaining
reasonable settlements of such coverage claims.
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LEGAL PROCEEDINGS
The Company maintains general liability and managed care professional
liability and directors and officers liability insurance and other insurance
coverage it believes is typical in the industry. In the ordinary course of
business, the Company is subject to claims and legal actions by enrollees,
providers and others and regulatory and contractual audits. There can be no
assurance that claims in excess of the Company's insurance coverage will not
arise or that all claims would be covered by such insurance.
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered hereby
will be used for general corporate purposes.
DESCRIPTION OF THE PLAN
The following description of the Plan and its administration is qualified
in its entirety by reference to the full text of the Plan, a copy of which is an
exhibit to the Registration Statement.
PURPOSE OF THE PLAN
The Plan offers selected employees of the Medical Groups an opportunity to
acquire a proprietary interest in the Company, or to increase such interest, by
exercising options to purchase shares of Common Stock. Under the Plan, an
aggregate of 1,600,000 shares of Common Stock have been reserved for issuance
upon exercise of options.
ADMINISTRATION
The Plan is administered by the Compensation and Organizational Committee
of the Board of Directors of the Company (the "Committee"), which consists of
two or more directors appointed by the Board of Directors and who serve at the
pleasure of the Board. If no Committee has been appointed, the full Board of
Directors will constitute the Committee. The Committee has the power, within
the limits of the Plan, to interpret the Plan and options thereunder, and to
adopt, amend or rescind rules, procedures and forms relating to the Plan. All
decisions, interpretations and other actions of the Committee concerning the
Plan are final and binding. The Committee acts as manager of, and not trustee
of, the Plan. Members of the Committee or the Board of Directors receive no
compensation for their services in connection with their administration of the
Plan. As of the date of this Prospectus, the members of the Committee are
Raymond S. Troubh, Chairman, David A. Boggs and Frank A. Olson. The members of
the Board of Directors and the Committee are listed in the Company's Annual
Report on Form 10-K. Requests for additional information concerning the Plan
and the Committee should be directed to Allen J. Marabito, Senior Vice
President - General Counsel and Secretary, Foundation Health Corporation,
3400 Data Drive, Rancho Cordova, CA 95670; telephone (916) 631-5000.
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ERISA; INTERNAL REVENUE CODE
The Plan is not subject to the Employee Retirement Income Security Act of
1974 ("ERISA") and is not qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Options granted under the Plan may only
be Nonqualified Stock Options ("NQSOs"). See "Certain Federal Income Tax
Consequences" below for information concerning the tax treatment of NQSOs.
ELIGIBILITY
The Plan provides that options may be granted to employees of Medical
Groups who are considered full-time equivalent employees for purposes of
employee benefits provided by Medical Groups.
Subject to certain limitations, the Committee has the authority to
determine the employees of Medical Groups to whom options will be granted under
the Plan, the type, amount and terms of the options to be granted, the time when
options will be granted and the duration of the exercise period of options. The
Plan does not provide for a maximum or a minimum number of shares of Common
Stock which may be granted under options to any employee.
TERMS OF OPTIONS
Each grant of an option under the Plan is evidenced by a Stock Option
Agreement between the optionee and the Company, and is subject to the following
additional terms and conditions:
TERM, VESTING AND EXERCISE OF THE OPTION: Each Stock Option Agreement
specifies the term of an option and the period during which all or any
installment of an option is exercisable. The vesting schedule for each option
granted under the Plan is established by the Committee in its sole discretion.
The vesting of such options may be accelerated in the event of the optionee's
death, disability or retirement, a change in control with respect to the Company
or other events. Options granted under the Plan are exercisable for a term of
ten years from the date of grant, unless a shorter term is specified by the
applicable Stock Option Agreement.
An option granted under the Plan may be exercised by giving written notice
of exercise to the Company, specifying the number of full shares of Common Stock
to be purchased and tendering payment of the purchase price to the Company.
Payment for shares issued upon exercise of an option may consist of cash or
check or, in the discretion of the Committee, shares of Common Stock which have
been owned by the optionee for more than six months, or a promissory note. In
the discretion of the Committee, payment may be made by the delivery of an
irrevocable direction to a securities broker approved by the Company to sell
shares of Common Stock and to deliver all or part of the proceeds to the
Company, or by the delivery of an irrevocable direction to pledge shares of
Common Stock to a securities broker or lender approved by the Company as
security for a loan and to deliver all or part of the loan proceeds to the
Company, in payment of all or part of the exercise price. As a condition to the
exercise of an option, the optionee will be required to make such arrangements
as the Committee may require for the satisfaction of applicable withholding tax
obligations in connection with such exercise.
-8-
<PAGE>
EXERCISE PRICE: The exercise price of an option granted under the Plan is
determined by the Committee and shall not be less than 100% of the fair market
value of a share of Common Stock on the date of grant.
TERMINATION OF SERVICE: If an optionee's service with Medical Groups
terminates for any reason other than death, the unexercised portion of vested
options shall expire on the earliest of the term of the option, 90 days after
termination for any reason other than total and permanent disability or
12 months after termination by reason of total and permanent disability.
Options may be exercised before the expiration of the applicable termination
period to the extent exercisable prior to termination.
DEATH: If an optionee should die while in service with Medical Groups, his
option will expire on the earlier of the term of the option or 12 months after
his death. Options may be exercised before the expiration of the applicable
termination period to the extent exercisable prior to or as a result of his
death. In the event an optionee dies after termination of employment but before
expiration of his option, such optionee's options may be exercised prior to
expiration by his executor or administrator.
LEAVES OF ABSENCE: Service with Medical Groups will be deemed to continue
while an optionee is on military leave, sick leave or other bona fide leave of
absence, as determined by the Committee.
OPTIONS NOT TRANSFERABLE: An option is not transferable by the optionee
otherwise than by will or the laws of descent and distribution, and is
exercisable during the optionee's lifetime only by the optionee or his or her
guardian or legal representative. Options may be subject to special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine, which provisions, if any, will be
set forth in the applicable Stock Option Agreement.
AMENDMENT OF OPTIONS: Within the limitations of the Plan, the Committee
may modify, extend or assume outstanding options, but no modification of an
option may impair an optionee's rights or increase an optionee's obligations
without the optionee's consent.
ADJUSTMENT OF SHARES UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
Upon any change in the Company's capitalization, such as a subdivision of
the outstanding shares of Common Stock, a declaration of a dividend payable in
shares, a declaration of a dividend payable in a form other than shares in an
amount that has a material effect on the value of shares, a combination or
consolidation of the outstanding shares into a lesser number of shares, or a
recapitalization or similar occurrence, the Committee will make appropriate
adjustments in the number of shares available for future grants under the Plan,
the number of shares covered by each outstanding option and/or the exercise
price under each outstanding option.
In the event the Company is a party to a merger or other reorganization,
outstanding options will be subject to the agreement of merger or
reorganization. The agreement will provide (i) for the assumption of
outstanding options by the surviving corporation or its parent, (ii) for their
continuation by the Company, if the Company is a surviving corporation,
(iii) for payment of a cash settlement equal to the difference between the
amount to be paid for one share under such agreement and the exercise price,
(iv) for the acceleration of their exercisability followed by cancellation of
options not exercised, or (v) for cancellation of all options that have been
outstanding for less than 12 months.
-9-
<PAGE>
AMENDMENT AND TERMINATION OF PLAN
The Committee may amend, suspend or terminate the Plan at any time and for
any reason; provided, that any amendment of the Plan which increases the number
of shares available for issuance under the Plan (except as a result of
adjustments for changes in capitalization) shall be subject to approval of the
Board of Directors of the Company. The Plan will terminate automatically on
October 1, 2003 if not terminated earlier by the Committee. The termination of
the Plan will not affect any shares previously issued or any option previously
granted under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following tax discussion is only a brief summary of current Federal
income tax laws relevant to the grant and exercise of options under the Plan.
It is intended solely for general information and does not make specific
representations to any optionee. A taxpayer's particular situation may be such
that some variation of the basic rules is applicable to him or her. In
addition, Federal income tax laws and regulations frequently have been revised
and may be changed again at any time in the future. Each optionee (or the
optionee's estate or legatee) is urged to consult a tax adviser before
exercising an option or before disposing of any shares acquired under the Plan,
especially with respect to the tax consequences of a gift of such shares or of
the optionee's death. In addition, a tax adviser should be consulted with
respect to any foreign, state or local tax consequences of a transaction under
the Plan.
GRANT AND EXERCISE OF NQSOS
An optionee will not be deemed to have received any income subject to tax
at the time an NQSO is granted.
If an NQSO is exercised, the optionee will be deemed to have received an
amount of ordinary income equal to the excess of the fair market value of shares
purchased on the date of exercise over the exercise price. In general, the
optionee's basis in the shares acquired by exercising an NQSO is equal to their
fair market value at the time of exercise. A subsequent disposition of such
shares in a taxable transaction will produce capital gain (or loss) for the
optionee equal to the difference between his or her basis and the sale proceeds.
USING STOCK TO EXERCISE NQSOS
Special rules apply if an optionee already owns shares and surrenders those
shares to pay all or part of the exercise price under an NQSO. Such a
transaction is treated as a tax-free exchange with respect to the number of new
option shares that is equal to the number of old shares being surrendered. The
optionee's basis in the new shares is the same as his or her basis in the old
shares, and the capital gain holding period runs without interruption from the
date when the old shares were acquired. Any additional new option shares
received by the optionee will trigger ordinary income taxation. The amount of
ordinary income is equal to (1) the fair market value of the additional new
option shares at the time of receipt less (2) any cash paid by the optionee in
connection with the exercise. The optionee's basis in the additional shares is
equal to their fair market value on the date such shares were exercised, and the
capital gain holding period commences on the same date. The effect of these
rules is to defer the date when any gain in the old shares must be recognized
for tax purposes. Stated differently, these rules allow an optionee to finance
the exercise of an NQSO by using shares that he or she already owns, without
paying current tax on any unrealized appreciation in the value of those old
shares.
10
<PAGE>
THE FOREGOING IS ONLY A SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES WITH
RESPECT TO CERTAIN TRANSACTIONS IN OPTIONS UNDER THE PLAN. EACH OPTIONEE IS
URGED TO CONSULT A TAX ADVISOR BEFORE EXERCISING ANY OPTION OR BEFORE DISPOSING
OF ANY SHARES OF STOCK ACQUIRED UNDER THE PLAN, BOTH WITH RESPECT TO FEDERAL
INCOME TAX CONSEQUENCES AS WELL AS ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES.
PLAN OF DISTRIBUTION
The shares of Common Stock to which this Prospectus relates will be offered
and sold by the Company directly to employees of Medical Groups exercising
options under the Plan. See "Description of the Plan."
EXPERTS
The consolidated financial statements and financial statement schedules of
the Company incorporated in this Registration Statement by reference from the
Company's Annual Report on Form 10-K for the year ended June 30, 1995, have been
audited by Deloitte & Touche LLP, independent auditors, to the extent and for
the periods stated in their report which is incorporated herein by reference,
and have been incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of CareFlorida Health Systems, Inc.
and its subsidiaries at December 31, 1993 and 1992 and for the years then ended
have been audited by Coopers & Lybrand L.L.P., as independent accountants, as
set forth in their report thereon which is incorporated in this Registration
Statement by reference from the Company's Annual Report on Form 10-K for the
year ended June 30, 1995, which has been so incorporated in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Thomas-Davis Medical Centers, P.C.
and subsidiaries as of December 31, 1993 and 1992 and for the years then ended
have been audited by Stevenson, Jones & Holmaas, P.C., independent auditors,
as stated in their report which is incorporated by reference in this
Registration Statement from the Company's Annual Report on Form 10-K for the
year ended June 30, 1995, and has been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
11
<PAGE>
The consolidated financial statements of Intergroup Healthcare
Corporation as of December 31, 1993 and 1992 and for the years then ended
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated herein by reference from the annual report
on Form 10-K of Foundation Health Corporation, in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Patricia A. Burgess, counsel to the Company.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are the approximate amounts of the fees and expenses
payable by the Registrant in connection with the offering described in the
Registration Statement. All amounts are estimated, except for the SEC
registration fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
SEC registration fee. . . . . . . . . . . . . . . . . . $ 10,857
Printing and engraving expenses . . . . . . . . . . . . 2,000
Accounting fees and expenses. . . . . . . . . . . . . . 10,000
Legal fees and expenses . . . . . . . . . . . . . . . . 1,000
Blue sky fees and expenses (including legal fees) . . . 1,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 2,000
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 26,857
- ------
- ------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits the
Registrant's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed action, suit or proceeding in which such person is made a
party by reason of his being or having been a director, officer, employee or
agent of the Registrant, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended. The statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Registrant's Restated Certificate of Incorporation provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by law. In addition, the Registrant has entered into
separate indemnification agreements with its directors and officers that will
require the Registrant, among other things, to indemnify them against certain
liabilities that may arise by reason of their status or service as directors or
officers to the fullest extent not prohibited by law. The Registrant has
obtained directors and officers' liability insurance that may cover, among other
things, liabilities under the federal securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
II-1
<PAGE>
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER
4.1(1) Specimen of Common Stock certificate with rights legend.
4.2(2) Form of Rights Certificate.
4.3(3) 1993 Nonstatutory Stock Option Plan of Foundation Health
Corporation, as amended.
5.1 Opinion of Patricia A. Burgess.
8.1 Opinion of Pillsbury Madison & Sutro as to certain tax matters.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Stevenson, Jones & Holmaas, P.C.
23.4 Consent of Ernst & Young LLP.
23.5 Consent of Pillsbury Madison & Sutro (included in Exhibit 8.1).
23.6 Consent of Patricia A. Burgess (included in Exhibit 5.1).
24.1 Power of Attorney (included at page II-4).
_______________
(1) Incorporated by reference to the Exhibits to Registrant's Registration
Statement on Form S-4 (File No. 33-51648).
(2) Incorporated by reference to the Exhibits to Registrant's Registration
Statement on Form S-4 (File No. 33-80432).
(3) Incorporated by reference to the Exhibits to Registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995 filed with the
Commission on September 27, 1995.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes: (1) to file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement (provided,
however, that clauses (i) and (ii) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement); (2) that, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rancho Cordova, State of California, on September 22,
1995.
FOUNDATION HEALTH CORPORATION
By /s/ Daniel D. Crowley
-------------------------------------
Daniel D. Crowley
Chairman, President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Daniel D. Crowley, Allen J. Marabito and Patricia
A. Burgess, and each of them, his true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the __ day of September, 1995.
Signature Title Date
--------- ----- ----
/s/ Daniel D. Crowley Director, President and September 22, 1995
- ------------------------- Chief Executive Officer
Daniel D. Crowley (Principal Executive Officer)
and Chairman of the
Board
II-4
<PAGE>
/s/ Robert Anderson Director September 26, 1995
- --------------------------
Robert Anderson
/s/ David A. Boggs Director September 26, 1995
- --------------------------
David A. Boggs
/s/ Jeffrey L. Elder Director, Senior Vice September 26, 1995
- --------------------------
Jeffrey L. Elder President--Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ Earl B. Fowler Director September 26, 1995
- --------------------------
Earl B. Fowler
/s/ Richard W. Hanselman Director September 26, 1995
- --------------------------
Richard W. Hanselman
/s/ Ross D. Henderson, M.D. Director September 26, 1995
- --------------------------
Ross D. Henderson, M.D.
/s/ Frank A. Olson Director September 26, 1995
- ---------------------------
Frank A. Olson
/s/ Richard J. Stegemeier Director September 26, 1995
- ---------------------------
Richard J. Stegemeier
/s/ Steven D. Tough Director September 26, 1995
- ---------------------------
Steven D. Tough
/s/ Raymond S. Troubh Director September 26, 1995
- ----------------------------
Raymond S. Troubh
II-5
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
4.1(1) Specimen of Common Stock certificate with rights legend.
4.2(2) Form of Rights Certificate.
4.3(3) 1993 Nonstatutory Stock Option Plan of Foundation Health
Corporation.
5.1 Opinion of Patricia A. Burgess.
8.1 Opinion as to certain tax matters.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Stevenson, Jones & Holmaas, P.C.
23.4 Consent of Ernst & Young LLP.
23.5 Consent of Pillsbury Madison & Sutro (included in Exhibit 5.1 and
Exhibit 8.1).
23.6 Consent of Patricia A. Burgess (included in Exhibit 5.1).
24.1 Power of Attorney (included at page II-4).
_______________
(1) Incorporated by reference to the Exhibits to Registrant's Registration
Statement on Form S-4 (File No. 33-51648).
(2) Incorporated by reference to the Exhibits to Registrant's Registration
Statement on Form S-4 (File No. 33-80432).
(3) Incorporated by reference to the Exhibits to Registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995 filed with the
Commission on September 27, 1995.
II-6
<PAGE>
EXHIBIT 5.1
September ____, 1995
Foundation Health Corporation
3400 Data Drive
Rancho Cordova, CA 95670
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-3 to be filed by
Foundation Health Corporation, a Delaware corporation ("FHC"), with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of 1,000,000 shares of FHC's common stock,
par value $.01 per share, including associated Rights to Purchase Series A
Participating Preferred Stock (the "Shares"), to be issued upon the exercise of
stock options granted under the 1993 Nonstatutory Stock Option Plan of
Foundation Health Corporation (the "Plan"), which Plan is described therein and
filed as an exhibit thereto:
I am of the opinion that the Shares have been duly authorized and, when issued
in accordance with the Plan, will be legally issued, fully paid and
nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
Patricia A. Burgess
Vice President and Counsel
PAB:lt
<PAGE>
Exhibit 8.1
September 21, 1995
Foundation Health Corporation
3400 Data Drive
Rancho Cordova, California 95670
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by Foundation Health Corporation, a Delaware corporation
("FHC"), with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended, of 1,000,000 shares
of FHC's common stock, par value $0.01 per share, to be issued upon the exercise
of stock options (the "Options") granted under the 1993 Nonstatutory Stock
Option Plan of Foundation Health Corporation, which plan is described in the
Registration Statement and filed as an exhibit thereto, we hereby confirm that
the discussion set forth under the caption "Certain Federal Income Tax
Consequences" in the Registration Statement describes the material federal
income tax considerations relevant to the holders of Options upon the grant and
exercise thereof.
We hereby consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement and to the use of our name in the Registration Statement
and the Prospectus included therein.
Very truly yours,
/s/ Pillsbury Madison & Sutro
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Foundation Health Corporation on Form S-3 of our report dated July 25, 1995,
appearing in the Annual Report on Form 10-K of Foundation Health Corporation for
the year ended June 30, 1995 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Sacramento, California
September 26, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Foundation Health Corporation on Form S-3 of our report dated February 28,
1994, on our audits of the consolidated financial statements of CareFlorida
Health Systems, Inc., as of December 31, 1993 and 1992 and the years then
ended, which report is included in the Annual Report on Form 10-K of
Foundation Health Corporation for the fiscal year ended June 30, 1995. We
also consent to the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Miami, Florida
September 25, 1995
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Foundation Health Corporation on Form S-3 of our report of dated April 27, 1994,
appearing in the Annual Report on Form 10-K of Foundation Health Corporation
for the year ended June 30, 1995 and to the reference to us under the heading
"Experts" in the prospectus, which is part of this Registration Statement.
STEVENSON, JONES & HOLMAAS, P.C.
Tucson, Arizona
September 26, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-3 and related Prospectus of Foundation Health
Corporation for the registration of 1,000,000 shares of its common stock and
to the incorporation by reference therein of our report dated February 16,
1994, except Note 17 as to which the date is March 18, 1994, with respect to
the consolidated financial statements of Intergroup Healthcare Corporation
for the years ended December 31, 1993 and 1992, appearing in the Annual
Report on Form 10-K of Foundation Health Corporation for the year ended June
30, 1995 filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Tucson, Arizona
September 26, 1995
