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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
FPA Medical Management, Inc.
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(Name of Issuer)
Common Stock, $0.002 par value per share
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(Title of Class of Securities)
302543 10 3
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(CUSIP Number)
Kirk A. Benson Copies to: Linda C. Williams, Esq.
Foundation Health Corporation Karen A. Dempsey, Esq.
3400 Data Drive Pillsbury Madison & Sutro, LLP
Rancho Cordova, CA 95670 P.O. Box 7880
(916) 631-5000 San Francisco, CA 94120-7880
(415) 983-1000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 10, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 23 Pages
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CUSIP No. 302543 10 3
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1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Foundation Health Corporation ("Foundation")
I.R.S. Identification No.: 68-0014772
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2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
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3) SEC Use Only
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4) Source of Funds (See Instructions)
00
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5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
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6) Citizenship or Place of Organization
U.S.A.
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7) Sole Voting Power
4,076,087(1)
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8) Number of Shares Beneficially Owned by Each Reporting
Person with Shared Voting Power
0
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9) Sole Dispositive Power
4,076,087
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10) Shared Dispositive Power
0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person
4,076,087
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12) Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) [ ]
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(1) Foundation has agreed to vote such shares in accordance with the terms
of a Voting Agreement between Foundation and the Issuer. See Item 6.
Page 2 of 23 Pages
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13) Percent of Class Represented by Amount in Row (11)
16.5%
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14) Type of Reporting Person (See Instructions)
CO
Page 3 of 23 Pages
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With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission as an exhibit to
this report, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
ITEM 1. SECURITY AND ISSUER.
This Statement relates to shares of Common Stock, par value $0.002 per
share ("Common Stock"), of FPA Medical Management, Inc. (the "Issuer"). The
address of the Issuer's principal executive offices is 3636 Nobel Drive, Suite
200, San Diego, California 92122.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by Foundation Health Corporation, a
corporation organized and existing under the laws of the State of Delaware
("Foundation"). Foundation is an integrated managed health care organization
with headquarters in Rancho Cordova, California. Through its HMO, insured PPO
and government contracts subsidiaries, Foundation provides group, individual,
Medicare, Medicaid and CHAMPUS coverage for more than three million individuals.
In addition, Foundation's subsidiaries offer managed health care products
related to workers' compensation, behavioral health, dental, vision and
prescription drugs, and administrative services for medical groups and self-
funded benefit programs. Foundation's principal offices are located at 3400
Data Drive, Rancho Cordova, California 95670.
The names and present principal occupations or employment, and the names,
principal businesses and addresses of any corporations or other organizations in
which such employment is conducted of the directors and executive officers of
Foundation are set forth in Annex 1 hereto and are incorporated herein by
reference. Each director and executive officer of Foundation is a citizen of
the United States. Other than executive officers and directors, there are no
persons or corporations controlling or ultimately in control of Foundation.
During the last five years, Foundation and, to the best knowledge of
Foundation, the executive officers and directors of Foundation have not (i) been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
were or are subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On December 10, 1996, Foundation acquired 4,076,087 shares (the "Shares")
of Common Stock, pursuant to the terms of a Stock and Note Purchase Agreement
(the "Purchase Agreement"), dated as of June 28, 1996, as amended, between
Foundation, the Issuer and the other parties listed therein. While the
transactions contemplated by the Purchase Agreement were consummated effective
as of November 29, 1996, Foundation did not acquire the Shares until
December 10, 1996. The Purchase Agreement related to, among other things, the
purchase, by a subsidiary of the Issuer, of the stock of Foundation Health
Medical Services, a California corporation, doing business in Arizona as TDMC
Medical Services Corporation ("FHMS"). The Shares were issued to Foundation as
part of the consideration for the purchase of the stock of FHMS pursuant to the
Purchase Agreement.
Page 4 of 23 Pages
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ITEM 4. PURPOSE OF TRANSACTION.
As described in Item 3 above, Foundation acquired the Shares in connection
with the acquisition of FHMS by a subsidiary of the Issuer. The Shares have
been acquired for investment purposes and not for the purpose or in connection
with any transaction having the purpose of changing the control of the Issuer.
Foundation may, however, from time to time communicate with the Issuer's
management regarding its business plans and operations. Subject to the
Registration Rights Agreement and Voting Agreement described below, Foundation
intends continually to assess the market and prospects for the Issuer's Common
Stock and may, based upon such assessment, from time to time, or at any time,
purchase additional shares of Common Stock or sell or otherwise dispose of the
Shares, and may engage in various hedging or other derivative transactions with
respect to the Shares.
Subject to the foregoing, Foundation does not have any present intention to
effect any of the transactions enumerated in clauses (a) through (j) of Item 4
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of the date hereof, Foundation may be deemed to be the beneficial owner
of 4,076,087 shares of Common Stock (approximately 16.5% of the total number of
shares of Common Stock outstanding at the date hereof). Subject to the terms of
the Registration Rights Agreement and the Voting Agreement, Foundation has sole
voting and dispositive power over all of the Shares.
Other than as set forth herein, neither Foundation nor any of its
subsidiaries beneficially owns any shares of Issuer's Common Stock. To the best
knowledge of Foundation, none of Foundation's executive officers or directors
beneficially owns any shares of the Issuer's Common Stock.
Other than as set forth herein, there have been no transactions in shares
of Issuer's Common Stock during the past 60 days by Foundation, or, to the best
knowledge of Foundation, by any of Foundation's executive officers and
directors. In addition, to the best knowledge of Foundation, no person other
than Foundation has the right to receive dividends from, or the proceeds from
the sale of, the securities covered by this Statement.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Foundation has entered into a Registration Rights Agreement, dated as of
November 29, 1996 (the "Registration Rights Agreement"), with the Issuer, a copy
of which is filed herewith as Exhibit 1 and incorporated herein by reference.
Pursuant to the terms of the Registration Rights Agreement, Foundation may, at
any time after March 31, 1997 and until the earlier (the "Expiration Date") of
(i) the date the Shares become freely tradable and (ii) November 29, 2001,
require the Issuer to register up to 2,000,000 of the Shares. In addition,
following the expiration of any contractual lock-ups entered into in connection
with such demand registration and prior to the Expiration Date, Foundation may
require the Issuer to register all of the remaining Shares pursuant to a shelf
registration statement. Foundation also has the option to request a shelf
registration statement only, in lieu of the first demand registration and
subsequent shelf registration. All sales by Foundation pursuant to a shelf
registration are subject to volume limitations set forth in the Registration
Rights Agreement. Under certain circumstances, the Issuer has the right to
defer such demand registrations. Furthermore, whenever the Issuer proposes to
register, under the Securities Act, any of its securities, Foundation is
entitled, subject to certain restrictions, to include its Shares in such
registration. In lieu of carrying out any of its obligations to register shares
pursuant to the Registration Rights Agreement, the Issuer may purchase the
Shares requested to be so registered at a price equal to the closing price of
such Shares on the date such registration is requested. Nothing in the
Registration Rights Agreement restricts Foundation's ability to enter into
hedging transactions with respect to the Shares.
Page 5 of 23 Pages
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Foundation and the Issuer have entered into a Voting Agreement (the "Voting
Agreement"), dated as of November 29, 1996, pursuant to which Foundation has
agreed to vote the Shares in accordance with the recommendation of the Board of
Directors of the Issuer with respect to all matters other than (i) transfers of
all or substantially all of the assets or capital stock of the Issuer,
consolidations, mergers, reclassifications and recapitalizations and (ii)
amendments to the Certificate of Incorporation or By-laws of the Issuer if such
amendment would change any of the rights of the Common Stock. In addition,
Foundation may vote the Shares in any manner in which it sees fit, during the
occurrence of any material breach by FPA or any of its affiliates under the
Purchase Agreement or certain other enumerated agreements between the Issuer and
its affiliates on the one hand, and FPA and its affiliates, on the other. The
Voting Agreement terminates at such time as Foundation owns less than 500,000
Shares. Pursuant to the Voting Agreement, Foundation may not transfer more than
500,000 shares of Common Stock to any company in the health services industry
without the prior written consent of the Issuer or Foundation's obtaining of the
written agreement of such transferee to be bound by the terms of the Voting
Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Registration Rights Agreement, dated as of November 29,
1996, by and between the Issuer and Foundation.
2. Voting Agreement, dated as of November 29, 1996, by and
between the Issuer and Foundation.
Page 6 of 23 Pages
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Date: December 19, 1996 FOUNDATION HEALTH CORPORATION
By /s/ Jeffrey L. Elder
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Name: Jeffrey L. Elder
Title: Senior Vice President
Chief Financial Officer
Page 7 of 23 Pages
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ANNEX 1
The following table sets forth the name, residence or business address and
present principal occupation or employment of each director and executive
officer of Foundation Health Corporation. Directors are indicated by an
asterisk.
Name and Residence or Present Principal Occupation
Business Address or Employment
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*Daniel D. Crowley Chairman of the Board,
Foundation Health President and Chief Executive
Corporation Officer of Foundation
3400 Data Drive (principal business: managed
Rancho Cordova, CA 95670 health care services).
*Earl B. Fowler President and owner of Fowler
Fowler International International Corporation
Corporation (principal business: international
2231 Crystal Drive, #500 consulting firm) and Chairman of
Crystal Park III SPD Technologies, Inc. (principal
Arlington, VA 22202 business: electrical equipment
manufacturing).
*Steven D. Tough President and Chief Operating
Foundation Health Officer-Government Programs
Corporation of Foundation (principal
3400 Data Drive business: managed health care
Rancho Cordova, CA 95670 services).
*David A. Boggs General Manager, ATC/Vancom
ATC/Vancom of Nevada Limited of Nevada Limited Partnership,
Partnership, Operating Operating Citizens Area Transit
Citizens Area Transit (principal business:
3200 W. Tompkins Avenue transportation)
Las Vegas, NV 89103
*Richard W. Hanselman Consultant to various companies;
3017 Poston Avenue Director of Arvin Industries,
Nashville, TX 37203 Becton, Dickinson and Company, BEC
Group, the Bradford Funds, Gryphon
Holdings, Inc. and IMCO Recycling,
Inc.
*Raymond S. Troubh Financial Consultant;
10 Rockefeller Plaza director of ADT Limited,
Suite 712 America West Airlines, Inc.,
New York, NY 10020 Applied Power Inc., ARIAD
Pharmaceuticals, Inc., Becton,
Dickinson and Company, Diamond
Offshore Drilling, Inc.,
General American Investors
Company, Olsten Corporation,
Petrie Stores Corporation, Time
Warner Inc., Triarc Companies,
Inc. and WHX Corporation.
Page 8 of 23 Pages
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*Jeffrey L. Elder Senior Vice President - Chief
Foundation Health Financial Officer of Foundation
Corporation (principal business: managed
3400 Data Drive health care services).
Rancho Cordova, CA 95670
*Patrick Foley Chairman, President and CEO
DHL Airways, Inc. of DHL Airways, Inc. (principal
333 Twin Dolphin Drive business: shipping);
Redwood City, CA 94065 Director of Continental Airlines
and Glenborough Realty Trust.
*Ross P. Henderson Medical Director of Intergroup
Intergroup of Arizona Prepaid Health Services of
1010 N. Finance Center Drive Arizona, Inc., (principal
Tucson, AZ 85710 business: a health maintenance
organization); Medical Director
of Thomas-Davis Medical Centers,
P.C.
*Richard J. Stegemeier Chairman Emeritus of Unocal
Unocal Corporation Corporation; director First
376 Valencia Avenue Interstate Bancorp, Halliburton
Brea, CA 92621 Company, Northrop Grumman
Corporation, Outboard Marine
Corporation, Pacific Enterprises
and Wells Fargo Bank.
Kirk A. Benson President and Chief Operating
Foundation Health Corporation Officer - Commercial Operations
3400 Data Drive of Foundation (principal
Rancho Cordova, CA 95670 business: managed health care
services)
Allen J. Marabito Senior Vice President -
Foundation Health Corporation General Counsel and Secretary
3400 Data Drive of Foundation (principal
Rancho Cordova, CA 95670 business: managed health care
services)
Page 9 of 23 Pages
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EXHIBIT 1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 29th day of November, 1996,
by and among FPA MEDICAL MANAGEMENT, INC., a Delaware corporation ("FPA"), and
FOUNDATION HEALTH CORPORATION, a Delaware corporation ("FHC").
W I T N E S S E T H:
A. WHEREAS, pursuant to a Stock and Note Purchase Agreement, dated as of
June 28, 1996 (the "Purchase Agreement"), by and among FPA and FHC and certain
other parties named therein, FHC will acquire as of the date hereof 4,076,087
shares (the "Registrable Shares") of common stock, $.002 par value, of FPA ("FPA
Common Stock").
B. WHEREAS, FPA and FHC desire to allow FHC to sell publicly the
Registrable Shares pursuant to certain registration statements filed under the
Securities Act of 1933, as amended ("Act"), pursuant to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein made and mutual benefits to be derived from this Agreement, it is hereby
agreed as follows:
1. DEMAND REGISTRATION STATEMENTS.
(a) FIRST DEMAND REGISTRATION. At any time during the period commencing
on March 31, 1997 hereof and ending on the earlier (the "Expiration Date") of
(i) the date upon which all of the Registrable Shares may be freely transferred
pursuant to Rule 144 promulgated under the Act and (ii) the fifth anniversary of
the date hereof, FHC may make one written request to FPA for registration under
the Act (the "First Demand Registration") with the Securities and Exchange
Commission ("Commission") on a Registration Statement on Form S-3 (or other
appropriate form which FPA is eligible to use with the Commission in order to
register under the Act the Registrable Shares) (the "First Demand Registration
Statement") covering the sale to the public of the number of such Registrable
Shares specified by FHC (but in no event in excess of 2,000,000 Registrable
Shares). Other holders of FPA Common Stock or FPA may participate in the First
Demand Registration so long as such participation does not adversely affect
FHC's ability to sell its Registrable Shares. Upon receipt of a request for the
First Demand Registration from FHC as described above, but subject to FPA's
right of first refusal pursuant to Section 6 to purchase the Registrable Shares
requested to be registered, FPA will, as promptly as reasonably practicable,
prepare and file with the Commission (and all applicable state securities
authorities) the First Demand Registration Statement covering such proposed sale
of all Registrable Shares requested to be registered, but in no event later than
April 15, 1997.
The First Demand Registration shall be firmly underwritten and led by one
or more "first tier" managing underwriters selected by FPA and acceptable to FHC
in its sole
Page 10 of 23 Pages
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discretion. Management of FPA shall participate in a "road show" and other
customary selling efforts which the underwriters reasonably deem appropriate to
assist in the sale of the Registrable Shares.
(b) SECOND DEMAND REGISTRATION. At any time during the period commencing
on the expiration of any contractual lock-up required by the underwriters
pursuant to the First Demand Registration and ending on the Expiration Date, FHC
may make one written request to FPA for registration under the Act (the "Second
Demand Registration") with the Commission on a Registration Statement on Form
S-3 (or other appropriate form which FPA is eligible to use with the Commission
in order to register under the Act the Registrable Shares on a "shelf"
registration basis (the "Second Demand Registration Statement") covering the
sale of all of the then outstanding Registrable Shares. Upon receipt of a
request for the Second Demand Registration from FHC as described above, but
subject to FPA's right of first refusal pursuant to Section 6 to purchase the
Registrable Shares requested to be registered, FPA will, as promptly as
reasonably practicable, prepare and file with the Commission (and all applicable
state securities authorities) the Second Demand Registration Statement covering
such proposed sale of all Registrable Shares requested to be registered.
(c) ALTERNATIVE DEMAND REGISTRATION. In lieu of the First Demand
Registration and the Second Demand Registration, at any time during the period
commencing on March 31, 1997 and ending on the Expiration Date, FHC may make one
written request to FPA for registration under the Act (the "Alternative Demand
Registration") with the Commission on a Registration Statement on Form S-3 (or
other appropriate form which FPA is eligible to use with the Commission in order
to register under the Act the Registrable Shares on a "shelf" registration
basis) (the "Alternative Demand Registration Statement") covering the sale of
all of the Registrable Shares. FHC may make such request for an Alternative
Demand Registration only after consultation with FPA. Upon receipt of a request
for the Alternative Demand Registration from FHC as described above, but subject
to FPA's right of first refusal pursuant to Section 6 to purchase the
Registrable Shares requested to be registered, FPA will, as promptly as
reasonably practicable, prepare and file with the Commission (and all applicable
state securities authorities) the Alternative Demand Registration Statement
covering such proposed sale of all Registrable Shares, but in no event later
than April 15, 1997.
(d) PROCEDURES. Subject to Section 2, FPA will use commercially
reasonable best efforts to have the First Demand Registration Statement, Second
Demand Registration Statement or Alternative Demand Registration Statement
(each, a "Demand Registration Statement") declared effective by the Commission
(and all applicable state securities authorities) as soon as practicable after
the filing thereof and to maintain the effectiveness thereof for a period of
(i) in the case of the First Demand Registration, 30 days (or until all
Registrable Shares covered thereby have been sold, if such sales are completed
before the end of such 30-day period), or (ii) in the case of any other Demand
Registration, until all Registrable Shares covered thereby have been sold or
such time as all of the Registrable Shares may be freely transferred pursuant to
Rule 144 promulgated under the Act.
Page 11 of 23 Pages
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(e) LIMITATIONS ON REGISTRATIONS. FPA shall only be required to provide
the First Demand Registration, Second Demand Registration and Alternative Demand
Registration (each a "Demand Registration") to FHC described under this Section
1; PROVIDED, HOWEVER, that a Registration Statement filed by FPA pursuant to
this Section 1 shall not count as an allowed Demand Registration Statement until
it has become effective under the Act and has been maintained effective for the
period described in Section 1(d).
(f) LIMITATION ON SALE OF REGISTRABLE SHARES. In the event of a Second
Demand Registration or an Alternative Demand Registration, FHC agrees to sell
only that number of Registrable Shares in any three month period that would be
permitted pursuant to the volume restrictions of Rule 144 promulgated under the
Act; PROVIDED, HOWEVER, that FHC may aggregate from one three month period to
another that number of Registrable Shares that it could have sold, but did not
sell, in any prior three month period. The limitation set forth in this Section
1(f) shall not apply in the event that FHC makes First Demand Registration
request and FPA does not file the First Demand Registration Statement on a
timely basis in accordance with Section 1(a).
2. POSTPONEMENT OR SUSPENSION OF SALES UNDER DEMAND REGISTRATION
STATEMENTS. FPA will be entitled to postpone the filing of any Demand
Registration Statement, and to suspend sales under any Demand Registration
Statement, for an aggregate number of days not exceeding ninety (90), if (a) in
the good faith judgment of the Board of Directors of FPA, the filing of a
Registration Statement would contain disclosure which would be seriously
detrimental to FPA at such time and the Board of Directors of FPA concludes, as
a result, that it is essential not to file such registration statement at the
time requested, and FPA shall furnish to FHC a certificate signed by the
President of FPA certifying thereto; and (b) a registration statement was filed
by FPA in connection with an underwritten public offering by FPA of any
securities within the ninety (90) days preceding the date of the request
(excluding FPA's registration of securities in connection with its 1996 offering
of Convertible Subordinated Debentures (the "Debentures")), or the Commission
(or applicable state securities authority) requires such postponement or
suspension; PROVIDED, HOWEVER, that in computing the thirty (30)-day period for
which FPA is required to maintain effectiveness of a Demand Registration
Statement, the period of any such suspension shall not be included. FPA shall
give prompt written notice to FHC of any such postponement or suspension and
shall likewise give prompt written notice to FHC of termination of such
postponement or suspension. FHC hereby agrees to postpone the sale of any
Registrable Shares registered pursuant to the Demand Registration Statement
during any suspension of sales of FPA Common Stock thereunder by FPA and during
any lock-up period applicable to the Company's senior management with respect to
any underwritten public offering, provided that any such lock-up period shall
not exceed ninety (90) days and shall not exceed in length the lock-up period
applicable to other holders, if any, of similar registration rights granted by
the Company with respect to shares of FPA Common Stock.
3. PIGGY BACK REGISTRATION RIGHTS.
(a) If at any time or from time to time after the date hereof and prior to
the Expiration Date, FPA proposes to register any of its securities under the
Act on any form
Page 12 of 23 Pages
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for the registration of securities under the Act, whether or not for its own
account (other than by a registration statement on Form S-4 or Form S-8 or other
form which does not include substantially the same information as would be
required in a form for the general registration of securities or would not be
available for the Registrable Securities) (a "Piggy Back Registration"), it
shall as expeditiously as possible give written notice to FHC of its intention
to do so and of FHC's rights under this Section 3. Such rights are referred to
hereinafter as "Piggy Back Registration Rights." Upon the written request of
FHC made within three (3) business days after receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
FHC, FPA shall include in the Registration Statement the Registrable Securities
which FPA has been so requested to register by FHC and FPA shall use
commercially reasonable best efforts to have the Registration Statement declared
effective by the Commission and to maintain the effectiveness thereof for the
period necessary for FHC to effect the proposed sale or other disposition (but
in no event for a period greater than 90 days).
(b) If, at any time after giving written notice of its intention to
register any securities in a Piggy Back Registration but prior to the effective
date of the related Registration Statement, FPA shall determine for any reason
not to register such securities, FPA shall give written notice of such
determination to FHC and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such Piggy Back
Registration. All commercially reasonable best efforts obligations of FPA
pursuant to Section 5 shall cease if FPA determines to terminate prior to such
effective date any registration where Registrable Securities are being
registered pursuant to this Section 3.
(c) If a Piggy Back Registration involves an offering by or through one or
more underwriters, then FHC, provided it has requested to have Registrable
Securities included in FPA's Registration Statement, shall agree to sell its
Registrable Securities to the underwriters selected by FPA on the same terms and
conditions as apply to other selling shareholders and enter into an underwriting
agreement with such underwriters containing customary representations and
warranties.
(d) If a Piggy Back Registration involves an offering by or through one or
more underwriters, FPA shall not be required to include Registrable Securities
therein if and to the extent the underwriter managing the offering reasonably
believes in good faith and advises FPA (which in turn advises FHC) that such
inclusion would materially adversely affect such offering; provided that,
subject to the rights under any registration rights agreements in effect prior
to the date hereof (which are registration rights relating to 50,000 Banque
Paribas warrants, 250,000 warrants and 525,000 shares of FPA Common Stock issued
to Physician Corporation of America and the Debentures) and subject to rights
under any future registration rights agreements for an aggregate of up to
200,000 shares of FPA Common Stock to be issued in connection with acquisitions,
(i) if other selling shareholders who are employees, officers, directors or
other affiliates of FPA have requested registration of securities in the
proposed offering, FPA will reduce or eliminate such other selling shareholders'
securities before any reduction or elimination of Registrable Securities, and
(ii) FHC's participation in such Piggy Back Registration shall be PRO RATA with
all other holders of the securities of FPA exercising "piggy back registration
rights" similar to those
Page 13 of 23 Pages
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set forth herein in proportion to the respective number of shares they have
requested to be registered.
4. EXPENSES. FHC shall pay all underwriting or brokerage commissions and
discounts, if any, associated with the Registrable Shares being sold by FHC
pursuant to the Demand Registration Statements or Piggy Back Registration. FPA
shall pay all other costs and expenses incurred by FPA directly associated with
the Demand Registration Statements or any Piggy Back Registration, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for FPA, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration.
5. REGISTRATION RIGHTS. If and whenever FPA is required under this
Agreement to use commercially reasonable best efforts to take action pursuant to
any Federal or state law or regulation to permit the sale or other disposition
of any Registrable Shares in order to effect or cause the registration of any
Registrable Securities under the Act as provided in this Agreement, FPA shall,
as expeditiously as practicable:
(a) furnish to FHC and the underwriters, if any, without charge,
as many copies of the Registration Statement, the Prospectus or the
Prospectuses (including each preliminary prospectus) and any amendment
or supplement thereto as they may reasonably request;
(b) enter into such agreements (including an underwriting
agreement) and take all such other actions reasonably required in
connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, if
the registration is in connection with an underwritten offering:
(i) make such representations and warranties to the underwriters in
such form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings and confirm the same if
and when requested; (ii) obtain opinions of counsel to FPA and updates
thereof (which counsel and opinions in form, scope and substance shall
be reasonably satisfactory to the underwriters) addressed to the
underwriters and FHC covering the matters customarily covered in
opinions requested in similar underwritten offerings and such other
matters as may be reasonably requested by such underwriters;
(iii) obtain "cold comfort" letters and updates thereof from FPA's
accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with similar
underwritten offerings; and (iv) deliver such documents and
certificates as may be reasonably requested by the underwriters to
evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by FPA; the above shall be done at each closing under
such underwriting or similar agreement or as and to the extent
required thereunder; and
Page 14 of 23 Pages
<PAGE>
(c) otherwise use commercially reasonable efforts to comply with
all applicable federal and state regulations; and take such other
action as may be reasonably necessary or advisable to enable FHC and
each such underwriter to consummate the sale or disposition in such
jurisdiction or jurisdictions in which FHC or underwriter shall have
reasonably requested that the Registrable Securities be sold. Except
as otherwise provided in this Agreement, FPA shall have sole control
in connection with the preparation, filing, withdrawal, amendment or
supplementing of each Registration Statement, the selection of
underwriters, and the distribution of any preliminary prospectus
included in the Registration Statement, and may include within the
coverage thereof additional shares of Common Stock or other securities
for its own account or for the account of one or more of its other
security holders.
FHC agrees to furnish to FPA such information regarding the distribution of
any Registrable Securities as to which any registration is being effected and
such other information as may otherwise be required by the Act to be included in
such Registration Statement.
6. RIGHT OF FIRST REFUSAL.
(a) In lieu of carrying out its obligation to effect a Piggy Back
Registration or Demand Registration of any Registrable Securities pursuant to
this Agreement, FPA may satisfy such obligation by offering to purchase and
purchasing such Registrable Securities requested to be registered at an amount
in cash per share equal to the Closing Price. The "Closing Price" shall mean:
(i) If the primary market for FPA Common Stock is a national
securities exchange registered under the Securities Exchange Act of
1934, as amended, the National Association of Securities Dealers
Automated Quotation System, National Market System or other market or
quotation system in which last sale transactions are reported on a
contemporaneous basis, the last reported sales price, regular way, of
FPA Common Stock as of the date of an FHC request for a Demand
Registration or request for inclusion in a Piggy Back Registration,
or, if there has not been a sale on such trading day, the highest
closing or last bid quotation therefor on such trading day (excluding,
in any case, any price that is not the result of bona fide arm's
length trading); or
(ii) If the primary market for FPA Common Stock is not an
exchange or quotation system in which last sale transactions are
contemporaneously reported, the highest closing or last bona fide bid
or asked quotation by disinterested persons (including any
individuals, partnerships, corporations, trust, joint ventures or
incorporated organizations) in the over-the-counter market on such
trading day as reported by the National Association of Securities
Dealers through its Automated Quotation System or its successor or
Page 15 of 23 Pages
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such other generally accepted source of publicly reported bid quotations as
FHC designates.
(b) The closing of any purchase of any Registrable Shares pursuant to this
Section 6 will take place at FPA's principal executive offices on such date as
FPA (or its designee) and FHC shall mutually select; PROVIDED, HOWEVER, that
such closing shall not occur more than sixty (60) days following the exercise of
FPA's (or its designee's) right of first refusal hereunder. At such closing,
the purchase price to be paid for the Registrable Shares shall be paid in full
in cash or by wire transfer to FHC and FHC shall deliver stock certificates
representing all of the Registrable Shares to be purchased by FPA (or its
designee), together with stock powers duly executed in blank to FPA (or its
designee) with signatures guaranteed by a bank, trust company or member firm of
the New York Stock Exchange, which Registrable Shares shall be free and clear of
all liens, encumbrances, charges, demands, assessments and claims (including,
without limitation, marital property claims) of every nature or kind whatsoever
(collectively, "Liens") and subject to no restrictions with respect to
transferability, other than those set forth in the legend placed on the back of
the certificates representing the Registrable Shares at the time they were
originally delivered to FHC.
7. INDEMNIFICATION.
(a) In connection with each Registration Statement relating to disposition
of Registrable Securities, FPA shall indemnify and hold harmless FHC (and its
permitted successors and assigns) and each Person, if any, who controls FHC
(within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934 (the "Exchange Act")) against any and all losses, claims,
damages and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the Act, the
Exchange Act or other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be started therein or necessary to make the statements therein in
light of the circumstances under which they were made not misleading; PROVIDED,
HOWEVER, that such indemnity shall not inure to the benefit of FHC (or any
Person controlling FHC within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) on account of any losses, claims, damages or liabilities
arising from the sale of the Registerable Securities if such untrue statement or
omission or alleged untrue statement or omission was made in such Registration
Statement, Prospectus or preliminary prospectus, or such amendment or
supplement, in reliance upon and in conformity with information furnished in
writing to FPA by FHC specifically for use therein or FHC's failure to provide
information required to be included therein or if FPA timely corrects any such
untrue statement or omission in an amendment or supplement and FHC does not
timely provide such amendment or supplement to the purchaser of the Registrable
Securities in accordance with applicable law. This
Page 16 of 23 Pages
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indemnity agreement shall be in addition to any liability with FPA may otherwise
have.
(b) In connection with each Registration Statement, FHC shall indemnify,
to the same extent as the indemnification provided by FPA in Section 7(a), FPA,
its directors and each officer who signs the Registration Statement and each
Person who controls FPA (within the meaning of Section 15 of the Act and
Section 20 of the Exchange Act), but only insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in the
Registration Statement, the Prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing by FHC to FPA specifically for use therein or
FHC's failure to provide information required to be included therein. In no
event shall the liability of FHC hereunder be greater in amount than the dollar
amount of the net proceeds received by FHC upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Any party that proposes to assert the right to be indemnified
hereunder will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 7(a) or 7(b) shall be available to any party who shall fail to give
notice as provided in this Section 7(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was prejudiced by the failure to give such notice but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
it from any liability that it may have to any indemnified party for contribution
or otherwise under this Section. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and the approval by the indemnifying party to such indemnified
party of its election so to assume the defense thereof and the approval by the
indemnified party of such counsel (which approval shall not be unreasonably
withheld), the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses, except as provided below and except for the
reasonable costs of investigation subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in writing
by the indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
Page 17 of 23 Pages
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in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent.
(d) FPA and FHC acknowledge that remedies at law for the enforcement of
this Section 7 may be inadequate and intend that this Section 7 shall be
specifically enforceable.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the internal laws of the State of Delaware.
(b) NOTICES. Except as otherwise provided in this Agreement, all notices,
requests, demands and other communications hereunder shall be deemed to be duly
given if delivered by hand or if mailed by certified or registered mail with
postage prepaid.
(i) If to FPA, to: FPA Medical Management, Inc., 3636 Nobel
Drive, Suite 200, San Diego, California 92122, Attention: Chief
Financial Officer (with copies to: FPA Medical Management, Inc., 3636
Nobel Drive, Suite 200, San Diego, California 82122, Attention:
James A. Lebovitz, Senior Vice President, General Counsel and
Secretary).
(ii) If to FHC, to: Foundation Health Corporation, 3400 Data
Drive, Rancho Cordova, California 95670; Attention: Chief Financial
Officer (with a copy to: Linda C. Williams, Esq. and Richard Grey,
Esq., Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San
Francisco, CA 94104).
(iii) Any party entitled to receive notice hereunder may change
its address at which notice is to be received or designate another
person to receive notice by giving notice to all other parties and
persons entitled to receive notice in the manner provided in this
Section.
(c) ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provisions of this Agreement, or where any provisions hereof are validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees and disbursements (including, without limitation,
reasonable attorneys' fees and disbursements incurred in connection with trials
and appeals) in addition to its costs and expenses and any other available
remedy.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but which together
shall constitute but one and the same instrument. Executed signature pages may
be removed from counterpart agreements and attached to one or more fully
executed copies of this Agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement may be assigned by FHC with
respect to any transfer of at least 500,000 shares (which transfer shall be
subject
Page 18 of 23 Pages
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to Section 4 of the Voting Rights Agreement dated as of the date hereof) or more
of the Registrable Shares or any lender in connection with any loan or credit
agreement for which the Registrable Shares are collateral. Upon any foreclosure
pursuant to any such security agreement involving the Registrable Shares as
collateral, the lender may pledge or assign this Agreement to any financial
institution and (ii) may, with the prior written consent of FPA (which consent
shall not be unreasonably withheld), pledge or assign this Agreement to any
person or entity other than a financial institution. Notwithstanding the
foregoing, no pledge or assignment permitted hereby shall relieve FHC of its
obligations hereunder. This Agreement shall be binding upon and inure to the
benefit of the respective parties thereto and their respective successors and
assigns.
(f) HEADINGS. The heading used in this Agreement are for convenience only
and shall not constitute a part of this Agreement.
(g) ENTIRE AGREEMENT. This instrument, together with the Purchase
Agreement and the Voting Agreement, embody the entire agreement
Page 19 of 23 Pages
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between the parties hereto with respect to the transactions contemplated herein,
and supersedes all prior agreements and understandings between the parties.
(h) CONFIDENTIALITY. Each party acknowledges that the information
received by it pursuant hereto may be confidential and for its use only, and it
will not use such confidential information in violation of the Exchange Act,
reproduce, disclose or disseminate such information to any other person (other
than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless such party has made such information
available to the public generally or such party is required to disclose such
information by a governmental body.
(i) HEDGING TRANSACTIONS. Nothing in this Agreement shall be interpreted
to limit FHC's ability to engage in hedging transactions involving the
Registrable Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
FPA MEDICAL MANAGEMENT, INC.
By ________________________________________
Title _____________________________________
FOUNDATION HEALTH CORPORATION
By ________________________________________
Title _____________________________________
Page 20 of 23 Pages
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EXHIBIT 2
VOTING AGREEMENT
This Voting Agreement, dated as of November 29, 1996, is entered into by
and between FOUNDATION HEALTH CORPORATION, a Delaware corporation ("FHC"), and
FPA MEDICAL MANAGEMENT, INC., a Delaware corporation ("FPA").
W I T N E S S E T H
WHEREAS, pursuant to that certain Stock and Note Purchase Agreement (the
"Purchase Agreement"), dated as of June 28, 1996, by and among FHC, FPA and the
other parties listed therein, FHC acquired 4,076,087 shares (the "Shares") of
the common stock of FPA;
WHEREAS, FHC and FPA desire to enter into an agreement governing the manner
in which FHC may vote the Shares with respect to certain matters;
NOW THEREFORE, in consideration of the terms, conditions and covenants
contained herein and in the Purchase Agreement, the parties hereto hereby agree
as follows (capitalized terms not otherwise defined herein shall have the
meaning set forth in the Purchase Agreement):
1. VOTING. FHC agrees to vote the Shares in accordance with the
recommendation of the Board of Directors of FPA (the "Board") as to all matters
with respect to which the Board makes a recommendation, PROVIDED, HOWEVER, that
FHC may vote the Shares in any manner it chooses and in its sole and absolute
discretion with respect to Excluded Matters (as defined in SECTION 2 hereof).
2. EXCLUDED MATTERS. Notwithstanding anything else contained herein,
FHC shall have the right to vote the Shares in any manner it sees fit, and in
its sole and absolute discretion, regardless of any recommendation made by the
Board, with respect to the following matters:
a. Any sale, lease, assignment, transfer or other conveyance of all
or substantially all of the assets or capital stock of FPA, or any
consolidation or merger involving FPA, or any reclassification or other
change of any stock, or any recapitalization of FPA; and
b. Any amendment of the Certificate of Incorporation or By-laws of
FPA if such amendment would change any of the rights, preferences or
privileges of the FPA Common Stock.
Page 21 of 23 Pages
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The foregoing matters shall be referred to herein as "Excluded Matters."
3. ABEYANCE. Notwithstanding anything else contained herein, FHC shall
have the right to vote the Shares in any manner it sees fit and in its sole and
absolute discretion, regardless of any recommendation made by the Board and
shall have no obligations hereunder, upon the occurrence and during the
continuation of any of the following:
a. Any material breach by FPA or any of its Affiliates under the
Purchase Agreement or any of the Related Agreements;
b. Any material breach by FPA or any of its Affiliates under the
Master Lease Assignment and Master Lease Agreement dated as of the date
hereof;
c. Any failure by FPA or any of its Affiliates to make any payments
to FHC when due, including payments under the Secured Promissory Note dated
as of the date hereof, the Secured Consolidated Promissory Note dated as of
the date hereof, or Section 10.7 or Article 11 of the Purchase Agreement,
but excluding any failure which is cured by FPA or any of its Affiliates by
its exercise of offset rights set forth in such agreement or the Purchase
Agreement.
4. TERMINATION. This Agreement shall terminate at such time as the
number of Shares held by FHC is less than 500,000
(taking into account any stock splits, reverse stock splits and dividends and
recapitalizations with respect to FPA Common Stock following the date hereof),
unless sooner agreed by the parties hereto. This Agreement shall not be
applicable with respect to any Shares transferred by FHC to any person except
Affiliates of FHC; provided, however, that transfers by FHC to any company in
the health services industry which result in such company owning 500,000 or more
shares of FPA Common Stock shall not be effected by FHC without the prior
written consent of FPA or FHC's obtaining the written agreement by such
transferee to be bound to the terms of this Agreement.
5. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware as applied to
contracts entered into solely between residents of, and to be performed entirely
in, such state.
6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Page 22 of 23 Pages
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and the year first above written.
FOUNDATION HEALTH CORPORATION
By __________________________
Title _______________________
FPA MEDICAL MANAGEMENT, INC.
By __________________________
Title _______________________
Page 23 of 23 Pages
