FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 30, 1997
FOHP, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 0-25944 22-3314813
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(State or other (Commission (IRS Employer
jurisdiction File Number) Identification
of incorporation) Number)
2 Bridge Avenue
Building 6
Red Bank, New Jersey 07701-1106
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (908)842-5000
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On April 30, 1997, pursuant to the Amended and Restated Securities Purchase
Agreement, dated February 10, 1997, among FOHP, Inc., a New Jersey corporation
("FOHP"), First Option Health Plan of New Jersey, Inc., a New Jersey corporation
and wholly-owned subsidiary of FOHP ("FOHP-NJ"), and Foundation Health Systems,
Inc., a Delaware corporation formerly known as Health Systems International,
Inc. ("FHS"), as amended by the amendment thereto dated as of March 13, 1997
(referred to herein, as so amended, as the "Amended Securities Purchase
Agreement"), FHS purchased from FOHP convertible debentures (the "Debentures")
in the aggregate principal amount of $51,701,120.38. The principal amount of the
Debentures are convertible, at the option of FHS, into up to 71% of FOHP's
capital stock on a fully-diluted basis. At the closing of the purchase of the
Debentures, FHS converted $1,701,120.38 of principal amount of Debentures into
168,109 shares of FOHP's common stock, par value $.01 per share ("Common
Stock"), which represents approximately 7.5% of FOHP's outstanding Common Stock.
In connection with FHS's purchase of the Debentures, FHS and FOHP entered
into a General Administrative Services Management Agreement (the "Administrative
Management Agreement"), pursuant to which FHS will oversee the management of
FOHP and will assist FOHP's management in provider contracting, utilization
review and quality assurance, employee relations, sales and marketing, and
strategic planning, among other services. FOHP will pay FHS 2% of its premium
revenue for the services provided by FHS under the Administrative Management
Agreement.
In addition, FHS and FOHP have entered into a Management Information
Systems and Claims Processing Services Management Agreement (the "MIS
Agreement"), pursuant to which FHS would provide claims processing, record
keeping and data processing services to all the health plans offered, or to be
offered, by FOHP's subsidiaries. The MIS Agreement will become effective at
FHS's option.
In connection with the sale of the Debentures, FHS and FOHP entered into a
letter agreement (the "Letter Agreement") which clarifies FHS's right under the
Amended Securities Purchase Agreement to infuse additional capital into FOHP in
the event that it is determined that FOHP-NJ needs capital to meet applicable
statutory net worth requirements (referred to herein as a "Net Capital
Shortfall"). Pursuant to the Letter Agreement, FHS may, at any time prior to
December 31, 1997, at its own discretion, contribute up to $5,000,000 in
additional capital to FOHP to be used in connection with certain anticipated
liabilities and contribute up to such additional amounts that may be projected
to be required from time to time (based upon reasonable projections prepared by
FHS taking into account
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anticipated full year 1997 operating results) in order for FOHP-NJ to meet
100% of the minimum statutory net worth requirements (or such higher percentage
that may be required by the appropriate regulators) as of December 31, 1997. In
the event that, in accordance with the terms of the Letter Agreement, FHS
contributes additional capital to FOHP to meet a Net Capital Shortfall or
projected Net Capital Shortfall, FHS will be issued additional convertible
debentures in substantially the same form as the Debentures.
The sale of the Debentures to FHS was approved by the shareholders of FOHP
at the 1996 Annual Meeting of Shareholders of FOHP (the "1996 Annual Meeting")
held on April 16, 1997. At the 1996 Annual Meeting, the shareholders of FOHP
also approved (i) certain amendments to the Certificate of Incorporation of FOHP
relating to changes in the classes of securities authorized for issuance by
FOHP, (ii) certain amendments to the Certificate of Incorporation of FOHP
relating to changes in the rights of shareholders of FOHP, and (iii) certain
amendments to the Certificates of Incorporation and By-laws of FOHP and FOHP-NJ
relating to the Boards of Directors of FOHP and FOHP-NJ and changes in the
composition thereof. Finally, at the 1996 Annual Meeting, FOHP's shareholders
also elected the following persons to serve on the Board of Directors of FOHP
(the "Board"): Roger W. Birnbaum, Dr. John F. Bonamo, Sister Jane Frances Brady,
Bruce G. Coe, John Gantner and Laurence M. Merlis. They join existing Board
members Christopher Dadlez, Dr. Mark Engel, Dr. Thomas J. Feneran and
Dr. Om P. Sawhney.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOHP, Inc.
(Registrant)
By: /s/Donald Parisi
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Donald Parisi
Acting President and Chief Executive
Officer and General Counsel
Date: May 15, 1997
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