<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange
Act of 1934 and Rule 13e-3 thereunder)
FOHP, INC.
(Name of Issuer)
FOHP, INC.
FOUNDATION HEALTH SYSTEMS, INC.
(Name of Persons Filing Statement)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Donald Parisi B. Curtis Westen
FOHP, Inc. Michael E. Jansen
3501 State Highway 66 Foundation Health Systems, Inc.
Neptune, NJ 07753 21600 Oxnard Street
(732) 918-6700 Woodland Hills, CA 91367
(818) 676-6978
(Name, Address and Telephone Number of each Person Authorized to Receive
Notices and Communications on Behalf of Persons Filing Statement)
Copies to:
Paul T. Colella, Esq.
Giordano, Halleran & Ciesla
A Professional Corporation
P.O. Box 190
125 Half Mile Road
Middletown, New Jersey 07748
(732) 741-3900
<PAGE> 2
This statement is filed in connection with:
(x) a. The Filing of Solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule
13e-3(c) under the Securities Exchange Act of 1934.
( ) b. The filing of a registration statement under the Securities
Act of 1933.
( ) c. Tender offer.
( ) d. None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: |X|
Calculation of Filing Fee:
<TABLE>
<CAPTION>
Transaction Valuation (1) Amount of Filing Fee (2)
<S> <C>
$2,167,193 $433.44
</TABLE>
-------------------------
(1) Estimated solely for purposes of calculating the
filing fee required by Rule 0-11 promulgated under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In accordance with subsection (b)(2)
of Rule 0-11, the transaction value is based on the
book value of the 2,083,839 shares of FOHP, Inc.
Common Stock, par value $.01 per share, to be
exchanged for cash or payment rights to be issued or
paid, as the case may be, by FOHP, Inc. in connection
with the merger of FHS Transition Company with and
into FOHP, Inc.
(2) The amount of the filing fee, calculated in
accordance with Rule 0-11, is equal to 1/50th of one
percent (1%) of the transaction value as set forth
above.
(x) Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid.
Amount Previously Paid: $433.44
Form or Registration No.: Preliminary Proxy Statement
Filing Party: FOHP, Inc.
Date Filed: December 18, 1998
<PAGE> 3
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") is being jointly filed by FOHP, Inc. ("FOHP" or the "Surviving
Corporation"), a New Jersey corporation, and Foundation Health Systems, Inc.
("FHS"), a Delaware corporation which currently owns approximately 98% of the
outstanding FOHP Common Stock, par value $.01 per share ("FOHP Common Stock"),
in connection with the merger (the "Merger") of FOHP Transition Company, a New
Jersey corporation and wholly-owned subsidiary of FHS, with and into FOHP, as
contemplated by the Agreement and Plan of Merger, dated as of November 16, 1998,
among FOHP, FHS Transition Company and FHS (the "Merger Agreement"). Upon the
terms and subject to conditions set forth in the Merger Agreement, at the time
of the Merger, each outstanding share of FOHP Common Stock (other than shares
held by FHS and dissenting shares, if any) will be converted into the right to
receive (i) the value of such share determined by independent qualified
appraisers as of December 31, 1998 or (ii) one (1) payment right, pursuant to
which the holder thereof will be entitled to receive a payment of not less than
fifteen dollars ($15.00) on or about July 1, 2001 from FOHP, provided certain
conditions are either satisfied or waived.
The information set forth in the preliminary Proxy Statement (the
"Proxy Statement") filed by FOHP with the Securities and Exchange Commission on
the date hereof is incorporated by reference herein in its entirety and the
responses to each item of this Schedule 13E-3 are qualified in their entirety by
the provisions of the Proxy Statement. The following is a summary
cross-reference sheet pursuant to General Instruction F of Schedule 13E-3 which
shows the location in the Proxy Statement of the information required to be
disclosed in response to the items of Schedule 13E-3.
<PAGE> 4
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 LOCATION IN PROXY STATEMENT
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Item 1(a)............................................... SUMMARY OF THE MERGER - The Companies
Item 1(b)............................................... Cover Page; MARKET PRICE INFORMATION
Item 1(c) - (d)......................................... MARKET PRICE INFORMATION
Item 1(e)............................................... *
Item 1 (f).............................................. SUMMARY OF THE MERGER - Background of the Merger; THE
MERGER - Background of the Merger
Item 2 (a) - (d)........................................ Cover Page; SUMMARY OF THE MERGER- The Companies;
MANAGEMENT OF SURVIVING CORPORATION; BOARD OF DIRECTORS
OF SURVIVING CORPORATION
Item 2(e) - (g)......................................... *
Item 3(a)............................................... SUMMARY OF THE MERGER - Background of the Merger;
SUMMARY OF THE MERGER - Reasons for the Merger; SUMMARY
OF THE MERGER - Related Agreements; THE MERGER -
Background of the Merger; THE MERGER - Reasons for the
Merger; THE MERGER - Related Agreements; RECENT
DEVELOPMENTS - HMO Subsidiary Merger; RELATED AGREEMENTS
Item 3(b)............................................... SUMMARY OF THE MERGER - Background of the Merger; SUMMARY
OF THE MERGER - Opinion of Financial Advisor to FOHP; THE
MERGER - Background of the Merger; THE MERGER - Opinion of
Financial Advisor to FOHP
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Item 4(a)............................................... SUMMARY OF THE MERGER - The Merger; SUMMARY OF THE
MERGER - Consideration to be offered to FOHP
Shareholders in the Merger; SUMMARY OF THE MERGER -
Conditions to the Merger; SUMMARY OF THE MERGER -
Dissenters' Rights; THE MERGER - The Merger Agreement;
THE MERGER - Consideration to be offered to FOHP
Shareholders in the Merger; THE MERGER - Contribution
Agreement; THE MERGER - Non-Transferability of Payment
Rights
Item 4(b)............................................... SUMMARY OF THE MERGER - Consideration to be offered to
FOHP Shareholders in the Merger; THE MERGER -
Consideration to be offered to FOHP Shareholders in the
Merger; DESCRIPTION OF PAYMENT RIGHTS
Item 5(a) - (g)......................................... *
Item 6 (a).............................................. SUMMARY OF THE MERGER - Consideration to be offered to
FOHP Shareholders in the Merger; THE MERGER Consideration
to be offered to FOHP Shareholders in the Merger; THE
MERGER - Contribution Agreement
Item 6(b) - (d) ........................................ *
Item 7(a)-(c)........................................... SUMMARY OF THE MERGER - Background of the Merger;
SUMMARY OF THE MERGER - Reasons for the Merger; THE
MERGER - Background of the Merger; THE MERGER - Reasons
for the Merger
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C>
Item 7(d)............................................... SUMMARY OF THE MERGER - The Merger; SUMMARY OF THE
MERGER - Comparison of Shareholder Rights; SUMMARY OF
THE MERGER - Accounting Treatment of the Merger;
SUMMARY OF THE MERGER - Certain Federal Income Tax
Consequences of the Merger; RISK FACTORS; THE MERGER -
The Merger Agreement; THE MERGER - Non-Transferability
of Payment Rights; THE MERGER - Exchange Procedures;
THE MERGER - Accounting Treatment of the Merger; THE
MERGER - Certain Federal Income Tax Consequences of the
Merger; DISSENTERS' RIGHTS; DESCRIPTION OF PAYMENT
RIGHTS; COMPARISON OF SHAREHOLDER RIGHTS
Item 8(a)-(b)........................................... SUMMARY OF THE MERGER - Background of the Merger;
SUMMARY OF THE MERGER - Reasons for the Merger; SUMMARY
OF THE MERGER - Recommendation of the FOHP Board; THE
MERGER - Background of the Merger; THE MERGER - Reasons
for the Merger; THE MERGER - Recommendation of the FOHP
Board
Item 8(c)............................................... SUMMARY OF THE MERGER - Required Vote to Approve Merger
Agreement; THE MERGER - Required Vote to Approve Merger
Agreement
Item 8(d)-(e)........................................... SUMMARY OF THE MERGER - Background of the Merger; THE
MERGER - Background of the Merger
Item 8(f)............................................... *
Item 9(a)-(c)........................................... SUMMARY OF THE MERGER - Background of the Merger;
SUMMARY OF THE MERGER - Opinion of Financial Advisor to
FOHP; THE MERGER - Background of the Merger; THE MERGER
- Opinion of Financial Advisor to FOHP; AVAILABLE
INFORMATION
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
Item 10(a).............................................. PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF
MANAGEMENT
Item 10(b).............................................. *
Item 11................................................. SUMMARY OF THE MERGER - Background of the Merger;
SUMMARY OF THE MERGER - Related Agreements; THE
MERGER - Background of the Merger; THE MERGER -
Reasons for the Merger; THE MERGER - Contribution
Agreement; RELATED AGREEMENTS; DESCRIPTION OF
PAYMENT RIGHTS
Item 12(a)-(b).......................................... *
Item 13(a).............................................. Cover Page; SUMMARY OF THE MERGER - Dissenters' Rights;
DISSENTERS' RIGHTS
Item 13(b)-(c).......................................... *
Item 14(a).............................................. FOHP SELECTED FINANCIAL DATA; FHS SELECTED FINANCIAL
DATA; INCORPORATION OF DOCUMENTS BY REFERENCE
Item 14(b).............................................. *
Item 15(a).............................................. SPECIAL MEETING - General Information
Item 15(b).............................................. *
Item 16................................................. *
</TABLE>
- ------------------
* Omitted either because the answer is negative, the Item is not
applicable or the Item is located in this Schedule 13E-3 only.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth under the caption "SUMMARY OF THE MERGER
- - The Companies" in the Proxy Statement is incorporated herein by reference.
(b) The information set forth on the Proxy Statement cover page and
under the caption "MARKET PRICE INFORMATION" in the Proxy Statement is
incorporated herein by reference.
5
<PAGE> 8
(c)-(d) The information set forth under the caption "MARKET PRICE
INFORMATION" in the Proxy Statement is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth under the captions "SUMMARY OF THE MERGER
- - Background of the Merger" and "THE MERGER - Background of the Merger" in the
Proxy Statement is incorporated herein by reference.
Effective March 3, 1997, FOHP redeemed 13,334 shares of its Common
Stock-NJ (the predecessor to FOHP Common Stock) from a hospital provider
shareholder. The redemption was made pursuant to FOHP's Certificate of
Incorporation. As provided in FOHP's Certificate of Incorporation, the
redemption price was equal to the lesser of the amount paid for the 13,334
shares of Common Stock-NJ by the hospital provider shareholder or the book value
of such shares as of December 31, 1996. Inasmuch as the book value of the 13,334
shares of Common Stock as of December 31, 1996 was not greater than zero, the
hospital provider shareholder received no payment in connection with the
redemption. During the quarter in which FOHP redeemed the 13,334 shares of
Common Stock-NJ from the hospital provider shareholder, there was no market for
the Common Stock-NJ nor was FOHP aware of any trading in its securities.
Effective November 1, 1998, FOHP redeemed 3,000 shares of FOHP Common
Stock from a physician provider shareholder. The redemption was made pursuant to
FOHP's Certificate of Incorporation. As provided in FOHP's Certificate of
Incorporation, the redemption price was equal to the lesser of the amount paid
for the 3,000 shares of FOHP Common Stock by the physician provider shareholder
or the book value of such shares as of December 31, 1997. Inasmuch as the book
value of one share of FOHP Common Stock was $0.36 as of December 31, 1997, which
was less than the $15.00 per share paid for such stock by the physician provider
shareholder, the physician provider shareholder received a total payment of
$1,080 in connection with the redemption. During the quarter in which FOHP
redeemed the 3,000 shares of FOHP Common Stock from the physician provider
shareholder, there was no market for the FOHP Common Stock nor was FOHP aware of
any trading in its securities.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Schedule 13E-3 is being filed jointly by FHS and FOHP
(which is the issuer of the class of equity securities which is the subject of
the Rule 13e-3 transaction). The information set forth on the Proxy Statement's
cover page and under the captions "SUMMARY OF THE MERGER - The Companies,"
"MANAGEMENT OF SURVIVING CORPORATION" and "BOARD OF DIRECTORS OF SURVIVING
CORPORATION" in the Proxy Statement is incorporated herein by reference.
6
<PAGE> 9
In addition, set forth below are the names, mailing addresses and
employment histories of the directors and executive officers of FHS:
MEMBERS OF THE BOARD OF DIRECTORS OF FHS
<TABLE>
<CAPTION>
Term to
Name Principal Occupation or Employment Expire
- ---- ---------------------------------- -------
<S> <C> <C>
J. Thomas Bouchard Senior Vice President, Human Resources of International 1999
Business Machines Corporation
Gov. George Deukmejian Partner of Sidley & Austin and former Governor of the State 2000
of California
Thomas T. Farley Senior Partner of Petersen, Fonda, Farley, Mattoon, 1999
Crockenberg and Garcia, P.C.
Patrick Foley Chairman, President and Chief Executive Officer of DHL 1999
Airways, Inc.
Adm. Earl B. Fowler President and owner of Fowler International Corporation and 2000
Director of various companies
Roger F. Greaves Former Co-Chairman of the Board of Directors, Co-President 2001
and Co-Chief Executive Officer of FHS and Director of
various companies
Richard W. Hanselman Director of and Consultant to various companies 2001
Malik M. Hasan, M.D. Chairman of the Board of Directors of FHS 1999
Richard J. Stegemeier Chairman Emeritus of the Board of Directors of Unocal 1999
Corporation
Raymond S. Troubh Financial Consultant to and Director of various companies 2001
</TABLE>
INFORMATION CONCERNING MEMBERS OF THE BOARD OF DIRECTORS OF FHS
Dr. Hasan became Chairman of the Board of Directors of FHS on May 7,
1997. He served as Chief Executive Officer of FHS from May 7, 1997 to August 7,
1998. From consummation of the merger of Health Systems International, Inc.
("HSI") and Foundation Health Corporation ("FHC") on April 1, 1997 (the "FHS
Combination"), until May 7, 1997, Dr. Hasan served as Chief Executive Officer
and President of FHS. Prior to the FHS Combination, Dr. Hasan served as Chairman
of the Board of Directors and Chief Executive Officer of HSI, commencing in
March 1995. Dr. Hasan also assumed the position of President of HSI in March
1995, an office he held until June 1996. In addition, Dr. Hasan served as
Treasurer of HSI from November 1996 until consummation of the FHS Combination.
Dr. Hasan was the Co-Chairman,
7
<PAGE> 10
Co-President and Co-Chief Executive Officer of HSI from January 1994 until March
1995. Dr. Hasan served as Chairman of the Board of Directors of QualMed, Inc. (a
predecessor to FHS) ("QualMed") from its formation in 1985 until August 1998.
Dr. Hasan assumed the additional position of Chief Executive Officer of QualMed
in June 1990. Effective March 1991, Dr. Hasan also became President of QualMed,
an office he held until February 1995. A board-certified neurologist in Pueblo,
Colorado since June 1975, Dr. Hasan maintained a limited practice until July
1992. From 1980 to 1984, Dr. Hasan was a director of the Colorado Medical
Society and Parkview Episcopal Medical Center. In 1989, he was appointed by the
Governor of Colorado to the Colorado Health Data Commission, on which he
continued to serve until 1993. Dr. Hasan served as a Clinical Assistant
Professor of Neurology at the University of Colorado from 1976 until 1990 and
has been a member of the London Royal College of Physicians since 1964.
Mr. Bouchard became a director of FHS upon consummation of the FHS
Combination. Previously, he served as a director of HSI since January 1994, upon
consummation of the merger transaction involving Health Net and QualMed which
created HSI (the "HSI Combination"). Mr. Bouchard served as a director of
QualMed from May 1991 until February 1995. Since October 1994, Mr. Bouchard has
served as Senior Vice President, Human Resources of International Business
Machines Corporation. From June 1989 until October 1994, Mr. Bouchard served as
Senior Vice President & Chief Human Resources Officer of U.S. West, Inc., a
diversified global communications company, and prior to that time he was Senior
Vice President - Human Resources and Organization for United Technologies Corp.
Mr. Bouchard has served on the Board of Directors of the Labor Policy
Association since March 1991 and Nordstrom National Credit Bank since April
1991.
Mr. Deukmejian became a director of FHS upon consummation of the FHS
Combination. Previously, he served as a director of HSI since January 1994, upon
consummation of the HSI Combination. Mr. Deukmejian served as a director of
QualMed from April 1992 until February 1995. Mr. Deukmejian has been a partner
in the law firm of Sidley & Austin, Los Angeles, California since February 1991.
Mr. Deukmejian served as Governor of the State of California for two terms, from
January 1983 to January 1991. Mr. Deukmejian also served the State of California
as Attorney General from 1979 to 1982, as a State Senator from 1967 to 1978 and
as a State Assemblyman from 1963 to 1966. Mr. Deukmejian has been a director of
Burlington Northern Santa Fe Pacific Corporation, a railroad company, since
September 1995, and was a director of one of its predecessors, Santa Fe Pacific
Corporation, from January 1991 until September 1995. Mr. Deukmejian is also a
director of Whittaker Corporation.
Mr. Farley became a director of FHS upon consummation of the FHS
Combination. Previously, he served as a director of HSI since January 1994, upon
consummation of the HSI Combination. Mr. Farley served as a director of QualMed
from February 1991 until February 1995 and is a senior partner in the law firm
of Peterson, Fonda, Farley, Mattoon, Crockenberg and Garcia, P.C. of Pueblo,
Colorado. Mr. Farley was formerly President of the governing board of Colorado
State University, the University of Southern Colorado and Ft. Lewis College and
Chairman of the Colorado Wildlife Commission. He served as Minority Leader of
the Colorado House of Representatives from 1967 to 1975. Mr. Farley was a
director of the Public Service Company of Colorado, a public gas and electric
company, from 1983 through 1997 and has been a director/advisor of Norwest Banks
of Pueblo and Sunset since 1985. Mr. Farley has been a member of the Board of
Regents of Santa Clara University, a Jesuit institution, since 1987.
8
<PAGE> 11
Mr. Foley became a director of FHS in April 1997 upon consummation of
the FHS Combination. Mr. Foley served as director of FHC from 1996 until the FHS
Combination. He has been Chairman, President and Chief Executive Officer of DHL
Airways, Inc. since 1988. Mr. Foley is also a director of Continental Airlines,
Inc., Glenborough Realty Trust, Inc., Del Monte Corporation and Flextronics
International.
Mr. Fowler became a director of FHS in April 1997 upon consummation of
the FHS Combination. Mr. Fowler served as a director of FHC from 1988 until the
FHS Combination. He is President and owner of Fowler International Corporation,
an international consulting firm, a director of NV Marketing Group, a life
insurance marketing company, and a director of SPD Technologies, Inc., an
electrical equipment manufacturer. Prior thereto, Mr. Fowler served in the
United States Navy and retired as Vice Admiral, U.S. Navy, and Commander of the
Naval Sea Systems Command.
Mr. Greaves became a director of FHS in May 1998. He previously served
as Co-Chairman of the Board of Directors, Co-President and Co-Chief Executive
Officer of FHS from January 1994 (upon consummation of the HSI Combination)
until March 1995. Prior to January 1994, Mr. Greaves served as Chairman of the
Board of Directors, President and Chief Executive Officer of H.N. Management
Holdings, Inc. (a predecessor to FHS) since its incorporation in June 1990. Mr.
Greaves is the former Chairman of the Board of Directors, President and Chief
Executive Officer of Health Net, a subsidiary of FHS. Prior to joining Health
Net, Mr. Greaves held various management roles at Blue Cross of Southern
California, including Vice President of Human Resources and Assistant to the
President, and held various management positions at Allstate Insurance Company
from 1962 until 1968. Mr. Greaves is a founding member of (and continues to
serve on) the Board of Governors of California State University at Long Beach,
and he is a member of the board of directors of Quidel Corporation and Zymed
Corporation.
Mr. Hanselman became a director of FHS in April 1997 upon consummation
of the FHS Combination. Mr. Hanselman served as a director of FHC from 1990
until the FHS Combination. He has been a corporate director of and consultant to
various companies since 1986. Mr. Hanselman is also a director of Arvin
Industries, Becton, Dickinson and Company, the Bradford Funds and Gryphon
Holdings Inc.
Mr. Stegemeier became a director of FHS in April 1997 upon consummation
of the FHS Combination. Mr. Stegemeier served as a director of FHC from 1993
until the FHS Combination. He is Chairman Emeritus of the Board of Directors of
Unocal Corporation and served as Chairman and Chief Executive Officer of Unocal
Corporation from July 1988 until his retirement in May 1994. Mr. Stegemeier is
also a director of Wells Fargo Bank, Halliburton Company, Northrop Grumman
Corporation and Pacific Enterprises.
Mr. Troubh became a director of FHS in April 1997 upon consummation of
the FHS Combination. Mr. Troubh served as a director of FHC from 1991 until the
FHS Combination. He is a financial consultant in New York City and former
Governor of the American Stock Exchange. Mr. Troubh served as a general partner
of Lazard Freres & Co., an investment banking firm. Mr. Troubh is also a
director of America West Airlines, Inc., ARIAD Pharmaceuticals, Inc., Becton,
Dickinson and Company, Diamond Offshore Drilling, Inc., General American
Investors Company, Olsten Corporation, Time Warner, Inc., Triarc
9
<PAGE> 12
Companies, Inc. and WHX Corporation. He is also a Trustee of MicroCap
Liquidating Trust and Petrie Stores Liquidating Trust.
EXECUTIVE OFFICERS OF FHS
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Jay M. Gellert President and Chief Executive Officer
Dale T. Berkbigler, M.D. Executive Vice President of Medical Affairs and Chief Medical
Officer
Steven P. Erwin Executive Vice President and Chief Financial Officer
B. Curtis Westen, Esq. Senior Vice President, General Counsel and Secretary
Karen Coughlin President of FHS Northeast Division
Cora Tellaz President of FHS California Division
J. Robert Bruce President of FHS Central Division
Gary Velasquez President of FHS Government Operations Division and Specialty Services
Division
Alexander Labak Senior Vice President and Chief Marketing Officer
Philip Katz, Ph.D. Senior Vice President and Chief Information Officer
Dale Terrell Senior Vice President and Chief Technology Officer
</TABLE>
Mr. Gellert became President and Chief Executive Officer of FHS on
August 7, 1998. He served as President and Chief Operating Officer of FHS from
May 7, 1997 to August 8, 1998. From consummation of the FHS Combination until
May 7, 1997, Mr. Gellert served as Executive Vice President and Chief Operating
Officer of FHS. Mr. Gellert served as a director and President and Chief
Operating Officer of FHS from June 1996 until consummation of the FHS
Combination. Mr. Gellert also holds the position of Chairman of the Board of
Directors for FHS' principal operating subsidiaries, Health Net and QualMed.
Prior to joining FHS, Mr. Gellert directed Shattuck Hammond Partners Inc.'s
strategic advisory engagements in the area of integrated delivery systems
development, managed care network formation and physician group practice
integration. Prior to joining Shattuck Hammond Partners, Mr. Gellert was an
independent consultant, and from 1988 to 1991, he served as President and Chief
Executive Officer of Bay Pacific Health Corporation. From 1985 to 1988, Mr.
Gellert was Senior Vice President and Chief Operating Officer for California
Healthcare System. Mr. Gellert has served on the Board of Directors of Paragon
Health network, Inc. since November 1997.
Dr. Berkbigler became Executive Vice President of Medical Affairs and
Chief Medical Officer of FHS upon consummation of the FHS Combination. Prior to
consummation of the
10
<PAGE> 13
FHS Combination, Dr. Berkbigler served as Executive Vice President of Medial
Affairs of HSI and as a director of HSI from January 1994 until consummation of
the FHS Combination. Dr. Berkbigler has been a director of QualMed since July
1987 and has served as the Executive Vice President of Medical Affairs of
QualMed since July 1989. Dr. Berkbigler became president of QualMed in February
1995, an office he held until July 1996. He was appointed Vice Chairman of the
Board, Executive Vice President and Chief Medical Officer of FHS in July 1996.
Prior to 1986, Dr. Berkbigler served as the President of San Luis Valley
Physicians Service Corporation, and from August 1986 to march 1991, held the
position of San Luis Valley HMO Medical Director. He was promoted to QualMed
Medical Director in April 1987, and assumed the title of Vice President of
Medical Affairs of QualMed in January 1988. He also served as a member of the
Board of Directors of St. Joseph Hospital, Del Norte, Colorado, from September
1983 through September 1989 and as its Chairman of the Board from October 1986
through September 1988. Dr. Berkbigler was a practicing internist in Del Norte,
Colorado from 1979 until 1991.
Mr. Erwin became Executive Vice President and Chief Financial Officer
of FHS on March 11, 1998. From 1994 to 1997, he served as Executive Vice
President and Chief Financial Officer for U.S. Bancorp, a major superregional
bank holding company based in Portland, Oregon. U.S. Bankcorp was acquired by
First Bank System in 1997. From 1987 to 1994, Mr. Erwin served as Treasurer for
Boston-based BayBanks, Inc. BayBanks was the major retail bank in Boston. Mr.
Erwin is also a member of the Board of Directors and Chairman of the Audit
Committee of Summit Design, Inc., a Beaverton, Oregon-based technology company.
Summit is a leading supplier of software tools designed to solve the integrated
circuit engineering problems caused by increasing chip complexity.
Mr. Westen became Senior Vice President, General Counsel and Secretary
of FHS upon consummation of the FHS Combination. Mr. Westen served as Senior
Vice President, General Counsel and Secretary of HSI since March 1995, Mr.
Westen also serves as a director of certain subsidiaries of FHS. Mr. Westen had
served as Senior Vice President, General Counsel and Secretary of QualMed since
February 1994, and served as Vice President of Administration of QualMed from
August 1993 until February 1994. Since February 1995, he has served as a
director of QualMed. Mr. Westen served as Assistant General Counsel and
Assistant Secretary of QualMed since joining QualMed in March 1992. From
September 1986 until March 1992, Mr. Westen was an attorney with the firm of
Lord, Bissell & Brook in Chicago, Illinois.
Ms. Karen A. Coughlin became President and Chief Executive Officer of
FHS Northeast Division in October 1998. Prior to joining FHS, Ms. Coughlin
served as President of one of two operating divisions of Humana, Inc., a leading
national health care company. During her 18 year tenure with Humana, Inc., Ms.
Coughlin also served as Vice President and General Manager of Humana, Inc. in
Chicago, Illinois and as a Vice President of Humana Health Care Plans of
Kentucky. In the not-for-profit sector, Ms. Coughlin served as head nurse of the
Pediatric Intensive Care Unit of Loma Linda University Center in California, as
Assistant Professor of Nursing for Minot State University in North Dakota, and
as a staff nurse in the Neonatal Intensive Care Unit for Cleveland's Fairview
General Hospital. She has served as a director of FOHP since November 18, 1998.
11
<PAGE> 14
Ms. Tellaz became President of FHS California Division on November 16,
1998. Ms. Tellaz formerly served as President and Chair of Prudential Healthcare
Plan of California, Inc., where she was responsible for operations in
California, Colorado and Arizona. Prior to joining Prudential in 1997, Ms.
Tellaz served Blue Shield of California for four years as Senior Vice President
and regional Chief Executive Officer. Ms. Tellaz began her career in health care
in 1978 with Kaiser Foundation Health Plan, where she held several executive
positions during her sixteen year tenure. Ms. Tellaz currently serves as a Board
member for several organizations, including the Golden State Bancorp Inc.,
Institute for Medical Quality, California Association of Health Plans, Holy
Names College, Asian Community Mental Health Services and The Institute for the
Future, Menlo Park, California.
Mr. Bruce became President and Chief Executive Officer of FHS Central
Division in June 1998. From 1996 to 1998, Mr. Bruce served as President of
QualMed Plans for Health, Inc. (PA). From 1994 to 1996, he served as Executive
Director of QualMed Plans for Health of Colorado, Inc. From 1992 to 1994, Mr.
Bruce served as Executive Director of Health Net Sacramento. From 1991 to 1992,
Mr. Bruce served as Director of Sales and Marketing for PCA Health Plan and
served as Director of Group Sales for Foundation Health Plans from 1990 to 1991.
Prior thereto, he served as Senior Sales Executive for Blue Shield of California
(1989-1990), Vice President, Sales of Occupational Urgent Care Health Systems,
Inc. (1988-1989), Senior Vice President, Marketing of Blue Cross and Blue Shield
of Colorado (1986-1988) and as a Director, Southwestern Regional Marketing
Office, of National Blue Cross and Blue Association from 1983 to 1984.
Mr. Velasquez became President of FHS Government Operations Division
upon consummation of the FHS Combination, and President of FHS Specialty
Services Division in September of 1997. Prior to the FHS Combination, Mr.
Velasquez served as President and Chief Operating Officer of FHC's California
HMO. Prior to this position, Mr. Velasquez served as President and Chief
Operating Officer of FHC's managed behavioral health care organization and as
President and COO of Specialty Services for FHC. Prior to joining FHC, Mr.
Velasquez served as Chief Financial Officer/General Manager of Managed Health
Network (now a FHS subsidiary). He also served as Vice President, Controller of
Equicor, Inc., a national employee benefits company.
Dr. Katz has served as Senior Vice President and Chief Information
Officer of FHS since February 1998. Previously, he served as Vice President and
Chief Information Officer of FHS and HSI from July 1996. Prior to joining HSI,
Dr. Katz was Vice President, Planning and Technology at Graduate Health System
from March 1990 until July 1996. Other past positions include President of
Integrated Technologies and Associate Vice President, Technology and Information
Management at Thomas Jefferson University.
Mr. Labak became Senior Vice President and Chief Marketing Officer of
FHS in December 1997. Previously, he served as Vice President of Marketing for
Johnson & Johnson (Canada) Lts. And as Vice President of Marketing/North America
for the personal products division of Johnson & Johnson, Inc., from May 1994 to
December 1997.
Mr. Terrell became Senior Vice President and Chief Technology Officer
for FHS in January 1998. Previously, he served as Executive Vice President of
Technology Services for
12
<PAGE> 15
Banc One Corp. ("Banc One") and President of Information Services, a division of
Banc One Services Corporation in Columbus, Ohio. As President of Information
Services, Mr. Terrell was responsible for the $350 million technology budget for
Banc One, a multi-state banking company and the parent of Banc One Services.
Prior to joining Banc One in 1992, Mr. Terrell held information technology
positions with Security Pacific Automation Company, a wholly-owned subsidiary of
Security Pacific Corporation. He also held information technology positions with
University Computing Company in Dallas, Texas and International Business
Machines Corporation in Oak Park, Michigan.
Each director and executive officer of FHS has a mailing address at
Foundation Health Systems, Inc., 21600 Oxnard Street, Woodland Hills, California
91367.
(e)-(g) During the last five years, neither FOHP nor FHS, nor, to the
best of their knowledge, any of their directors and executive officers (i) has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Except for Mr. Alexander Labak, who is a citizen of Austria, to the
best of FOHP's and FHS' knowledge, each of the executive officers and directors
of FOHP and FHS are citizens of the United States.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) The information set forth under the captions "SUMMARY OF THE MERGER
- - Background of the Merger," "SUMMARY OF THE MERGER - Reasons for the Merger,"
"SUMMARY OF THE MERGER - Related Agreements," "THE MERGER - Background of the
Merger," "THE MERGER - Reasons for the Merger," "THE MERGER - Related
Agreements," "RECENT DEVELOPMENTS - HMO Subsidiary Merger" and "RELATED
AGREEMENTS" in the Proxy Statement is incorporated herein by reference.
(b) The information set forth under the captions "SUMMARY OF THE MERGER
- - Background of the Merger," "SUMMARY OF THE MERGER - Opinion of Financial
Advisor to FOHP," "THE MERGER - Background of the Merger" and "THE MERGER -
Opinion of Financial Advisor to FOHP" in the Proxy Statement is incorporated
herein by reference.
13
<PAGE> 16
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth under the captions "SUMMARY OF THE MERGER
- - The Merger," "SUMMARY OF THE MERGER - Consideration to be offered to FOHP
Shareholders in the Merger," "SUMMARY OF THE MERGER - Conditions to the Merger,"
"SUMMARY OF THE MERGER - Dissenters' Rights," "THE MERGER - The Merger
Agreement," "THE MERGER Consideration to be offered to FOHP Shareholders in the
Merger," "THE MERGER - Contribution Agreement" and "THE MERGER -
Non-Transferability of Payment Rights" in the Proxy Statement is incorporated
herein by reference.
(b) The information set forth under the captions "SUMMARY OF THE MERGER
- - Consideration to be offered to FOHP Shareholders in the Merger" "THE MERGER -
Consideration to be offered to FOHP Shareholders in the Merger" and "DESCRIPTION
OF PAYMENT RIGHTS" in the Proxy Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(d) Not Applicable.
(e) The information set forth under the captions "Summary of the Merger
- - The Merger" and "The Merger - The Merger Agreement" in the Proxy Statement is
incorporated herein by reference.
(f)-(g) Following the consummation of the Merger, there will be only
one holder of FOHP Common Stock. Therefore, it is anticipated that FOHP will,
pursuant to Rule 12g-4 of the Exchange Act, terminate the registration of FOHP
Common Stock under the Exchange Act. As a result of the termination of the
registration of FOHP Common Stock under the Exchange Act, FOHP's obligation to
file reports pursuant to Section 15(d) of the Exchange Act will be suspended.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth under the captions "SUMMARY OF THE MERGER
- - Consideration to the offered to FOHP Shareholders in the Merger," "THE MERGER
- - Consideration to the offered to FOHP Shareholders in the Merger" and "THE
MERGER - Contribution Agreement" in the Proxy Statement is incorporated herein
by reference.
14
<PAGE> 17
(b) It is expected that aggregate fees, expenses and costs associated
with the Merger will be approximately $290,433. A breakdown of such fees,
expenses and costs is set forth below:
<TABLE>
<S> <C>
Filing Fees $ 433
---------
Legal Fees $ 125,000
---------
Accounting Fees $ 30,000
---------
Appraisal Fees $ 100,000
---------
Solicitation Expenses $ 10,000
---------
Printing Costs $ 15,000
---------
Miscellaneous $ 10,000
---------
TOTAL $ 290,433
---------
</TABLE>
It is expected that FHS will initially incur substantially all expenses
and pay all fees and costs associated with the Merger. Certain or all of the
fees, expenses and costs associated with the Merger may be allocated to FOHP at
some later date.
(c)-(d) Not Applicable.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth under the captions "SUMMARY OF THE
MERGER - Background of the Merger," "SUMMARY OF THE MERGER - Reasons for the
Merger," "THE MERGER - Background of the Merger," and "THE MERGER - Reasons for
the Merger" in the Proxy Statement is incorporated herein by reference.
(d) The information set forth under the captions "SUMMARY OF THE MERGER
- - The Merger," "SUMMARY OF THE MERGER - Comparison of Shareholder Rights,"
"SUMMARY OF THE MERGER - Accounting Treatment of the Merger," "SUMMARY OF THE
MERGER - Certain Federal Income Tax Consequences of the Merger," "RISK FACTORS,"
"THE MERGER - The Merger Agreement," "THE MERGER - Non-Transferability of
Payment Rights," "THE MERGER - Exchange Procedures," "THE MERGER - Accounting
Treatment of the Merger," "THE MERGER - Certain Federal Income Tax Consequences
of the Merger," "DISSENTERS' RIGHTS," "DESCRIPTION OF PAYMENT RIGHTS" and
"COMPARISON OF SHAREHOLDER RIGHTS" in the Proxy Statement is incorporated herein
by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth under the captions "SUMMARY OF THE
MERGER - Background of the Merger," "SUMMARY OF THE MERGER - Reasons for the
Merger,"
15
<PAGE> 18
"SUMMARY OF THE MERGER - Recommendation of the FOHP Board," "THE MERGER -
Background of the Merger," "THE MERGER - Reasons for the Merger" and "THE MERGER
Recommendation of the FOHP Board" in the Proxy Statement is incorporated herein
by reference.
(c) The information set forth under the captions "SUMMARY OF THE MERGER
- - Required Vote to approve Merger Agreement" and "THE MERGER - Required Vote to
approve Merger Agreement" in the Proxy Statement is incorporated herein by
reference.
More specifically, the Merger has not been structured so that the
approval of at least a majority of unaffiliated security holders is required.
(d)-(e) The information set forth under the captions "SUMMARY OF THE
MERGER - Background of the Merger" and "THE MERGER - Background of the Merger"
in the Proxy Statement is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under the captions "SUMMARY OF THE
MERGER - Background of the Merger," "SUMMARY OF THE MERGER - Opinion of
Financial Advisor to FOHP," "THE MERGER - Background of the Merger," "THE MERGER
- - Opinion of Financial Advisor to FOHP" and "AVAILABLE INFORMATION" in the Proxy
Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth under the caption "PRINCIPAL SHAREHOLDERS
AND SECURITY OWNERSHIP OF MANAGEMENT" in the Proxy Statement is incorporated
herein by reference.
(b) Effective November 1, 1998, FOHP redeemed 3,000 shares of FOHP
Common Stock from a physician provider shareholder. The redemption was made
pursuant to FOHP's Certificate of Incorporation. As provided in FOHP's
Certificate of Incorporation, the redemption price was equal to the lesser of
the amount paid for the 3,000 shares of FOHP Common Stock by the physician
provider shareholder or the book value of such shares as of December 31, 1997.
Inasmuch as the book value of one share of FOHP Common Stock was $.36 as of
December 31, 1997, which was less than the $15.00 per share paid for such stock
by the physician provider shareholder, the physician provider shareholder
received a total payment of $1,080 in connection with the redemption. During the
quarter in which FOHP redeemed the 3,000 shares of FOHP Common Stock from the
physician provider shareholder, there was no market for the FOHP Common Stock
nor was FOHP aware of any trading in its securities.
16
<PAGE> 19
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth under the captions "SUMMARY OF THE MERGER -
Background of the Merger," "SUMMARY OF THE MERGER - Related Agreements," "THE
MERGER - Background of the Merger," "THE MERGER- Reasons for the Merger," "THE
MERGER - Contribution Agreement," "RELATED AGREEMENTS" and "DESCRIPTION OF
PAYMENT RIGHTS" in the Proxy Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a) It is anticipated that FHS, which owns approximately 98% of the
outstanding FOHP Common Stock, will vote in favor of the Merger. If FHS votes in
favor of the Merger, the Merger will occur, provided that all of the other
conditions to the Merger have been either satisfied or waived. Several directors
of FOHP and one executive officer of FOHP owns shares of FOHP Common Stock. It
is anticipated that such directors and executive officers will vote in favor of
the Merger.
(b) To the best of FHS' and FOHP's knowledge, none of the persons set
forth in paragraph (a) of this Item has, in their individual capacity, made a
recommendation in support of or opposed to the Merger.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth on the Proxy Statement cover page and
under the caption "SUMMARY OF THE MERGER - Dissenters' Rights" and "DISSENTERS'
RIGHTS" in the Proxy Statement is incorporated herein by reference.
(b) No provision has been made by FOHP or FHS in connection with the
Merger to allow unaffiliated security holders to obtain access to the corporate
file of FOHP or FHS or to obtain counsel or appraisal services at the expense of
FOHP or FHS, except for the information to be furnished by FOHP and FHS under
the captions "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY
REFERENCE" in the Proxy Statement.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth under the captions "FOHP SELECTED
FINANCIAL DATA," "FHS SELECTED FINANCIAL DATA" and "INCORPORATION OF DOCUMENTS
BY REFERENCE" in the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
17
<PAGE> 20
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth under the caption "SPECIAL MEETING -
General Information" in the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
The information contained in the Proxy Statement is incorporated herein
by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
(a) None.
(b) Fairness Opinion of Janney Montgomery Scott Inc., dated July 15,
1998, and update thereto dated November 16, 1998, included as Appendix F to the
Proxy Statement incorporated by reference as Exhibit (d) to this Schedule 13E-3.
(c)
(i) Amended and Restated Securities Purchase Agreement, dated
February 10, 1997, by and among FOHP, First Option Health
Plan of New Jersey, Inc. and Health Systems International,
Inc. (the predecessor to FHS) (previously filed with the
Securities and Exchange Commission (the "SEC") on March 19,
1997 as Appendix A to the definitive Proxy Statement
distributed in connection with the 1996 Annual Meeting of
Shareholders of FOHP held on April 16, 1997, and
incorporated herein by reference).
(ii) Agreement and Plan of Merger, dated as of November 16, 1998,
among FOHP, FHS Transition Company and FHS included as
Appendix A to the Proxy Statement incorporated by reference
as Exhibit (d) to this Schedule 13E-3.
(iii) Form of Payment Right - Hospital Shareholders included as
Appendix D-1 to the Proxy Statement incorporated by
reference as Exhibit (d) to this Schedule 13E-3.
(iv) Form of Payment Right - Non-Hospital Shareholders included
as Appendix D-2 to the Proxy Statement incorporated by
reference as Exhibit (d) to this Schedule 13E-3.
(v) Contribution Agreement between FOHP and FHS included as
Appendix E to the Proxy Statement incorporated by reference
as Exhibit (d) to this Schedule 13E-3.
18
<PAGE> 21
(d) Preliminary Proxy Statement of FOHP filed with the SEC on the date
hereof and incorporated by reference herein.
(e) Sections 14A:11-1 through 11-11 of the New Jersey Business
Corporation Act regarding Dissenters' Rights included as Appendix G to the Proxy
Statement incorporated by reference as Exhibit (d) to this Schedule 13E-3.
(f) None.
19
<PAGE> 22
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Schedule 13E-3 is true, complete and
correct.
FOHP, INC.
By: /s/ Thomas W. Wilfong
------------------------------------------
Name: Thomas W. Wilfong
Title: President and Chief Executive Officer
FOUNDATION HEALTH SYSTEMS, INC.
By: /s/ Michael Jansen
------------------------------------------
Name: Michael Jansen
Title: Vice President, Assistant General Counsel
and Assistant Secretary
20
<PAGE> 23
EXHIBIT INDEX
(a) None.
(b) Fairness Opinion of Janney Montgomery Scott Inc., dated July 15,
1998, and update thereto dated November 16, 1998, included as Appendix F to the
Proxy Statement incorporated by reference as Exhibit (d) to this Schedule 13E-3.
(c)
(i) Amended and Restated Securities Purchase Agreement, dated
February 10, 1997, by and among FOHP, First Option Health
Plan of New Jersey, Inc. and Health Systems International,
Inc. (the predecessor to FHS) (previously filed with the
Securities and Exchange Commission (the "SEC") on March 19,
1997 as Appendix A to the definitive Proxy Statement
distributed in connection with the 1996 Annual Meeting of
Shareholders of FOHP held on April 16, 1997, and
incorporated herein by reference).
(ii) Agreement and Plan of Merger, dated as of November 16, 1998,
among FOHP, FHS Transition Company and FHS included as
Appendix A to the Proxy Statement incorporated by reference
as Exhibit (d) to this Schedule 13E-3.
(iii) Form of Payment Right - Hospital Shareholders included as
Appendix D-1 to the Proxy Statement incorporated by
reference as Exhibit (d) to this Schedule 13E-3.
(iv) Form of Payment Right - Non-Hospital Shareholders included
as Appendix D-2 to the Proxy Statement incorporated by
reference as Exhibit (d) to this Schedule 13E-3.
(v) Contribution Agreement between FOHP and FHS included as
Appendix E to the Proxy Statement incorporated by reference
as Exhibit (d) to this Schedule 13E-3.
(d) Preliminary Proxy Statement of FOHP filed with the SEC on the date
hereof and incorporated by reference herein.
(e) Sections 14A:11-1 through 11-11 of the New Jersey Business
Corporation Act regarding Dissenters' Rights included as Appendix G to the Proxy
Statement incorporated by reference as Exhibit (d) to this Schedule 13E-3.
(f) None.
