Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MAXICARE HEALTH PLANS, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
PAUL R. DUPEE, JR.
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED MARCH 19, 1998
CONSENT SOLICITATION
IN CONNECTION WITH
THE INCREASE IN THE AUTHORIZED NUMBER OF DIRECTORS,
THE AMENDMENT OF BYLAWS AND THE ELECTION OF
DIRECTORS OF MAXICARE HEALTH PLANS, INC.
-----------
SOLICITATION STATEMENT OF
MR. PAUL R. DUPEE, JR.
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This Solicitation Statement and the accompanying GOLD Consent Card are
being furnished to holders (the "Shareholders") of outstanding common stock, par
value $.01 per share (the "Common Stock"; shares thereof are referred to herein
as the "Shares"), of Maxicare Health Plans, Inc., a Delaware corporation
("Maxicare" or the "Company"), on March __, 1998 by Mr. Paul R. Dupee, Jr. (the
"Soliciting Shareholder") in connection with the solicitation of written
consents ("Consents") of the Shareholders to enact the proposals listed below
(the "Proposals"). The purpose of the Proposals is to elect a majority of the
Company's Board of Directors (the "Board"), who are committed, subject to their
fiduciary duties, to pursuing strategic alternatives to enhance shareholder
value, including a business combination or a sale of the Company or its assets.
The Proposals are (1) a proposal to repeal any amendments to the bylaws of the
Company (the "Bylaws") adopted by the Board since February 1, 1998; (2) a
proposal that would add 10 new directors, thereby increasing the authorized
number of directors on the Board from 7 to 17, and to clarify that the
Shareholders may fill the resulting new directorships by written consent in lieu
of a meeting; and (3) a proposal to fill the directorships created by the
increase in the authorized number of directors on the Board with Soliciting
Shareholder Nominees (defined below).
CONSENT PROCEDURE
Section 228 of the General Corporation Law of the State of Delaware (the
"GCL") states that, unless otherwise provided in the certificate of
incorporation, any action that may be taken at any annual or special meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken, shall be signed
by holders of outstanding stock having not fewer than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, and those
consents are delivered to the corporation by delivery to its registered office
in Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.
The Company's restated certificate of incorporation does not restrict
the right of the Company's Shareholders to take action by written consent.
VOTE REQUIRED TO ENACT THE PROPOSALS
Proposal 1--Bylaw Repeal Proposal
Proposal 1 proposes to repeal any amendments to the Bylaws adopted by
the Board since February 1, 1998. Under the Bylaws, a bylaw may be repealed by
the holders of a majority of the outstanding Shares by written consent. See
"Proposals--Bylaw Repeal Proposal."
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THESE ARE PRELIMINARY SOLICITATION MATERIALS AND, IN ACCORDANCE WITH U.S.
SECURITIES LAWS, DO NOT INCLUDE A CONSENT CARD. ONCE OUR SOLICITATION
MATERIALS BECOME DEFINITIVE, YOU WILL RECEIVE ANOTHER COPY ALONG WITH OUR
CONSENT CARD.
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Proposal 2--Board Increase Proposal
Proposal 2 would (a) exercise the Shareholders' right under the existing
Bylaws to add 10 new directors, thereby increasing the authorized number of
directors on the Board to 17, and (b) adopt an amendment to the Bylaws
effectuating the same increase in the authorized number of directors on the
Board and clarifying the right of Shareholders to fill the resulting
newly-created directorships by written consent in lieu of a meeting. Under the
Bylaws, the Board Increase Proposal may be enacted by the holders of a majority
of the outstanding Shares by written consent. See "Proposals -- Board Increase
Proposal."
Proposal 3--Filling of Newly-Created Directorships Proposal
Proposal 3 proposes to fill the directorships created by the increase in
the number of directors effected by Proposal 2 with the Soliciting Shareholder
Nominees (defined below). Under the Company's restated certificate of
incorporation and the Bylaws, the holders of a majority of the outstanding
Shares are entitled to fill such directorships, and the Bylaw Amendment enacted
by Proposal 2 will clarify that the Shareholders may take such action by written
consent. See "Proposals--Filling of Newly-Created Directorships Proposal."
THIS SOLICITATION STATEMENT AND THE ACCOMPANYING GOLD CONSENT CARD ARE
FIRST BEING SENT TO SHAREHOLDERS ON OR ABOUT MARCH __, 1998. CONSENTS SHOULD BE
DELIVERED AS PROMPTLY AS POSSIBLE, BY MAIL (USING THE ENCLOSED ENVELOPE), TO THE
SOLICITING SHAREHOLDER'S CONSENT SOLICITOR, MACKENZIE PARTNERS, INC.
("MACKENZIE"), 156 FIFTH AVENUE, NEW YORK, NEW YORK 10010, FAX (212) 929-0308.
REASONS FOR THE SOLICITATION
The purpose of the solicitation is to elect a majority of directors who
would be committed, subject to their fiduciary duties, to pursuing strategic
alternatives to enhance shareholder value, including a business combination or
sale of the Company or its assets.
The Soliciting Shareholder seeks to accomplish this purpose by adopting
the Proposals, which would (1) add 10 new directors to the Board, thereby
increasing the authorized number of directors to 17 and (2) fill the resulting
new directorships with the Soliciting Shareholder Nominees (defined below), who
would constitute a Board majority.
The Soliciting Shareholder believes that the policies followed by the
Board in recent years have failed to maximize shareholder value. Between March
10, 1997 and March 17, 1998, the closing bid price of the Common Stock on NASDAQ
fell from $23 3/8 to $11 1/8, a drop of 52%. During that same period, the Morgan
Stanley HMO Index, which tracks the average stock market performance of
companies in the Company's industry, increased by 4%. There has also recently
been a sharp decline in the Company's operating results. The Company reported a
net loss of $35,068,000 for the year ended December 31, 1997, compared with net
income of $19,425,000 for the same period in 1996.
The Soliciting Shareholder believes that the Company could increase
shareholder value by engaging in a business combination with, or sale to,
another company in the managed health care business. The Soliciting Shareholder
believes that the other party to such a transaction is likely to perceive that
it can increase the profitability of the Company's business through economies of
scale or improved management and, therefore, the Company's business would be
credited with more value in such a transaction than is justified by its present
level of profitability. In addition, the Soliciting Shareholder believes that
such a transaction would improve the utilization of the Company's net operating
loss carryforward, which is presently providing little value to the Company
because of the Company's low level of profitability.
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SHAREHOLDERS ENTITLED TO EXECUTE CONSENTS
Article II, Section 11 of the Bylaws generally authorizes the Board to
select the record date for determining Shareholders entitled to give written
consents. Such record date shall not be more than ten days from the date upon
which the resolution fixing such record date is adopted by the Board. However,
Section 11 also provides that if no record date has been fixed by the Board, the
record date shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is submitted to the Company.
On March 19, 1998, a signed consent setting forth the actions to be
taken pursuant to this Consent Solicitation and dated March 19, 1998 was
submitted to the Company by the Soliciting Shareholder. Therefore, March 19,
1998 is the record date for this Consent Solicitation and persons holding Shares
on such date shall be entitled to give consents pursuant to this Consent
Solicitation. Under the GCL, action by written consent is not effective unless
written consents from the holders of the requisite number of shares are
delivered to the corporation within 60 days of the earliest dated consent
delivered to the corporation.
By executing and returning the Consent Card to MacKenzie you will be
consenting to enact the Proposals.
If any of your shares of Common Stock are held in the name of a
brokerage firm, bank, bank nominee or other institution, only it can execute a
Consent Card for such shares and will do so only upon receipt of your specific
instructions. Accordingly, you are asked to contact the person responsible for
your account and instruct that person to execute the GOLD Consent Card.
THE FAILURE TO EXECUTE AND RETURN THE GOLD CONSENT CARD WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE PROPOSALS.
PROPOSALS
1. BYLAW REPEAL PROPOSAL.
(Item 1 on Consent Card)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A RESOLUTION REGARDING THE
REPEAL OF BYLAWS ADOPTED BY THE BOARD SINCE FEBRUARY 1, 1998:
"Resolved, that pursuant to the Bylaws of the Company, the stockholders
of the Company hereby repeal Bylaw amendments adopted by the Board of Directors
since February 1, 1998."
The purpose of the Bylaw repeal proposal (the "Bylaw Repeal Proposal")
is to prevent the Board from interfering with the implementation of the
Proposals being acted upon by the Shareholders pursuant to this Consent
Solicitation. The Bylaw Repeal Proposal would repeal any Bylaw amendments
adopted by the Board between February 1, 1998 and the date on which the Bylaw
Repeal Proposal is enacted.
While it is possible that such Bylaw amendments would conceivably be in
the best interests of Shareholders, the Soliciting Shareholder believes that any
such amendments are likely to be aimed at frustrating the Soliciting
Shareholder's Proposals and therefore are not likely to be in the best interests
of Shareholders. The Soliciting Shareholder is not aware of any Bylaw amendments
adopted by the Board since February 1, 1998. If the Board adopts amendments to
the Bylaws and the Soliciting Shareholder becomes aware of such amendments prior
to the adoption of the Bylaw Repeal Proposal, the Soliciting Shareholder will
take reasonable efforts to inform Shareholders of such amendments and the effect
that the Bylaw Repeal Proposal would have in relation to such amendments.
Vote Required to Adopt the Bylaw Repeal Proposal.
Article IX, Section 1 of the Bylaws provides that bylaws may be repealed
"by the vote of holders of a majority of the outstanding shares entitled to vote
unless, as to a particular provision, a higher vote is required by the
Certificate
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of Incorporation or by statute; provided, however, that Section 3 of Article II,
and Sections 1 and 2 of Article IX of the Bylaws may not be amended or repealed
in any respect except by the affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding shares entitled to vote thereon...."
The Bylaw Repeal Proposal does not propose to amend or repeal Article
II, Section 3 (special meetings of stockholders) or Article IX, Section 1 or 2
(amendments) of the Bylaws. Nor does the Company's restated certificate of
incorporation or the GCL require a higher vote than a majority of the
outstanding Shares to repeal bylaws other than those listed above. Accordingly,
the Bylaw Repeal Proposal may be enacted by the holders of a majority of the
outstanding Shares entitled to vote. See "Vote Required to Adopt The Proposals."
2. BOARD INCREASE PROPOSAL
(Item 2 on Consent Card)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A RESOLUTION INCREASING THE
AUTHORIZED NUMBER OF DIRECTORS ON THE BOARD BY TEN AND CLARIFYING THAT THE
SHAREHOLDERS MAY FILL VACANCIES ON THE BOARD AND NEWLY-CREATED DIRECTORSHIPS BY
WRITTEN CONSENT IN LIEU OF A MEETING:
"Resolved, that pursuant to the Bylaws of the Company, the stockholders
of the Company hereby increase the authorized number of directors on the Board
by 10, thereby increasing the authorized number of directors to 17, and hereby
amend the Bylaws by deleting Article III, Section 2 thereof in its entirety and
replacing the same with the following effective immediately:
`Section 2. Number of Directors. The number of directors which
shall constitute the Board of Directors of the Corporation shall be 17.
The number of directors may from time to time be changed, by resolution
of the Board of Directors or a majority vote of the outstanding shares
entitled to vote thereon. The directors shall, except for filling
vacancies (whether resulting from resignations, removals or otherwise)
and directorships created by an increase in the authorized number of
directors, be elected at the annual meeting of the stockholders and each
director shall be elected to serve until his successor is elected and
qualifies. Directors need not be stockholders. Notwithstanding anything
to the contrary in these Bylaws, the requirements of Article II, Section
14 shall not apply to nominees selected to fill vacancies or
newly-created directorships by written consent of the holders of a
majority of the outstanding shares entitled to vote.'"
Article FIFTH, paragraph A of the Company's certificate of incorporation
provides, "The number of directors which shall constitute the board of directors
of the Corporation (the "Board") shall be fixed in accordance with the Bylaws of
the Corporation." Article III, Section 2 of the Company's Bylaws presently
provides that the authorized number of directors shall initially be nine and may
be changed by Board resolution or vote of a majority of the outstanding shares.
The Company's proxy statement for the 1997 annual meeting stated that the Board
had established the authorized number of directors at seven. The Soliciting
Shareholder seeks shareholder approval to increase the number of authorized
directors by 10 to 17 and to amend the Bylaws to reflect that increase.
One purpose of the Board Increase Proposal is to create a sufficient
number of Board vacancies to allow the Soliciting Shareholder Nominees, if
elected, to fill such newly-created directorships, to constitute a majority of
the Board. If the Board Increase Proposal becomes effective, there will be 10
newly-created directorships because the number of authorized directors on the
Board will be increased from seven to 17. See "Filling of Newly-Created
Directorships."
The other purpose of the Board Increase Proposal is to clarify that the
Shareholders may fill vacancies on the Board and newly-created directorships by
written consent in lieu of a meeting.
Article III, Section 3 of the Bylaws presently provides that vacancies
on the Board "may be filled in the manner provided in the Certificate of
Incorporation . . . A vacancy or vacancies in the Board of Directors is deemed
to
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exist in the case of the death, resignation, or removal of any director or if
the authorized number of directors be increased . . . ."
Article FIFTH, paragraph C of the Company's certificate of incorporation
provides that "Any vacancies occurring in the Board for any reason, and any
newly created directorships resulting from any increase in the number of
directors, may be filled by the Board, acting by a majority of the directors
then in office, although less than a quorum or by the stockholders, and any
director so chosen shall hold office until the next election of the class for
which such director shall have been chosen and until his successor shall be
elected and qualified."
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action that may be taken at any annual or special meeting of
stockholders may be taken without a meeting by written consent of holders of the
required number of shares. See "Consent Procedure." The Company's restated
certificate of incorporation does not limit the Shareholders' ability to act by
written consent in lieu of a meeting.
Article II, Section 14(c) of the Bylaws presently provides that "Only
persons who are nominated in accordance with the procedures set forth in this
bylaw shall be eligible to serve as directors. . . ." The procedures set forth
in Article II, Section 14 concern the nomination of persons for election to the
Board at annual or special meetings of stockholders. To clarify Article II,
Section 14 of the Bylaws, Article III, Section 2 of the Bylaws is proposed to be
amended to provide that the requirements of Article II, Section 14 shall not
apply to nominees selected by written consent of shareholders to fill vacancies
on the Board and newly-created directorships.
Vote Required to Adopt the Board Increase Proposal.
Article III, Section 2 of the Bylaws presently provides that the
authorized number of directors "may be changed by resolution of the Board of
Directors or a majority vote of the outstanding shares entitled to vote
thereon."
Article IX, Section 1 of the Bylaws provides that the Bylaws may be
amended "by the vote of holders of a majority of the outstanding shares entitled
to vote unless, as to a particular provision, a higher vote is required by the
Certificate of Incorporation or by statute; provided, however, that Section 3 of
Article II, and Sections 1 and 2 of Article IX of these Bylaws may not be
amended or repealed in any respect except by the affirmative vote of the holders
of not less than eighty percent (80%) of the outstanding shares entitled to vote
thereon . . . ."
The Board Increase Proposal does not propose to amend or repeal Article
II, Section 3 (special meetings of stockholders) or Article IX, Section 1 or 2
(amendments) of the Bylaws. Nor does the Company's restated certificate of
incorporation or the GCL require a higher vote than a majority of the
outstanding Shares to amend the Bylaws to increase the authorized number of
directors. Accordingly, the Board Increase Proposal may be enacted by the
holders of a majority of the outstanding Shares entitled to vote. See "Vote
Required to Adopt the Proposals."
3. FILLING OF NEWLY-CREATED DIRECTORSHIPS PROPOSAL.
(Item 3 on Consent Card)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A RESOLUTION REGARDING THE
FILLING OF NEWLY-CREATED DIRECTORSHIPS:
"Resolved, the stockholders hereby elect the Soliciting Shareholder
Nominees (the "Nominees") to fill the new directorships on the Board created by
the adoption of the resolution proposed by Paul R. Dupee, Jr. amending the
Bylaws to increase the size of the Board. The Nominees, once on the Board, shall
hold such office until each of their successors has been elected and qualified
or until their earlier resignation or removal."
The Soliciting Shareholder has nominated the following persons (the
"Soliciting Shareholder Nominees") to the Board to fill the newly-created
directorships. Unless otherwise indicated, the address of each of the Soliciting
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Shareholder Nominees is care of the Soliciting Shareholder, 10 Wilton Row,
London, SW1X 7NR, England. The Nominees shall seek to have the Board assign them
to classes as indicated below.
NAME AGE PRINCIPAL OCCUPATION AND EMPLOYMENT CLASS
George H. Bigelow 55 Mr. Bigelow has served as President, Chief Operating I
Officer and Director of Americana Hotels and Realty
Corporation, a publicly-traded real estate investment
trust located in Boston, Massachusetts since March
1986. In March 1997, he became Chief Financial
Officer of that company. He was the President of
Americana Corporation from 1986 until 1997. Since
January 1998, Mr. Bigelow has been a Manager/Member
of the Americana Group, LLC. In addition, Mr.
Bigelow served on the Board of Directors of
Newton-Wellesley Hospital from 1986 until 1996, and
was Chairman of the Board from 1991 until 1993.
Robert M. Davies 47 Robert M. Davies is Managing Director of The Menai III
Group LLC, a merchant banking firm. Mr. Davies was
the Vice President of Wexford Capital Corporation, an
investment manager to several private investment
funds, from 1994 to March 1997. From September 1993
to May 1994 he was Managing Director of Steinhardt
Enterprises, Inc., an investment company, and from
1987 to August 1993, he was Executive Vice President
of The Hallwood Group Incorporated, a merchant
banking firm. Mr. Davies is a Director and Chairman
of Oakhurst Company, Inc. and a Director of its
majority-owned subsidiary, Steel City Products, Inc.
Paul R. Dupee Jr. 54 Mr. Dupee is a private investor. He has served as a I
Director of the Lynton Group, Inc. since 1996 and has
been Chairman since 1998. From 1986 through 1996,
Mr. Dupee was Director and Vice Chairman of the
Boston Celtics Limited Partnership, which owns the
National Basketball Association team the Boston
Celtics.
Richard A. Eddy 61 For the last five years, Mr. Eddy has served as II
Managing General Partner of TPL Properties Ltd., a
real estate company which holds investment properties
world-wide, and as General Partner of Mesa Verde
Villas, a large apartment project in Orange County
California.
Enrique F. Gittes 58 From 1992 to the present, Mr. Gittes has served as a II
Director of North Atlantic Smaller Companies
Investment Trust Plc, which invests in special
situations and provides venture capital financing.
Since 1993, Mr. Gittes has been a Director of Denison
International Ltd., a manufacturer and distributor of
hydraulic pumps and valves for industrial
applications. From 1992 until 1994, Mr. Gittes
served as a Director of Scholl Plc, a manufacturer
and marketer of Dr. Scholl's and other personal care
products. From 1997 to the present, he has been the
Chairman of the Board of Directors of Synthesis
Technologies, Inc., a developer of software for
searching and analyzing free text in clinical data
repositories.
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NAME AGE PRINCIPAL OCCUPATION AND EMPLOYMENT CLASS
Peter Homick 52 Since 1988, Mr. Homick has worked as an independent I
consultant specializing in the insurance
industry. In that capacity, he served as interim
chief executive officer for Group Health
Hospitalization and Medical Services, Inc., a
health care insurer, and has evaluated
investments, provided advice on operations and
strategic planning, identified and negotiated
new business opportunities and assisted in
business dispositions.
Christopher H. Mills 45 Mr. Mills has served as Chief Executive Officer of I
North Atlantic Smaller Companies Investment Trust
Plc, which invests in special situations and provides
venture capital financing, since 1984. In addition,
he serves as a Director of Compass Plastics &
Technologies, Critical Care Concepts, Gateway
Homecare Inc., Oak Industries, Inc., PS Group
Holdings, Inc., W-H Holdings Inc., Denison
International Limited, Horace Small Apparel Plc, J.O.
Hambro & Partners Limited and Moss Financial Services
Ltd.
Claudia M. Perkins 39 Since 1992, Ms. Perkins has been an independent II
consultant specializing in publishing and research.
She has completed projects in the United Kingdom and
Mexico. Ms. Perkins has been a Director of J.O.
Hambro Capital Management since 1995.
Lawrence I. Sosnow 63 From 1975 until 1994, Mr. Sosnow was the Chief III
Executive Officer of Patient Care, Inc., a New Jersey
home health services provider. Since 1995, he has
been Vice Chairman of that company's board of
directors. In addition, since 1997, Mr. Sosnow has
served as Vice Chairman of the board of directors of
Athena Healthcare, Inc., which is in the business of
physician practice management. From 1990 until 1993,
he was a dialysis provider for the Upper Manhattan
Dialysis Center.
Allen L. Thomas 58 Mr. Thomas was General Counsel of General Atlantic II
Group Ltd., a holding company for interests in the
hotel, retail, leisure, health club, software and
property industries, from 1992 until 1994. In 1994,
he began investing privately and providing business
and legal advice, which continues to the present. In
addition, since 1995, Mr. Thomas has served as
General Counsel and Director of Penna Holdings, Plc,
a human resources consulting firm. From March 1995
until December 1995, he was a non-executive director
of Ockham Holdings Plc, an insurance and stock
brokerage firm. Since January 1996 he has served as
the Chairman of that company.
The Nominees are committed, subject to their fiduciary duties, to
pursuing strategic alternatives to enhance shareholder value, including a sale
of the Company or its assets. The Nominees have no present intention to change
the existing senior management of the Company. The Nominees intend to appoint
the Soliciting Shareholder to oversee the implementation of their plan to pursue
strategic alternatives. The Soliciting Shareholder and the Soliciting
Shareholder Nominees contemplate agreeing on the terms of incentive compensation
to be paid to the Soliciting Shareholder. Subject to their fiduciary duties, the
Nominees expect to support the Soliciting Shareholder's request for
reimbursement of costs and expenses in connection with this solicitation.
On November 11, 1971, the Soliciting Shareholder was named as one of 44
defendants in a civil lawsuit brought by the Securities and Exchange Commission
(the "Commission") in the United States District Court for the
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Southern District of New York in an action entitled Commission v. Everest
Management Corporation, et al., Case No. 71 Civ. 4932. The complaint contained
45 claims, only 3 of which named the Soliciting Shareholder. The claims against
the Soliciting Shareholder were based on alleged violations of section 17 of the
Securities Act of 1933, section 10(b) of the Securities Exchange Act of 1934 and
sections 206(1) and (2) of the Investment Advisers Act of 1940.
On November 6, 1973, the Soliciting Shareholder consented to the entry
of a Final Judgment of Permanent Injunction in connection with the complaint,
without admitting any of the allegations in the Complaint, without trial or
adjudication of, or finding on, any issue of fact or law or any wrongdoing or
liability on the part of the Soliciting Shareholder and without the Final
Judgment constituting evidence or admission with respect to any such issue. The
injunction prohibits the Soliciting Shareholder from violating certain
provisions of the federal securities laws.
Employment Agreements.
The Employment Agreement dated April 1, 1996 and amended on February 11,
1997 (the "Employment Agreement"), between the Company and Peter J. Ratican
("Ratican") provide that in the event of a Change of Control of the Company,
Ratican may elect to terminate the Employment Agreement within 120 days of such
Change of Control, in which case such Ratican will be entitled to receive a
payment equal to 2.99 times his average annualized compensation from all sources
from and relating to the Company which is includable in his gross income,
including the value of unexercised options and termination of forfeiture
restrictions on shares of common stock, for the most recent five taxable years
ending with and including the calendar year in which the Change of Control
occurs. In addition, all options held by Ratican to purchase shares of common
stock not otherwise already vested pursuant to the terms of such options and all
shares of restricted stock not otherwise already vested pursuant to the terms of
the applicable Restricted Stock Agreement shall vest immediately upon such
termination.
"Change of Control" is defined to include the Continuing Directors of
the Company ceasing to constitute a majority of the Board. Continuing Directors
are those persons who were directors on April 1, 1996 and those persons who were
nominated for election by the stockholders or appointed, in each case, by the
affirmative vote of a majority of Continuing Directors then serving on the
Board. The Soliciting Shareholder Nominees will, if elected, constitute a
majority of the Board, so their election will be a Change of Control under the
Employment Agreement.
Possible Amendments to Board Increase Resolution and Filling of Vacancies
Resolution.
Under Article FIFTH, paragraph C of the Company's restated certificate
of incorporation and Article III, Section 3 of the Bylaws, the Board has the
power to increase the authorized number of directors on the Board and to fill
those newly-created directorships. If the Board seeks to frustrate the purpose
of the Proposals by increasing the authorized number of directors and filling
the resulting new directorships prior to the adoption of the Proposals, the
Soliciting Shareholder believes that such Board action would be invalid under
Delaware law and the Bylaws. However, in such event, or in the event that the
Board has increased the authorized number of directors since the Company's last
proxy statement was filed, the Soliciting Shareholder may amend the Board
Increase Proposal to increase the number of authorized directors by more than 10
and may name additional Nominees, so that the Nominees, if elected, will
constitute a majority of the Board.
Vote Required to Fill Vacancies Created by an Increase in the Size of the Board.
Under the Company's restated certificate of incorporation and the
Bylaws, holders of a majority of the outstanding Shares may fill vacancies on
the Board, which are defined to include new directorships resulting from an
increase in the size of the Board. Under Delaware law, absent a limitation in
the certificate of incorporation, any action that may be taken at any annual or
special meeting of stockholders may be taken by written consent. See "Consent
Procedures." In addition, the Board Increase Proposal will clarify the
nomination requirements of Article II, Section 14 of the Bylaws do not apply to
the election of directors by written consent of shareholders. Accordingly, the
holders of a majority of outstanding Shares entitled to vote may fill, by
written consent, the new directorships created by the increase in the authorized
number of directors.
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THE MAXICARE RIGHTS PLAN
The Company has filed a Form 8-K Report with the Securities and Exchange
Commission stating that on February 24, 1998, the Board had declared a
distribution to Shareholders of preferred stock purchase rights of the type
commonly known as a "Poison Pill." The Company's description of the Poison Pill
is attached to this Solicitation Statement as Exhibit A.
The election of the Soliciting Shareholder Nominees and Shareholder
approval of the three Proposals set forth in this Consent Solicitation will not
trigger any rights under the Poison Pill. However, following the election of the
Soliciting Shareholder Nominees, the Board may wish to enter into certain
transactions which could not be accomplished unless the Poison Pill were
redeemed or otherwise made inapplicable to the transaction. While the Company
retains the power to redeem the rights under the Poison Pill at a nominal price,
the Poison Pill includes a provision ("Dead Hand Clause") that does not allow
the Poison Pill to be redeemed unless redemption is approved by a majority of
the independent directors who are "Continuing Directors" (defined in the
Company's description of the Poison Pill as "the members of the Board of
Directors as of February 24, 1998 or persons recommended to succeed a Continuing
Director by a majority of Continuing Directors"). It is the view of Delaware
counsel for the Soliciting Shareholder that, although there are no Delaware
decisions directly addressing the issue, the Dead Hand Clause would be held
contrary to Delaware law by a Delaware court. As described below in the Section
entitled "Certain Litigation," contemporaneously with the filing of this
preliminary Consent Solicitation, the Soliciting Shareholder has commenced an
action in the Delaware Court of Chancery seeking, among other things,
declaratory and injunctive relief holding that the Poison Pill and the Dead Hand
Clause are invalid and unenforceable.
CERTAIN LITIGATION
Contemporaneously with the filing of this preliminary Consent
Solicitation, the Soliciting Shareholder filed complaints in the Court of
Chancery for the State of Delaware in and for New Castle County (the "State
Court Complaint") and in the United States Federal District Court for the
District of Delaware (the "Federal Court Complaint"). Both complaints name the
Company as a defendant and the State Court Complaint names, in addition, the
current members of the Board (the "Director Defendants") as defendants.
The Federal Court Complaint seeks a declaratory judgment that the
materials the Soliciting Shareholder has filed with the Securities and Exchange
Commission relating to this solicitation, including this Consent Solicitation,
comply with the federal securities laws, including Rule 14a-9 promulgated
pursuant to Section 14(a) of the Securities and Exchange Act of 1934, 15 U.S.C.
section 78n(a).
The State Court Complaint describes the Company's Bylaws and the
Proposals set forth in this Consent Solicitation and seeks a declaratory
judgment that (a) holders of a majority of the outstanding Shares entitled to
vote may increase the authorized number of directors on the Board and may amend
the Bylaws (i) to reflect that increase and (ii) to clarify that the
requirements of Article II, Section 14 of the Bylaws do not apply to nominees
selected to fill vacancies or newly-created directorships by written consent
(such Bylaw amendments are referred to in this "Certain Litigation" section as
the "Amendments"); (b) any action by the Director Defendants to obstruct,
undermine, delay, repeal or amend the Amendments would violate Delaware law and
the Bylaws and would constitute a breach of the Director Defendants' fiduciary
duties; (c) any action by the Director Defendants to adopt new Bylaws or amend
the Bylaws to require supermajority shareholder approval to enact the Amendments
would violate the Bylaws and Delaware law and would constitute a breach of the
Director Defendants' fiduciary duties; (d) Article II, Section 14 of the Bylaws
applies only to directors to be elected at an annual or special meeting of the
shareholders and not to those to be elected by written consent, or, in the
alternative, that if the Amendments are approved by written consent of the
holders of a majority of the outstanding shares entitled to vote, that Article
II, Section 14 does not apply to the Soliciting Shareholder Nominees and their
election by written consent; and (e) the Dead Hand Clause violates Delaware law
and is thus invalid and unenforceable. The State Court Complaint seeks permanent
and preliminary injunctive relief enjoining the Director Defendants from
enforcing or implementing the Poison Pill.
-9-
CERTAIN INFORMATION CONCERNING
THE SOLICITING SHAREHOLDER AND OTHER PARTICIPANTS
IN THE SOLICITATION
The Soliciting Shareholder owns 207,900 shares of Common Stock directly
and beneficially owns 21,000 shares of Common Stock owned by a corporation in
which he owns 100% of the outstanding stock. Certain information about the
Soliciting Shareholder and the Soliciting Shareholder Nominees is set forth in
the Schedules attached hereto.
Except as set forth in this Solicitation Statement or in the Schedules
hereto, to the best knowledge of the Soliciting Shareholder, none of the
Soliciting Shareholder, any of the persons participating in this solicitation on
behalf of the Soliciting Shareholder, or any associate of any of the foregoing
persons (i) owns beneficially, directly or indirectly, or has the right to
acquire, any securities of the Company or any parent or subsidiary of the
Company, (ii) owns any securities of the Company of record but not beneficially,
(iii) has purchased or sold any securities of the Company within the past two
years, (iv) has incurred indebtedness for the purpose of acquiring or holding
securities of the Company, (v) is or has been a party to any contract,
arrangement or understanding with respect to any securities of the Company
within the past year, (vi) has been indebted to the Company or any of its
subsidiaries since the beginning of the Company's last fiscal year, (vii) has
any arrangement or understanding with respect to future employment by the
Company or with respect to any future transactions to which the Company or any
of its affiliates will or may be a party, (viii) knows of any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries is to be a party, in which the amount involved exceeds $60,000
and in which any of the Soliciting Shareholder, any of the persons participating
in this solicitation on behalf of the Soliciting Shareholder or any of their
respective associates had, or will have, a direct or indirect material interest,
or (ix) has been convicted during the last ten years in a criminal proceeding
(excluding traffic violations or other similar misdemeanors). In addition,
except as set forth in this Solicitation Statement or in the Schedules hereto,
to the best knowledge of the Soliciting Shareholder, none of the Soliciting
Shareholder, any of the persons participating in this solicitation on behalf of
the Soliciting Shareholder, or any associate or immediate family member of any
of the foregoing persons has had or is to have a direct or indirect material
interest in any transaction with the Company since the beginning of the
Company's last fiscal year, or any proposed transaction, to which the Company or
any of its affiliates was or is a party.
The Soliciting Shareholder, J.O. Hambro Capital Management Ltd
("Hambro"), North Atlantic Smaller Companies Investment Trust ("North Atlantic")
and American Opportunity Trust ("Opportunity") have entered into an oral
agreement under which the costs of this solicitation are shared 40% by the
Soliciting Shareholder, 40% by North Atlantic and 20% by Opportunity. Hambro is
an investment advisor for funds, including North Atlantic and Opportunities.
Hambro's principal place of business is at 10 Park Place, London SW1A 1LP,
England. Hambro beneficially owns 424,050 shares of Common Stock, including
200,000 shares owned by North Atlantic and 90,000 shares owned by Opportunity.
VOTING RIGHTS
According to the Company's Form 10-Q for the quarterly period ended
September 30, 1997, as of November 11, 1997, 17,968,359 Shares were outstanding
and entitled to vote. The Soliciting Shareholder believes that the Shares are
the only outstanding class of securities of the Company entitled to act by
written consent. Each Share is entitled to one vote. For a description of the
vote required to adopt the Proposals, see "Proposals--Vote Required for
Adoption" under each of the Proposals and in the forepart of this Solicitation
Statement under "Vote Required to Enact the Proposals."
GENERAL INFORMATION
This Solicitation Statement and the accompanying GOLD Consent Card are
first being made available to Shareholders on or about March ___, 1998. Executed
Consent Cards will be solicited by mail, advertisement, telephone, telecopier
and in person. Solicitation will be made by the Soliciting Shareholder,
Christopher Mills and
-10-
Robert M. Davies, none of whom will receive additional compensation for such
solicitation. Consents will be solicited from individuals, brokers, banks, bank
nominees and other institutional holders. The Soliciting Shareholder has
requested banks, brokerage houses and other custodians, nominees and fiduciaries
to forward all solicitation materials to the beneficial owners of the shares
they hold of record. The Soliciting Shareholder will reimburse these record
holders for their reasonable out-of-pocket expenses.
In addition, the Soliciting Shareholder has retained MacKenzie to
solicit consents, for which MacKenzie will be paid a fee of approximately
$______. MacKenzie will be reimbursed for its reasonable expenses.
If the Soliciting Shareholder Nominees are elected, the Soliciting
Shareholder intends to ask the Board to have the Company reimburse the
Soliciting Shareholder for costs and expenses incurred in connection with this
solicitation. The Soliciting Shareholder does not intend to request that his
reimbursement request be submitted to a vote of the Shareholders. Costs
incidental to this solicitation, including expenditures for printing, postage,
legal and related expenses are expected to be approximately $_______.
REVOCABILITY OF SIGNED CONSENTS
You may revoke your Consent at any time by executing and delivering a
written revocation to the Company (please send a copy of any revocation sent to
the Company to MacKenzie so the Soliciting Shareholder is aware of the
revocation) or by delivering a later-dated Consent voting against the Proposals.
Such a revocation must clearly state that your Consent Card is no longer
effective. Any revocation of a Consent will not affect any action taken pursuant
to the Consent prior to such revocation.
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR CONSENT OR REQUIRE
ASSISTANCE, PLEASE CONTACT MACKENZIE TOLL-FREE AT (800) 322-2885.
-11-
SCHEDULE I
INFORMATION CONCERNING THE SOLICITING SHAREHOLDER AND SOLICITING
SHAREHOLDER NOMINEES
Each of the Soliciting Shareholder Nominees is a participant in the
solicitation and the name and present principal occupation or employment of each
of the Soliciting Shareholder Nominees is set forth in the body of this
Solicitation Statement under the Filling of Newly-Created Directorships
Proposal. The principal business addresses of each of the Soliciting Shareholder
Nominees are set forth on Schedule II.
Consents may be solicited by mail, advertisement, telephone, telecopier
and in person.
-12-
SCHEDULE II
PRINCIPAL BUSINESS ADDRESSES OF SOLICITING SHAREHOLDER NOMINEES
George H. Bigelow The Americana Group LLC
535 Boylston Street
Boston, MA 02116
Robert M. Davies The Menai Group LLC
100 First Stamford Place, 6th floor
Stamford, CT 06902
Paul R. Dupee Jr. 10 Wilton Row
London SW1X 7NR
England
Richard A. Eddy Mesa Verde Villas
553 Irvine Avenue
Newport Beach, CA 92660
Enrique F. Gittes North Atlantic Smaller Companies Investment Trust Plc
c/o J.O. Hambro Capital Management Ltd
10 Park Place
London SW1A 1LP
England
Peter Homick 55 Biltmore Estates
Phoenix, AZ 85106
Christopher Mills J.O. Hambro Capital Management Ltd
10 Park Place
London SW1A 1LP
England
Claudia Perkins J.O. Hambro Capital Management Ltd
10 Park Place
London SW1A 1LP
England
Lawrence Sosnow 850 Park Avenue
New York, NY 10021
Allen Thomas Penna Holdings Plc
2 Fore Street
London
England
-13-
SCHEDULE III
TRANSACTIONS IN THE COMPANY'S SECURITIES BY THE SOLICITING SHAREHOLDER AND
HIS AFFILIATES
The following table sets forth information with respect to all
purchases and sales of Common Stock of the Company by the Soliciting Shareholder
and his affiliates during the past two years. Except as set forth in Schedules
III, IV and V, no participant in this solicitation has purchased or sold
securities of the Company within the past two years.
DATE NUMBER OF SHARES PRICE
---- ---------------- -----
3/7/97 -2,500 $24.3750
3/20/97 -5,000 25.8750
7/25/97 5,000 19.7250
8/6/97 5,000 19.4500
8/7/97 3,000 19.0000
8/11/97 2,000 17.8750
8/19/97 2,000 17.3750
9/25/97 3,000 18.9896
10/7/97 6,000 18.5208
10/8/97 16,800 19.8006
10/9/97 13,000 19.5865
10/10/97 5,200 19.5250
10/10/97 4,000 19.2969
10/20/97 3,000 18.5000
10/20/97 2,000 18.5000
10/20/97 1,300 18.4688
10/22/97 5,000 15.2500
11/3/97 5,000 14.2825
11/7/97 10,000 13.0000
12/15/97 5,000 10.5000
12/15/97 2,200 10.0000
12/16/97 10,000 10.5000
1/26/98 3,500 8.5188
2/6/98 8,000 7.9606
2/10/98 4,000 9.1813
2/17/98 4,600 9.5300
2/18/98 5,500 9.6000
2/25/98 2,000 10.2562
3/2/98 4,000 9.7500
3/3/98 1,200 9.5000
3/5/98 8,800 9.7500
3/9/98 8,500 9.8750
3/12/98 10,300 10.7500
3/13/98 5,000 10.9375
3/13/98 5,000 10.9338
3/13/98 5,000 10.9325
-14-
SCHEDULE IV
TRANSACTIONS IN THE COMPANY'S SECURITIES BY HAMBRO, NORTH ATLANTIC,
OPPORTUNITIES AND THEIR AFFILIATES
The following table sets forth information with respect to all
purchases and sales of Common Stock of the Company by Hambro, North Atlantic,
Opportunity and their affiliates during the past two years. Except as set forth
in Schedules III, IV and V and Schedule IV, no participant in this solicitation
has purchased or sold securities of the Company within the past two years.
PARTICIPANT DATE NUMBER OF SHARES PRICE
----------- ----- --------------- -------
North Atlantic 3/29/96 25,000 16.4791
Hambro 6/21/96 4,000 20.2331
North Atlantic 6/24/96 25,000 12.8263
Hambro 7/1/96 300 19.2650
Hambro 7/1/96 2,000 19.1800
Hambro 12/3/96 1,500 20.7700
Hambro 3/3/97 500 22.4813
Hambro 3/14/97 -2,000 24.2373
Hambro 5/6/97 1,000 14.0916
Hambro 5/28/97 1,000 13.1261
Hambro 6/2/97 500 24.3300
Hambro 6/30/97 2,000 22.7531
Hambro 6/30/97 500 22.7981
Hambro 7/28/97 3,000 19.9188
Hambro 7/28/97 200 20.2069
Hambro 7/28/97 500 19.9688
Hambro 8/6/97 200 12.2601
Hambro 8/6/97 500 12.3514
Hambro 8/20/97 200 18.1143
Hambro 8/20/97 3,000 18.0641
Hambro 9/2/97 300 11.4287
Hambro 9/2/97 300 18.3850
Hambro 9/2/97 500 18.2100
North Atlantic 11/11/97 74,500 13.1930
Opportunity 11/12/97 40,000 14.7670
Hambro 12/18/97 2,000 21.5150
North Atlantic 12/19/97 500 13.6145
Hambro 2/12/98 1,500 9.7653
Hambro 2/12/98 1,300 9.6481
Hambro 2/12/98 1,200 9.6981
Hambro 2/12/98 1,000 5.9732
-15-
SCHEDULE IV (CONTINUED)
In addition to the transactions in the Company's securities listed on the
previous page, put options have been sold and remain outstanding as set forth in
the following chart:
PARTICIPANT DATE NUMBER OF SHARES SUBJECT TO STRIKE PRICE
OPTION
North Atlantic 8/1/97 10,000 17.50
North Atlantic 8/19/97 10,000 17.50
North Atlantic 12/15/97 65,000 12.50
North Atlantic 12/16/97 35,000 12.50
Opportunity 3/2/98 10,000 12.50
-16-
SCHEDULE V
TRANSACTIONS IN THE COMPANY'S SECURITIES BY OTHER PARTICIPANTS
The following table sets forth information with respect to all
purchases and sales of Common Stock of the Company during the past two years by
participants in the solicitation other than the Soliciting Shareholder, Hambro,
North Atlantic, Opportunity and their respective affiliates. Except as set forth
in Schedules III, IV and V, no participant in this solicitation has purchased or
sold securities of the Company within the past two years.
GEORGE H. BIGELOW:
On March 16, 1998, Mr. Bigelow purchased 1,000 shares of the Company's
Common Stock at a price of $11.0625 per share.
ENRIQUE F. GITTES:
Mr. Gittes does not directly own any shares of the Company's Common
Stock. He is a Director of North Atlantic, whose ownership of and
transactions in the Common Stock are set forth in this Consent
Solicitation and Schedule IV hereto.
CHRISTOPHER MILLS:
Christopher Mills does not directly own any shares of the Company's
Common Stock. He owns 11% of the outstanding voting stock of North
Atlantic and is therefore deemed to be an associate of North Atlantic.
Mr. Mills is a director and 0.8% shareholder of Opportunity. Hambro's,
North Atlantic's and Opportunity's ownership and transactions are set
forth in this Consent Solicitation and Schedule IV hereto.
CLAUDIA PERKINS:
Claudia Perkins does not directly own any shares of the Company's
Common Stock. She is a Director of Hambro, whose ownership of and
transactions in the Common Stock are set forth in this Consent
Solicitation and Schedule IV hereto.
LAWRENCE SOSNOW:
On Friday, March 13, 1998, Mr. Sosnow purchased 7,000 shares of the
Company's Common Stock for $10.984 per share.
-17-
Exhibit A
THE COMPANY'S DESCRIPTION OF
THE POISON PILL
On February 24, 1998, the Board of Directors of Maxicare
Health Plans, Inc. (the "Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of Common
Stock, par value $0.01 per share (the "Common Shares"), of the Corporation. The
dividend is payable to the stockholders of record on March 16, 1998 (the "Record
Date"), and with respect to Common Shares issued thereafter, until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Shares issued after the Distribution Date. Except as set forth below,
each Right, when it becomes exercisable, entitles the registered holder to
purchase from the Corporation one five-hundredth of a share of Series B
Preferred Stock, $0.01 par value (the "Preferred Shares"), of the Corporation at
a price of $45.00 per one five-hundredth of a Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Corporation and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"),
dated as of February 24, 1998.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares upon the
earliest to occur of (i) the date of a public announcement that, without the
prior consent of a majority of the Disinterested Directors (as defined below), a
person or group of affiliated or associated persons has acquired beneficial
ownership of 15% or more of the outstanding Common Shares (except pursuant to a
Permitted Offer, as hereinafter defined), or (ii) 10 days (or such later date as
the Board may determine) following the commencement or announcement of an
intention to make a tender or exchange offer, the consummation of which would
result in a person or group becoming an Acquiring Person (as hereinafter
defined) (the earliest of such dates being called the "Distribution Date").
A person or group whose acquisition of Common Shares causes a Distribution Date
pursuant to clause (i) above is an "Acquiring Person". The date that a person or
group announces publicly that it has become an Acquiring Person is the "Shares
Acquisition Date". Any current holder that has previously advised the
Corporation that it holds in excess of 15% of the Common Shares has been
"grandfathered" with respect to its current position, including an allowance for
certain small incremental additions thereto.
"Disinterested Directors" are "Continuing Directors" who are
not officers or employees of the Corporation and who are not Acquiring Persons
or their affiliates, associates or representatives of any of them, or any person
who was directly or indirectly proposed or nominated as a director of the
corporation by an Acquiring Person or certain related parties and "Continuing
Directors" are the members of the Board of Directors as of February 24, 1998 or
persons recommended to succeed a Continuing Directors by a majority of
Continuing Directors.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Common Shares. Until
the Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender or transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of the Summary of Rights Agreement being attached thereto, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (the "Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date (and to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
-2-
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on February 23, 2008, unless earlier
redeemed by the Corporation as described below.
In the event that any person becomes an Acquiring Person
(except pursuant to a tender or exchange offer which is for all outstanding
Common Shares at a price and on terms which a majority of the Disinterested
Directors determines to be adequate and in the best interests of the Corporation
and its stockholders, other than such Acquiring Person, its affiliates and
associates (a "Permitted Offer")), each holder of a Right will thereafter have
the right (the "Flip-In Right") to receive upon exercise Common Shares or one
five-hundredth of a share of Preferred Shares (or, in certain circumstances,
other securities of the Corporation) having a value (immediately prior to such
triggering event) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event described
above, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void.
In the event that, at any time following the Shares
Acquisition Date, (i) the Corporation consolidates with, or merges into, an
Acquiring Person, or an affiliate or associate thereof, or any person or entity
in which such Acquiring Person, affiliate or associate has an interest or which
is acting in concert with such Acquiring Person, affiliate or associate (an
"Interested Stockholder"), or any other entity (if all holders of Common Shares
are not treated alike in such transaction), (ii) an Interested Stockholder or
any other entity (if all holders of Common Shares are not treated alike in such
transaction) consolidates with, or merges into the Corporation (other than, in
the case of either transaction described in (i) and (ii) above and certain
reorganization transactions), or (iii) the Corporation sells or otherwise
transfers (in one transaction or a series of transactions) 50% or more of the
assets or earning power of the Corporation to an Interested Stockholder or to
any other entity (if all holders of Common Shares are not treated alike in such
transaction), proper provision shall be made so that each holder of a
-3-
Right (except Rights which previously have been voided as set forth below) shall
thereafter have the right (the "Flip-Over Right") to receive, upon exercise,
common shares of the acquiring or surviving company (or, in the event there is
more than one acquiring company, the acquiring company receiving the greatest
portion of the assets or earning power transferred) having a value equal to two
times the exercise price of the Right.
The Purchase Price payable, and the number of Preferred
Shares, Common Shares or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then current market price of the Preferred Shares, or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding cash dividends) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights and the Purchase Price
payable are also subject to adjustment in the event of a stock split of the
Common Shares or a stock dividend on the Common Shares payable in Common Shares
or subdivisions, consolidations or combinations of the Common Shares occurring,
in any such case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable, except at the election of the Corporation for Common Shares.
Each Preferred Share will be entitled to a dividend per share of 500 times the
dividend declared per Common Share. In the event of liquidation, the holders of
the Preferred Shares will be entitled (after the payment of any liquidation
preference on any other series of preferred stock) to $100 per share, plus the
holders of the Preferred Shares and the holders of the Common Shares will share
the remaining assets in the ratio of 500 to 1 (as adjusted) for each Preferred
Share and Common Share so held, respectively. Finally, in the event of any
merger, consolidation or other transaction in which
-4-
Common Shares are exchanged, each Preferred Share shall be entitled to receive
500 times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
With certain exceptions, no adjustment in the Purchase Price
shall be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are one five-hundredths or integral multiples of one
five-hundredths of a Preferred Share, which may, at the election of the
Corporation, be evidenced by depository receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise or if the Preferred
Shares are not traded, the market price of the Common Shares on such date.
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the Common
Shares, the Board of Directors of the Company (with the approval of a majority
of the Disinterested Directors) may exchange the Rights (other than the Rights
owned by the Acquiring Person or its affiliates and associates, which shall have
become void) at an exchange ratio of one Common Share per Right (subject to
adjustment). The Board of Directors can substitute one five-hundredths of a
Preferred Share for some or all of the Common Shares per Right.
At any time prior to the earlier to occur of (i) a person
becoming an Acquiring Person or (ii) the expiration of the Rights, and under
certain other circumstances, the Corporation may redeem the Rights in whole, but
not in part, at a price of $.01 per Right (the "Redemption Price") which
redemption shall be effective upon the action of the Board of Directors (with
the approval of a majority of the Disinterested Directors). Additionally,
following the Shares Acquisition Date, the Corporation may redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price, provided
that such redemption is in connection with a merger or other business
combination transaction or series of transactions involving the Corporation in
-5-
which all holders of Common Shares are treated alike but not involving an
Acquiring Person or its affiliates or associates and provided further that this
redemption right shall not exist for 180 days following the Shares Acquisition
Date under certain circumstances.
All of the provisions of the Rights Agreement may be amended
by the Directors of the Corporation (with the approval of a majority of the
Disinterested Directors) prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Corporation, including, without
limitation, the right to vote or to receive dividends. While the distribution of
the Rights will not be taxable to stockholders of the Corporation, stockholders
may, depending upon the circumstances, recognize taxable income should the
Rights become exercisable or upon the occurrence of certain events thereafter.
This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
Exhibit 4.13 hereto, which is hereby incorporated herein by reference.
-6-
APPENDIX 1
CONSENT CARD
MAXICARE HEALTH PLANS, INC.
CONSENT CARD
THIS CONSENT IS SOLICITED ON BEHALF OF
MR. PAUL R. DUPEE, JR. IN OPPOSITION TO THE BOARD OF DIRECTORS OF THE
COMPANY
The undersigned hereby acknowledges receipt of the Consent Solicitation
(the "Consent Solicitation") in Connection with the Increase in the Authorized
Number of Directors, the Amendment of Bylaws and the Election of Directors of
Maxicare Health Plans, Inc. (the "Company") and consents with respect to all of
the Common Stock, par value $.01 per share of the Company held by the
undersigned, to the adoption of each of the proposals set forth herein as such
proposals are defined in the Consent Solicitation without a meeting of the
stockholders of the Company.
1. SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE BYLAW REPEAL
PROPOSAL
[ ] CONSENTS/FOR [ ] WITHHOLDS CONSENT/AGAINST [ ] ABSTAIN
2. SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE BOARD INCREASE
PROPOSAL
[ ] CONSENTS/FOR [ ] WITHHOLDS CONSENT/AGAINST [ ] ABSTAIN
3. SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE ELECTION OF GEORGE
BIGELOW, ROBERT DAVIES, PAUL DUPEE JR., RICHARD EDDY, ENRIQUE GITTES, PETER
HOMICK, CHRISTOPHER MILLS, CLAUDIA PERKINS, LAWRENCE SOSNOW AND ALLEN THOMAS
TO FILL THE NEWLY CREATED DIRECTORSHIPS (THE FILLING OF NEWLY-CREATED
DIRECTORSHIPS PROPOSAL)
[ ] CONSENTS/FOR [ ] WITHHOLDS CONSENT/AGAINST [ ] ABSTAIN
TO WITHHOLD CONSENT FOR THE ELECTION OF AN INDIVIDUAL NOMINEE, INDICATE SUCH
NOMINEE IN THE SPACE ABOVE
The signature on this Consent should
correspond exactly with stockholder's
name as printed to the left. In the case
of joint tenancies, co-executors, or
co-trustees, both should sign. Persons
signing as Attorney, Executor,
Administrator, Trustee or Guardian
should give their full title.
DATED:---------------------------, 1998
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Signature
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Title
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK
PLEASE SIGN, DATE AND RETURN THIS CONSENT IN THE
ENCLOSED PREPAID ENVELOPE