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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. 3)
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] 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:
.......................................................
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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.
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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 April 21, 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 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 would 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).
The Soliciting Shareholder believes it is in the Shareholders' best
interests for the Board to pursue the possibility of a strategic transaction,
including a business combination or a sale of the Company or its assets, and to
execute such a transaction if it can enhance shareholder value. The Soliciting
Shareholder is aware that the Company has stated in its Preliminary Solicitation
Materials that "the Board has been supervising management's evaluation of the
Company's businesses and operations with a view toward streamlining operations
and enhancing and focusing on those operations which have generated
substantially all of the Company's growth and profitability in recent years."
Based on that statement, the Soliciting Shareholder believes the existing Board
intends to retain certain of the Company's existing operations, whereas he
believes the Company should pursue the possibility of a strategic transaction or
transactions involving all the Company's businesses and assets. Furthermore, in
view of the Company's poor recent performance, as reflected in the decline in
the market price of its stock and its operating results during the past year,
the Soliciting Shareholder believes it would be advantageous for Shareholders to
elect a new Board majority to supervise the pursuit of value-enhancing strategic
alternatives.
However, the Soliciting Shareholder and the other Soliciting Shareholder
Nominees (defined below) have no specific plans for such a transaction, nor are
they presently engaged in discussions with potential parties to such a
transaction, and there is no assurance that if the Proposals are adopted, such a
transaction will be effected or will result in Shareholders receiving proceeds
substantially greater than the current market price of the Company's stock. If
the Soliciting Shareholder Nominees are elected to the Board and such a
transaction cannot be effected on favorable terms, the nominees will seek to
operate the Company's business profitably while pursuing opportunities to engage
in a strategic transaction on terms advantageous to Shareholders, although the
Soliciting Shareholder Nominees have no specific plans for changing the
Company's business operations.
The Board recently adopted a "Poison Pill" that includes a "Dead Hand
Clause" that would enable existing directors and their designated successors to
block certain strategic transactions, even if a new Board majority is elected.
The Soliciting Shareholder believes that the Dead Hand Clause is legally invalid
and is seeking a declaratory judgment to that effect in Delaware Chancery Court.
See "Certain Litigation." The Soliciting Shareholder has received an
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opinion from Messrs. Potter, Anderson & Corroon, his Delaware counsel, that
although there are no Delaware decisions directly on point, it is their opinion
that the Dead Hand Clause in the Maxicare Poison Pill is not valid under
Delaware law. This opinion is based principally on the inconsistency between a
Dead Hand Clause and the reasoning of the leading Delaware case upholding a
poison pill, Moran v. Household International, Inc., 500 A.2d 1346 (Del. Supr.
1985). The Moran opinion assumed that the poison pill at issue in that case
would have "minimal" effect on proxy contests and that a new board elected in a
proxy contest could redeem the poison pill. By contrast, with the Dead Hand
Clause in place, a new Maxicare board could not redeem the Poison Pill or engage
in certain strategic transactions without the approval of a majority of the
pre-existing directors and their designated successors. In Invacare Corporation
v. Healthdyne Technologies, Inc., 968 F. Supp. 1578 (N.D. Ga. 1997), the court
rejected a challenge under Georgia law to a continuing director provision of a
poison pill of a Georgia corporation. However, that opinion was based on the
court's interpretation of Georgia statutory law and legislative history and thus
is not controlling on the question of the validity of the Dead Hand Clause in
Maxicare's Poison Pill.
If the court upholds the Maxicare Dead Hand Clause, there could be an
adverse impact on the implementation or timing of the Company's strategic plans
since a Board majority consisting of Soliciting Shareholder Nominees would not
be able unilaterally to approve strategic transactions in which another party
acquires 15% or more of the outstanding Shares, whether by means of a tender
offer, exchange offer, merger, negotiated or open market stock purchase or other
means. However, other strategic transactions, such as asset sales to
unaffiliated third parties and mergers in which no shareholder acquires 15% of
the Company's Shares, would not trigger the Poison Pill and therefore would not
be affected by the Dead Hand Clause. See "The Maxicare Rights Plan."
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.
In a counterclaim asserted in an action brought by the Soliciting
Shareholder in Delaware Chancery Court, the Company is seeking a declaratory
judgment that Shareholders must comply with the advance notice requirements for
proposals or nominations at stockholders' meetings, which are contained in
Article II, Section 14 of the Bylaws, in order to amend the Bylaws or elect
directors by written consent. If the position asserted by the Company in this
counterclaim were correct, the Shareholders could not adopt the Proposals
through this Consent Solicitation since the Soliciting Shareholder has not
complied with these advance notification requirements.
The Soliciting Shareholder has received an opinion from Messrs Potter,
Anderson & Corroon, his Delaware counsel, to the effect that such advance
notification requirements are not applicable to consent solicitations and,
if applicable, could be validly amended by stockholders prior to or
simultaneously with the election of directors not nominated in accordance
with these requirements. Based on this opinion, the Soliciting Shareholder
believes that Shareholders are not required to comply with such advance notice
requirements in order to amend the Bylaws or elect directors by written consent,
although there can be no assurance that such requirements will be held to be
inapplicable to such actions by written consent.
In its opinion, Delaware counsel expresses the view that the advance
notification requirements are not applicable to actions by written consent of
shareholders since the time limits contained in these requirements all
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relate to meeting dates that have no relationship to the timing of a consent
solicitation. Delaware counsel also expresses the view that to the extent the
advance notification requirements were construed as applying to stockholder
action by written consent, these requirements would be deemed to violate
Section 228 of the GCL. That section gives shareholders the right to act by
written consent "without a meeting, without prior notice and without a vote,"
unless otherwise provided in the certificate of incorporation" (emphasis added).
Finally, if the advance notification requirements were deemed validly to apply
to shareholder action by written consent to fill newly created directorships,
Delaware counsel is of the opinion that Shareholders can eliminate such
requirements by a Bylaw amendment adopted prior to or simultaneously with the
election of a Board candidate as to which timely notice was not submitted. That
opinion is principally based on the fact that the only portion of the advance
notification requirement that, by its terms, applies to directors chosen by
written consent is a provision which says that only persons nominated in
accordance with the advance notice requirements are eligible to serve as
directors. If the Board Increase Proposal is adopted, an amendment to
Article III, Section 2 would make that provision inapplicable to directors
selected by written consent, and the amendment would become effective
at or before the time the Soliciting Shareholder Nominees would begin to serve
as directors. In Delaware counsel's view the repeal of such an eligibility
requirement simultaneously with the election of directors to whom the provision
would otherwise apply would make that requirement inapplicable to the directors
then elected.
RECENT DEVELOPMENTS
On March 28, 1998, after the Soliciting Shareholder filed a preliminary
consent solicitation statement with the Securities and Exchange Commission, the
Board purported to adopt amendments (the "March Bylaw Amendments") to the bylaws
of the Company (the "Bylaws") that would increase the vote required to adopt the
Proposals from 50% to 80% of the outstanding Shares. Such amendments are
hereinafter referred to as the "March Bylaw Amendments." The Bylaws, as they
existed prior to the adoption of the March Bylaw Amendments, are hereinafter
referred to as the "Preexisting Bylaws."
Specifically, the Board amended Article III, Section 2 of the Bylaws to
require the affirmative vote of holders of 80% of the outstanding Shares to
change the number of authorized directors. The Board also amended Article IX,
Section 1 of the Bylaws to require the affirmative vote of holders of 80% of the
outstanding Shares to amend either Article II, Section 14, which establishes
notice requirements for stockholder business and nominations at stockholder
meetings, or Article III, Section 2, which deals with the number of directors on
the Board. The March Bylaw Amendments shall cease to be effective at the close
of the 1999 annual meeting of stockholders unless approved by holders of a
majority of the outstanding Shares prior to that time.
The Soliciting Shareholder has received an opinion from Messrs. Potter,
Anderson & Corroon, his Delaware counsel, that the March Bylaw Amendments would
be declared unenforceable by a Delaware court presented with the issue. However,
there is no controlling legal precedent on the precise issue of whether the
March Bylaw Amendments are valid under Delaware law. This issue will be resolved
by a court of competent jurisdiction, and there can be no assurance that the
March Bylaw Amendments will be held by a court to be invalid under Delaware law.
Delaware counsel's opinion regarding the March Bylaw Amendments is based
in part on the view that the Board could not meet its burden under Blasius
Industries, Inc. v. Atlas Corporation, 564 A.2d 651 (Del. Ch. 1988), of
demonstrating a compelling justification for actions undertaken for the primary
purpose of impeding the exercise of stockholder voting power. However, there is
no case that has directly considered whether bylaw amendments similar to the
March Bylaw Amendments violate Blasius. In USACafes v. Office, Case No. 8186
(Del. Ch. 1985), involving facts similar to this Consent Solicitation, the court
refused to grant a preliminary injunction prohibiting the enforcement of a bylaw
similar to the March Bylaw Amendments. The court stated in its opinion that "the
fact that a 75% vote requirement may be more difficult to obtain than a simple
majority does not lead to the conclusion that providing one's consent is an
exercise in futility." However, the court's decision was based on the lack of
irreparable harm in allowing the 75% supermajority vote requirement to remain in
effect while a consent solicitation proceeded, and the court explicitly held
that its decision to deny plaintiff's motion for preliminary injunction did not
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reach the merits of the plaintiff's attack on the validity of the bylaws.
While Blasius itself involved actions that made it impossible to change
control of the board through a consent solicitation, the Blasius principles
have been applied in situations in which the company manipulated the electoral
process to impede the exercise of stockholder voting power, without making it
impossible to succeed in a proxy contest or consent solicitation. See, e.g.,
Aprahamian v. HBO & Co., 531 A.2d 1204 (Del. Ch. 1987); Schnell v. Chris-Craft
Industries, Inc., 285 A.2d 437 (Del. Sup. 1971).
Delaware counsel's opinion that the March Bylaw Amendments would be
declared unenforceable by a court presented with the issue is also based on
their belief that, although there are no decisions on point, Section 109(a) of
the GCL bars directors from imposing a supermajority voting requirement for
stockholder amendments to the bylaws of a Delaware corporation. The pertinent
language of Section 109(a) states that the fact that the power to adopt, amend
or repeal bylaws has been imposed on the board "shall not divest stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws" (emphasis
added). It should be noted that Section 216 of the GCL authorizes the
certificate of incorporation or bylaws of a corporation to establish the vote
required for any shareholder action and does not prohibit the board from
adopting a bylaw that imposes a supermajority vote requirement for stockholder
bylaw amendments. Delaware counsel has stated that in their opinion Section 216
does not address whether the Board can adopt a bylaw that imposes such a
supermajority vote requirement and, therefore, in their opinion Section 216 does
not undermine or conflict with the limitations on the board's amendment powers
imposed by Section 109(a).
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. Holders of fifty percent of the outstanding
Shares can amend or repeal the Bylaws, except for certain provisions that can
only be amended by holders of 80% of the outstanding Shares (provisions that can
only be amended or repealed by majority vote are hereinafter referred to as "50%
Provisions"; provisions that can be amended or repealed by 80% vote are
hereinafter referred to as "80% Provisions"). See "Proposals -- Bylaw Repeal
Proposal." Accordingly, the vote required to adopt the Bylaw Repeal Proposals
depends on whether the provisions being repealed are 50% Provisions or 80%
Provisions.
Certain of the March Bylaw Amendments involve 80% Provisions. The other
March Bylaw Amendments involve 50% Provisions under the Preexisting Bylaws that
would become 80% Provisions pursuant to the March Bylaw Amendments. Therefore,
if the March Bylaw Amendments were valid, the affirmative vote of holders of 80%
of the outstanding Shares would be required to repeal the March Bylaw
Amendments.
The Soliciting Shareholder believes that the March Bylaw Amendments are
legally invalid and that the Preexisting Bylaws therefore remain in effect. This
belief is based on an opinion from Messrs. Potter, Anderson & Corroon, his
Delaware counsel, that the March Bylaw Amendments would be declared
unenforceable by a Delaware court presented with the issue. See "Recent
Developments." However, there is no controlling legal precedent on the precise
issue of whether the March Bylaw Amendments are valid under Delaware law. This
issue will be resolved by a court of competent jurisdiction, and there can be no
assurance that the March Bylaw Amendments will be held by a court to be invalid
under Delaware law. Under the Preexisting Bylaws, any amendment that does not
amend Article II, Section 3 (special meetings of stockholders) or Article IX,
Section 1 or 2 (amendments) of the Bylaws may be repealed by the holders of a
majority of outstanding Shares.
If the Board adopts additional amendments to the Bylaws, the vote
required to repeal those amendments will also depend on whether such amendments
involve 50% Provisions or 80% Provisions.
Accordingly, the Soliciting Shareholder believes that the vote required
to adopt Proposal 1 is 50% of the outstanding Shares, but the Proposal will not
be effective against amendments to 80% Provisions unless Proposal 1 is adopted
by the vote of holders of at least 80% of the outstanding Shares.
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Proposal 2--Board Increase Proposal
Proposal 2 would (a) exercise the Shareholders' right under the Bylaws
to add 10 new directors, thereby increasing the 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 Preexisting Bylaws, the Board Increase
Proposal would involve only 50% Provisions and thus may be enacted by the
holders of a majority of the outstanding Shares by written consent. See
"Proposals -- Board Increase Proposal." However, if the Board has validly
adopted the March Bylaw Amendments, the vote of holders of 80% of the
outstanding Shares would be required to adopt the Board Increase Proposal. See
"Recent Developments."
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). The Soliciting Shareholder believes that 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 Shareholders may
take such action by written consent. See "Proposals--Filling of Newly-Created
Directorships Proposal." The Company has indicated that it believes that
Shareholders cannot fill newly-created directorships by written consent because
the Soliciting Shareholder has not complied with the advance notice requirements
contained in Article II, Section 14 of the Bylaws. See "Consent Procedure."
This Solicitation Statement and the accompanying GOLD Consent Card are
first being sent to Shareholders on or about April __, 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 18, 1998, the last trading day prior to the announcement of
this Consent Solicitation, the closing bid price of the Common Stock on NASDAQ
fell from $23 3/8 to $11 1/4, a drop of 51.87%. 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. According to the
Company's Form 10-K filed on March 31, 1998, the Company reported a net loss of
$35,081,000 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 it is in the Shareholders' best
interests for the Board to pursue the possibility of a strategic transaction,
including a business combination or a sale of the Company or its assets, and to
execute such a transaction if it can enhance shareholder value. The Soliciting
Shareholder is aware that the Company has stated in its Preliminary Solicitation
Materials that "the Board has been supervising management's evaluation of the
Company's businesses and operations with a view toward streamlining operations
and enhancing and focusing on those operations which have generated
substantially all of the Company's growth and profitability
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in recent years." Based on that statement, the Soliciting Shareholder believes
the existing Board intends to retain certain existing operations, whereas the
Soliciting Shareholder believes the Company should pursue the possibility of
a strategic transaction or transactions involving all the Company's businesses
and assets. Furthermore, in view of the Company's poor recent performance, as
reflected in decline in the market price of its stock and its operating results
during the past year, the Soliciting Shareholder believes it would be
advantageous for Shareholders to elect a new Board majority to supervise the
pursuit of value-enhancing strategic alternatives.
The Soliciting Shareholder did not attempt, prior to filing the
preliminary Consent Solicitation Statement with the Securities and Exchange
Commission, to persuade the Board to adopt a policy of seeking to maximize
shareholder value through strategic transactions, because he believed that the
Board was committed to following its present policies, which, as indicated
above, he believes would include retaining certain of the Company's operations.
The Soliciting Shareholder believes the Board should consider disposing of those
operations as part of a strategic transaction.
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
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Solicitation. Assuming that the March Bylaw Amendments, which were adopted by
the Board on March 28, 1998, were validly enacted, they would be repealed by
the Bylaw Repeal Proposal. This Proposal would also repeal any other Bylaw
amendments adopted by the Board between February 1, 1998 and the date on which
the Bylaw Repeal Proposal is enacted.
The Soliciting Shareholder believes that the March Bylaw Amendments were
not in the best interests of Shareholders because such amendments, if valid,
would impede Shareholders' ability to change the composition of the Board. The
Soliciting Shareholder also believes that in adopting the March Bylaw
Amendments, the Board showed that it is attempting to interfere with
Shareholders' exercise of that right, and, therefore, other Bylaw amendments
adopted by the present Board are also likely to be contrary to Shareholders'
best interests.
The Soliciting Shareholder is not aware of any other 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 reasonably practicable efforts to send Shareholders additional materials
describing 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.
If the March Bylaw Amendments were valid, the affirmative vote of
holders of 80% of the outstanding Shares would be required to repeal the March
Bylaw Amendments. See "Vote Required to Enact the Proposals - Proposal 1 - Bylaw
Repeal Proposal."
The Soliciting Shareholder believes that the March Bylaw Amendments are
legally invalid and that the Preexisting Bylaws therefore remain in effect. This
belief is based on an opinion from Messrs. Potter, Anderson & Corroon, his
Delaware counsel, that the March Bylaw Amendments would be declared
unenforceable by a Delaware court presented with the issue. See "Recent
Developments." However, there is no controlling legal precedent on the precise
issue of whether the March Bylaw Amendments are valid under Delaware law. This
issue will be resolved by a court of competent jurisdiction, and there can be no
assurance that the March Bylaw Amendments will be held by a court to be invalid
under Delaware law. See "Certain Litigation." Under the Preexisting Bylaws, any
amendment that does not amend Article II, Section 3 or Article IX, Section 1 or
2 may be enacted by holders of a majority of the outstanding Shares entitled to
vote. The full text of Article II, Section 3 and Article IX, Section 1 of the
Preexisting Bylaws is attached hereto as Exhibit B.
Accordingly, the Soliciting Shareholder believes that the vote required
to adopt Proposal 1 is 50% of the outstanding Shares, but the Proposal will not
be effective against amendments to 80% Provisions unless Proposal 1 is adopted
by the vote of at least 80% of the outstanding Shares.
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:
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'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.'"
The Board Increase Proposal would increase the number of directors by 10
to 17, so the Shareholders can elect a new Board majority. The Proposal also
expressly provides that Shareholders acting by written consent to fill
newly-created directorships or vacancies on the Board need not comply with
requirements in the Bylaws for giving the Company advance notice of nominations
of candidates to be elected to the Board at annual or special shareholders'
meetings. The Soliciting Shareholder seeks such clarification because there is
language in the Bylaws that could be interpreted as meaning that only persons
nominated in accordance with such requirements are eligible to serve as
directors.
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 Bylaws 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.
Article III, Section 3 of the Bylaws 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 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." The full text of Article FIFTH,
Paragraphs A and C are attached hereto as Exhibit C.
Under Section 228 of the GCL, 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" by written consent of holders of the required number
of shares (emphasis added). 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. They require that
nominations and proposals for consideration by Shareholders at annual or special
meetings be submitted to the corporate secretary during a specified time period
preceding the meeting date or the anniversary of the prior year's annual
meeting. 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.
The Company has sought a declaratory judgment that the Soliciting
Shareholder's proposals to amend the Bylaws and elect an additional ten
directors are invalid under Delaware law, based in part on the view that the
Soliciting Shareholder must comply with the advance notice requirements of
Article II, Section 14 of the Bylaws in
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<PAGE>
order to elect directors by written consent, whether or not the Board Increase
Proposal is adopted. The Soliciting Shareholder has received an opinion from
Messrs Potter, Anderson & Corroon, his Delaware counsel, to the effect
that those requirements do not apply to the election of directors by
Shareholders written consent and that if they did apply, Shareholders can
eliminate such requirements by a Bylaw amendment adopted prior to or
simultaneously with the election of a Board candidate as to which timely notice
was not submitted. See "Consent Procedure."
If the Company prevails in its argument that the advance notice
requirements apply to the election of directors pursuant to this Consent
Solicitation, any newly-created directorships resulting from adoption of the
Board Increase Proposal may not be filled by Shareholders pursuant to this
Consent Solicitation since the Soliciting Shareholder has not complied with
those advance notification requirements. Instead, those directorships may be
filled by the existing Board or by Shareholders voting at a meeting of
shareholders.
Vote Required to Adopt the Board Increase Proposal.
Under the Preexisting Bylaws, the Board Increase Proposal would involve
only 50% Provisions and thus may be enacted by holders of a majority of
outstanding Shares. The full text of Article II, Section 14 and Article III,
Section 2 of the Preexisting Bylaws is attached hereto as Exhibit B. If the
March Bylaw Amendments were valid, however, an 80% vote of Shareholders would be
required to enact the Board Increase Proposal. See "Vote Required to Enact the
Proposals: Proposal 2 - Board Increase Proposal."
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 proposes for election 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
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.
<TABLE>
<CAPTION>
Name Age Principal Occupation and Employment Class
- ---- --- ----------------------------------- -----
<S> <C> <C> <C>
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.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Name Age Principal Occupation and Employment Class
- ---- --- ----------------------------------- -----
<S> <C> <C> <C>
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 Plc, 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.
Peter Homick 52 Since 1988, Mr. Homick has worked as an independent I
consultant specializing in the insurance industry.
In that capacity, he served from June 1993 to
September 1993 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.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Name Age Principal Occupation and Employment Class
- ---- --- ----------------------------------- -----
<S> <C> <C> <C>
Christopher H. Mills 45 Mr. Mills serves as Executive Director and I
co-investment adviser (with J.O. Hambro Capital
Management Limited ("Hambro")) of North Atlantic
Smaller Companies Investment Trust Plc ("North
Atlantic"), which invests in special situations
and provides venture capital financing and
American Opportunity Trust Plc ("Opportunity").
Mr. Mills serves as a Director of Opportunity,
Hambro, Compass Plastics & Technologies,
Critical Care Concepts, Gateway Homecare Inc.,
Oak Industries, Inc., PS Group Holdings, Inc.,
W-H Holdings Inc., Denison International Plc,
Horace Small Apparel Plc, Growth Financial
Services 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 Limited ("Hambro")
since 1995 and is the designated fund manager for Oryx
International Growth Fund Limited, for which Hambro
serves as investment adviser.
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.
</TABLE>
The Soliciting Shareholder Nominees will bring to the Board extensive
experience in finance and health care, including Mr. Homick's experience as
interim chief executive officer for Group Health Hospitalization and Medical
Services, Inc., a health care insurer, and Mr. Sosnow's experience as Chief
Executive Officer of Patient Care, Inc., a New Jersey home health services
provider, and vice chairman of the board of directors of Athena Healthcare,
Inc., which is in the business of physician practice management. None of the
Soliciting Shareholder Nominees has experience in the management of HMOs.
The Soliciting Shareholder 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 Soliciting Shareholder
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<PAGE>
Nominees have no present intention to change the existing senior management of
the Company or to halt the Company's announced plans to streamline its
operations and to focus on the Company's most profitable operations, although
the Soliciting Shareholder Nominees believe that the Company should pursue a
strategic transaction or transactions that include these operations as well. The
Soliciting Shareholder Nominees intend to appoint a committee to oversee the
implementation of the plan to pursue strategic alternatives. The Soliciting
Shareholder contemplates that the committee will retain appropriate
professionals to assist in such implementation. Subject to their fiduciary
duties, the Soliciting Shareholder Nominees expect to support the Soliciting
Shareholder's request for reimbursement of costs and expenses in connection with
this solicitation. The Soliciting Shareholder does not intend to seek any other
compensation in connection with this solicitation or the implementation of the
strategic plan.
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 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.
Messrs. Dupee, Gittes and Mills, Ms. Perkins and Mr. Thomas reside in
London. Because these individuals reside outside the United States, it may not
be possible to effect service of process on them or to enforce judgments against
them for liabilities under the federal securities laws or for breaches of
fiduciary duty. These nominees believe that their residence outside the United
States will not impair their ability to act effectively as directors of the
Company.
It is possible that the Board Increase Proposal will be adopted but that
the Soliciting Shareholder Nominees will not be selected to fill the
newly-created directorships. This could occur if the Soliciting Shareholder
Nominees fail to receive the requisite vote from Shareholders or if a court
determines that the Soliciting Shareholder Nominees have not been validly
nominated because the Soliciting Shareholder did not comply with the advance
notice requirements contained in the Bylaws. In such event, the existing Board
could fill the directorships or Shareholders could do so at a future
Shareholder's meeting.
Employment Agreement.
The Employment Agreement dated April 1, 1996, as amended on February 11,
1997 and March 28, 1998 (the "Employment Agreement"), between the Company and
Peter J. Ratican ("Ratican") provides 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 (the "Change of Control Period"), in which
case such Ratican will be entitled to receive an amount (the "Change of Control
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. 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. In addition, if the Employment Agreement is terminated by the
Company for any reason other than "Cause" (as defined in the Employment
Agreement) during the Change of Control Period, Ratican is entitled to receive
the Change of Control Payment.
"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
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<PAGE>
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.
Ratican's salary, bonus and other compensation received in the past five
years, based on information in the Company's Form 10-Ks for the years ending
December 31, 1995, 1996 and 1997, are set forth in the chart below. There is no
assurance that this information includes all sources of compensation that would
be used in computing the Change of Control Payment. The Change of Control
Payment would equal 2.99 times Ratican's average annualized compensation from
all sources for the last five years, including compensation earned as a result
of or derived from the exercise of stock options, the vesting of restricted
stock and the value of any remaining unexercised options. The amount due to
Ratican would thus depend on the facts and circumstances existing at the time he
elected to terminate the Employment Agreement and would be difficult to
calculate in advance.
<TABLE>
<CAPTION>
Year Salary Reorganization Bonus Stock Option Restricted All Other
---- ------ Bonus ----- Awards Stock Awards Compensation
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1993 $425,000 $18,513 $7,070
1994 425,000 5,539
1995 425,000 25,278 $356,862 $1,048,125 4,500
1996 481,250 146,872 70,000 (#) 4,500
1997 500,000 71,993 70,000 (#) 4,800
</TABLE>
Under the Employment Agreement, Ratican is also entitled to a sale bonus
(the "Sale Bonus") upon the sale of the Company or substantially all of its
assets or upon a merger in which the Company's shareholders cease to own a
majority of the outstanding voting capital stock of the Company (a "Sale"), if
after a Change of Control a definitive agreement with respect to a Sale which is
consummated is entered into (a) within one year if Ratican elects to terminate
the Employment Agreement as a result of the Change of Control or the Employment
Agreement terminates during the Change of Control Period as a result of
Ratican's death or incapacity, or (b) on or before March 31, 2001 if the Company
elects to terminate the Employment Agreement without Cause or if Ratican
terminates the Employment Agreement for Good Reason (as defined in the
Employment Agreement).
The amount of the Sale Bonus is computed using a formula which is based
on percentages of the excess (the "Excess") of (a) the consideration received
from the Sale over (b) the Initial Value of the Company, which is equal to
$147,000,000. The applicable percentages range from 2% of any Excess up to
$50,000,000, to 5% of any Excess of $200,000,001 or more.
Vote Required to Fill Newly-Created Directorships Resulting From 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 that the
advance notice requirements of Article II, Section 14 of the Bylaws do not apply
to the election of directors by written consent of shareholders.
The Company has sought a declaratory judgment that the Soliciting
Shareholder's proposals to amend the Bylaws and elect an additional ten
directors are invalid under Delaware law, based in part on the view that the
Soliciting Shareholder must comply with the advance notice requirements of
Article II, Section 14 of the Bylaws in order to elect directors by written
consent, whether or not the Board Increase Proposal is adopted.
The Soliciting Shareholder has received an opinion from Messrs. Potter,
Anderson & Corroon, his Delaware counsel, to the effect that such advance
notification requirements are not applicable to consent solicitations and, if
applicable, could be validly amended by stockholders prior to or simultaneously
with the
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<PAGE>
election of directors not nominated in accordance with these requirements. Based
on this opinion, the Soliciting Shareholder believes that Shareholders are
not required to comply with such advance notice requirements in order to amend
the Bylaws or elect directors by written consent, although there can be no such
assurance that requirements will be held to be inapplicable to such actions by
written consent.
In its opinion, Delaware counsel expresses the view that the advance
notification requirements are not applicable to actions by written consent of
Shareholders since the time limits contained in these requirements all relate to
meeting dates that have no relationship to the timing of a consent solicitation.
Delaware counsel also expresses the view that to the extent the advance
notification requirements were construed as applying to stockholder action by
written consent, these requirements would be deemed to violate Section 228 of
the GCL. That section gives shareholders the right to act by written consent
"without a meeting, without prior notice and without a vote, unless otherwise
provided in the certification of incorporation" (emphasis added). Finally, if
the advance notification requirements were deemed validly to apply to
Shareholder action by written consent to fill newly created directorships,
Delaware counsel is of the opinion that Shareholders can eliminate such
requirements by a Bylaw amendment adopted prior to or simultaneously with the
election of a Board candidate as to which timely notice was not submitted. That
opinion is principally based on the fact that the only portion of the advance
notification requirement that, by its terms, applies to directors chosen by
written consent is a provision which says that only persons nominated in
accordance with the advance notification requirements are eligible to serve as
directors.
If the Board Increase Proposal is adopted, an amendment to Article III,
Section 2 would make that provision inapplicable to directors selected by
written consent, and the amendment would become effective at or before the
time the Soliciting Shareholder Nominees would begin to serve as directors.
Therefore, in Delaware counsel's view, the adoption of the Board Increase
Proposal would result in the timely elimination of any potential conflict
between the Bylaws and the selection of the Soliciting Shareholder Nominees as
directors by written consent. See "Consent Procedure."
If the Company prevails in its argument that the advance notification
requirements apply to the election of directors by written consent, any
newly-created directorships resulting from adoption of the Board Increase
Proposal may not be filled by Shareholders pursuant to this Consent Solicitation
since the Soliciting Shareholder has not complied with those advance
notification requirements. Instead, those directorships may be filled by the
existing Board or by Shareholders voting at a meeting of shareholders.
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"). The Soliciting Shareholder has
received an opinion from Messrs. Potter, Anderson & Corroon, his Delaware
counsel, that, although there are no Delaware decisions directly on point, it is
their opinion that the Dead Hand Clause in the Maxicare Poison Pill is not valid
under Delaware law. This opinion is based principally on the inconsistency
between a Dead Hand Clause and the reasoning of the leading Delaware case
upholding a poison pill, Moran v. Household International, Inc., 500 A.2d 1346
(Del. Sup. 1985). The Moran opinion assumed that the poison pill at issue in
that case would have a "minimal" effect on proxy contests and that a new board
elected in a proxy contest could redeem the poison pill. By contrast, with a
Dead Hand Clause in place, a new Maxicare board could not redeem the Poison Pill
or engage in
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<PAGE>
certain strategic transactions without the approval of a majority of the
pre-existing directors and their designated successors. In Invacare Corporation
v. Healthdyne Technologies, Inc., 968 F. Supp. 1578 (N.D. Ga. 1997), the court
rejected a challenge under Georgia law to a continuing director provision of a
poison pill of a Georgia corporation. However, that opinion was based on the
court's interpretation of Georgia statutory law and legislative history and thus
is not controlling on the question of the validity of the Dead Hand Clause in
Maxicare's Poison Pill. As described below in the Section entitled "Certain
Litigation," 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.
If the Dead Hand Clause is upheld, it could adversely affect the ability
of the Soliciting Shareholder Nominees to implement strategic transactions
involving structures that trigger the Poison Pill. The Poison Pill is generally
triggered by transactions in which another party acquires 15% or more of the
outstanding Shares, whether by means of a tender offer, exchange offer, merger,
negotiated or open market stock purchase or other means. However, the Dead Hand
Clause would not affect the Soliciting Shareholder Nominees' ability to effect
strategic transactions that do not trigger the Poison Pill, such as asset sales
or mergers in which the other party or its Shareholders do not acquire Shares or
do not acquire a sufficient number of Shares to trigger the Poison Pill. While
the Dead Hand Clause could significantly impair the implementation of a
strategic plan by limiting the universe of transactions available to the
Company, the Soliciting Shareholder believes it would be feasible to sell the
Company's business and assets to one or more purchasers in transactions that
would not trigger the Poison Pill and, therefore, would not be affected by the
Dead Hand Clause.
CERTAIN LITIGATION
Contemporaneously with the filing of his initial preliminary Consent
Solicitation Statement, 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. The purpose of seeking the
declaratory relief sought in the state court litigation is to obtain a judicial
determination as expeditiously as possible that this consent solicitation is
legally valid and that a new Board majority may be elected as set forth in this
Solicitation Statement.
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<PAGE>
A counterclaim asserted by the Company in its answer to the State Court
Complaint seeks a declaratory judgment that the Soliciting Shareholder's
proposals to repeal bylaws adopted by the Board since March 27, 1998, to amend
the Bylaws and to elect 10 additional directors are invalid under Delaware law.
That claim is based on the Company's view that, after giving effect to the March
Bylaw Amendments, the Bylaws require the affirmative vote of holders of 80% of
the outstanding Shares in order to amend the Bylaws and that Shareholders must
comply with the advance notice requirements in the Bylaws for proposals or
nominations at shareholders' meetings (which the Soliciting Shareholder has not
done) in order to amend the Bylaws or elect directors by written consent. The
Company also seeks a declaratory judgment that the March Bylaw Amendments are
valid.
The counterclaim asserted in the Company's answer to the Federal Court
Complaint alleges that the Soliciting Shareholder's preliminary consent
solicitation statement violates Section 14(a) of the Securities Exchange Act and
Rule 14a-9 promulgated thereunder because the statement fails to disclose
material facts necessary to make the preliminary statement not misleading. The
counterclaim alleges that, among other omissions and misstatements, the
preliminary statement's discussion of the vote necessary to enact the Proposals
is inaccurate in light of the March Bylaw Amendments.
The Soliciting Shareholder has received an opinion from Messrs. Potter,
Anderson & Corroon, his Delaware counsel, that the March Bylaw Amendments would
be declared unenforceable by a Delaware court presented with the issue. See
"Recent Developments." However, there is no controlling legal precedent on the
precise issue of whether the March Bylaw Amendments are valid under Delaware
law. This issue will be resolved by a court of competent jurisdiction, and there
can be no assurance that the March Bylaw Amendments will be held by a court to
be invalid under Delaware law.
The Soliciting Shareholder has also received an opinion from Delaware
counsel to the effect that the advance notification requirements are not
applicable to consent solicitations and, if applicable, could be validly amended
by stockholders prior to or simultaneously with the election of directors not
nominated in accordance with the advance notification requirements. Based on
this opinion, the Soliciting Shareholder believes that Shareholders are not
required to comply with the advance notification requirements, although there
can be no assurance that such requirements will be held to be inapplicable to
such actions by written consent.
In its opinion, Delaware counsel expresses the view that the advance
notification requirements are not applicable to actions by written consent of
Shareholders since the time limits contained in these requirements all relate to
meeting dates that have no relationship to the timing of a consent solicitation.
Delaware counsel also expresses the view that to the extent the advance
notification requirements were construed as applying to stockholder action by
written consent, these requirements would be deemed to violate Section 228 of
the GCL. That section gives shareholders the right to act by written consent
"without a meeting, without prior notice and without a vote, unless otherwise
provided in the certification of incorporation" (emphasis added). Finally, if
the advance notification requirements were deemed validly to apply to
Shareholder action by written consent to fill newly created directorships,
Delaware counsel is of the opinion that shareholders can eliminate such
requirements by a Bylaw amendment adopted prior to or simultaneously with the
election of a Board candidate as to which timely notice was not submitted. That
opinion is principally based on the fact that the only portion of the advance
notification requirement that, by its terms, applies to directors chosen by
written consent is a provision which says that only persons nominated in
accordance with the advance notification requirements are eligible to serve as
directors.
If the Board Increase Proposal is adopted, an amendment to Article III,
Section 2 would make that provision inapplicable to directors selected by
written consent; and the amendment would become effective at or before the time
the Soliciting Shareholder Nominees would begin to serve as directors.
Therefore, in Delaware counsel's view, the adoption of the Board Increase
Proposal would result in the timely elimination of any potential conflict
between the Bylaws and the selection of the Soliciting Shareholder Nominees as
directors by written consent. See "Consent Procedure" and "Recent Developments."
There is no assurance that the Soliciting Shareholder will prevail in the
state-court or federal-court litigation.
-16-
<PAGE>
<PAGE>
CERTAIN INFORMATION CONCERNING
THE SOLICITING SHAREHOLDER AND OTHER PARTICIPANTS
IN THE SOLICITATION
The Soliciting Shareholder, J.O. Hambro Capital Management Limited
("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.
North Atlantic and Opportunity are both investment funds. Hambro is an
investment advisor for funds, including North Atlantic and Opportunity. Hambro
receives an investment management fee from North Atlantic equal to 1% of gross
assets less current liabilities at each year end. Hambro receives an investment
management fee from Opportunity equal to 0.5% of gross assets less current
liabilities at each year end. The principal place of business for Hambro, North
Atlantic and Opportunity is at 10 Park Place, London SW1A 1LP, England. Of the
Soliciting Shareholder Nominees, Mr. Gittes, Mr. Mills and Ms. Perkins are
officers and/or directors of any of Hambro, North Atlantic and Opportunity. Mr.
Dupee has invested in one or more funds managed by Hambro but has no other
relationship with Hambro, North Atlantic or Opportunity. None of Hambro, North
Atlantic or Opportunity will receive any fee in connection with this
solicitation.
The participants in this solicitation (the "Participants"), which
consist of the Soliciting Shareholder, Hambro, North Atlantic, Opportunity and
the Soliciting Shareholder Nominees, own, in the aggregate, 817,300 Shares or
4.56% of the outstanding shares of Common Stock. Certain information about the
Participants is set forth in the Schedules attached hereto. Schedules III, IV,
V, VI and VII set forth information about transactions in, and beneficial
ownership of, Common Stock by the Participants.
A Statement on Schedule 13D has been filed by the Participants and
certain other persons or entities, affiliated with Hambro and/or Christopher
Mills, which are not Participants ("Non-Participants"). The Non-Participants
include J.O. Hambro & Company Limited (the indirect owner of a majority of the
stock of Hambro), J.O. Hambro Asset Management Limited (a wholly owned
subsidiary of J.O. Hambro & Company Limited that
-17-
<PAGE>
<PAGE>
directly owns a majority of the stock of Hambro), J.O. Hambro Investment
Management Limited (a majority-owned subsidiary of J. O. Hambro Asset Management
Limited) and Growth Financial Services Limited (a company 99% owned by
Christopher Mills). The following chart shows the Shares deemed to be
beneficially owned by the Non-Participants:
<TABLE>
<CAPTION>
Non-Participant Aggregate Number of Number of Number of Approximate
Number of Shares: Sole Shares: Shared Shares: Sole or Percentage
Shares Owned Power to Vote Power to Vote Shared Power
to Vote to Dispose
<S> <C> <C> <C> <C> <C>
J.O. Hambro & 559,050 0 559,050 559,050 3.1%
Company
J.O. Hambro Asset 559,050 0 559,050 559,050 3.1%
Management
J.O. Hambro 78,850 0 78,850 78,850 .4%
Investment
Management
GFS 305,000 0 305,000 305,000 1.7%
</TABLE>
The Participants and Non-Participants together own 896,150 Shares,
aggregating slightly less than 5% of the outstanding Shares (896,269 Shares
would be exactly 5%.) The Statement on Schedule 13D was filed based on an
erroneous calculation which indicated that the Participants and Non-Participants
owned an aggregate number of Shares
-18-
<PAGE>
<PAGE>
which was more than 5% of the outstanding Shares. The Participants and
Non-Participants are filing Amendment No. 2 to Schedule 13D, which indicates,
among other things, that their total ownership is less than 5% and, accordingly,
that they do not have a continuing Schedule 13D filing obligation. The
Non-Participants have no interest in the Solicitation or its outcome
other than their interest as Shareholders or as investment managers which
receive fees based on profits or assets under management.
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 Participants, 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.
VOTING RIGHTS
According to the Company's Form 10-K for the year ended December 31,
1997, as of March 25, 1998, 17,925,381 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 April 21, 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 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 not to exceed $50,000.
MacKenzie will be reimbursed for its reasonable expenses.
-19-
<PAGE>
<PAGE>
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 $400,000.
-20-
<PAGE>
<PAGE>>
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.
-21-
<PAGE>
<PAGE>
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.
-22-
<PAGE>
<PAGE>
SCHEDULE II
PRINCIPAL BUSINESS ADDRESSES OF SOLICITING SHAREHOLDER NOMINEES
<TABLE>
<S> <C>
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 Limited
10 Park Place
London SW1A 1LP
England
Peter Homick 55 Biltmore Estates
Phoenix, AZ 85106
Christopher Mills J.O. Hambro Capital Management Limited
10 Park Place
London SW1A 1LP
England
Claudia Perkins J.O. Hambro Capital Management Limited
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
</TABLE>
-23-
<PAGE>
<PAGE>
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 has purchased or sold securities of the Company within the
past two years.
<TABLE>
<CAPTION>
Date Number of Shares Price
---- ---------------- -----
<S> <C> <C>
5/7/96 5,700 20.1250
7/1/96 5,000 17.0000
7/2/96 1,000 15.3750
7/5/96 1,000 15.7500
7/12/96 1,000 14.7500
7/19/96 1,000 14.7500
7/23/96 1,000 14.2500
7/26/96 1,000 15.0000
7/30/96 4,000 15.1250
8/20/96 4,000 17.3281
9/20/96 2,000 17.8750
9/23/96 1,000 19.2500
11/20/96 -3,000 21.7500
11/21/96 -2,500 22.5000
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 19.6250
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 4,000 15.5313
10/22/97 10,000 17.5000
10/22/97 5,000 15.2500
11/3/97 5,000 14.2625
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
</TABLE>
-24-
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
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
3/20/98 10,700 12.6210
3/26/98 20,600 11.7560
3/27/98 11,000 11.9375
3/27/98 900 12.000
4/1/98 40,000 11.6250
4/2/98 15,000 11.6250
</TABLE>
-25-
<PAGE>
<PAGE>
SCHEDULE IV
TRANSACTIONS IN THE COMPANY'S SECURITIES BY HAMBRO, NORTH ATLANTIC
AND OPPORTUNITY
The following table sets forth information with respect to all purchases
and sales of Common Stock of the Company by Hambro, North Atlantic and
Opportunity during the past two years. Except as set forth in Schedules III, IV
and V, no Participant has purchased or sold securities of the Company within the
past two years.
<TABLE>
<CAPTION>
Participant Date Number of Shares
----------- ---- ----------------
<S> <C> <C>
North Atlantic 3/29/96 25,000
Hambro 6/12/96 1,500
Hambro 6/21/96 4,000
North Atlantic 6/24/96 25,000
Hambro 7/1/96 300
Hambro 7/1/96 2,000
Hambro 12/3/96 1,500
Hambro 3/3/97 500
Hambro 3/14/97 -2,000
Hambro 5/6/97 1,000
Hambro 5/28/97 1,000
Hambro 6/2/97 500
Hambro 6/30/97 2,000
Hambro 6/30/97 500
Hambro 7/28/97 3,000
Hambro 7/28/97 200
Hambro 7/28/97 200
Hambro 7/28/97 500
Hambro 8/6/97 200
Hambro 8/6/97 500
Hambro 8/20/97 200
Hambro 8/20/97 300
Hambro 8/20/97 3,000
Hambro 9/2/97 300
Hambro 9/2/97 300
Hambro 9/2/97 500
North Atlantic 11/11/97 74,500
Opportunity 11/12/97 40,000
Hambro 12/18/97 2,000
North Atlantic 12/19/97 500
Opportunity 12/28/97 50,000
Hambro 2/12/98 1,500
Hambro 2/12/98 1,300
Hambro 2/12/98 1,200
Hambro 2/12/98 1,000
North Atlantic 3/20/98 85,000
North Atlantic 3/20/98 20,000
Hambro 4/2/98 35,000
</TABLE>
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<PAGE>
<PAGE>
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 Schedules IV and VI hereto. Mr. Gittes expressly
disclaims beneficial ownership of the shares of the Company's Common
Stock owned by North Atlantic.
Christopher Mills:
Christopher Mills does not directly own any shares of the Company's
Common Stock. He serves as executive director of, and owns 11% of the
outstanding voting stock of, North Atlantic and therefore may be deemed
to be an affiliate of North Atlantic. Mr. Mills is a director and 0.8%
shareholder of Opportunity. Mr. Mills is a director of Hambro. Hambro's,
North Atlantic's and Opportunity's ownership and transactions are set
forth in this Consent Solicitation and Schedules IV and VI hereto. Mr.
Mills expressly disclaims beneficial ownership of the shares of the
Company's Common Stock owned by North Atlantic, Opportunity and Hambro.
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
Schedules IV and VI hereto. Ms. Perkins expressly disclaims beneficial
ownership of the shares of the Company's Common Stock owned by Hambro.
Lawrence Sosnow:
On March 13, 1998, Mr. Sosnow purchased 7,000 shares of the Company's
Common Stock for $10.984 per share. On March 19, 1998, Mr. Sosnow
purchase 2,000 Shares of Common Stock for $11.7094 per share.
-27-
<PAGE>
<PAGE>
SCHEDULE VI
SECURITY OWNERSHIP OF
PARTICIPANTS
AS OF APRIL 20, 1996
<TABLE>
<CAPTION>
Title of Name and Amount and Nature Percent
Class Address of Beneficial Owner of Beneficial Ownership of Class
- ------------- ----------------------------- --------------------------- --------
<S> <C> <C> <C>
Common Stock Paul R. Dupee, Jr. 306,100 shares owned 1.82%
10 Wilton Row directly 21,000 shares
London SW1X7NR beneficially owned;
England owned by Providence
Capitol Enterprises, Inc.,
a corporation all of whose
capital stock is owned by
Mr. Dupee
Common Stock J.O. Hambro Capital Management 480,200 shares beneficially 2.68%
Limited owned; shares are held in (includes
10 Park Place accounts over which Hambro shares owned
London SW1A 1LP has certain discretionary by North
England authority (including North Atlantic and
Atlantic and Opportunity) Opportunity)
Common Stock North Atlantic Smaller 305,000 shares beneficially 1.70%
Companies Investment Trust Plc owned; shares are held as
10 Park Place part of the portfolio of
London SW1A 1LP this publicly-held
England investment trust
Common Stock American Opportunity Trust 90,000 shares beneficially 0.5% (includes
10 Park Place owned; shares are held as shares subject
London SW1A 1LP part of the portfolio of to put option)
England this publicly-held
investment trust
Common Stock George Bigelow 1,000 shares owned directly .0056%
The Americana Group LLC
535 Boylston Street
Boston, MA 02116
Common Stock Lawrence Sosnow 9,000 shares owned directly 0.05%
850 Park Avenue
New York, NY 10021
</TABLE>
-28-
<PAGE>
<PAGE>
SCHEDULE VII
In addition to the transactions in, and ownership of, the Company's securities
by Hambro, North Atlantic and Opportunity listed in Schedules IV and VI, options
have been sold and remain outstanding as set forth in the following chart:
<TABLE>
<CAPTION>
Seller Type of Date Sold Expiration Number of Shares Strike Price
------ Option --------- Date Subject to Option ------------
------ ---------- -----------------
<S> <C> <C> <C> <C> <C>
Opportunity Put 3/2/98 June 1998 10,000 $12.50
North Call 3/23/98 September 105,000 12.50
Atlantic 1998
</TABLE>
-29-
<PAGE>
<PAGE>
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").
<PAGE>
<PAGE>
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-
<PAGE>
<PAGE>
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
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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
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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
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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.
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Exhibit B
MAXICARE HEALTH PLANS, INC.
SELECTED BYLAWS
ARTICLE II.
Section 3. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time for any purpose or purposes by the Board of Directors, the
Chairman or Vice-President of the Board, the President of the Corporation or by
a committee of the Board which has been duly designated by the Board and whose
powers and authority, as provided in a resolution of the Board or in these
bylaws, include the power to call such meetings, and such special meetings shall
be called by the President of the Corporation at the request in writing of
stockholders owning at least a majority in amount of the entire capital stock of
the Corporation issued and outstanding and entitled to vote. Such stockholders'
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
Section 14. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) ANNUAL MEETING OF STOCKHOLDERS
(1) Nominations of persons for election to the Board of Directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting delivered pursuant to Section 4 of Article II of
these bylaws, (b) by or at the direction of the Chairman of the Board of
Directors, or (c) by any stockholder who is entitled to vote at the meeting, who
complied with the notice procedures set forth in clauses (2) and (3) or [sic]
this subsection (A) and this bylaw and who was a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of the foregoing
subsection (A) (1) of this bylaw, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive officers of the Corporation not less than seventy (70) days nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty (20) days or delayed by more than
seventy (70) days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the ninetieth (90th) day prior to
such annual meeting and not later than the close of business on the later of the
seventieth (70th) day prior to such annual meeting or the tenth (10th) day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each person who
the stockholder proposes to nominate for election or reelection as a director,
all
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information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any on whose behalf the proposal is made, and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner, and (ii) the class and number of shares of the capital stock of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding anything in the second sentence of subsection (a) (2)
of this bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
(80) days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by this bylaw shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary of the Corporation at the
principal executive offices of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS
As set forth in Section 3 of Article II above, only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to Section 4 of Article II of these bylaws. Nominations of
persons for election to the Board of Directors shall be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors, or (b) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this bylaw
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation. Nominations by stockholders of person [sic] for
election to the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by subsection (A) (2) of
this bylaw shall be delivered to the Secretary of the Corporation at the
principal executive offices of the Corporation no later than the close of
business on the thirtieth (30th) day prior to such special meeting or, if fewer
than thirty (30) days notice of such meeting is given, no later than the fifth
(5th) day following the day on which public announcement is first made of the
date of the
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special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) GENERAL
(1) Only persons who are nominated in accordance with the procedures set
forth in this bylaw shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
bylaw. Except as otherwise provide [sic] by law, the Restated Certificate of
Incorporation of the Corporation, as amended, or these bylaws, the chairman of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this bylaw and, if any proposed nomination or
business is not in compliance with this bylaw, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this bylaw. Nothing in this bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III.
Section 2. NUMBER OF DIRECTORS. The number of directors which shall
constitute the Board of Directors of the Corporation shall initially be nine
(9). The number of directors may from time to time by [sic] 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 an increase in the number of directors,
resignations, removals or otherwise), 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.
ARTICLE IX.
Section 1. AMENDMENT BY STOCKHOLDERS. New Bylaws may be adopted or these
Bylaws may be amended or 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 of Incorporation or by statute;
provided, however, that
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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 ("Voting Shares"), regardless of class and voting class, and,
where such action is proposed by an Interested Stockholder or by an Associate or
Affiliate of an Interested Stockholder (as such capitalized terms are defined in
the Certificate of Incorporation of the Corporation), the affirmative vote of
the holders of a majority of all Voting Shares, regardless of class and voting
together as a single class, other than shares held by the Interested Stockholder
which proposed (or the Affiliate or Associate of which proposed) such action, or
any Affiliate or Associate of such Interested Stockholder; provided, however,
that where such action is approved by a majority of the Disinterested Directors
(as defined in the Certificate of Incorporation of the Corporation), the
affirmative vote of a majority of the Voting Shares, regardless of class and
voting class, shall be required for approval of such action.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
Stockholders as provided in Section 1 of this Article IX to adopt, amend or
repeal bylaws, bylaws may be adopted, amended or repealed by the Board of
Directors.
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Exhibit C
MAXICARE HEALTH PLANS, INC.
SELECTED PROVISIONS OF RESTATED CERTIFICATE OF INCORPORATION
FIFTH: Board of Directors
A. Number of Directors. 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.
* * *
C. Vacancies on Board. 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.
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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
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