<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/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)
PATRICIA R. OSBERG
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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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<PAGE> 2
MAXICARE HEALTH PLANS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON AUGUST 17, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Maxicare Health Plans, Inc. (the "Company") will be held at the Sunset Room in
the Transamerica Center Tower Restaurant, 1150 South Olive Street, Los Angeles,
California, on August 17, 1994, at 8:00 a.m. (Pacific Time) for the following
purposes:
1. To elect two directors to the Board of Directors who will serve until
the Company's 1997 Annual Meeting of Stockholders and until their
successors have been duly elected and qualified; and
2. To transact such other business as may be properly brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on June 30, 1994 will be
entitled to notice of and to vote at said meeting or any adjournments thereof. A
list of such stockholders shall be open to the examination of any stockholder at
the meeting and for a period of ten days prior to the date of the meeting at the
office of Maxicare Health Plans, Inc., 1149 South Broadway Street, Los Angeles,
California, 90015.
The Board of Directors urges each stockholder to read carefully the
enclosed proxy statement which is incorporated herein by reference.
By Order of the Board of Directors,
Alan D. Bloom
Secretary
1149 South Broadway Street
Los Angeles, California 90015
Dated: July 13, 1994
IMPORTANT
STOCKHOLDERS ARE REQUESTED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. IF YOU PLAN TO ATTEND THE MEETING AND
WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY
IS VOTED.
<PAGE> 3
MAXICARE HEALTH PLANS, INC.
1149 SOUTH BROADWAY STREET
LOS ANGELES, CALIFORNIA 90015
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 17, 1994
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") and management of Maxicare Health Plans,
Inc., a Delaware corporation (the "Company"), of proxies to be used at the
Annual Meeting of Stockholders to be held at the Transamerica Center Sunset Room
in the Tower Restaurant, 1150 South Olive Street, Los Angeles, California, on
August 17, 1994 at 8:00 a.m. (Pacific Time) and at any adjournments thereof. A
form of the proxy is enclosed for use at the meeting. Stockholders are being
asked to vote upon the election of two directors to the Board, and to transact
such other business as may properly come before the meeting.
If no instructions are given on the proxy, all shares represented by valid
proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted FOR the directors nominated by the Board, and as
recommended by the Board with regard to all other matters or if no such
recommendation is given, in the discretion of the proxy holder. Proxies marked
"withhold" will be counted towards the quorum requirement but will not be voted
FOR the election of the Board's director nominees.
A proxy may be revoked at any time before it is exercised by giving written
notice of revocation to the Secretary of the Company or by submitting, prior to
the time of the meeting, a properly executed proxy bearing a later date.
Stockholders having executed and returned a proxy, who attend the meeting and
desire to vote in person, are requested to so notify the Secretary of the
Company prior to the time of the meeting.
The mailing address of the Company is 1149 South Broadway Street, Los
Angeles, California, 90015. The approximate date on which this Proxy Statement
and form of proxy are being mailed to the stockholders is July 20, 1994.
GENERAL INFORMATION
OUTSTANDING SHARES AND VOTING RIGHTS
There were 10,094,195 shares of common stock of the Company ("Common
Stock") outstanding as of June 30, 1994, the Record Date for the stockholders
entitled to vote at the Annual Meeting. Of the total shares of Common Stock
outstanding as of that date, 811,911 shares of Common Stock were held in claims
reserves by the Company, as disbursing agent pursuant to the Company's Joint
Plan of Reorganization dated May 14, 1990, as modified, which was confirmed by
the Bankruptcy Court by order dated August 31, 1990 (the "Reorganization Plan").
The Company holds such shares (the "Unallocated Shares") as disbursing agent for
the benefit of creditors under the Reorganization Plan. Of the 811,911
Unallocated Shares held as of the Record Date, 603,477 were held for the benefit
of creditors of the Company's operating subsidiaries (Reorganization Plan
classes 5A through 5H), 114,419 were held for bank group creditors
(Reorganization Plan class 7), and 94,015 shares were held for bondholder
creditors (Reorganization Plan classes 8A through 8D). As of the Record Date, no
shares were being held for the benefit of Maxicare Health Plans, Inc. creditors
(Reorganization Plan class 9); however, certain of the shares held for the
benefit of Reorganization Plan classes 7 and 8A through 8D will be reallocated
to Reorganization Plan class 9 pursuant to a formula set forth in the
Reorganization Plan. The Reorganization Plan provides that until such time as
any share of Common Stock reserved for a holder of an allowed claim or allowed
interest under the Reorganization Plan is allocated, the disbursing agent shall
deliver an irrevocable proxy to vote the Unallocated Shares to the independent
directors of the Board (as such term is defined by the Reorganization Plan).
Currently, the independent directors are Messrs. Brinegar, Field, Lewis and
Manne and Ms. Courtright (the "Independent
<PAGE> 4
Directors"). The Reorganization Plan provides that the Unallocated Shares shall
be voted in the following manner:
(i) 603,477 shares which were held in the claims reserves as of the
Record Date for the holders of Reorganization Plan classes 5A through 5H
and Reorganization Plan class 9 allowed claims, shall (a) as to proposals
made by the Company, be voted in the same manner and to the same degree as
all of the allocated shares of Common Stock; and (b) as to proposals made
by any person or entity other than the Company, be voted in accordance with
the vote of a majority of the Independent Directors; and
(ii) 208,434 shares which were held in the claims reserves as of the
Record Date for holders of Reorganization Plan class 7 and Reorganization
Plan classes 8A through 8D allowed claims, shall be voted in the same
manner and to the same degree as all of the allocated shares of Common
Stock.
The only business which the Board presently believes will be voted upon at
the Annual Meeting is the election of two directors. Consequently, all
Unallocated Shares will be voted in the same manner and to the same degree as
the allocated shares of Common Stock.
Each stockholder of record at the close of business on June 30, 1994 is
entitled to one vote for each share of Common Stock then held on each matter to
come before the meeting, or any adjournments thereof.
As of June 30, 1994 there were 2,400,000 shares of Series A Cumulative
Convertible Preferred Stock ("Series A Stock") outstanding and entitled to vote
at the Annual Meeting. Each share of the Series A Stock carries the right to
vote the equivalent of 2.7548 shares of Common Stock or 6,611,520 shares of
Common Stock in aggregate. Generally, holders of Series A Stock vote together
with the holders of the Common Stock as a single class, including with respect
to the election of directors; however, under certain circumstances the holders
of Series A Stock shall be entitled to vote as a separate class and in that
regard may determine the outcome of certain proposals which may be presented for
stockholder consideration.
A majority of the votes eligible to be cast at the Annual Meeting by
holders of Common Stock and Series A Stock, or 8,352,858 votes, represented in
person or by proxy at the Annual Meeting is required for a quorum. A plurality
of the votes cast at the Annual Meeting by holders of shares of Common Stock and
Series A Stock entitled to vote, and present, in person or by proxy, at the
Annual Meeting is required for the election of each nominee as a director. The
Company's Certificate of Incorporation does not provide for cumulative voting.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of the outstanding
shares of Common Stock and Series A Stock owned beneficially as of June 30, 1994
by each director or nominee for director as of such date, by the Company's chief
executive officer ("CEO"), by the four other most highly compensated executive
officers other than the CEO, by all directors and executive officers as a group,
and by each person who, to the knowledge of the Company, beneficially owned more
than 5% of any class of the Company's voting stock on such date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
OWNERSHIP(1) PERCENTAGE PERECENTAGE PERCENTAGE
-------------------- OF OF OF TOTAL
NAME AND ADDRESS OF COMMON SERIES A COMMON SERIES A VOTING
PERSON OR GROUP STOCK(2) STOCK(2) STOCK STOCK POWER(3)
- - --------------------------------------------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Maxicare Health Plans, Inc.,
as disbursing agent(4)..................... 811,911 8.04% 4.86%
1149 South Broadway Street
Los Angeles, California 90015
Cede & Co.(5)................................ 6,971,294 69.06% 41.73%
P.O. Box 20
Bowling Green Station
New York, New York 10274
Peter J. Ratican(6).......................... 427,996 4.07% 2.50%
1149 South Broadway Street
Los Angeles, California 90015
Eugene L. Froelich(7)........................ 427,778 4.07% 2.50%
1149 South Broadway Street
Los Angeles, California 90015
Alan D. Bloom(8)............................. 7,026 * *
1149 South Broadway Street
Los Angeles, California 90015
Richard A. Link(9)........................... 46,686 * *
1149 South Broadway Street
Los Angeles, California 90015
William B. Caswell(10)....................... 21,867 * *
1149 South Broadway Street
Los Angeles, California 90015
Claude S. Brinegar(11)(12)................... 21,000 * *
1149 South Broadway Street
Los Angeles, California 90015
Florence F. Courtright(7)(12)................ 10,000 * *
1149 South Broadway Street
Los Angeles, California 90015
Thomas W. Field, Jr.(7)(12).................. 20,000 * *
1149 South Broadway Street
Los Angeles, California 90015
Charles E. Lewis(12)(13)..................... 20,016 * *
1149 South Broadway Street
Los Angeles, California 90015
Alan S. Manne(12)(14)........................ 10,500 * *
1149 South Broadway Street
Los Angeles, California 90015
General Motors Hourly-Rate
Employes Pension Trust(15)................. 446,535 153,200 4.25% 6.38% 2.67%
767 Fifth Avenue
New York, New York 10153
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
OWNERSHIP(1) PERCENTAGE PERECENTAGE PERCENTAGE
-------------------- OF OF OF TOTAL
NAME AND ADDRESS OF COMMON SERIES A COMMON SERIES A VOTING
PERSON OR GROUP STOCK(2) STOCK(2) STOCK STOCK POWER(3)
- - --------------------------------------------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
General Motors Salaried Employes
Pension Trust(15).......................... 417,066 144,100 3.98% 6.00% 2.50%
767 Fifth Avenue
New York, New York 10153
J.P. Morgan & Co. Incorporated(16)........... 535,612 190,000 5.04% 7.92% 3.21%
23 Wall Street
New York, New York 10015
Froley, Revy Investment Co., Inc.(17)(18).... 650,133 236,000 6.05% 9.83% 3.89%
10900 Wilshire Boulevard, #1050
Los Angeles, California 90024
Mutual Series Fund Inc.(19).................. 817,778 188,100 7.71% 7.84% 4.90%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Ryback Management Corporation(20)............ 1,040,554 193,500 9.79% 8.06% 6.23%
7711 Carondelet Avenue
St. Louis, Missouri 63105
Snyder Capital Management, Inc.(21).......... 871,480 100,000 8.40% 4.17% 5.22%
350 California Street
San Francisco, California 94104
Smith Barney Shearson Holdings Inc.(22)...... 998,804 329,100 9.08% 13.71% 5.98%
1345 Avenue of the Americas
New York, New York 10105
Bear Stearns Securities Corp.(23)............ 1,269,287 177,600 11.99% 7.40% 7.60%
One Metrotech Center North
Brooklyn, New York 11201-3862
All Directors and Executive Officers
as a Group (15 persons)(24)................ 1,102,989 9.86% 6.20%
</TABLE>
- - ---------------
* -- Less than one percent
(1) Except as otherwise set forth herein, all information pertaining to the
holdings of persons who beneficially own more than 5% of any class of the
Company's voting stock (other than the Company or its executive officers
and directors) is based on filings with the Securities and Exchange
Commission and information provided by the record holders.
(2) In setting forth "beneficial" ownership, the rules of the Securities and
Exchange Commission require that shares underlying currently exercisable
options and warrants or issuable upon conversion of the Series A Stock,
including options and warrants which become exercisable within 60 days,
held by a described person be treated as "beneficially" owned and further
require that every person who has or shares the power to vote or to dispose
of shares of stock be reported as a "beneficial" owner of all shares as to
which any such sole or shared power exists. As a consequence, shares which
are not yet outstanding are, if obtainable upon exercise of an option or
warrant which is exercisable or will become exercisable within sixty (60)
days or upon conversion of the Series A Stock, nevertheless treated as
"beneficially" owned by the designated person, and several persons may be
deemed to be the "beneficial" owners of the same securities if they share
the power to vote or dispose of them.
(3) Assumes 10,094,195 shares of Common Stock outstanding, the conversion of
all 2,400,000 shares of Series A Stock outstanding (or 6,611,520 shares)
and, with respect to each listed beneficial owner, the exercise or
conversion of any option, warrant or right held by each such owner
exercisable or convertible within 60 days.
(4) These shares are held by the Company, as disbursing agent for the benefit
of holders of Reorganization Plan classes 5A through 5H, 7 and 8A through
8D allowed claims. The Company disclaims beneficial
4
<PAGE> 7
ownership of these shares. For information concerning the voting of these
shares, see "General Information -- Outstanding Shares and Voting Rights".
(5) Cede & Co. holds these shares as a nominee for the Depository Trust
Company, which is the securities depository for various segments of the
financial industry. None of these shares are owned beneficially by Cede &
Co.
(6) Includes 427,778 shares which are subject to options which are currently
exercisable.
(7) All shares (and the calculation of the percentage owned assumes such shares
are outstanding) are subject to options which are currently exercisable.
(8) Includes 6,666 shares which are subject to options which are currently
exercisable and 2 shares which are subject to warrants which are currently
exercisable.
(9) Includes 46,664 shares which are subject to options which are currently
exercisable.
(10) Includes 16,667 shares which are subject to options which are currently
exercisable.
(11) Includes 20,000 shares which are subject to options which are currently
exercisable.
(12) Does not include the Unallocated Shares, held of record by the Company.
Under certain circumstances, the Independent Directors, currently Messrs.
Brinegar, Field, Lewis and Manne and Ms. Courtright, have rights to vote
the Unallocated Shares. The Independent Directors disclaim beneficial
ownership of these shares. For further information on the voting of these
shares, see "General Information -- Outstanding Shares and Voting Rights",
above.
(13) Includes 20,000 shares which are subject to options which are currently
exercisable and 12 shares which are subject to warrants which are currently
exercisable.
(14) Includes 10,000 shares which are subject to options which are currently
exercisable.
(15) The shares of Common Stock and Series A Stock are held by Mellon Bank,
N.A., acting as trustee (the "Trustee") under two separate trust agreements
for the General Motors employee pension trusts (the "Trusts"). The Trustee
may act for the Trusts with respect to such shares only pursuant to
direction of one of the Trusts' applicable investment managers. General
Motors Investment Management Corporation ("GMIMCo") is the investment
manager with respect to 200,000 shares (in the aggregate) of Series A
Stock. The shares of Series A Stock are convertible into an aggregate of
819,002 shares of Common Stock; the shares of Common Stock issuable upon
conversion of the Series A Stock are included in the number of shares of
Common Stock attributable to these holders. Investment and disposition
decisions regarding the shares of Series A Stock and Common Stock managed
by the Trusts' other investment managers are made by the personnel of such
managers, who act independently of GMIMCo, although the continued
engagement of such managers as investment managers for the Trusts is
subject to the authorization of GMIMCo. Because of the Trustee's limited
role, beneficial ownership of the shares of Series A Stock and Common Stock
by the Trustee is disclaimed.
(16) Includes 12,200 shares of Common Stock and 190,000 shares of Series A Stock
held in a fiduciary capacity by J.P. Morgan and Co. Incorporated through
its subsidiaries J.P. Morgan Investment Management, Inc. and Morgan
Guaranty Trust Company of New York. All shares of Common Stock and Series A
Stock are subject to the sole dispositive authority of these subsidiaries
of J.P. Morgan and Co. Incorporated and the shares of Series A Stock are
subject to the sole voting authority of these entities. The shares of
Series A Stock are convertible into an aggregate of 523,412 shares of
Common Stock; the shares of Common Stock issuable upon conversion of the
Series A Stock are included in the number of shares of Common Stock
attributable to these holders.
(17) The shares of Common Stock issuable upon conversion of the Series A Stock
are included in the number of shares of Common Stock attributable to these
holders. None of the holders currently hold shares of Common Stock.
(18) All shares are held on behalf of institutional investors and are subject to
the sole voting and dispositive authority of Froley, Revy Investment Co.,
Inc.
5
<PAGE> 8
(19) Mutual Series Fund Inc. (the "Fund") is an investment company consisting of
four separate series of stock. Two of the series, namely, Mutual Beacon
Fund and Mutual Qualified Fund, are the beneficial owners of 58,000 shares
and 130,100 shares, respectively, of Series A Stock. In addition, the
Mutual Beacon Fund is the beneficial owner of 299,600 shares of Common
Stock. The shares owned by these funds are registered in nominee name.
Pursuant to investment advisory contracts with each of the series, Heine
Securities Corporation ("Heine"), an investment advisor, and Michael F.
Price, president of Heine, have sole investment and voting power over the
securities beneficially owned by the series. However, Heine and Mr. Price
disclaim any beneficial ownership in such shares owned by the Fund. The
shares of Series A Stock are convertible into an aggregate of 518,178
shares of Common Stock; the shares of Common Stock issuable upon conversion
of the Series A Stock are included in the number of shares of Common Stock
attributable to these holders.
(20) Lindner Fund, Inc. ("Lindner") is an investment company which beneficially
owns 507,500 shares of Common Stock and 193,500 shares of Series A Stock.
The shares owned by Lindner are registered in nominee name. Pursuant to an
investment advisory contract with Lindner, Ryback Management Corporation,
an investment advisor, shares investment and voting power over the
securities beneficially owned by Lindner. The shares of Series A Stock are
convertible into an aggregate of 533,054 shares of Common Stock; the shares
of Common Stock issuable upon conversion of the Series A Stock are included
in the number of shares of Common Stock attributable to these holders.
(21) Includes 596,000 shares of Common Stock and 100,000 shares of Series A
Stock held in a fiduciary capacity by Snyder Capital Management, Inc.
("Snyder"), an investment advisor for a number of investors. No individual
investor beneficially owns more than 5% of any class of the Company's
voting stock. Snyder has sole voting and investment power over 49,000
shares of Common Stock. Voting power is shared by Snyder on 452,000 shares
of Common Stock and 95,100 shares of Series A Stock. Investment power is
shared by Snyder on 547,000 shares of Common Stock and 100,000 shares of
Series A Stock. The shares of Series A Stock are convertible into an
aggregate of 275,480 shares of Common Stock; the shares of Common Stock
issuable upon conversion of the Series A Stock are included in the number
of shares of Common Stock attributable to this holder.
(22) Includes 92,199 shares of Common Stock and 329,100 shares of Series A Stock
held in a fiduciary capacity by Smith Barney Shearson Inc. ("SBS"), a
registered broker/dealer. Smith Barney Shearson Holdings Inc. ("SBH") is
the sole common shareholder of SBS and The Travelers Inc. ("TRV") is the
sole shareholder of SBH. However, SBH and TRV disclaim any beneficial
ownership in such shares. The shares of Series A Stock are convertible into
an aggregate of 906,605 shares of Common Stock; the shares of Common Stock
issuable upon conversion of the Series A Stock are included in the number
of shares of Common Stock attributable to this holder. SBS has sole voting
power over approximately 915,315 shares, including those shares issuable
upon conversion of Series A Stock.
(23) Bear Stearns Securities Corp. is the record holder of these shares;
however, all shares are held on behalf of investors. Bear Stearns
Securities Corp. disclaims beneficial ownership of all shares. The shares
of Series A Stock are convertible into an aggregate of 489,252 shares of
Common Stock; the shares of Common Stock issuable upon conversion of the
Series A Stock are included in the number of shares of Common Stock
attributable to these holders.
(24) Includes 1,093,880 shares which are subject to options which are currently
exercisable and 26 shares which are subject to warrants which are currently
exercisable.
6
<PAGE> 9
ITEM 1. ELECTION OF DIRECTORS
Under the terms of the Company's by-laws, the Board may consist of up to
nine persons as established by resolution of the Board. As of the date hereof,
the Board consists of seven members: Peter Ratican, Claude Brinegar, Fiorenza
(Florence) Courtright, Thomas Field, Jr., Eugene Froelich, Charles Lewis and
Alan Manne. Florence Courtright, who was nominated by the Nominating Committee
of the Board and elected to the Board by the members of the Board in November
1993, is the only director who was not elected by a vote of the Company's
stockholders at meetings for which proxies were solicited.
The Company's Certificate of Incorporation provides that directors are
classified into Class I, Class II or Class III and the initial terms of the
directors are staggered for one, two and three years, respectively. The
Certificate of Incorporation further provides that at the annual meeting
following the expiration of the initial terms of the directors in each class,
the class of directors elected at such meeting would stand for election for a
three year term ending at the third annual meeting thereafter.
At the Annual Meeting, the Board proposes the election of the following
nominees to the Board, each to serve as a Class I director for three years until
the 1997 Annual Meeting, and until his successor is elected and qualified:
CLASS I
CHARLES E. LEWIS
Director since: 1983
Age: 65
Dr. Lewis has been a Professor of Medicine, Public Health and Nursing at
the University of California at Los Angeles, since 1970. As of July 1993,
he was appointed Director of the Center for Health Promotion and Disease
Prevention. He is a member of the Institute of Medicine, National Academy
of Sciences and is a graduate of the Harvard Medical School and of the
University of Cincinnati School of Public Health where he received a
Doctorate of Science degree. Dr. Lewis is a Regent of the American College
of Physicians and a member of the Board of Commissioners of the Joint
Commission on Accreditation of Health Care Organizations.
CLAUDE S. BRINEGAR
Director since: 1991
Age: 67
Mr. Brinegar is currently Vice Chairman of the board of directors of Unocal
Corporation and served as Executive Vice President of Administration and
Planning until May 1992. In 1985, Mr. Brinegar was elected Executive Vice
President of Unocal and he became Chief Financial Officer in 1986. In 1989,
Mr. Brinegar was elected as Vice Chairman of Unocal. He is also a member of
the board of directors of Consolidated Rail Corporation and a visiting
scholar at Stanford University.
If the nominees should for any reason become unavailable to serve as a
director or be withdrawn from nomination, and if the Board shall designate a
substitute nominee, the shares represented by valid proxies will be voted in
favor of the substitute nominee. A stockholder may, in the manner set forth on
the enclosed form of proxy, instruct the named proxies not to vote that
stockholder's shares for a particular nominee or nominees, as indicated.
THE BOARD RECOMMENDS VOTES FOR THE ELECTION OF MESSRS. LEWIS AND BRINEGAR
AS DIRECTORS ON THE BOARD. PROXIES GIVEN WITHOUT INSTRUCTIONS WILL BE VOTED FOR
THESE INDIVIDUALS.
7
<PAGE> 10
The following persons currently serve as members of the Board and each of
these members will continue to serve until the Annual Meeting in the year
indicated or until his/her successor is duly elected and qualified:
CLASS II
EUGENE L. FROELICH
Director since: 1989
Elected to serve until: 1995 Annual Meeting
Age: 52
Mr. Froelich was appointed Chief Financial Officer, Executive Vice
President -- Finance and Administration in March 1989. From 1984 to March
1989, Mr. Froelich was President of GFE, Inc., where he engaged in
financial and business consulting for a variety of industries. Previously,
Mr. Froelich was Vice President of MCA INC and he is a certified public
accountant.
FLORENCE F. COURTRIGHT
Director since: 1993
Elected to serve until: 1995 Annual Meeting
Age: 62
Ms. Courtright has been a private investor for the last five years. She is
a founding Limited Partner of Bainco International Investors, 1.p. and a
Trustee of Loyola Marymount University. Further, Ms. Courtright is a former
co-owner of the Beverly Wilshire Hotel and the Beverly Hills Hotel.
CLASS III
PETER J. RATICAN
Director since: 1983
Elected to serve until: 1996 Annual Meeting
Age: 50
Mr. Ratican was appointed Chairman of the Board, Chief Executive Officer
and President of the Company in August 1988. Prior to joining the Company,
Mr. Ratican was a senior executive of DeLaurentiis Entertainment Group Inc.
and MCA INC. Prior to joining MCA INC, he was a Senior Audit Manager for
the Los Angeles office of Price Waterhouse, specializing in the
entertainment and health care industries. Mr. Ratican is a member of the
California Knox-Keene Health Care Services Advisory Committee, which
assists the California Department of Corporations in regulating prepaid
health plans (HMOs) and he is a certified public accountant.
THOMAS W. FIELD, JR.
Director since: 1992
Elected to serve until: 1996 Annual Meeting
Age: 60
Mr. Field was appointed Chairman of the Board of ABCO Markets in December
1991. ABCO Markets is in the grocery business. He has been President of
Field & Associates, a management consulting firm, since October 1989. From
1984 to September 1989, Mr. Field was with McKesson Corporation in a number
of executive capacities, most recently as Chairman of the Board, President
and Chief Executive Officer. Mr. Field also holds directorships at Campbell
Soup Company, Bromar Inc. and Hume Medical.
8
<PAGE> 11
ALAN S. MANNE
Director since: 1994
Elected to serve until: 1996 Annual Meeting
Age: 69
Mr. Manne is currently a professor emeritus and from 1961 to 1992 was a
professor of operations research at Stanford University. He is an author or
co-author of seven books and received his Ph.D. in economics from Harvard
University. He is co-organizer of the International Energy Workshop.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were five meetings of the Company's Board during the year ended
December 31, 1993. During that year, each director attended at least 75% of the
meetings of the Board and its committees that each director was entitled to
attend.
The Board has standing Audit, Compensation, Nominating and Option
Committees.
Audit Committee. The Audit Committee meets periodically with management and
the Company's independent public accountants to make inquiries regarding the
manner in which the responsibilities of each are being discharged and the Audit
Committee reports thereon to the Board. The Audit Committee also recommends, for
the approval of the Board, the annual appointment of the Company's independent
public accountants with whom the Audit Committee reviews the scope of the audit
and non-audit assignments, the accounting principles being applied by the
Company in financial reporting, the scope of internal auditing procedures, and
the adequacy of internal controls. The current members of the Audit Committee
are Messrs. Brinegar, Field, Lewis and Manne. During 1993, the Audit Committee
met eight times.
Compensation Committee. The Compensation Committee reviews and makes
recommendations with respect to the Company's various compensation programs.
This committee administers the awarding of discretionary bonuses by the Company
and also approves the remuneration of executive and other senior officers of the
Company. The current members of the Compensation Committee are Messrs. Field,
Brinegar and Ratican (ex-officio) and Ms. Courtright. The Compensation Committee
met two times during 1993.
Nominating Committee. The Nominating Committee recommends to the Board
nominees for election to the Board at the annual meeting and to fill any Board
vacancies that may occur. The current members of the Nominating Committee are
Messrs. Lewis and Manne and Ms. Courtright. The Nominating Committee will
consider nominees recommended by stockholders, however, there are presently no
formal procedures for the submission of such recommendations. The Nominating
Committee met one time during 1993.
Option Committee. The Option Committee administers the 1990 Stock Option
Plan and authorizes the granting of options thereunder. Members of this
committee must be directors who are not, during the one year prior to service as
an administrator of the plan, granted or awarded options pursuant to the plan.
The current members of the Option Committee are Messrs. Ratican and Froelich.
The Option Committee met five times during 1993.
DIRECTORS REMUNERATION
During 1993, certain current and then serving members of the Board received
compensation for their services as directors. These members included Claude
Brinegar, Leon Clements, Florence Courtright, Thomas Field, Jr., Walter
Filkowski and Charles Lewis and they received cash payments of $33,000, $29,250,
$6,000, $31,500, $6,000 and $30,750, respectively. During 1994, current
directors, excluding directors who are also officers of the Company, will
receive compensation for their services in the amount of $24,000 per year, plus
$750 per meeting. In addition, these directors are entitled to be reimbursed for
all of their reasonable out-of-pocket expenses incurred in connection with their
services as directors of the Company.
9
<PAGE> 12
Non-employee directors of the Company have received options to purchase
shares of Common Stock which are immediately exercisable at an exercise price
equal to the market price at the date of grant. Set forth below is a schedule of
the outstanding options at December 31, 1993 held by each of the current and
former directors, the date of grant and the exercise price of such options:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
DIRECTOR OPTIONS DATE OF GRANT PER SHARE
-------------------------------- ---------- ------------------ --------------
<S> <C> <C> <C>
Leon Clements................... 10,000 May 20, 1991 $ 8.00
Walter Filkowski................ 10,000 May 20, 1991 $ 8.00
Charles Lewis................... 10,000 May 20, 1991 $ 8.00
10,000 December 20, 1993 $ 9.63
Claude Brinegar................. 10,000 July 18, 1991 $ 9.25
10,000 December 20, 1993 $ 9.63
Thomas Field.................... 10,000 April 1, 1992 $10.50
10,000 December 20, 1993 $ 9.63
Florence Courtright............. 10,000 November 5, 1993 $10.88
</TABLE>
Alan Manne was granted 10,000 options on January 28, 1994 at an exercise
price of $12.63, all of which are immediately exercisable. Provided these
directors continue to serve as directors of the Company, the exercise term of
these options is five years. If the directorship is terminated, the options
expire thirty (30) days from the date of such termination. Upon the expiration
of his term as a director on February 10, 1993, the Board voted to extend the
period in which Mr. Filkowski could exercise his options to one year from the
termination date of his directorship. In February 1994, Mr. Filkowski exercised
all options held.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter Ratican, the Company's President and Chief Executive Officer, served
as an ex-officio member of the Compensation Committee of the Company for the
year ended December 31, 1993. Although Mr. Ratican served as an ex-officio
member of the Compensation Committee, he did not participate in any decisions
regarding his own compensation as an executive officer. The Company's Board of
Directors as a whole determines Mr. Ratican's total compensation package.
EXECUTIVE OFFICER COMPENSATION
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information in regard to the
compensation and benefits provided to the Company's Chairman and Chief Executive
Officer and the four other most highly compensated executive officers. The
disclosure requirements for these five individuals include the use of tables and
a report explaining the rationale and considerations that led to fundamental
executive officer compensation decisions affecting those individuals. In
fulfillment of this requirement, the Compensation Committee, at the direction of
the Board, has prepared the following report for inclusion in this Proxy
Statement. This report reflects the Company's compensation philosophy as
endorsed by the Board and resulting actions taken by the Company for the 1993
reporting period shown in the various compensation tables supporting this
report. As noted earlier in the Proxy Statement, the Compensation Committee
approves the payment amounts and award levels for executive officers of the
Company and its subsidiaries.
THE 1993 BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY REGARDING EXECUTIVE OFFICERS
The Compensation Committee designs, reviews and approves the compensation
program for the Company's top executive employees. The Compensation Committee
for the Company's 1993 fiscal year was comprised of three outside directors and
Peter Ratican (ex-officio), the Company's Chief Executive Officer (the "CEO").
The Compensation Committee coordinates with the Stock Option Committee stock
option
10
<PAGE> 13
grants pursuant to the stockholder approved Stock Option Plan. The
recommendations of the Compensation Committee regarding compensation are
presented to the Board which makes all final approvals.
The fundamental philosophy of the Company's compensation program is to
offer compensation opportunities for all employees which are based on the
individual's contribution and personal performance. Consideration is also given
to a person's potential for future responsibility and promotion.
In designing and administering the individual elements of the executive
compensation program, the Compensation Committee strives to balance short and
long-term incentive objectives and employ prudent judgment in establishing
performance criteria, evaluating performance and determining actual incentive
payments. Essentially, the executive compensation program of the Company has
been designed to:
- support a pay for performance policy that differentiates in compensation
amounts based on corporate, business unit and individual performance;
- motivate key executive officers to achieve strategic business
initiatives and reward them for their achievement;
- provide compensation opportunities which are comparable to those offered
by other leading companies in the health care industry, thus allowing
the Company to compete for and retain talented executives who are
critical to the Company's long-term success; and
- align the interest of executives with the long-term interest of
stockholders through award opportunities that can result in bonuses and
ownership of common stock.
RELATIONSHIP OF PERFORMANCE UNDER THE COMPENSATION PROGRAM
The compensation program supports the Company's internal culture and human
resource values which are to foster career opportunities and development of the
best people at all levels and to encourage and reward actions which put the
interests of the Company as a whole ahead of functional specialties and
individual considerations.
At present, the compensation program for all executives, including the CEO
and the four other most highly compensated executive officers other than the CEO
(the "named executives"), is comprised of two elements:
- Base salary and benefits typically offered to executives by major
corporations.
- Stock option grants to provide an incentive that focuses the executives'
attention on managing the Company from the perspective of an owner with
an equity stake in the business. These stock options are tied to the
future performance of the Company's stock and will provide value to the
recipient only when the price of the Company's stock increases above the
option grant price.
Since the Company has been formally reorganized for only three years and
has not built a strong history of profitable operations, the Compensation
Committee believes that to attract and retain quality executives more emphasis
should be placed in 1993 on base salary than on performance measured
compensation for the named executives, other than the CEO and Mr. Froelich (the
"CFO").
In addition to the above mentioned compensation elements, there are two
elements in the Company's executive compensation program for the CEO and the
CFO:
- Annual incentive compensation.
- Long-term compensation.
SALARY FACTORS
Every employee of the Company, including the named executives, is assigned
a grade level with a salary range that is designed to reflect competitive
practice for the position they hold. At the end of each fiscal year, the
Compensation Committee reviews and approves an annual salary plan for all
executives for the upcoming
11
<PAGE> 14
year. This salary plan is developed under the ultimate direction of the CEO. The
salaries approved for 1993 reflect consideration of the Compensation Committee's
and the Board's subjective assessment of the performance of each executive over
the past year, judgments as to the expected future contributions of the
individual executive and recognition of the continued improvement of the
Company's results of operations as evidenced by an $803,000 (11.5%) increase in
the Company's income from operations and a $2.10 (25.1%) increase in the
Company's annual average stock price from 1991 to 1992.
PERFORMANCE EVALUATION. The Compensation Committee has taken particular
note of the executives' success in restructuring the Company's businesses to
adjust for the decline in its enrollment which resulted from the Company filing
for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code
("Chapter 11") in 1989 and in effectively directing the Company's operations
under the difficult competitive conditions in the markets served by the Company
over the last three years. The Compensation Committee believes the executives
displayed effective leadership in accomplishing a turnaround of the Company's
operating performance subsequent to the filing of Chapter 11 and has taken into
account the executives' performance in increasing total membership of its
ongoing operations. In its review of the executives' performance and
compensation, the Compensation Committee has also taken into account the
executives' consistent commitment to the long-term success of the Company
through development of new or improved products. The Compensation Committee also
assessed past performance and its expectation as to future contributions in
leading the Company and its businesses.
COMPETITIVE DATA. Executive salaries were set to correspond to the
Compensation Committee's understanding of the median range of salaries for other
companies. No formal study was performed, but a formal study for all executive
officers other than the CEO and CFO is planned for the 1994 fiscal year.
The salary compensation for the CEO and CFO for 1993 was in accordance with
the five year Employment Agreements entered into in 1992 and no changes or
increases were made for 1993.
After completing their subjective assessment of the above salary factors,
the Compensation Committee increased the salaries of three of the named
executives effective January 1, 1993 as set forth in the tables below.
BENEFITS
In the past, the Company adopted certain broad-based employee benefit plans
in which the executives are permitted to participate on the same terms as
non-executive employees who meet applicable eligibility criteria, subject to any
legal limitations on the amounts that may be contributed or the benefits that
may be payable under the plans. Benefits under these and other plans are not
tied to Company performance.
STOCK OPTIONS
As noted earlier in the Proxy Statement, stock options are granted to
employees and directors under the 1990 Stock Option Plan by the Stock Option
Committee which is comprised of the CEO and the CFO. These grants are made only
after approval by the Compensation Committee. Stock option grants provide the
right to purchase shares of Common Stock at the fair market value (the closing
price) on the date of grant. Each stock option becomes exercisable in three
annual installments following the date of grant and has a five year term. The
number of shares covered by an individual's option represents the Stock Option
Committee's subjective assessment of the individual's relative value to the
Company. During 1993 stock options were granted to three of the named
executives. In determining the amount of options to grant, the Stock Option
Committee took into account the items discussed above under "Salary", the desire
to tie closely the financial interests of the named executives to those of the
Company's stockholders and the total amount of options currently held by the
named executive. The grants made in 1993, as set forth in the tables below,
reflect such considerations.
12
<PAGE> 15
ANNUAL INCENTIVES
In addition to the base salary, the CEO and the CFO could earn an annual
performance bonus which is based on the pre-tax earnings of the Company. For
purposes of calculating the annual bonus, the goals on pre-tax earnings are set
forth in the CEO's and the CFO's Employment Agreements. No bonus was paid for
1993 because the pre-tax earnings goal was not achieved. The bonuses paid
pursuant to the Company's plan of reorganization are not under the jurisdiction
of the Compensation Committee.
OTHER COMPENSATION
Also set forth in the CEO's and the CFO's Employment Agreements is a bonus
on the sale of the Company or substantially all of its assets or a merger into
another company. This bonus is based on the extent to which the sale price
exceeds an initial value set forth in the CEO's and the CFO's Employment
Agreements.
CONCLUSION
Based on its evaluation of these factors, the Compensation Committee
believes that the executive employees of the Company are dedicated to achieving
significant improvements in long-term financial performance and that the
compensation policies, plans and programs the Compensation Committee and the
Board designed, implemented and administered have contributed to achieving this
management focus. The policies, plans and programs used in setting 1993
compensation are consistent with those used when 1992 compensation was set.
There were no decisions affecting compensation paid to the CEO or CFO for 1993
that were made by the Board or the Compensation Committee after October 21,
1992.
SUBMITTED ON JUNE 2, 1994 BY THE 1993 COMPENSATION
COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
CLAUDE S. BRINEGAR
LEON M. CLEMENTS
THOMAS W. FIELD, JR.
PETER J. RATICAN (ex-officio)
13
<PAGE> 16
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the years ended December 31,
1993, 1992 and 1991, of those persons who were, at December 31, 1992 (i) the
chief executive officer and (ii) the other four most highly compensated
executive officers of the Company (collectively the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
STOCK
ANNUAL COMPENSATION OPTIONS
-------------------- AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) (#) COMPENSATION(3)(4)
- - -------------------------------- ------- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Peter J. Ratican 1993 $425,000 $ 18,513 $7,075
Chairman of the Board 1992 $423,653 $148,122 150,000 $6,866
of Directors, Chief 1991 $374,999
Executive Officer and
President
Eugene L. Froelich 1993 $325,000 $ 18,513 $7,075
Executive Vice President -- 1992 $323,654 $148,122 150,000 $6,866
Finance and Administration, 1991 $274,999
Chief Financial Officer and
Director
Alan D. Bloom 1993 $200,000 7,500 $6,000
Senior Vice President, 1992 $195,000 $5,850
Secretary and General Counsel 1991 $195,000
Richard A. Link 1993 $195,000 5,000 $5,850
Chief Accounting Officer 1992 $190,008 $5,700
and Senior Vice President 1991 $175,000 20,000
-- Accounting
William B. Caswell 1993 $182,000 10,000 $4,200
Vice President, General 1992 $154,818 25,000
Manager -- Maxicare
California(5)
</TABLE>
- - ---------------
(1) Excludes distributions received during the year ended December 31, 1992 paid
with respect to claims for pre-petition compensation paid pursuant to the
Reorganization Plan.
(2) These amounts are bonuses payable pursuant to the Reorganization Plan and
were paid from funds held by the Disbursing Agent in a segregated account
and were not paid out of the Company's available cash.
(3) These amounts include contributions made by the Company on behalf of the
Named Officer under the Company's 401(k) Savings Incentive Plan.
(4) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted by
the Securities and Exchange Commission, as informally interpreted by the
Commission's Staff, amounts of Other Annual Compensation and All Other
Compensation are excluded for the Company's 1991 fiscal year.
(5) William B. Caswell's employment at the Company began in February 1992.
14
<PAGE> 17
OPTION GRANTS
Shown below is further information on grants of stock options pursuant to
the 1990 Incentive Stock Option Plan during the year ended December 31, 1993, to
the Named Officers which are reflected in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL
SECURITIES PERCENTAGE OF RATES OF STOCK
UNDERLYING TOTAL OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(3)
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME (#) FISCAL 1993 ($/SHARE)(2) DATE 5% 10%
- - ------------------------------- ---------- ------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan D. Bloom.................. 7,500 3.4% $9.63 12/20/98 $ 82,575 $104,250
Richard A. Link................ 5,000 2.3% $9.63 12/20/98 $ 55,050 $ 69,500
William B. Caswell............. 10,000 4.6% $9.63 12/20/98 $110,100 $139,000
</TABLE>
- - ---------------
(1) The options were granted as of December 20, 1993 and vest in one-third
installments on the first, second and third anniversaries of the date of
grant. If the grantee's employment is terminated under certain circumstances
or there is a restructuring of the Company (as set forth in the option
agreement) these options would become immediately exercisable.
(2) The option exercise price is subject to adjustment in the event of a stock
split or dividend, recapitalization or certain other events.
(3) The actual value, if any, the Named Officer may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized by the Named
Officer will be at or near the value estimated. This amount is net of the
option exercise price.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock granted in fiscal 1993 and prior years under
employment agreements and the 1990 Incentive Stock Option Plan to the Named
Officers and held by them at December 31, 1993. None of the Named Officers
exercised any stock options during fiscal 1993.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1993 (#) DECEMBER 31, 1993(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter J. Ratican.............................. 377,778 50,000 $ 1,066,667 $87,500
Eugene L. Froelich............................ 377,778 50,000 $ 1,066,667 $87,500
Alan D. Bloom................................. 6,667 10,833 $ 11,667 $ 6,733
Richard A. Link............................... 46,667 28,333 $ 78,333 $39,767
William B. Caswell............................ 8,333 26,667 $ 4,167 9,533
</TABLE>
- - ---------------
(1) Based on the closing price on the NASDAQ-NMS on that date ($9.75), net of
the option exercise price.
EMPLOYMENT AGREEMENTS
As of January 1, 1992, the Company has entered into five-year employment
agreements with Peter J. Ratican and Eugene L. Froelich ("Senior Management").
These employment agreements provide for annual base compensation of $425,000 for
Mr. Ratican and $325,000 for Mr. Froelich, subject to increases and bonuses, as
may be determined by the Board based on annual reviews. The employment
agreements provide that upon the termination of either member of Senior
Management by the Company without Cause or reasons other than death or
incapacity or the voluntary termination by either member of Senior Management
for certain reasons as set forth in their employment agreements, the terminated
member will be entitled to receive (i) a payment equal to the balance of the
terminated member's annual base salary which would have been paid over the
remainder of the term of the employment agreement; (ii) an additional one year's
annual base
15
<PAGE> 18
salary; (iii) payment of any performance bonus amounts which would have
otherwise been payable over the remainder of the term of the agreement; (iv)
immediate vesting of all stock options; (v) the continuation of the right to
participate in any profit sharing, bonus, stock option, pension, life, health
and accident insurance, or other employee benefits plans including a car
allowance through December 31, 1996. Cause is defined as: (i) the willful or
habitual failure to perform requested duties commensurate with his employment
without good cause; (ii) the willful engaging in misconduct or inaction
materially injurious to the Company; or (iii) the conviction for a felony or of
a crime involving moral turpitude, dishonesty or theft. In the event of a Change
in Control of the Company, either member may elect to terminate the employment
contract in which case the electing member will be entitled to receive a payment
equal to 2.99 times that member's average annualized compensation from the
Company over a certain period. Change of Control is defined as: (i) any
transaction or occurence which results in the Company ceasing to be publically
owned with at least 300 stockholders; (ii) any person or group becoming
beneficial owner of more than forty percent (40%) of the combined voting power
of the Company's outstanding securities; (iii) a change in the composition of
the Board, as set forth in the employment agreement; (iv) the merger or
consolidation of the Company with or into any other non-affiliated entity
whereby the Company's equity security holders, immediately prior to such
transaction, own less than sixty percent (60%) of the equity; or (v) the sale or
transfer of all or substantially all of its assets. In the event of death or
incapacity, the member, or his estate, shall receive the equivalent of ninety
(90) days base salary and in the case of incapacity, the continuation of health
and disability benefits. The employment agreements also provide that in the
event either member of Senior Management does not receive an offer for a new
employment agreement containing terms at least as favorable as those contained
in the existing employment agreements before the expiration of such employment
agreements, such member will be entitled to receive a payment equal to one
year's base salary under the terminating agreement. Under these agreements, each
member of Senior Management will be entitled to receive an annual performance
bonus calculated using a formula, as set forth in the employment agreements,
which is based on the Company's annual pre-tax earnings, before extraordinary
items, over $10 million. In addition, upon the sale of the Company, a sale of
substantially all of its assets or a merger where the Company shareholders cease
to own a majority of the outstanding voting capital stock, Senior Management
will be entitled to a sale bonus calculated using a formula which is based on a
percentage of the excess value of the Company over an initial value as set forth
in the employment agreements.
In addition, Senior Management remains entitled to receive certain
additional compensation out of funds set aside for distribution under the
Reorganization Plan on December 5, 1990 or from the proceeds of assets
liquidated on behalf of pre-petition creditors under the Reorganization Plan.
As of January 1, 1993 the Company entered into an employment agreement,
effective through December 31, 1994, with Richard A. Link. As of January 1, 1994
the Company entered into an employment agreement, effective through December 31,
1994, with Alan D. Bloom and an employment agreement, effective through December
31, 1995, with William B. Caswell. The contracts provide a minimum base salary
of $197,500, $203,000 and $195,000 for Messrs. Link, Bloom and Caswell,
respectively, subject to increases and bonuses, as may be determined from time
to time by the Chief Executive Officer of the Company. The contract with Mr.
Caswell also provides that: (i) should he die, his estate shall receive the
equivalent of thirty (30) days base salary; (ii) should the Company terminate
his employment prior to the first anniversary of the contract for any reason
other than death, incapacity, or Cause, he shall receive the equivalent of his
annual base salary; (iii) should the Company terminate his employment on or
after the first anniversary of the contract for any reason other than death,
incapacity, or Cause, he shall receive the amount of the remainder of his annual
base salary as would have been paid had the contract not been terminated which
amount shall in no event be less than the equivalent of six (6) months base
salary; and (iv) should his employment be terminated for any reason other than
death, voluntary resignation, incapacity or Cause within six (6) months of a
Change of Control, he shall receive the equivalent of his annual base salary.
Cause is defined as (i) the willful and continued failure to perform duties
pursuant to the employment agreement without good cause; (ii) the willful
engaging in misconduct or inaction materially injurious to the Company; or (iii)
the conviction of a felony or of a crime involving moral turpitude. Change of
Control is defined as (i) the merger or consolidation of the Company with or
into any other non-affiliated entity whereby the Company's equity security
holders, immediately prior to such transaction, own less than fifty percent
(50%) of the equity; or (ii) the sale or
16
<PAGE> 19
transfer of all or substantially all of its assets. The contracts with Messrs.
Link and Bloom provide that should their employment be terminated under certain
circumstances, they would receive up to the equivalent of four (4) months base
salary.
COMPARISON OF CUMULATIVE TOTAL RETURN GRAPH
The following graph presents a two and three quarter years comparison of
cumulative total returns for the Common Stock of the Company, index for the
NASDAQ Stock Market (U.S. Companies), the index for the Standard and Poor's 500
and an index of peer companies (the "Managed Care Group") selected by the Board
of Directors. This graph only presents two and three quarter years of
information because the Company's Common Stock was issued on April 2, 1991 and
was traded on the over-the-counter market beginning April 30, 1991. The Peer
Group consists of six other managed care companies: Coventry Corporation, FHP
International, Foundation Health, Pacificare Health Systems, Qual-Med, Inc.,
TakeCare, Inc. Total return assumes the monthly reinvestment of dividends.
<TABLE>
<CAPTION>
Maxicare
Measurement Period Health Plans,
(Fiscal Year Covered) Inc. NASDAQ U.S. Peer Group
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 114.71 123.53 94.90
1992 150.00 143.65 178.50
1993 114.71 163.93 177.52
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
No independent public accountants have been retained for the current year
ending December 31, 1994. The Company is currently reviewing proposals requested
from certain international accounting firms, including Price Waterhouse.
Price Waterhouse has been the Company's principal independent public
accountant since the fourth quarter of 1988, and is familiar with the business
and operations of the Company and its subsidiaries. Management has not followed
the practice of presenting the selection of auditors to the stockholders for
approval. A representative of Price Waterhouse is expected to be present at the
Annual Meeting, will have an opportunity to make a statement, and will be
available to answer questions, if any, from stockholders.
17
<PAGE> 20
OTHER MATTERS
ADDITIONAL INFORMATION
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, (including financial statements and financial statement
schedules) as filed with the Securities and Exchange Commission are available
upon written request from the office of Investor Relations, Maxicare Health
Plans, Inc., 1149 South Broadway Street, Los Angeles, California, 90015.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING
Any proposal relating to a proper subject which a stockholder may intend to
be presented for action at the next Annual Meeting of Stockholders currently
scheduled to be held on July 28, 1995 must be received by the Company no later
than March 8, 1995, to be considered for inclusion in the proxy material to be
disseminated by the Board of Directors in accordance with the provisions of Rule
14a-(8)(3)(i) promulgated under the Exchange Act. Copies of such proposals
should be sent to the Corporate Secretary at the Company's principal executive
offices. To be eligible for inclusion in such proxy materials, such proposals
must conform to the requirements set forth in Regulation 14A under the Exchange
Act.
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of any matter to be presented at the
Annual Meeting or any postponement or adjournment thereof which is not listed on
the Notice of Annual Meeting and discussed above. If other matters should
properly come before the meeting, however, the persons named in the accompanying
proxy will vote all proxies in accordance with the recommendation of the Board,
or if no such recommendation is given, in their own discretion.
COST OF SOLICITING PROXIES
The Company will bear the cost of proxy solicitation for the election of
the Board's nominees for director. In addition to the use of the mail, proxies
may be solicited by personal interview, telephone or telegraph, by officers,
directors and other employees of the Company, who will not receive any
additional compensation for such services. The Company will also request
persons, firms and corporations holding shares in their names, or in the names
of their nominees, which are beneficially owned by others, to send or cause to
be sent proxy materials to, and obtain proxies from, such beneficial owners and
will reimburse such holders for their reasonable expenses in so doing.
By Order of the Board of Directors,
Alan D. Bloom
Secretary
Los Angeles, California
Dated: July 13, 1994
18
<PAGE> 21
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
OF MAXICARE HEALTH PLANS, INC.
ANNUAL MEETING OF STOCKHOLDERS AUGUST 17, 1994
The undersigned, does hereby appoint Peter J. Ratican and Eugene L. Froelich,
and each of them, proxies for the undersigned with full power of substitution,
to vote all of the shares of Common Stock of the Company which the undersigned
is entitled to vote, with all powers the undersigned would possess if personally
present at the 1994 Annual Meeting of Stockholders of Maxicare Health Plans,
Inc. (including all adjournments thereof) to be held at the Transamerica Center
Tower Restaurant, 1150 So. Olive Street, Los Angeles, California, August 17,
1994 at 8:00 a.m., Pacific Time, on all matters that may come before the
Meeting.
The undersigned hereby instructs said proxies or their substitutes:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / To VOTE FOR all nominees / / To WITHHOLD AUTHORITY to vote for all
listed below. nominees listed below.
</TABLE>
CHARLES E. LEWIS AND CLAUDE S. BRINEGAR
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- - --------------------------------------------------------------------------------
2. DISCRETIONARY AUTHORITY: In their discretion, the proxies are authorized to
vote with respect to all other matters which may properly come before the
Meeting. THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR.
(Continued and to be SIGNED ON REVERSE SIDE)
The undersigned hereby revokes any proxy or proxies heretofore given, and
ratifies and confirms that all the proxies appointed hereby, or either of them,
or their substitute or substitutes may lawfully do or cause to be done by virtue
hereof. The undersigned hereby acknowledges receipt of a copy of the Notice of
Annual Meeting and Proxy Statement, both dated July 13, 1994, and a copy of the
Company's Annual Report for the year ended December 31, 1993.
Dated______________________, 1994
__________________________, (L.S.)
__________________________, (L.S.)
Signature(s)
NOTE: Your signature should appear
the same as your name appears
hereon. In signing as attorney,
executor, administrator, trustees
or guardian, please indicate the
capacity in which signing, when
signing as joint tenants, all
parties in the joint tenancy must
sign. When a proxy is given by a
corporation, it should be signed
by an authorized officer and the
corporate seal affixed. No postage
is required if mailed within the
United States.
<PAGE> 22
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
OF MAXICARE HEALTH PLANS, INC.
ANNUAL MEETING OF STOCKHOLDERS AUGUST 17, 1994
The undersigned, does hereby appoint Peter J. Ratican and Eugene L. Froelich,
and each of them, proxies for the undersigned with full power of substitution,
to vote all of the shares of Series A Cumulative Convertible Preferred Stock of
the Company which the undersigned is entitled to vote, with all powers the
undersigned would possess if personally present at the 1994 Annual Meeting of
Stockholders of Maxicare Health Plans, Inc. (including all adjournments thereof)
to be held at the Transamerica Center Tower Restaurant, 1150 So. Olive Street,
Los Angeles, California, August 17, 1994 at 8:00 a.m., Pacific Time, on all
matters that may come before the Meeting.
The undersigned hereby instructs said proxies or their substitutes:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / To VOTE FOR all nominees / / To WITHHOLD AUTHORITY to vote for all
listed below. nominees listed below.
</TABLE>
CHARLES E. LEWIS AND CLAUDE S. BRINEGAR
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- - --------------------------------------------------------------------------------
2. DISCRETIONARY AUTHORITY: In their discretion, the proxies are authorized to
vote with respect to all other matters which may properly come before the
Meeting. THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR.
(Continued and to be SIGNED ON REVERSE SIDE)
The undersigned hereby revokes any proxy or proxies heretofore given, and
ratifies and confirms that all the proxies appointed hereby, or either of them,
or their substitute or substitutes may lawfully do or cause to be done by virtue
hereof. The undersigned hereby acknowledges receipt of a copy of the Notice of
Annual Meeting and Proxy Statement, both dated July 13, 1994, and a copy of the
Company's Annual Report for the year ended December 31, 1993.
Dated_____________________, 1994
________________________, (L.S.)
________________________, (L.S.)
Signature(s)
NOTE: Your signature should appear
the same as your name appears
hereon. In signing as attorney,
executor, administrator, trustees
or guardian, please indicate the
capacity in which signing, when
signing as joint tenants, all
parties in the joint tenancy must
sign. When a proxy is given by a
corporation, it should be signed
by an authorized officer and the
corporate seal affixed. No postage
is required if mailed within the
United States.
