SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Exchange Act of 1934
Date of Report: May 4, 1999
MAXICARE HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-12024 95-3615709
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
of incorporation)
1149 South Broadway Street
Los Angeles, California
(Address of principal executive office)
90015
(Zip Code)
(213) 765-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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5. Other Events
On April 16, 1999, Maxicare Health Plans, Inc. (the "Company") and
Peter J. Ratican ("Ratican"), the Company's Chairman of the Board,
President and Chief Executive Officer ("CEO") announced they had
reached an agreement pursuant to which Ratican would be resigning as
President and CEO of the Company. In order to ensure an orderly
transition, the Company and Ratican agreed that such resignations
would become effective on June 30, 1999 (the "Termination Date"). The
Company's board of directors (the "Board") has formed a committee to
identify an appropriate successor. In addition, Ratican agreed not to
stand for re-election to the Board when his term expires at the 1999
Annual Meeting of Shareholders which is scheduled for June 30, 1999
(the "1999 Annual Meeting"). In connection with the foregoing, Ratican
and the Company entered into a Settlement Agreement dated April 16,
1999 (the "Settlement Agreement"). The Settlement Agreement, which was
negotiated between Ratican and representatives of the Board over a two
month period, outlines the terms of the agreements between Ratican and
the Company, including the amendment to Ratican's Employment Agreement
and certain other existing agreements and the terms of a new
consulting agreement (the "Related Agreements"). The Settlement
Agreement also provides on the Effective Date, upon the occurrence of
certain other events and subject to certain limitations, Ratican and
the Company shall exchange releases. The Settlement Agreement became
effective upon the expiration of Ratican's seven day recision period
on April 24, 1999 (the "Effective Date"). On the Effective Date each
of the Related Agreements became effective. The Settlement Agreement
is attached hereto and made a part hereof as Exhibit 1.
In connection with the Settlement Agreement, effective as of the
Effective Date, the Board agreed to nominate for re-election Thomas W.
Field, Jr. and to nominate for election as new directors, George H.
Bigelow and Simon Whitmey (Messrs. Bigelow and Whitmey hereinafter
referred to as the "New Directors") for election for three year terms
as directors at the 1999 Annual Meeting. The New Directors will take
the place of Mr. Ratican and incumbent director Alan S. Manne, who
announced his retirement upon the expiration of his term at the 1999
Annual Meeting.
Pursuant to the Settlement Agreement, Ratican and the Company have
entered into a four year non-exclusive consulting agreement
commencing July 1, 1999 ( the "Commencement Date") at an annual
consulting fee of $500,000 (the "Consulting Fee") and the provision by
the Company to Ratican of certain health and other benefits comparable
to those currently being received by Ratican under his Employment
Agreement (the "Ratican Consulting Agreement"). The Ratican Consulting
Agreement is attached hereto and made a part hereof as Exhibit 2. The
Ratican Consulting Agreement provides that Ratican's consulting
services shall not interfere with his other business activities and he
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will be free to engage in such other business activities as he
desires; provided, however, he shall be prohibited from rendering
services to an HMO competitor of the Company in California, Indiana
or Louisiana during the first year of the Ratican Consulting
Agreement. The Ratican Consulting Agreement is terminable prior to the
Commencement Date under certain circumstances such as a termination of
Ratican's Employment Agreement as a result of his death or incapacity
or for "Cause", as defined in the Employment Agreement, by the
Company. After the Commencement Date, the Ratican Consulting Agreement
may be terminated voluntarily by Ratican or for "Cause", as defined in
the Consulting Agreement, by the Company. In the event of a
termination of the Consulting Agreement after the Commencement Date as
a result of Ratican's death or incapacity, Ratican or his estate
would receive the Consulting Fee due for the remainder of the four
year term. The Ratican Consulting Agreement provides for
indemnification by the Company to Ratican under appropriate
circumstances and the advancement of legal fees and expenses for
indemnification actions and in the event of a dispute thereunder
subject to certain requirements.
If the Company, after notice and time to cure, fails to pay the
Ratican Consulting Fee and is determined to be in breach of the
Ratican Consulting Agreement (a "Company Default"), (i) Ratican may
terminate the Ratican Consulting Agreement, declare the remaining
balance due thereunder immediately payable and receive the discounted
value thereof; (ii) the Amended Note (as defined below) will become
non-recourse; and (iii) Ratican will continue to accrue benefits under
the SERP (as defined below) through June 30, 2003.
To assist in the transition, Elwood I. Kleaver, Jr. ("Kleaver"), a
current board member, has agreed to become the Company's Interim Chief
Operating Officer ("COO") beginning April 24, 1999 (the "Kleaver
Commencement Date") pursuant to a consulting agreement with the
Company dated April 16, 1999 (the "Kleaver Consulting Agreement").
Under the Kleaver Consulting Agreement, Kleaver agrees to serve as COO
for a period of no less than four months (the "Initial Term") at
$40,000 per month (the "Kleaver Consulting Fee"). Although the
Kleaver Consulting Agreement is non-exclusive and Kleaver may continue
and/or finish any of his existing consulting arrangements; Kleaver's
other consulting services may not materially interfere with the
performance of his duties as COO. In addition, during the term of the
Kleaver Consulting Agreement, Kleaver may not enter into new
consulting or employment agreements without prior approval of the
Board and will be prohibited from working for a competitor of the
Company in California, Indiana and Louisiana. The Kleaver Consulting
Agreement may be terminated (i) upon Kleaver's death or disability;
(ii) for "Cause", as defined in the Kleaver Consulting Agreement;
(iii) for any reason other than as set forth in (i) or (ii) as set
forth above or (iv) after August 24, 1999, upon thirty days prior
notice. In the event of a termination of the Kleaver Consulting
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Agreement pursuant to (iii) Kleaver would be entitled to receive
either the unpaid portion of the Kleaver Consulting Fee for the
Initial Term or if the termination is after the Initial Term, $40,000.
The Kleaver Consulting Agreement is attached hereto and made a part
hereof as Exhibit 3.
Pursuant to the terms of the Kleaver Consulting Agreement, the Company
has granted Kleaver, effective as of the Commencement Date, options
to purchase 50,000 shares of the Company's common stock (the "Kleaver
Options") pursuant to the Company's 1995 Stock Option Plan at $ 5.3125
per share, the closing market price of the Company's common stock on
the last trading day immediately preceding the effectiveness of the
option grant. The Kleaver Options have a ten year term and vest at a
rate of 6,000 shares per month during the Initial Term and 4,000
shares per month thereafter. All vested options will be exercisable
for a period of one year after the termination of Kleaver's consulting
services to the Company (or employment by the Company, if applicable).
The Stock Option Agreement between Kleaver and the Company setting
forth the terms of the Kleaver Options is attached hereto and made a
part hereof as Exhibit 4.
In connection with the Settlement Agreement, Ratican and the Company
have amended certain agreements between them. Effective on April 24,
1999, Ratican and the Company entered into Amendment No. 4 ("Amendment
No.4") dated April 16, 1999 to Ratican's Amended and Restated
Employment Agreement, as amended (the "Employment Agreement") pursuant
to which Ratican and the Company agreed: (i) to shorten the
termination date of such agreement from April 1, 2001 to the
Termination Date; (ii) that Ratican would no longer be entitled to
future or potential performance bonuses, sales bonuses, severance pay
upon the expiration of the term of the Employment Agreement, or stock
option grants under the terms of the Employment Agreement; (iii) that
during the period from the Effective Date through the Termination
Date, Ratican's powers and duties would be limited to those powers and
duties designated by the Executive Committee of the Board (the
"Executive Committee"); and (iv) the termination of Ratican's
employment pursuant to Amendment No. 4 on the Termination Date and the
election of the New Directors at the 1999 Annual Meeting would not
trigger any payments to Ratican as a result of a "Change of Control",
as such term is defined in Amendment No. 4. Amendment No. 4 between
Ratican and the Company is attached hereto and made a part hereof as
Exhibit 5.
In connection with the Settlement Agreement, as of the Effective Date
adjustments were also made to Ratican's outstanding option agreements.
Ratican's Senior Executives Stock Option Agreement (the "1996 Option
Agreement") with respect to options granted under the Maxicare Health
Plans, Inc. Senior Executives 1996 Stock Option Plan (the "1996 Option
Plan") was amended so that: (i) the term of the options granted
thereunder (the "1996 Plan Options") was shortened to January 1, 2005
<PAGE>
(the "Option Term"); (ii) the exercise price of the options granted on
July 26, 1996, January 1, 1997 and January 1, 1998 was reduced from
$14.75, $22.25 and 10.88, respectively, to $7.2875 or $1.875 over the
average closing trading price of the Company's common stock price for
April 19, 1999 through April 23, 1999 or $5.4125 and (iii) the 1996
Plan Options would remain exercisable through the Option Term,
notwithstanding the termination of Ratican's employment with the
Company or the termination of the Ratican Consulting Agreement.
Amendment No.1 dated April 16, 1999 to the 1996 Option Agreement
between Ratican and the Company dated as of April 1, 1996 and
Amendment Number Two dated April 16, 1999 to the 1996 Option Plan,
which reflect the foregoing, are attached hereto and made a part
hereof as Exhibits 6 and 7, respectively. In addition, as of the
Effective Date, the Company and Ratican entered into Amendment No. 2
dated April 16, 1999 ("Amendment No. 2 to the 1989 Option Agreement")
to the option agreement dated as of August 31, 1989, as amended (the
"1989 Option Agreement") pursuant to which the 1989 Option Agreement
was amended to extend Ratican's ability to exercise the options
granted thereunder ("the 1989 Plan Options") until December 5, 2000
(the original option term of the 1989 Plan Options under the 1989
Option Agreement), notwithstanding the termination of Ratican's
employment with the Company on the Termination Date. Amendment No. 2
to the 1989 Option Agreement is attached hereto and made a part hereof
as Exhibit 8.
In connection with the Settlement Agreement, as of the Effective Date,
the terms of the Maxicare Health Plans, Inc. Supplemental Executive
Retirement Plan (the "SERP") were amended so that Ratican will
continue to accrue benefits under the SERP during the term of the
Ratican Consulting Agreement. Amendment No. 3 to the SERP dated April
16, 1999 is attached hereto and made a part hereof as Exhibit 9.
As of the Effective Date, Ratican's promissory note in the original
principal amount of $2,229,028.13, (the "Original Balance") dated
February 18, 1997, and related loan documents (the "1997 Note") were
also amended. Pursuant to the terms of the Amended and Restated
Promissory Note dated April 16, 1999 (the "Restated 1997 Note") the
term of the 1997 Note was extended from April 1, 2001 to June 30, 2003
(the "Maturity Date"). In addition, the Restated 1997 Note provides
that on the Maturity Date, in lieu of payment of the Original Balance
and all accrued interest thereon (the "Maturity Balance"), Ratican
may fully satisfy his obligations under the 1997 Note through the
payment to the Company for payment to the applicable state and Federal
tax authorities the applicable minimum state and federal withholding
amounts and FICA taxes due from Ratican resulting from the reduction
of the Maturity Balance to zero (the "Applicable Taxes"); provided,
however, in the event the Ratican Consulting Agreement is terminated
for Cause or voluntarily by Ratican or Ratican fails to timely pay the
Applicable Taxes, the Restated 1997 Note provides that the full
Maturity Balance will remain due. The Restated 1997 Note also provides
<PAGE>
that Ratican may withdraw, at any time, all or any portion of the
150,000 shares of the Company's common stock held by the Company as
collateral under the Note and substitute in lieu thereof, cash,
treasury notes, U.S. government backed securities or other collateral
acceptable to Maxicare valued at not less than $800,000. As
previously discussed, the Restated 1997 Note becomes non-recourse upon
the occurrence of a Company Default under the Ratican Consulting
Agreement. The Restated 1997 Note, Amendment One dated April 16, 1999
to the Loan Agreement between the Company and Ratican dated February
18, 1997 and Amendment One dated April 16, 1999 to the Pledge
Agreement between the Company and Ratican dated February 18, 1997
effectuating the foregoing are attached hereto and made a part hereof
as Exhibits 10, 11 and 12, respectively. In connection with the
Ratican Settlement Agreement, the Company also cancelled Ratican's
promissory note in the amount of $143,118, dated July 1998.
Item 7. Financial Statements and Exhibits.
(b) Exhibits.
10.3l 1. The Settlement and Release Agreement between
Peter J. Ratican ("Ratican") and Maxicare
Health Plans, Inc. (the "Company")
dated April 16, 1999;
10.3m 2. The Consulting Agreement between Ratican and
the Company dated April 16, 1999;
10.91 3. The Consulting Agreement between Elwood I.
Kleaver, Jr. ("Kleaver") and the Company
dated April 16, 1999;
10.91a 4. Stock Option Agreement between Kleaver and
the Company dated April 16, 1999;
10.3n 5. Amendment No. 4 dated April 16, 1999 to the
Amended and Restated Employment and
Indemnification Agreement between
Ratican and the Company dated as of April 1,
1996;
10.82c 6. Amendment No. 1 dated April 16, 1999 to the
Stock Option Agreement between Ratican and
the Company dated April 1, 1996;
10.84b 7. Amendment Number Two dated April 16, 1999 to
the Maxicare Health Plans, Inc. Senior
Executives 1996 Stock Option Plan;
<PAGE>
10.14b 8. Amendment No. 2 dated April 16, 1999 to the
Stock Option Agreement between Ratican and
the Company dated August 31,
1989;
10.87c 9. Amendment No. 3 dated April 16, 1999 to the
Supplemental Executive Retirement Plan;
10.3o 10. Ratican's Amended and Restated Secured
Promissory Note dated April 16, 1999;
10.3p 11. Amendment One dated April 16, 1999 to the
Loan Agreement between Ratican and the
Company dated February 18, 1997; and
10.3q 12. Amendment One dated April 16, 1999 to the
Pledge Agreement between Ratican and the
Company dated February 18, 1997.
99.10 13. Press Release dated April 19, 1999 announcing
management transition and Board changes.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
MAXICARE HEALTH PLANS, INC.
(Registrant)
Date: May 4, 1999 By: /s/ Richard A. Link
Richard A. Link
Chief Financial Officer
Exhibit 10.3l
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (this "Agreement")
is entered into this 16 day of April, 1999 (the "Execution Date"), by
and between Peter J. Ratican ("Employee") located at 1265 Chateau
Road, Pasadena, CA 91105 and Maxicare Health Plans, Inc., a Delaware
corporation, located at 1149 South Broadway Street, Suite 910, Los
Angeles, CA 90015 ("Maxicare").
WHEREAS, Employee has been employed as Chairman of the
Board ("Chairman"), President and Chief Executive Officer ("CEO") of
Maxicare pursuant to the terms of that certain Amended and Restated
Employment and Indemnification Agreement dated as of April 1, 1996, as
amended by Amendment No. 1 thereto, dated February 11, 1997, Amendment
No. 2 thereto, dated March 28, 1998 and Amendment No. 3 thereto, dated
May 8, 1998 by and between Maxicare and Employee (collectively, the
"Employment Agreement");
WHEREAS, the Board of Directors of Maxicare (the
"Board") has indicated that they continue to support Employee as
Chairman, President and CEO and believe that Employee and the other
two directors up for reelection at the 1999 Annual Meeting of
Shareholders (the "1999 Annual Meeting"), Messrs. Field and Manne,
should be renominated for election should they choose to run (the
"Board Slate");
WHEREAS, Employee and Maxicare have been advised that
certain of its shareholders intend to propose a slate of directors at
the 1999 Annual Meeting which (i) does not include Employee and (ii)
which will include at least two new directors (collectively, the
"Shareholder Slate");
WHEREAS, election of the Shareholder Slate over the
Board Slate would trigger a "Change of Control" as such term is
defined under the Employment Agreement which would entitle the
Employee to terminate the Employment Agreement pursuant to Sections
7(f) and 9(a) thereof and to receive a lump sum cash payment
calculated pursuant to Section 8(a)(i) and (ii) of the Employment
Agreement (the "Parachute Payment");
WHEREAS, the Parachute Payment is estimated at
approximately $3.61 million if the trading price of Maxicare's Common
Stock is $5.00 or less at the time of the 1999 Annual Meeting and
$3.96 million in the event the trading price of Maxicare's Common
Stock is $8.00 at the time of the 1999 Annual Meeting;
<PAGE>
WHEREAS, the Board and the Employee wish to save
Maxicare the expense, publicity and distraction of a proxy contest
between the Board Slate and the Shareholder Slate;
WHEREAS, effective as of the Effective Date, as such
term is hereinafter defined, and subject to the terms and conditions
set forth in this Agreement, on June 30, 1999 Employee is willing to
terminate the Employment Agreement, his service as a director of
Maxicare, his employment with Maxicare and to resign as Chairman, CEO
and President and to waive and release certain of his rights under the
Employment Agreement, including but not limited to payments pursuant
to Sections 8 (a)(i) and (ii) as a result of Change of Control and
Section 8(a)(iv) as a result of a termination pursuant to Section 7(b)
for "Good Reason" as such term is defined in the Employment Agreement
or Section 7(e) of the Employment Agreement;
NOW, THEREFORE, in consideration of the promises and
releases given herein, the parties hereby agree as follows:
1. Capitalized Terms. Except as expressly defined
herein, capitalized terms shall have the meanings
ascribed to them in the Amended Employment
Agreement.
2. Effectiveness of this Agreement. This Agreement
shall be deemed effective and shall be enforceable solely upon the
occurrence of the Effective Date. For purposes of this Agreement, the
"Effective Date" is defined as the date when all of the requirements
of the following Sections 2(a) and 2(b) are met:
(a) The occurrence of both of the following time
periods which shall run consecutively: (i) the Release Review Period
which shall be deemed to be a period consisting of either: (y) twenty-
one (21) days following the date of delivery of this Agreement to the
Employee, which Employee acknowledges to be April 9, 1999 (the
"Release Delivery Date") or (z) such lesser period as the Employee may
agree to in writing and (ii) the Release Revocation Period which shall
be deemed to be a period consisting of seven (7) days following the
Execution Date of this Agreement by the Employee. During the Release
Revocation Period, Employee may revoke and rescind this Agreement at
any time by delivering written notice thereof to Maxicare. The Release
Revocation Period shall terminate at 12:01 a.m., Los Angeles time on
the Effective Date which shall be the eighth (8th) day following the
commencement date thereof; and
(b) The following occur: (i) the delivery of the
fully executed Exhibits "A - I" hereof (hereinafter, collectively the
"Related Agreements"); (ii) the Effective Date of the Consulting
Agreement between the Company and Elwood I. Kleaver, Jr. ("Kleaver")
pursuant to which Kleaver agrees to function as the Company's Chief
<PAGE>
Operating Officer ("COO"); and (iii) unanimous approval of this
Agreement by the Board provided, however, that if such approval is not
unanimous, Employee may elect to declare this Agreement and the
Related Agreements null and void.
3. Amendment No. 4 to the Employment Agreement.
Subject to and conditioned upon the occurrence of the Effective Date,
Maxicare and the Employee agree that, as of the Effective Date, the
Employment Agreement shall be further amended by Amendment No. 4
thereto, as attached hereto and made a part hereof as Exhibit "A" (the
Employment Agreement, as amended by Amendment No. 4 thereto,
hereinafter referred to "Amended Employment Agreement"). The Amended
Employment Agreement shall provide that: (i) the expiration of the
term thereof shall be June 30, 1999 (the "Termination Date"), and (ii)
effective as of the Effective Date thereof, Employee agrees that he
will not stand for re-election for Director of Maxicare nor shall
Employee consent to be nominated as a Director of Maxicare at the
Annual Meeting of Shareholders scheduled for June 30, 1999. On the
Termination Date, Employee shall resign as Chairman, CEO, President
and a director of Maxicare and as an employee, officer and/or director
of Maxicare's subsidiaries through the delivery to Maxicare of a
resignation executed by Employee as attached hereto and made a part
hereof as Exhibit "B" (the "Resignation"). Except as otherwise
provided herein or in Section 7 or Section 17 below, all rights to any
compensation or benefits enjoyed by or due to Employee as part of
Employee's employment with Employer pursuant to the Employment
Agreement or the Amended Employment Agreement shall cease as of the
Termination Date; including but not limited to any rights to office or
parking space, vacation or sick pay, use of telephones, xeroxing or
facsimile equipment, secretarial assistance, all benefits and/or
rights pursuant to Section 5 of the Employment Agreement and
additional Stock Options grants after the Termination Date pursuant to
Section 4(c) of the Employment Agreement. Employee further
acknowledges and agrees that effective as of the Effective Date: (i)
Employee shall not be entitled to any Performance Bonus pursuant to
Section 4(b) of the Employment Agreement or Amended Employment
Agreement for 1999 or any period thereafter; (ii) Employee shall waive
any future rights to a Sale Bonus under Section 10 of the Employment
Agreement; and (iii) Employee shall not be entitled to receive any
additional stock option grants pursuant to Section 4(c) of the
Employment Agreement. Employee further acknowledges that through the
Execution Date, Employee has been reimbursed in full by Maxicare for
all reimbursable expenses that Employee would be entitled to
reimbursement for pursuant to Section 6 of the Employment Agreement or
otherwise. During the period from the Effective Date through the
Termination Date (the "Transition Period"), Employee shall continue to
serve as the Chairman, CEO, President and a director of Maxicare;
however, Employee's powers and duties during the Transition Period
shall be solely as set forth by the Executive Committee of the Board
(the "Executive Committee"). Employee acknowledges that on the
<PAGE>
Effective Date, Maxicare shall engage Kleaver as Chief Operating
Officer and all of Maxicare's officers and employees (other than
Employee) shall report to Kleaver during the Transition Period.
During the Transition Period, Maxicare shall only be entitled to
terminate the Amended Employment Agreement (i) for "Cause" pursuant to
Section 7(d) of the Amended Employment Agreement, (ii) due to the
"Incapacity" of the Employee or (iii) as a result of the Employee's
death.
4. Consulting Agreement. On the Execution Date,
Employee and Maxicare shall execute a four year consulting agreement,
as attached hereto and made a part hereof as Exhibit "C" (the
"Consulting Agreement"). Unless the Amended Employment Agreement
terminates as a result of Sections 7(a), 7(b) without "Good Reason",
7(c), 7(d) or 7(f) during the Transition Period, the Consulting
Agreement shall commence on July 1, 1999 (the "Commencement Date")
and, unless terminated sooner pursuant to the terms thereof, shall
terminate on June 30, 2003. During the term of the Consulting
Agreement, Employee shall receive a consulting fee of $500,000 per
annum. In addition, during the term of the Consulting Agreement,
Employee shall receive solely those benefits currently received by
Employee pursuant to Section 5 of the Employment Agreement and which
are expressly set forth in Schedule 1 attached hereto and made a part
hereof. The effectiveness of the Consulting Agreement shall be
subject to and conditioned upon the occurrence of the Effective Date
unless Employee terminates the Amended Employment Agreement pursuant
to Section 7(b) thereof for Good Reason.
5. Amendments to Loan Agreement and Promissory Notes.
On the Execution Date, Employee and Maxicare shall execute Amendment
No. 1 to the Loan Agreement dated as of February 18, 1997 between
Maxicare and Employee as attached hereto and made a part hereof as
Exhibit "D" (the "Amendment No. 1 to the Loan Agreement") and execute
Amendment No. 1 to the Pledge Agreement dated as of February 18, 1997
between Maxicare and Employee as attached hereto and made a part
hereof as Exhibit "E" (the "Amendment No. 1 to the Pledge Agreement").
On the Effective Date, Employee shall execute and deliver an Amended
and Restated Secured Promissory Note that amends and restates the
Secured Promissory Note of the Employee dated February 18, 1997 and
such Amended and Restated Secured Promissory Note shall be attached
hereto and made a part hereof as Exhibit "F" ("Amended and Restated
Secured Promissory Note"). The effectiveness of Amendments No.1 to
the Loan and Pledge Agreements and the Amended and Restated Secured
Promissory Note shall be subject to and conditioned upon both (i) the
occurrence of the Effective Date and (ii) expiration of the Amended
Employment Agreement on the Termination Date or its earlier
termination for any reason, except (y) by Employee pursuant to Section
7(b) of the Amended Employment Agreement without "Good Reason" or (z)
for "Cause" pursuant to Section 7(d) of the Amended Employment
Agreement. Upon the effectiveness of the Amended and Restated Secured
<PAGE>
Promissory Note, Maxicare shall cancel and deliver to Employee the
Secured Promissory Note of the Employee dated February 18, 1997.
6. Cancellation of Promissory Note dated July 30, 1998.
On the Effective Date, Maxicare shall cancel and deliver to Employee
the Promissory Note dated July 30, 1998, in the principal amount of
$143,118 (the "1998 Note"). The effectiveness of the cancellation of
the 1998 Note shall be subject to and conditioned upon both (i) the
occurrence of the Effective Date and (ii) expiration of the Amended
Employment Agreement on the Termination Date or its earlier
termination for any reason, except (y) by Employee pursuant to Section
7(b) of the Amended Employment Agreement without "Good Reason" or (z)
for "Cause" pursuant to Section 7(d) of the Amended Employment
Agreement.
7. Payments to Executive. Maxicare agrees to pay
Employee all salary, wages, vacation pay or other compensation and
benefits due, accrued and unpaid pursuant to the Amended Employment
Agreement through the Termination Date, or its earlier termination
pursuant to Section 7 thereof.
8. Amendments to outstanding Options under the 1996
Senior Executive Stock Option Plan. On the Execution Date, Maxicare
shall deliver to Employee an Amendment No.1 to the Option Agreement
and shall approve and implement Amendment No.2 to the Maxicare Health
Plans, Inc. Senior Executives 1996 Stock Option Plan ("Plan Amendment
No.2"), as attached hereto and made a part hereof, as Exhibits "G-1"
and ""G-2", respectively, with respect to those options granted prior
to the Execution Date to Employee under the Maxicare Health Plans,
Inc. Senior Executives 1996 Stock Option Plan listed in Schedule 2 as
attached hereto and made a part hereof (the "Amended Options"). The
Amended Options shall have a term expiring on January 1, 2005 and an
exercise price equal to $1.875 over the average closing trade price of
Maxicare's Common Stock for the last five trading days immediately
preceding the Effective Date. The effectiveness of Amendment No.1 to
the Option Agreement and Plan Amendment No. 2, shall be subject to and
conditioned upon both (i) the occurrence of the Effective Date and
(ii) expiration of the Amended Employment Agreement on the Termination
Date or its earlier termination for any reason, except (y) by Employee
pursuant to Section 7(b) of the Amended Employment Agreement without
"Good Reason" or (z) for "Cause" pursuant to Section 7(d) of the
Amended Employment Agreement.
9. Amendment to outstanding Options dated as of August
31, 1989. On the Execution Date, Maxicare shall deliver to Employee
an Amended and Restated Option Agreement, as attached hereto and made
a part hereof as Exhibit "H", with respect to options to purchase
277,777.5 shares of Maxicare's Common Stock at $6.54 per share granted
to Employee pursuant to that certain Option Agreement with Maxicare
dated, as of August 31, 1989, as amended by Amendment No. 1 dated
<PAGE>
April 1, 1996 (the "Amended and Restated Confirmation Options"). The
Amended and Restated Confirmation Options shall provide that Employee
shall be entitled to exercise all outstanding Options subject thereto
through and until December 5, 2000. The effectiveness of the Amended
and Restated Option Agreement shall be subject to and conditioned upon
both (i) the occurrence of the Effective Date and (ii) expiration of
the Amended Employment Agreement on the Termination Date or its
earlier termination for any reason, except (y) by Employee pursuant to
Section 7(b) of the Amended Employment Agreement without "Good Reason"
or (z) for "Cause" pursuant to Section 7(d) of the Amended Employment
Agreement.
10. Amendment to Supplemental Executive Retirement Plan.
On the Execution Date, Maxicare shall execute Amendment No. 3, as
attached hereto and made a part hereto as Exhibit "I" to the Maxicare
Health Plans, Inc. Supplemental Executive Retirement Plan (the "SERP")
dated as of January 1, 1997, as amended by Amendment No. 1, dated as
of March 28, 1998 and Amendment No. 2, dated as of May 8, 1998
("Amendment No. 3 to the SERP"). Amendment No. 3 to the SERP which
shall become effective on the Commencement Date, shall provide among
other things that Employee shall continue to accrue rights and
benefits under the SERP during the term of the Consulting Agreement.
The effectiveness of Amendment No. 3 to the SERP shall be subject to
and conditioned upon both (i) the occurrence of the Effective Date and
(ii) expiration of the Amended Employment Agreement on the Termination
Date or its earlier termination for any reason, except (y) by Employee
pursuant to Section 7(b) of the Amended Employment Agreement without
"Good Reason" or (z) for "Cause" pursuant to Section 7(d) of the
Amended Employment Agreement.
11. Attorneys Fees. On the Effective Date, in
connection with the negotiation and documentation of this Agreement
and the Related Agreements, Maxicare agrees to pay the Firm of
Valensi, Rose & Magaram ("VR&M") the sum of $50,000.
12. Release of Maxicare Released Parties.
(a) Except as expressly set forth in Section 12(b)
below and subject to and conditioned upon the occurrence of each of
the following conditions: (i) the Effective Date; (ii) Maxicare's
satisfactions of its obligations under the Amended Employment
Agreement through the expiration of the Amended Employment Agreement
Termination Date or its earlier termination for any reason, except
such termination by reason of Section 7(b) for "Good Reason"; and
(iii) the delivery of each of the Related Agreements which have been
fully executed, this Section 12 shall become effective on the
Termination Date or the earlier termination of the Amended Employment
Agreement for any reason, except by Employee pursuant to Section 7(b)
thereof for "Good Reason", Employee, on his own behalf and on behalf
of his agents, attorneys, representatives, assigns, transferees,
<PAGE>
predecessors in interest, successors in interest, joint venturers,
partners, employees, officers, directors, heirs, legatees, executors,
administrators, and servants (all of which for convenience are
hereinafter referred to as the "Employee Releasing Parties"), hereby
releases and absolutely and forever discharges Maxicare, its agents,
attorneys, representatives, assigns, transferees, predecessors in
interest, successors in interest, affiliates, subsidiaries, joint
venturers, partners, and their respective employees, officers,
directors, heirs, legatees, executors, administrators, and servants
(all of which for convenience are hereinafter referred to as "Maxicare
Released Parties"), from, and shall indemnify and hold Maxicare and
the Maxicare Released Parties harmless from and against, any and all
rights, claims, demands, damages, debts, liabilities, accounts,
obligations, reckonings, liens, attorney's fees, costs, expenses,
actions and causes of action of every kind and nature whatsoever,
whether now known or unknown, suspected or unsuspected, based upon
statute, common law or otherwise, which Employee and/or any of the
Employee Releasing Parties has, own or hold, or at any time heretofore
ever had, owned or held, or may hereafter have, own or hold based upon
or related to any fact, thing, act, event, happening, inaction or
omission occurring or existing at any time up to and including the
Termination Date (collectively "Employee Claims"), including but not
limited to those arising out of, relating to or in connection with
Employee's employment with Maxicare, the Employment Agreement, the
Amended Employment Agreement and any compensation or benefit of any
nature whatsoever which may be due Employee or which may become due
Employee as a result of Employee's employment or consulting services
by Maxicare or any of the Maxicare Released Parties, and the
termination thereof; severance benefits or other compensation or
benefits due to Employee pursuant to Sections 4, 5, 6, 8, 9, 10, 16
and 18(f) of the Employment Agreement and the Amended Employment
Agreement and all Employee Claims, compensation and/or benefits
arising out of or relating to the Employment Agreement, the Amended
Employment Agreement or the termination thereof (all of which for
convenience are hereinafter referred to as the "Employee Released
Matters").
(b) Employee Released Matters shall not extend to
any rights or claims which: (i) Employee may have or which may in the
future arise under Sections 11 ("Indemnification"), 14 ("Advance of
Fees and Expenses"), 18(d) ("Construction") and 18(g) ("Jurisdiction")
of the Amended Employment Agreement or (ii) which may arise with
respect to any breach by the Company of the Amended Employment
Agreement.
13. Release of Employee.
(a) Except as set forth in Section 13 (b) below
and subject to and conditioned upon the occurrence of each of the
following: (i) the Effective Date, (ii) expiration of the Amended
<PAGE>
Employment Agreement on the Termination Date or its earlier
termination for any reason, except (y) by Employee pursuant to Section
7(b) of the Amended Employment Agreement without "Good Reason" or (z)
for "Cause" pursuant to Section 7(d) of the Amended Employment
Agreement and (iii) the delivery of each of the Related Agreements
which have been fully executed, on the Termination Date, this Section
13 shall become effective and Maxicare, on its own behalf and on
behalf of its subsidiaries, "affiliates" (as such term is defined
under the Securities Exchange Act of 1934, as amended), officers,
directors, employees, shareholders, agents, attorneys, accountants,
representatives, assigns, transferees, predecessors in interest,
successors in interest, joint venturers, partners and servants (all
of which for convenience are hereinafter referred to as the "Maxicare
Releasing Parties"), shall hereby release and absolutely and forever
discharges Employee, its agents, attorneys, representatives, assigns,
transferees, successors in interest, and their respective employees,
officers, directors, heirs, legatees, executors, administrators, and
servants (all of which for convenience are hereinafter referred to as
"Employee Released Parties"), from, and shall indemnify and hold
Employee and the Employee Released Parties harmless from and against,
any and all rights, claims, demands, damages, debts, liabilities,
accounts, obligations, reckonings, liens, attorney's fees, costs,
expenses, actions and causes of action of every kind and nature
whatsoever, whether now known or unknown, suspected or unsuspected,
based upon statute, common law or otherwise, which Maxicare and/or any
of the Maxicare Releasing Parties has, own or hold, or at any time
heretofore ever had, owned or held, or may hereafter have, own or hold
based upon or related to any fact, thing, act, event, happening,
inaction or omission occurring or existing at any time up to,
including the Termination Date (collectively "Maxicare Claims"),
arising out of or in connection with (i) Employee's employment with
Maxicare; (ii) Employee's service as a Director of Maxicare; (iii)
Employee's services as an officer and/or director of any parent,
subsidiary or affiliate of Maxicare (collectively with Maxicare,
hereinafter the "Company"); (iv) Employee's service as a consultant;
(v) any actions or failure to act by the Employee on behalf of the
Company; and (vi) all obligations of Employee to the Company pursuant
to the Amended Employment Agreement, Employment Agreement or the Old
Employment Agreement (all of which for convenience are hereinafter
referred to as the "Maxicare Released Matters").
(b) Maxicare Released Matters shall not extend to
any rights or claims which Company may have or which may in the future
arise with respect to (i) (y) "willful" actions or misconduct which
are materially injurious to the Company; provided, however that to
be considered willful an act must be done in bad faith and without
reasonable belief on the part of the Employee that the action was in
the interests of the Company or (z) conviction by final judgment of
Employee of a felony or a crime involving moral turpitude, theft,
fraud or dishonesty with respect to Employee's actions or failure to
<PAGE>
act as an officer, director or employee of the Company; or (ii)
Sections 11 ("Indemnification'), 14 ("Advance of Fees and Expenses"),
18(d) ("Construction") and 18(g) ("Jurisdiction") of the Amended
Employment Agreement or (iii) any breaches by Employee of the Amended
Employment Agreement.
14. Applicability of California Civil Code Section 1542.
Employee Releasing Parties and Maxicare Releasing Parties
(collectively the "Releasing Parties") waive and relinquish all
rights and benefits afforded by Section 1542 of the Civil Code of
State of California with respect to the Employee Released Matters and
Maxicare Released Matters. The Releasing Parties understand that the
facts with respect to the releases contained in this Agreement may
hereinafter turn out to be other than or different from the facts in
that connection now known or believed by the Releasing Parties to be
true; and the Releasing Parties hereby accepts and assumes the risk of
the facts turning out to be different and agrees that this Agreement
shall be and remain in all respects effective and not subject to
termination or rescission by virtue of any such difference in facts.
Section 1542 of the Civil Code of the State of
California reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
15. Releases Contained Herein Irrevocable; Covenant Not
to Sue. Upon the effectiveness of the releases set forth in Sections
12 and 13 above, the releases contained herein shall become
irrevocable with respect to the Maxicare and/or Employee Released
Parties (collectively, the "Released Parties") as to the Maxicare
and/or Employee Released Matters (collectively, the "Released
Matters"). Furthermore, the Releasing Parties hereby covenant and
agree that they will forever refrain and forebear from commencing,
instituting or prosecuting any lawsuit, action or other proceeding
against the Released Parties based on, arising out of, or in
connection with the Released Matters. Notwithstanding the foregoing,
nothing contained herein shall preclude Employee or Maxicare from
exercising their respective rights subject to Section 23(h) hereof in
the event the other party breaches any of its obligations hereunder.
16. Withholding Taxes. Employee understands and agrees
that Maxicare shall be entitled to and shall withhold from any payment
required hereby such applicable state and federal withholding or
similar taxes as may be required.
17. Survival of Amended Employment Agreement Provisions.
The rights and/or obligations of Maxicare and Employee under Sections
<PAGE>
11, 12, 13, 14, 18(d) and 18(g) of the Amended Employment Agreement
shall not be affected hereby, which rights and obligations or
provisions shall survive in accordance with the terms of the Amended
Employment Agreement. Except as expressly set forth above all of the
terms and provisions of the Amended Employment Agreement shall be
terminated and no longer of any force or effect as of the Termination
Date.
18. No Representations. The parties hereto represent and
acknowledge that in executing this Agreement they do not rely and have
not relied upon any representation or statement made by any of the
parties or by any of the parties' agents, attorneys or representatives
with regard to the subject matter, basis or effect of this Agreement
or otherwise, other than those specifically stated in this written
Agreement.
19. Federal Age Discrimination in Employment Act.
Employee acknowledges and agrees that:
(a) This Agreement constitutes a voluntary waiver
of any and all rights and claims Employee has against the Maxicare
Released Parties as of the date of the Employee's execution of this
Agreement under the Federal Age Discrimination in Employment Act of
1986, 29 U.S.C. Section 621, et. seq.;
(b) Employee has waived rights or Employee Claims
pursuant to this Agreement, including, but not limited to,
remuneration for which Employee is entitled, in exchange for the
consideration received from Maxicare, including but not limited to
agreements and obligations of Maxicare contained in the Related
Agreements, the value of which exceeds payment or remuneration to
which Employee was already entitled;
(c) Employee has been advised to consult with an
attorney concerning this Agreement prior to executing it;
(d) Employee was given twenty-one (21) days to
consider the terms of this Agreement or expressly waived such
consideration period; and
(e) Employee may revoke this Agreement at any time
during the seven (7) days following Employee's execution of this
Agreement and that this Agreement does not become effective or
enforceable until the Release Revocation Period has expired, which
will be the Effective Date of this Agreement.
20. Release of Future Rights and Benefits. Employee
acknowledges and agrees that the Company, at the Employee's request,
has agreed to the agreements and obligations contained in the Related
Agreements as full satisfaction and discharge of Employee's rights and
<PAGE>
any Employee Claims with respect to certain benefits and future
contingent compensation under the Employment Agreement and the Amended
Employment Agreement, including but not limited to (i) Employee's
relinquishment of all rights and future benefits after the Termination
Date under Section 5 of the Employment Agreement in existing benefit
plans and plans which may in the future be established; (ii) potential
Sale Bonuses after the Effective Date pursuant to Section 10 of the
Employment Agreement; (iii) payments as a result of a Change of
Control after the Termination Date pursuant to Sections 8 (a)(i) and 8
(a)(ii) of the Employment Agreement (the "Change of Control Payment");
and (iv) potential Performance Bonuses payable after the Effective
Date under Section 4(b) of the Employment Agreement. Employee is
aware that the value of the future benefits being relinquished by such
Employee could greatly exceed the payments and obligations of Maxicare
under the Related Agreements and the value of the future Performance
Bonuses, Change of Control Payment and Sale Bonus could in the
aggregate exceed $8,000,000. Except for those benefits set forth in
Schedule 1, nothing contained herein, shall require Maxicare to
maintain any plan or benefit program for its employees or executives
or prohibit Maxicare from establishing any new benefits or plans in
the future any rights or interests to which Employee is expressly
waiving by the terms hereof. Notwithstanding the foregoing and
without the encouragement by or request of the Company, the Employee
has elected to forego these rights and benefits and certain other
rights in return for the consideration to be received by Employee
pursuant to the Related Agreements.
21. Non-Assignment of Released Matters. Employee
represents and warrants that Employee has not heretofore assigned or
transferred, or purported to assign or transfer, to any person, firm
or corporation whomsoever any Employee Claim. In the event that any
Employee Claim arising out of or relating to an Employee Released
Matter should be made or instituted against any Maxicare Released
Parties because of any such purported assignment or transfer, Employee
agrees to indemnify and hold harmless such Maxicare Released Parties
and to satisfy any such Employee Claim, including reasonable expenses
of investigation, attorneys' fees and costs relating thereto.
22. Representation by Counsel. Employee acknowledges
that Maxicare has advised Employee to seek the advice of counsel in
connection with Employee's rights with respect to the Employment
Agreement, Amended Employment Agreement, Related Agreements, the
termination of his employment with Maxicare and this Agreement. In
connection therewith, Employee has been represented by and has
consulted with counsel of his own choice throughout the Release Review
Period, VR&M, with respect to the above and the negotiations which
preceded Employee's execution of this Agreement and during the Release
Revocation Period. In connection with the foregoing, Employee and
Maxicare acknowledge that Maxicare has been represented by the firm of
Jeffer, Mangels, Butler & Marmaro LLP ("JMBM") in connection with the
<PAGE>
negotiation, documentation and execution of this Agreement and the
Related Agreements. Employee and Maxicare further acknowledge that
JMBM has in the past represented Diane's Designs, a corporation owned
by Employee and Employee's spouse and that JMBM does not now currently
represent Diane's Designs. In connection with all matters relating to
this Agreement and Related Agreements, JMBM has represented solely the
interest of Maxicare.
23. Miscellaneous
(a) Employee acknowledges that this Agreement
affects the settlement of claims which are denied and contested by
Maxicare, and that nothing contained herein shall be construed as an
admission of liability by or on behalf of Maxicare, by whom liability
is expressly denied. In addition, Maxicare acknowledges that this
Agreement affects the settlement of claims which are denied and
contested by Employee, and that nothing contained herein shall be
construed as an admission of liability by or on behalf of Employee, by
whom liability is expressly denied.
(b) This Agreement shall be binding upon and shall
inure to the benefit of (and be enforceable by) Employee and his
respective legal heirs in the event of Employee's death or
incompetency. All of the covenants and arguments herein contained in
favor of the Maxicare Released Parties are for the express benefit of
each and all of them.
(c) This Agreement is made and entered into in the
State of California and shall be interpreted and enforced under and
pursuant to the laws of said jurisdiction.
(d) Wherever in this Agreement the context may
require, the masculine gender shall be deemed to include the feminine
and/or neuter, and the singular to include the plural.
(e) This Agreement shall be binding upon and inure
to the benefit of Maxicare, Employee, the Released Parties and their
respective successors and assigns. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of Maxicare or
by any merger, reorganization or other transaction in which Maxicare
is not the surviving or resulting corporation or upon any transfer of
all or substantially all of the assets of Maxicare in the event of any
such merger, or transfer of assets.
(f) This Agreement may not be modified, altered or
amended except by an instrument in writing signed by the parties
hereto.
(g) Nothing in the Agreement is intended to
require or shall be construed as requiring Maxicare to do or fail to
do any act in violation of applicable law. If any provision of this
<PAGE>
Agreement is invalid or unenforceable, the remainder of this Agreement
shall nevertheless remain in full force and effect. If any provision
is held invalid or unenforceable with respect to particular
circumstances, it shall, nevertheless, remain in full force and effect
in all other circumstances.
(h) The parties hereto agree that any and all
disputes hereunder, including but not limited to, any purported breach
by Maxicare or Employee of their obligations pursuant to this
Agreement, shall be submitted to a court located in Los Angeles,
California and in this regard, the parties agree that they shall
consent to personal jurisdiction in any state and/or the United States
District Court for the Central District of California sitting in Los
Angeles, California and agree to venue in the State of California.
All costs and expenses (including attorneys' fees) incurred by the
parties in connection with any dispute arising under this Agreement,
shall be apportioned between the parties by such court based upon such
court's determination of the merits of their respective positions.
(i) Any notice to Maxicare required or permitted
hereunder shall be given in writing to Maxicare, either by personal
service, telex, telecopier or, if by mail, by registered or certified
mail return receipt requested, postage prepaid, duly addressed to the
Secretary of Maxicare at the address set forth above or to such other
addresses as Maxicare may hereinafter notify Employee, with a copy to
Barry L. Burten, Esq., Jeffer, Mangels, Butler & Marmaro LLP, 2121
Avenue of the Stars, 10th Floor, Los Angeles, California 90067. Any
such notice to Employee shall be given in a like manner, and if mailed
shall be addressed to Employee at Employee's home address set forth
above with a copy to Philip S. Magaram, Esq., Valensi Rose & Magaram
PLC, 1800 Avenue of the Stars, Suite 1000, Los Angeles, California
90067. For the purpose of determining compliance with any time limit
herein, a notice shall be deemed given on the fifth business day
following the postmarked date, if mailed, or the date of delivery if
personally delivered or delivered by telex or telecopier.
(j) A waiver by either party of any term or
condition of this Agreement or any breach thereof, in any one
instance, shall not be deemed or construed to be a waiver of such term
or condition or of any subsequent breach thereof.
(k) The paragraph and subparagraph headings
contained in this Agreement are solely for convenience and shall not
be considered in its interpretation.
(l) This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
(m) Employee represents and agrees that Employee
has carefully read and fully understands all of the provisions of this
<PAGE>
Agreement and is voluntarily entering into this Agreement.
(n) Employee and Maxicare hereby agree that there
will be a mutually agreeable press release upon the occurrence of
execution of this Agreement and the Related Agreements.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
MAXICARE HEALTH PLANS, INC.
a Delaware corporation
By: /s/ Alan D. Bloom By: /s/ Richard A. Link
Alan D. Bloom, Secretary Richard A. Link, Executive
Vice President and Chief
Financial Officer
"EMPLOYEE"
/s/ Peter J. Ratican
Peter J. Ratican
<PAGE>
Schedule 1
Description of Company Benefits
o Basic life insurance (underwritten by Maxicare Life and
Health Insurance Company - "MLH"); face value of
$1,200,000.
o Basic Accidental Death and Dismemberment (underwritten
by Transamerica); policy value of $500,000.
o Long term disability (underwritten by UNUM).
o Indemnity medical coverage (underwritten by MLH);
subscriber and dependents.
o Indemnity dental coverage (underwritten by SafeHealth
Insurance Company); subscriber and dependents.
o Maxicare medical coverage; subscriber and dependents.
o Maxicare dental coverage; subscriber and dependents.
o Maxicare Health Plans, Inc. - Supplemental Executive
Retirement Plan.
<PAGE>
Schedule 2
Options Previously Granted Under the Maxicare Health
Plans, Inc. 1996 Senior Executives Stock Option Plan
Exercise
Number of Shares Date of Grant Price Expiration Date
70,000 July 26, 1996 $14.75 July 26, 2006
70,000 January 1, 1997 $22.25 January 1, 2007
70,000 January 1, 1998 $10.88 January 1, 2008
Exhibit 10.3m
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement"), is entered
into this 16 day of April, 1999 (the "Execution Date"), by and between
Peter J. Ratican ("Consultant") located at 1265 Chateau Road,
Pasadena, CA 91105 and Maxicare Health Plans, Inc., a Delaware
corporation, located at 1149 South Broadway Street, Suite 910, Los
Angeles, CA 90015 (the "Company").
WHEREAS, Consultant has been employed as Chairman of the
Board ("Chairman"), President and Chief Executive Officer ("CEO") of
the Company pursuant to the terms of that certain Amended and Restated
Employment and Indemnification Agreement dated as of April 1, 1996, as
amended by Amendment No. 1 thereto, dated February 11, 1997, Amendment
No. 2 thereto, dated March 28, 1998, Amendment No. 3 thereto, dated
May 8, 1998 and Amendment No. 4 thereto of even date herewith by and
between the Company and Consultant (collectively, the "Employment
Agreement");
WHEREAS, the Consultant has agreed to terminate the
Employment Agreement on June 30, 1999 (the "Termination Date") and
enter into a Settlement and Release Agreement with the Company of even
date herewith (the "Settlement Agreement") along with certain other
agreements ("Related Agreements");
WHEREAS, subject to the effectiveness of this Agreement,
the Settlement Agreement and the Related Agreements the Company and
the Consultant have agreed that Consultant shall render consulting
services on behalf of the Company after the Termination Date pursuant
to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, the Company and Consultant agree as
follows:
1. Definitions. As used in this Agreement, the
following capitalized terms shall have the following meanings, unless
otherwise expressly provided or unless the context otherwise requires.
"Board of Directors" means the Board of Directors of the Company or
the Executive Committee of the Board of Directors.
"Cause" means, except as otherwise contemplated by
Sections 7(a) or 7(b) below, the involuntary termination of the
Agreement by the Company by reason of:
<PAGE>
(i) the willful or habitual failure by Consultant
to perform requested duties commensurate with his engagement pursuant
to the terms of this Agreement without good cause (the "Breach"),
after a demand for substantial performance is delivered to Consultant
by the Board of Directors, which notice specifically identifies the
manner in which Consultant has not performed his duties (other than as
a result of the death orIncapacity of Consultant) and Consultant is
given the opportunity to cure the Breach ;
(ii) the willful engaging by Consultant in
misconduct materially injurious to the Company, provided, however,
that an act shall be considered "willful," only if done or omitted in
bad faith and without reasonable belief on Consultant's part that his
action was in the best interest of the Company; or
(iii) the conviction by final judgment and after all
appeals of Consultant for a felony or of a crime involving moral
turpitude, dishonesty, fraud or theft with respect to the performance
of Consultant's services to the Company (collectively referred to as
"Crime"); provided, however, this provision shall not apply in the
event that such Crime was committed by Consultant on behalf of or for
the benefit of the Company and not for Consultant's personal gain.
Notwithstanding the foregoing, for purposes of Sections 1(i) and
1(ii), above, such events shall be deemed to have occurred only upon
(a) the due adoption by the Board of Directors at a meeting called and
held for such purpose (after reasonable notice to Consultant and his
counsel and after affording Consultant and his counsel an opportunity
to be heard before the Board of Directors), of a resolution finding
that, in the good faith opinion of the Board of Directors, Consultant
was guilty of the conduct set forth in such Sections, and (b) in the
event that such resolution is duly adopted by the Board of Directors,
the receipt by Consultant of five (5) days written notice prior to the
effectiveness thereof.
"Incapacity" means the absence of the Consultant from
his engagement or the inability of Consultant to perform his duties
pursuant to this Agreement by reason of mental or physical illness,
disability or incapacity for a period of four (4) months or more
during any twelve (12) month period during the term hereof, and either
the Company or Consultant elects to declare such illness, disability
or incapacity to be of a permanent nature.
2. Consulting Services. Subject to the restrictions
and limitations set forth below, during the "Term" as hereinafter
defined, of this Agreement, Consultant and the Company hereby agree:
(a) for the purposes hereof the consulting
services rendered by the Consultant shall be limited to advice and
strategic planning for the Company, or discussions, negotiations with
<PAGE>
third parties of a nature consistent with those services previously
performed by the Consultant as Chief Executive Officer and President
of the Company;
(b) Consultant shall render only those consulting
services requested by the Chairman of the Board of the Company, or its
Chief Executive Officer, or the Board of Directors (collectively, the
"Supervisors"). Unless expressly requested by the Supervisors in a
manner consistent with the terms hereof, Consultant shall not be
required to render any consulting services during the Term hereof and
the failure of the Supervisors to request and the Consultant to render
consulting services during the Term hereof shall not be grounds for
termination or modification of this Agreement;
(c) unless expressly agreed to by the Consultant
all consulting services rendered by the Consultant hereunder shall be
rendered during normal business hours; and
(d) any consulting services rendered by the
Consultant pursuant to this Agreement shall be in the Los Angeles
metropolitan area or such other place as the Company may in the future
relocate its principal executive offices to. The consulting services
rendered by the Consultant during the Term of this Agreement as set
forth in Sections 2(a) through 2(d) above shall hereinafter be defined
as the "Consulting Services".
3. Non-Exclusive Services. Notwithstanding anything to
the contrary contained elsewhere herein:
(a) the Consulting Services to the Company during
the Term of this Agreement shall be non-exclusive. In addition, the
performance of such Consulting Services shall not interfere with any
other business or position which Consultant wishes to engage in or
undertakes during the Term hereof. Notwithstanding the foregoing,
Consultant agrees that for a period of one (1) year from the
Termination Date, Consultant shall not serve as an employee, officer,
director, advisor, consultant or purchase an amount in excess of five
percent (5%) of any corporation, partnership, joint venture, limited
liability company or other enterprise which competes directly or
indirectly with the Company in the States of California, Indiana or
Louisiana, including but not limited to any health care provider,
health maintenance organization ("HMO"), preferred provider
organization ("PPO"), life, health or disability insurance company, or
any other business which arranges for, provides or finances health
care in such states (hereinafter, collectively "Competitors"). Except
as expressly set forth in the preceding sentence, nothing contained in
this Agreement shall prohibit Consultant from serving as an officer,
director or employee, or being a shareholder, partner, joint-venturer
or member of any Competitor or any other business or other enterprise
including any business, enterprise, position, or ownership interest
<PAGE>
which may be competitive with the Company or any of its subsidiaries
or affiliates. Consultant shall be able to take reasonable vacations
during the Term (as hereinafter defined) of this Agreement, including,
but not limited to, out of town vacations, and the rendering of
Consulting Services shall not interfere with such vacations; and
(b) Subject to the requirements of Section 3(a)
above, Consultant shall be entitled to earn and receive from entities
other than the Company any compensation, salary, profit
participations, bonuses, wages, consulting fees or other earnings for
services rendered by Consultant during the Term hereof without offset
or deduction with respect to any Consulting Fees due hereunder
whatsoever. In addition, Consultant shall have no duty of any kind
pursuant to this Agreement to seek any other employment or engage in
any other business activity during the term hereof.
4. Compensation.
(a) As compensation for Consultant's agreement to
be available to render the Consulting Services during the Term of this
Agreement, the Company agrees to compensate the Consultant at a rate
of Five Hundred Thousand Dollars ($500,000) per annum (the
"Consulting Fee"). Said Consulting Fee shall be payable in equal
monthly installments beginning on July 1, 1999 and continuing on the
first business day of each month thereafter (the "Required
Compensation Payment Date") or in such other installments as may be
agreed upon between the parties.
(b) If Consultant does not receive the applicable
portion of the Consulting Fee ("Required Compensation Payment") within
five (5) days after the Required Compensation Payment Date in
accordance with the provisions of this Agreement, Consultant shall be
entitled to liquidated damages on such payment at a rate of five (5)
percent thereof and Consultant may provide the Company with written
notification delivered in accordance with Section 15(g) below that
such payment has not been received (the "Default Notice"). If
Consultant does not receive the Required Compensation Payment within
thirty (30) days after the date the Default Notice is deemed given by
Consultant to the Company pursuant to Section 15(g) below (the "Breach
Date") and there is a final, nonappealable judgment by a court with
appropriate jurisdiction pursuant to Section 15(f) below ruling that
the Company's failure to pay such Required Compensation Payment is a
breach of its obligations to Consultant under the Consulting Agreement
which breach has not been estopped, excused, waived, subject to
offset, recoupment or subject to any other affirmative defenses
available to the Company under law or equity as a result of
Consultant's breach of the Consulting Agreement or otherwise (a
"Company Default"), then such Company Default shall be deemed
retroactive to the Breach Date. Upon the occurrence of a Company
<PAGE>
Default, Consultant may elect (hereinafter referred to as the "Company
Default Election") to do the following:
(i) receive the present value (determined
using an interest rate of five (5) percent) of the Consulting Fees
remaining due through June 30, 2003 (the "Remaining Amounts Due");
(ii) in the event of the foregoing,
Consultant shall agree to execute such documents as may be mutually
acceptable to counsel for Consultant and the Company or its designees
assigning to the Company as a substitute for Collateral under the
Pledge Agreement entered into on February 18, 1997 between the Company
and Consultant an amount not to exceed $800,000 of all of Consultant's
or Consultant's assignee's rights, title and interests in the
Remaining Amounts Due ("Assigned Remaining Amounts Due"). Such amount
shall accrue interest at a rate of five (5) percent per annum from the
assignment date through June 30, 2003. If the event Consultant timely
pays to the Company the difference between the Withholding Amount, as
such term is defined in the Amended and Restated Secured Promissory
Note of even date herewith entered into between Consultant and the
Company (hereinafter referred to as the "Withholding Amount"), and the
Remaining Amount Due and the Company fails to pay the Withholding
Amount to the applicable governmental entities in a timely manner:
(i) the entire Withholding Amount shall earn interest at the legal
rate from and after the date of receipt by the Company of Consultant's
payment and (ii) the Consultant shall be entitled to recovery of any
penalties incurred as a result of such failure to pay the Withholding
Amount;
(iii) withdraw Collateral (as such term is
defined in the Pledge Agreement entered into on February 18, 1997 by
and between the Company and Consultant) of Consultant's choice to the
extent that the total amount of the Collateral exceeds $800,000. In
the event the Assigned Remaining Amounts Due equals or exceeds
$800,000, Consultant shall be entitled to withdraw the entire amount
of the remaining Collateral;
(iv) the foregoing remedies shall be in
addition to such other remedies as may be available to Consultant in
law and in equity;
(v) the foregoing provisions shall not
prejudice Consultant's rights to seek provisional remedies and
prejudgment interest upon the occurrence of a Breach Date; and
(vi) upon the occurrence of the Breach Date, the Company shall no
longer be entitled to cure any breach of this Agreement.
5. Benefits. In addition to the Consulting Fee
provided for in Section 3 of this Agreement during the term of this
Agreement:
<PAGE>
(a) Consultant shall have the right to continue to
participate in any life, health and accident insurance, or other
employee benefit plans as expressly set forth in Schedule 1 attached
hereto (the "Benefits") or such other comparable plans with respect to
such Benefits which may be in effect from time to time during the Term
of this Agreement for senior executives of the Company under terms no
less favorable to those currently available to the Consultant pursuant
to the terms of the Employment Agreement, as though Consultant was a
full time employee of the Company;
(b) the Company shall provide Consultant with a
monthly automobile allowance of One Thousand One Hundred Dollars
($1,100) and a car-phone, which car-phone shall be maintained at the
Company's expense; and
(c) the Company shall pay on behalf of or
reimburse Consultant for up to $10,000 for each year during the term
of this Agreement thereafter for the fees and expenses incurred by
Consultant in connection with financial and tax counseling, estate
planning and income tax preparation.
6. Expenses. The Company shall promptly reimburse
Consultant for all out of pocket expenses incurred by Consultant in
the discharge of Consultant's duties hereunder, upon receipt from
Consultant of vouchers, receipts or other reasonable substantiation of
such expenses. Upon the prior request of the Company and at the
election of the Consultant, in the event the Consultant travels on the
Company's behalf to perform any Consulting Services, Consultant shall
be entitled to travel first class, to stay at luxury hotels and eat at
first class restaurants.
7. Term of Agreement. The term of this Agreement shall
commence on July 1, 1999 and shall continue for a period of four (4)
years from such date until June 30, 2003, unless earlier terminated as
herein provided. This Agreement shall be terminated prior to the
expiration of the term as set forth above only in the event of the
occurrence of any one of the following circumstances:
(a) The death of Consultant;
(b) The Incapacity ofConsultant;
(c) The Company terminates this Agreement for
Cause; or
(d) Consultant voluntarily elects to terminate this
Agreement by written notice to the Company. For the purposes of this
Agreement, the "Term" hereof shall be July 1, 1999 through June 30,
2003 or such other shorter period in the event the Agreement is
<PAGE>
terminated sooner pursuant to Sections 7(a) through 7(d) above.
8. Compensation Upon Termination. Subject to
Section 8(d) below, in the event this Agreement is terminated pursuant
to Sections 7(a) through 7(d) hereof, the Company shall be obligated
to pay or provide to Consultant (or his legal representatives, as the
case may be) under this Agreement the following and only the
following:
(a) In the event of a termination pursuant to
Section 7(a): (x) the remaining Consulting Fees due Consultant under
Section 4 hereof through June 30, 2003 as though such termination had
not occurred, when such Consulting Fees would have otherwise been due;
(y) benefits due under Section 5 (to the extent available) for sixty
(60) days after such termination and (z) payment for any unreimbursed
expenses through the end of the Term;
(b) In the event of a termination pursuant to
Section 7(b): (x) the remaining Consulting Fees due Consultant under
Section 4 hereof through June 30, 2003 as though such termination had
not occurred, when such Consulting Fees would have otherwise been due;
(y) benefits due under Section 5 (to the extent available) through
June 30, 2003 as though such termination had not occurred, when such
Consulting Fees would have otherwise been due and (z) payment for any
unreimbursed expenses through the end of the Term;
(c) In the event of a termination pursuant to
Sections 7(c) or 7(d): (x) payment of any unpaid Consulting Fees due
Consultant under Section 4 hereof through the end of the Term; (y)
benefits due under Section 5 through the end of the Term; and (z)
payment for any unreimbursed expenses through the end of the Term;
and
(d) Consultant agrees to cooperate with the
Company, including being available for such medical exams as may be
necessary, to enable the Company to obtain declining principal
balance term life insurance on the Consultant in an amount equal to
the outstanding amounts due pursuant to Section 8(a)(x) above in the
event of Consultant's death.
9. Indemnification.
(a) The Company shall indemnify Consultant, during
and after the Term of this Agreement, to the fullest extent provided
for in the Company's Articles of Incorporation or Bylaws, as in
effect, or as may thereafter be amended, modified or revised from time
to time (collectively, "Company's Articles"), or permitted under the
law of Delaware or such other state in which the Company may hereafter
be domiciled, against any and all costs, claims, judgments, fines,
settlements, liabilities, and fees or expenses (including, without
<PAGE>
limitation, reasonable attorneys' fees) incurred in connection with
any proceedings (including, without limitation, threatened actions,
suits or investigations) brought by party or parties other than
Consultant or Consultant's heirs, successors or assignees arising out
of, or relating to, Consultant's actions or inactions as Consultant or
the Consultant Services performed by Consultant at any time during the
Term of this Agreement or any counterclaims brought in defense of an
otherwise indemnifiable action. The indemnification contemplated
under this Section 9(a) shall be provided to Consultant unless, at the
time indemnification is sought, such indemnification would be
prohibited under the law of Delaware or of the state in which the
Company may then be domiciled; the Company may rely on the advice of
its counsel in determining whether indemnification is so prohibited.
(b) In the event of any actual or threatened
investigation, administrative proceeding or litigation by any federal,
state or local governmental authority (including agencies thereof)
against the Company or any director, officer or employee of the
Company arising from actions taken or events occurring at any point
during the Term hereof, in which proceedings Consultant is not a party
or threatened to be made a party but which require Consultant's
attendance and if, under applicable law, or the rules or regulations
of the particular governmental authority, counsel for the Company
cannot additionally represent Consultant upon the provision of proper
substantiation, or such simultaneous representation would not be
permitted under the applicable canons of ethics governing attorneys-
at-law, then: (i) Consultant shall have the right to retain such
personal legal counsel, accounting advisors and experts as may be
reasonably necessary in connection with such attendance, and (ii) the
Company shall promptly reimburse Consultant, whether or not then in
office, for all reasonable expenses incurred by him in retaining the
above counselors, advisors and experts. If Consultant's attendance is
required at proceeding contemplated by this Section 9(b) after the
Term hereof, then, in all events, and in addition to the reimbursement
described in (ii) above, the Company shall pay to Consultant a stipend
in the amount of One Thousand Dollars ($1,000) per day for each day or
any portion thereof during which Consultant is in attendance and shall
reimburse Consultant for all reasonable travel, hotel and living
expenses incurred by him in connection with such attendance.
(c) Any reimbursement or indemnification required
under this Section 9 shall be made no later than ten (10) business
days after receipt by the Company of the written request of
Consultant, together with, with respect to expenses incurred,
vouchers, receipts or other reasonable substantiation.
(d) If Consultant is entitled under any provision
of this Section 9 to indemnification by the Company for some or a
portion of the expenses, judgments, fines, or penalties actually and
reasonably incurred by him in the investigation, defense, appeal or
<PAGE>
settlement of any action, suit or other proceeding, but not, however,
for the total amount thereof, the Company shall nevertheless indemnify
Consultant for the portion of such expenses, judgments, fines or
penalties to which Consultant is entitled.
(e) The indemnification provided under this
Section 9 shall not be deemed exclusive of any other rights to which
Consultant may be entitled under the Company's Articles, any
resolution of the Board of Directors, any agreement, any vote of
shareholders or disinterested directors, insurance contracts, the law
of Delaware or any other state in which the Company may hereafter be
domiciled, or otherwise, both as to actions or inactions by Consultant
in connection with his performing Consulting Services during the Term
hereof, even though complaint may have been asserted after the Term
hereof. Amounts payable as indemnification under this Section 9 shall
be reduced by the amount of any other sums received by Consultant for
the same purpose pursuant to any of such other provisions.
(f) In the event of any change, after the date of
this Agreement, in any applicable law, statute, or rule which expands
the right of a corporation domiciled in Delaware or the state in which
the Company may hereafter be domiciled to indemnify a consultant, such
change (to the extent permitted by applicable law) shall be
automatically incorporated herein, without further action of the
parties, to the extent that such change affects Consultant's rights
and the Company's obligations under this Section 9.
(g) In the event of any change, after the date of
this Agreement, in any applicable law, statute, or rule which narrows
or restricts the right of a corporation domiciled in Delaware or the
state in which the Company may hereafter be domiciled to indemnify a
consultant such change (to the extent permitted by applicable law)
shall have no effect on the provisions of, or the parties' respective
rights and obligations under this Section 9.
(h) In the event of an amendment or other
revision, after the date of this Agreement, to the Company's Articles
which expands the right of the Company to indemnify Consultant for the
consulting services rendered by Consultant during the Term hereof,
such change shall be automatically incorporated into this Agreement,
without further action of the parties, to the extent that such change
relates to Consultant's rights and the Company's obligations under
this Section 9.
(i) In the event of an amendment or other
revision, after the date of this Agreement, to the Company's Articles
which narrows or restricts the right of the Company to indemnify
Consultant for the consulting services rendered by Consultant during
the Term hereof, such change shall have no effect on the provisions
of, or the parties' respective rights and obligations under, this
Section 9.
<PAGE>
(j) The Company agrees to give Consultant prompt
notice of any amendment to or modification of the Company's Articles
which relate to its ability to provide the indemnification
contemplated under this Section 9.
(k) Notwithstanding any other provision herein,
the Company shall not be obligated pursuant to the terms of this
Section 9:
(i) to indemnify or advance expenses to
Consultant with respect to proceedings or claims (except counterclaims
or cross claims) initiated or brought voluntarily by Consultant and
not by way of defense, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board
of Directors finds it to be appropriate; or
(ii) to advance expenses or indemnify
Consultant for any such expenses incurred by him with respect to any
claim, issue or matter, raised in connection with a proceeding
instituted by Consultant to enforce or interpret the provisions of
this Section 9, if a court of competent jurisdiction renders a final
judgment ruling against the Consultant with respect to the material
assertions made by Consultant with respect to such claim, issue or
matter, but such indemnification or advancement of expenses may be
provided by the Company in specific cases if the Board of Directors
finds it to be appropriate; or
(iii) to indemnify Consultant for expenses
or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to Consultant by an
insurance carrier under a policy of directors' and officers' liability
insurance maintained by the Company; or
(iv) to indemnify Consultant for expenses
or liabilities arising from the purchase and sale by Consultant of
securities of the Company in violation of federal or state securities
laws; or
(v) to indemnify Consultant for
liabilities or with respect to proceedings or claims relating to
actions not taken in his capacity as a Consultant rendering Consulting
services on behalf of the Company, including, without limitation,
actions taken in his individual capacity as a shareholder.
10. Confidentiality. Consultant covenants and agrees
that he will not at any time during or after the Term of this
Agreement reveal, divulge or make known to any person, firm or
corporation any information, knowledge or data of a proprietary nature
relating to the business of the Company or any of its affiliates which
<PAGE>
is not or has not become generally known or public. Consultant shall
hold, in a fiduciary capacity, for the benefit of the Company, all
information, knowledge or data of a proprietary nature, relating to or
concerned with, the operations, customers, developments, sales,
business and affairs of the Company and its affiliates which is not
generally known to the public and which is or was obtained by the
Consultant during the Term of this Agreement. Consultant recognizes
and acknowledges that all such information, knowledge or data is a
valuable and unique asset of the Company and accordingly he will not
discuss or divulge any such information, knowledge or data to any
person, firm, partnership, corporation or organization other than to
the Company, its affiliates, designees, assignees or successors or
except as may otherwise be required by the law, as ordered by a court
or other governmental body of competent jurisdiction, or in connection
with the business and affairs of the Company.
11. Equitable Remedies. In the event of a breach or
threatened breach by Consultant of any of his obligations under
Section 10 hereof, Consultant acknowledges that the Company may not
have an adequate remedy at law and therefore it is mutually agreed
between Consultant and the Company that in addition to any other
remedies at law or in equity which the Company may have, the Company
shall be entitled to seek in a court of law and/or equity a temporary
and/or permanent injunction restraining Consultant from any continuing
violation or breach of this Agreement.
12. Advance of Fees and Expenses. The Company shall
promptly advance to Consultant:
(a) to the maximum extent provided for in the
Company's Articles or permitted by the law of Delaware or such other
state in which the Company may hereafter be domiciled, any fees or
expenses which are included as indemnifiable fees or expenses pursuant
to Section 9 hereof (including, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals,
amounts paid in settlement by or on behalf of Consultant, and legal,
accounting or other professional fees and disbursements) which may be
incurred by Consultant and in the event of any other dispute arising
under this Agreement involving an effort by Consultant to protect,
enforce or secure rights or benefits claimed by him hereunder, all
reasonable expenses, including attorneys' fees, incurred by Consultant
in connection with such dispute (collectively, "Reimbursed Expenses");
(b) Reimbursed Expenses shall be made by the
Company upon the written request of Consultant, which request shall be
accompanied by an undertaking executed by Consultant acceptable in
form and substance to counsel for the Company, by which Consultant
undertakes to repay any amounts advanced to the extent that it is
ultimately determined, by compromise, settlement, arbitration or final
non-appealable court ruling, that Consultant is not entitled to
<PAGE>
indemnification or payment, as appropriate, for all or any portion of
such fees and expenses;
(c) No later than ten (10) business days after
receipt by the Company of the written request and undertaking of
Consultant, together with receipts, invoices or other written
documentation evidencing the Reimbursed Expenses to be covered by the
advance, the Company shall make the advance requested, in one or more
payments, to Consultant or according to his written instructions; and
(d) Any advances contemplated under Section 12(a)
above, shall be made to Consultant unless, at the time the advance is
requested, such advance would be prohibited under the law of Delaware
or the state in which the Company may then be domiciled; the Company
may rely on the written advice of its counsel in determining whether
an advance is so prohibited.
13. Effective Date. The effectiveness of this Agreement
shall be conditioned upon (i) the occurrence of the "Effective Date"
as such term is defined in the Settlement Agreement; (ii) delivery of
the fully executed Settlement Agreement and Related Agreements; (iii)
the Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Agreement by the Board provided, however,
that if such approval is not unanimous, Consultant may elect to
declare the Settlement Agreement and the Related Agreements null and
void.
14. Representation by Counsel. Consultant acknowledges
that the Company has advised Consultant to seek the advice of counsel
in connection with Consultant's rights with respect to this Agreement,
the Settlement Agreement and the Related Agreements. In connection
therewith, Consultant has been represented by and has consulted with
counsel of his own choice throughout the negotiation, drafting and
execution of this Agreement, Valensi, Rose & Magaram PLC. In
connection with the foregoing, Consultant and the Company acknowledge
that the Company has been represented by its general outside counsel,
the firm of Jeffer, Mangels, Butler & Marmaro LLP ("JMBM") in
connection with the negotiation, documentation and execution of this
Agreement. Consultant and the Company further acknowledge that JMBM
has in the past represented Diane's Designs, a corporation owned by
Consultant and Consultant's spouse and that JMBM does not now
currently represent Diane's Designs. In connection with all matters
relating to this Consultants, JMBM has represented solely the interest
of the Company.
15. Miscellaneous.
(a) This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company. This
<PAGE>
Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company or by any merger, reorganization or other
transaction in which the Company is not the surviving or resulting
corporation or upon any transfer of all or substantially all of the
assets of Company in the event of any such merger, or transfer of
assets. The provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving business entity or the
business entity to which such assets shall be transferred in the same
manner and to the same extent that the Company would be required to
perform it if no such transaction had taken place.
This Agreement shall inure to the benefit of and be
enforceable by Consultant's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees.
(b) Except as otherwise provided by law or
elsewhere herein, Consultant shall be entitled to all benefits as set
forth herein notwithstanding the occurrence of the following events:
(i) any act of force majeure which
materially and adversely affects the Company's business and
operations, including but not limited to, the Company having sustained
a material loss, whether or not insured, by reason of fire,
earthquake, flood, epidemic, explosion, accident, calamity or other
act of God; or
(ii) any strike or labor dispute or court
or government action, order or decree; or
(iii) a banking moratorium having been
declared by federal or state authorities; or
(iv) an outbreak of major armed conflict,
blockade, embargo, or other international hostilities or restraints or
orders of civic, civil defense, or military authorities, or other
national or international calamity having occurred; or
(v) any act of public enemy, riot or civil disturbance or threat
thereof; or
(vi) a pending or threatened legal or
governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the
threat of any such proceeding or action, which could materially
adversely affect the Company.
(c) This Agreement may not be modified, altered or
amended except by an instrument in writing signed by the parties
hereto.
<PAGE>
(d) This Agreement shall be construed in
accordance with the laws of the State of California except to the
extent that any provision of Sections 9 or 12 hereof may relate to an
interpretation of the corporation laws of Delaware, the state in which
the Company is domiciled, in which case such provision shall be
construed in accordance with the corporation laws of that state.
(e) Nothing in the Agreement is intended to
require or shall be construed as requiring the Company to do or fail
to do any act in violation of applicable law; provided, however, that
the foregoing shall not be utilized as a defense by the Company to any
claim by Consultant that the Company has breached any terms of this
Agreement. If any provision of this Agreement is invalid or
unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall,
nevertheless, remain in full force and effect in all other
circumstances.
(f) The parties hereto agree that any and all
disputes hereunder shall be submitted to a court located in Los
Angeles, California and in this regard, the parties agree that they
shall consent to personal jurisdiction in any state and/or the United
States District Court for the Central District of California sitting
in Los Angeles, California and agree to venue in the State of
California. All costs and expenses (including attorneys' fees)
incurred by the parties in connection with any dispute arising under
this Agreement, shall be apportioned between the parties by a court
based upon such court's determination of the merits of their
respective positions. The burden of proving that indemnification or
any advance under Sections 9 or 12 is not appropriate shall be on the
Company.
(g) Any notice to the Company required or
permitted hereunder shall be given in writing to the Company, either
by personal service, telex, telecopier or, if by mail, by registered
or certified mail return receipt requested, postage prepaid, duly
addressed to the Secretary of the Company at its then principal place
of business with a copy to Barry L. Burten, Esq., Jeffer, Mangels,
Butler & Marmaro LLP, 2121 Avenue of the Stars, 10th Floor, Los
Angeles, California 90067. Any such notice to Consultant shall be
given in a like manner, and if mailed shall be addressed to Consultant
at Consultant's home address then shown in the files of the Company
with a copy to Philip Magaram, Esq., Valensi Rose & Magaram PLC, 1800
Avenue of the Stars, Suite 1000, Los Angeles, California 90067. For
the purpose of determining compliance with any time limit herein, a
notice shall be deemed given on the fifth business day following the
postmarked date, if mailed, or the date of delivery if personally
delivered or delivered by telex or telecopier.
<PAGE>
(h) A waiver by either party of any term or
condition of this Agreement or any breach thereof, in any one
instance, shall not be deemed or construed to be a waiver of such term
or condition or of any subsequent breach thereof.
(i) The section and subsection headings contained
in this Agreement are solely for convenience and shall not be
considered in its interpretation.
(j) This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
(k) Consultant represents and agrees that
Consultant has carefully read and fully understands all of the
provisions of this Agreement and is voluntarily entering into this
Agreement.
(l) The Company hereby acknowledges that it has
reviewed and approved all of Consultant's expense reimbursement
requests through the Effective Date as such term is defined in the
Settlement Agreement.
16. Survival. The rights and/or obligations of the
Company and Consultant under Sections 10, 11, 12, 15(g) and 15(f) of
this Agreement shall not be affected by the termination of this
Agreement which rights and obligations or provisions shall survive.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
COMPANY:
MAXICARE HEALTH PLANS, INC.
a Delaware corporation
By: /s/ Richard A. Link
Its: Executive Vice President and
Chief Financial Officer
By: /s/ Alan Bloom
Its: Secretary
CONSULTANT:
/s/ Peter J. Ratican
Peter J. Ratican
<PAGE>
Schedule 1
Description of Company Benefits
o Basic life insurance (underwritten by Maxicare Life and
Health Insurance Company - "MLH"); face value of
$1,200,000.
o Basic Accidental Death and Dismemberment (underwritten
by Transamerica); policy value of $500,000.
o Long term disability (underwritten by UNUM).
o Indemnity medical coverage (underwritten by MLH);
subscriber and dependents.
o Indemnity dental coverage (underwritten by SafeHealth
Insurance Company); subscriber and dependents.
o Maxicare medical coverage; subscriber and dependents.
o Maxicare dental coverage; subscriber and dependents.
o Maxicare Health Plans, Inc. - Supplemental Executive
Retirement Plan.
Exhibit 10.91
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement"), is entered
into this 16 day of April, 1999 (the "Execution Date"), by and between
Elwood I. Kleaver, Jr. ("Consultant") located at 4670 Somerset Court,
Brookfield, Wisconsin 53045-8156 and Maxicare Health Plans, Inc., a
Delaware corporation, located at 1149 South Broadway Street, Suite
910, Los Angeles, CA 90015 (the "Company").
WHEREAS, Peter J. Ratican ("Ratican") has been employed
as Chairman of the Board ("Chairman"), President and Chief Executive
Officer ("CEO") of the Company pursuant to the terms of that certain
Amended and Restated Employment and Indemnification Agreement by and
between the Company and Ratican dated as of April 1, 1996, as amended
by Amendment No. 1 thereto, dated February 11, 1997, Amendment No. 2
thereto, dated March 28, 1998 and Amendment No. 3 thereto, dated May
8, 1998 (the "Existing Employment Agreement");
WHEREAS, Ratican has agreed to terminate the Ratican
Employment Agreement effective June 30, 1999 (the "Termination Date")
and enter into a Settlement and Release Agreement with the Company
(the "Ratican Settlement Agreement"), Amendment No. 4 thereto of even
date herewith (Amendment No. 4 along with the Existing Employment
Agreement, collectively, the "Ratican Employment Agreement"), along
with certain other arrangements (all such agreements, collectively,
the "Ratican Related Agreements");
WHEREAS, Ratican has agreed to perform limited duties
from the Effective Date, as defined in the Ratican Settlement
Agreement (hereinafter referred to as the "Effective Date"), until the
Termination Date;
WHEREAS, Consultant has served on the Board of Directors
since May of 1998 and has over twenty years of experience in the
managed health care industry;
WHEREAS, Consultant has been in the business of
rendering health care consulting services for over four years;
WHEREAS, the Company requires immediate additional
senior executive expertise and experience; accordingly, in recognition
that Consultant's skills and experience are essential to the on-going
business, operations and prospects of the Company, the Company and
Consultant have agreed to enter into this Agreement for a term
commencing on the Effective Date through and beyond the term of the
Ratican Employment Agreement;
<PAGE>
WHEREAS, subject to the effectiveness of the Ratican
Settlement Agreement and the Ratican Related Agreements, the Company
and the Consultant have agreed that Consultant shall render consulting
services on behalf of the Company pursuant to the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, the Company and Consultant agree as
follows:
1. Definitions. As used in this Agreement, the
following capitalized terms shall have the following meanings, unless
otherwise expressly provided or unless the context otherwise requires.
"Board of Directors" means the Board of Directors of the
Company or the Executive Committee of the Board of Directors which the
Executive Committee shall, during the term hereof, initially consist
of Consultant, Claude Brinegar, Thomas W. Field and Paul R. Dupee, Jr.
"Cause" means, except as otherwise contemplated by
Sections 6(a) or 6(b) below, the involuntary termination of the
Agreement by the Company by reason of:
(i) the willful or habitual failure by
Consultant to perform requested duties commensurate with his duties
pursuant to the terms of this Agreement without good cause (the
"Breach"), after a demand for substantial performance is delivered to
Consultant by the Board of Directors, which notice specifically
identifies the manner in which Consultant has not performed his duties
(other than as a result of the death or Incapacity of Consultant) and
Consultant is given the opportunity to cure the Breach;
(ii) the willful engaging by Consultant in
misconduct materially injurious to the Company, provided, however,
that an act shall be considered "willful," only if done or omitted in
bad faith and without reasonable belief on Consultant's part that his
action was in the best interest of the Company; or
(iii) the conviction by final judgment of
Consultant for a felony or of a crime involving moral turpitude,
dishonesty, fraud or theft with respect to the performance of
Consultant's services to the Company.
Notwithstanding the foregoing, for purposes of Sections
(i) and (ii), above, such events shall be deemed to have occurred only
upon (a) the due adoption by the Board of Directors at a meeting
called and held for such purpose (after reasonable notice to
Consultant and his counsel and after affording Consultant and his
counsel an opportunity to be heard before the Board of Directors), of
<PAGE>
a resolution finding that, in the good faith opinion of the Board of
Directors, Consultant was guilty of the conduct set forth in such
Sections, and (b) in the event that such resolution is duly adopted by
the Board of Directors, the receipt by Consultant of five (5) days
written notice prior to the effectiveness thereof.
"Incapacity" means the absence of the Consultant from
his consulting duties or the inability of Consultant to perform his
duties pursuant to this Agreement by reason of mental or physical
illness, disability or incapacity for a period of thirty (30)
consecutive days or more during the term hereof, and either the
Company or Consultant elects to declare such illness, disability or
incapacity to be of a permanent nature.
2. Consulting Services. Subject to the restrictions
and limitations set forth below, during the "Term" as hereinafter
defined, of this Agreement, Consultant and the Company hereby agree:
(a) for the purposes hereof, Consultant shall serve as the Chief
Operating Officer ("COO") of the Company with such duties and
responsibilities as normally associated with such position, including,
but not limited to, supervision over the Company's corporate offices
and functions and its California, Indiana and Louisiana health
maintenance organization ("HMO") plans and operations. All employees
of the Company and all employees of the Company's subsidiaries shall
report to Consultant either directly or indirectly;
(b) Consultant shall also render such other
consulting services as may from time to time be reasonably requested
by the Board of Directors;
(c) any consulting services rendered by the
Consultant pursuant to this Agreement shall be substantially rendered
in the Company's offices in Los Angeles, Indiana, or Louisiana; and
(d) subject to Section 3(a) below, Consultant
shall render his consulting services to the Company on a substantially
full-time basis.
The consulting services rendered by the Consultant
during the Term of this Agreement as set forth in Sections 2(a)
through 2(d) above shall hereinafter be defined as the "Consulting
Services".
3. Non-Exclusive Services. Notwithstanding anything to
the contrary contained elsewhere herein:
(a) the Consulting Services to the Company during the
Term of this Agreement shall be non-exclusive. While Consultant may
continue and/or finish any of his existing consulting arrangements
("Other Business Agreements"), as set forth in Schedule 1 attached
<PAGE>
hereto and made a part hereof, during the term of this Agreement,
Consultant may not enter into new consulting or employment agreements
without the prior approval of the Board of Directors. In addition,
Consultant's performance of Other Business Agreements during the Term
of this Agreement shall not materially interfere with Consultant's
performance of his Consulting Services to the Company during the Term
hereof. During the Term of this Agreement, Consultant shall not serve
as an employee, officer, director, advisor, consultant or purchase an
amount in excess of five percent (5%) of any corporation, partnership,
joint venture, limited liability company or other enterprise which
competes directly or indirectly with the Company in the States of
California, Indiana or Louisiana, including but not limited to any
health care provider, HMO, preferred provider organization ("PPO"),
life, health or disability insurance company, or any other business
which arranges for, provides or finances health care in such states
(hereinafter, collectively "Competitors"); and
(b) Subject to the requirements of Section 3(a)
above, Consultant shall be entitled to earn and receive from entities
other than the Company any compensation, salary, profit
participations, bonuses, wages, consulting fees or other earnings for
services rendered by Consultant during the Term hereof without offset
or deduction with respect to any Consulting Fee due hereunder
whatsoever.
4. Compensation and Stock Options.
(a) In addition to director fees which the Company
is already obligated to pay Consultant as of the date of this
Agreement, as compensation for Consultant's agreement to be available
to render the Consulting Services during the Term of this consulting
Agreement, the Company agrees to compensate the Consultant at a rate
of Forty Thousand Dollars ($40,000) per month (the "Consulting Fee").
Said Consulting Fee shall be payable in equal monthly installments or
in such other installments as may be agreed upon between the parties.
(b) The Company shall grant to Consultant options
pursuant to the Company's 1995 Stock Option Plan (the "Plan") to
purchase Fifty Thousand (50,000) shares of Common Stock on the
Effective Date (the "Stock Options"). The Stock Options shall have an
exercise price equal to the Closing Price of the Common Stock on the
last trading date immediately preceding the Grant Date. For purposes
of this Section 4(b), the "Closing Price" for each trading day shall
mean the closing bid price (or average of bid prices) of the Common
Stock as reported by the National Association of Securities Dealers
Automated Quotation System - National Market System ("NASDAQ-NMS") or
if the Common Stock is not traded on NASDAQ on such national or
regional securities exchange or quotation system where the Common
Stock is traded. Each Stock Option granted pursuant to the terms
hereof shall vest at the rate of 6,000 shares per month for the first
<PAGE>
four months and 4,000 shares per month thereafter, have a ten (10)
year term and such other terms and conditions as set forth in the Plan
and/or the Stock Option Agreement (the "Option Agreement") which shall
be in substantially the form of Exhibit A attached hereto. Consultant
acknowledges that he is entitled to the grant of only the Stock
Options and no other stock options pursuant to this Agreement.
(c) Except as expressly set forth in this Section
4 or elsewhere in this Agreement, Consultant shall not be entitled to
receive any other compensation or benefits from the Company as a
result of the performance of Consultant's consulting services
hereunder, including but not limited to participation in the Company's
life, health and disability insurance plans, profit sharing, pension
or 401(k) bonus plans or any other plans or programs currently or
which in the future may become available to the Company's officers or
employees, in such capacities.
5. Expenses. The Company shall promptly reimburse
Consultant for all out of pocket expenses incurred by Consultant in
the discharge of Consultant's duties hereunder, including, but not
limited to, first class hotel expenses, meals, air fare and automobile
expenses in connection with the performance of Consultant's Consulting
Services at the Company's offices in California, Indiana and Louisiana
during the Term hereof. In connection with the foregoing at
Consultant's request, the Company shall provide first class air fare
to enable Consultant to fly home to Wisconsin weekly during the
weekends during the Term of this Agreement. The Company shall
reimburse Consultant upon receipt from Consultant of vouchers,
receipts or other reasonable substantiation of such expenses. Upon
the prior request of the Company and at the election of the
Consultant, in the event the Consultant travels on the Company's
behalf to perform any Consulting Services, Consultant shall be
entitled to travel first class, to stay at luxury hotels, similar
restaurant expenses and other expenses of the type described above.
6. Term of Agreement. The term of this Agreement shall
commence as of the Effective Date and shall continue for a period of
no less than four (4) months from such date (the "Four-Month Period"),
unless earlier terminated as herein provided. The term of this
Agreement shall continue on a month-to-month basis after the Four-
Month Period (the "Extended Term") until terminated by either the
Company or Consultant provided notice is given in accordance with
Section 15(g) thirty (30) days prior to such termination ("Thirty Day
Termination Notice"). This Agreement shall be terminated prior to
the expiration of the periods set forth above only in the event of the
occurrence of any one of the following circumstances:
(a) The death of Consultant;
(b) The Incapacity of Consultant;
<PAGE>
(c) The Company terminates this Agreement for
Cause; and
(d) The Company terminates this Agreement for any
reason other than as set forth in Sections 6(a), 6(b) or 6(c). For the
purposes of this Agreement, the "Term" hereof shall be the period from
the Effective Date through thirty (30) days after a Thirty Day
Termination Notice is provided or such other shorter period in the
event the Agreement is terminated sooner pursuant to Sections 6(a)
through 6(d) above.
7. Compensation Upon Termination. Subject to
Section 7(d) below, in the event this Agreement is terminated pursuant
to Sections 6(a) through 6(d) hereof, the Company shall be obligated
to pay or provide to Consultant (or his legal representatives, as the
case may be) under this Agreement the following and only the
following:
(a) In the event of a termination pursuant to
Section 6(a) or 6(b): (y) any unpaid Consulting Fee through the date
of the Consultant's death or Incapacity, as the case may be, plus
thirty (30) days thereafter, when such Consulting Fee would have
otherwise been due and (z) payment for any unreimbursed expenses
through the end of the Term;
(b) In the event of a termination pursuant to
Section 6(c): (y) any unpaid Consulting Fee through the date of
termination, when such Consulting Fee would have otherwise been paid
and (z) payment for any unreimbursed expenses through the end of the
Term; and
(c) In the event of a termination pursuant to
Section 6(d): (y) either (i) payment of any unpaid Consulting Fee
through the end of the Four-Month Period if the termination occurs
during the Four-Month Period or (ii) payment of any unpaid Consulting
Fee through the date of termination, plus an additional thirty (30)
days, if the termination occurs during the Extended Term, when such
Consulting Fee would have been otherwise paid; and (z) payment for any
unreimbursed expenses through the end of the Term.
8. Indemnification.
(a) The Company shall indemnify Consultant, during
and after the Term of this Agreement, to the fullest extent provided
for in the Company's Articles of Incorporation or Bylaws, as in
effect, or as may thereafter be amended, modified or revised from time
to time (collectively, "Company's Articles"), or permitted under the
law of Delaware or such other state in which the Company may hereafter
be domiciled, against any and all costs, claims, judgments, fines,
<PAGE>
settlements, liabilities, and fees or expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection with
any proceedings (including, without limitation, threatened actions,
suits or investigations) brought by party or parties other than
Consultant or Consultant's heirs, successors or assignees arising out
of, or relating to, Consultant's actions or inactions as Consultant or
the Consultant Services performed by Consultant or any counterclaims
brought in defense of an otherwise indemnifiable action at any time
during the Term of this Agreement. The indemnification contemplated
under this Section 8(a) shall be provided to Consultant unless, at the
time indemnification is sought, such indemnification would be
prohibited under the law of Delaware or of the state in which the
Company may then be domiciled; the Company may rely on the advice of
its counsel in determining whether indemnification is so prohibited.
(b) In the event of any actual or threatened
investigation, administrative proceeding or litigation by any federal,
state or local governmental authority (including agencies thereof)
against the Company or any other director officer or employee of the
Company arising from actions taken or events occurring at any point
during the Term hereof, in which proceedings Consultant is not a party
or threatened to be made a party but which require Consultant's
attendance and if, under applicable law, or the rules or regulations
of the particular governmental authority, counsel for the Company
cannot additionally represent Consultant upon the provision of proper
substantiation, or such simultaneous representation would not be
permitted under the applicable canons of ethics governing attorneys-
at-law, then: (i) Consultant shall have the right to retain such
personal legal counsel, accounting advisors and experts as may be
reasonably necessary in connection with such attendance, and (ii) the
Company shall promptly reimburse Consultant, whether or not then in
office, for all reasonable expenses incurred by him in retaining the
above counselors, advisors and experts.
If Consultant's attendance is required at proceeding
contemplated by this Section 8(b) after the Term hereof, then, in all
events, and in addition to the reimbursement described in (ii) above,
the Company shall pay to Consultant a stipend in the amount of One
Thousand Dollars ($1,000) per day for each day or any portion thereof
during which Consultant is in attendance and shall reimburse
Consultant for all reasonable travel, hotel and living expenses
incurred by him in connection with such attendance.
(c) Any reimbursement or indemnification required
under this Section 8 shall be made no later than ten (10) business
days after receipt by the Company of the written request of
Consultant, together with, with respect to expenses incurred,
vouchers, receipts or other reasonable substantiation.
(d) If Consultant is entitled under any provision
of this Section 8 to indemnification by the Company for some or a
<PAGE>
portion of the expenses, judgments, fines, or penalties actually and
reasonably incurred by him in the investigation, defense, appeal or
settlement of any action, suit or other proceeding, but not, however,
for the total amount thereof, the Company shall nevertheless indemnify
Consultant for the portion of such expenses, judgments, fines or
penalties to which Consultant is entitled.
(e) The indemnification provided under this
Section 8 shall not be deemed exclusive of any other rights to which
Consultant may be entitled under the Company's Articles, any
resolution of the Board of Directors, any agreement, any vote of
shareholders or disinterested directors, insurance contracts, the law
of Delaware or any other state in which the Company may hereafter be
domiciled, or otherwise, both as to actions or inactions by Consultant
in connection with his performing Consulting Services during the Term
hereof, even though complaint may have been asserted after the Term
hereof. Amounts payable as indemnification under this Section 8 shall
be reduced by the amount of any other sums received by Consultant for
the same purpose pursuant to any of such other provisions.
(f) In the event of any change, after the date of
this Agreement, in any applicable law, statute, or rule which expands
the right of a corporation domiciled in Delaware or the state in which
the Company may hereafter be domiciled to indemnify a consultant, such
change (to the extent permitted by applicable law) shall be
automatically incorporated herein, without further action of the
parties, to the extent that such change affects Consultant's rights
and the Company's obligations under this Section 8.
(g) In the event of any change, after the date of
this Agreement, in any applicable law, statute, or rule which narrows
or restricts the right of a corporation domiciled in Delaware or the
state in which the Company may hereafter be domiciled to indemnify a
consultant such change (to the extent permitted by applicable law)
shall have no effect on the provisions of, or the parties' respective
rights and obligations under this Section 8.
(h) In the event of an amendment or other
revision, after the date of this Agreement, to the Company's Articles
which expands the right of the Company to indemnify Consultant for the
consulting services rendered by Consultant during the Term hereof,
such change shall be automatically incorporated into this Agreement,
without further action of the parties, to the extent that such change
relates to Consultant's rights and the Company's obligations under
this Section 8.
(i) In the event of an amendment or other
revision, after the date of this Agreement, to the Company's Articles
which narrows or restricts the right of the Company to indemnify
Consultant for the consulting services rendered by Consultant during
<PAGE>
the Term hereof, such change shall have no effect on the provisions
of, or the parties' respective rights and obligations under, this
Section 8.
(j) The Company agrees to give Consultant prompt
notice of any amendment to or modification of the Company's Articles
which relate to its ability to provide the indemnification
contemplated under this Section 8.
(k) Notwithstanding any other provision herein,
the Company shall not be obligated pursuant to the terms of this
Section 8:
(i) to indemnify or advance expenses to
Consultant with respect to proceedings or claims (except counterclaims
or cross claims) initiated or brought voluntarily by Consultant and
not by way of defense, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board
of Directors finds it to be appropriate; or
(ii) to indemnify Consultant for any
expenses incurred by him with respect to any claim, issue or matter,
raised in connection with a proceeding instituted by Consultant to
enforce or interpret the provisions of this Section 8, if a court of
competent jurisdiction renders a final judgment ruling against the
Consultant with respect to the material assertions made by Consultant
with respect to such claim, issue or matter; or
(iii) to indemnify Consultant for expenses
or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to Consultant by an
insurance carrier under a policy of directors' and officers' liability
insurance maintained by the Company; or
(iv) to indemnify Consultant for expenses
or liabilities arising from the purchase and sale by Consultant of
securities of the Company in violation of federal or state securities
laws; or
(v) to indemnify Consultant for
liabilities or with respect to proceedings or claims relating to
actions not taken in his capacity as a Consultant rendering Consulting
services on behalf of the Company, including, without limitation,
actions taken in his individual capacity as a shareholder.
9. Confidentiality. Consultant covenants and agrees
that he will not at any time during or after the Term of this
Agreement reveal, divulge or make known to any person, firm or
corporation any information, knowledge or data of a proprietary nature
<PAGE>
relating to the business of the Company or any of its affiliates
which is not or has not become generally known or public. Consultant
shall hold, in a fiduciary capacity, for the benefit of the Company,
all information, knowledge or data of a proprietary nature, relating
to or concerned with, the operations, customers, developments, sales,
business and affairs of the Company and its affiliates which is not
generally known to the public and which is or was obtained by the
Consultant during the Term of this Agreement. Consultant recognizes
and acknowledges that all such information, knowledge or data is a
valuable and unique asset of the Company and accordingly he will not
discuss or divulge any such information, knowledge or data to any
person, firm, partnership, corporation or organization other than to
the Company, its affiliates, designees, assignees or successors or
except as may otherwise be required by the law, as ordered by a court
or other governmental body of competent jurisdiction, or in connection
with the business and affairs of the Company.
10. Equitable Remedies. In the event of a breach or
threatened breach by Consultant of any of his obligations under
Section 9 hereof, Consultant acknowledges that the Company may not
have an adequate remedy at law and therefore it is mutually agreed
between Consultant and the Company that in addition to any other
remedies at law or in equity which the Company may have, the Company
shall be entitled to seek in a court of law and/or equity a temporary
and/or permanent injunction restraining Consultant from any continuing
violation or breach of this Agreement.
11. Advance of Fees and Expenses. The Company shall
promptly advance to Consultant:
(a) to the maximum extent provided for in the
Company's Articles or permitted by the law of Delaware or such other
state in which the Company may hereafter be domiciled, any fees or
expenses which are included as indemnifiable fees or expenses pursuant
to Section 8 hereof (including, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals,
amounts paid in settlement by or on behalf of Consultant, and legal,
accounting or other professional fees and disbursements) which may be
incurred by Consultant (collectively, "Reimbursed Expenses");
(b) Reimbursed Expenses shall be made by the
Company upon the written request of Consultant, which request shall be
accompanied by an undertaking executed by Consultant acceptable in
form and substance to counsel for the Company, by which Consultant
undertakes to repay any amounts advanced plus Interest on the advanced
amount to the extent that it is ultimately determined, by compromise,
settlement, arbitration or final non-appealable court ruling, that
Consultant is not entitled to indemnification or payment, as
appropriate, for all or any portion of such fees and expenses. For
purposes of this Section 11(b), the term "Interest" shall accrue and
<PAGE>
be payable from the date the amount was advanced at the rate of eight
percent (8.0%) per annum computed and applied on the basis of a 365
day year, actual days elapsed. At no time, however, shall Consultant
be obligated, or required, to pay Interest at a rate which could
subject Consultant to either civil or criminal liability as a result
of such rate being in excess of the maximum rate which Consultant is
permitted to charge. If, by the terms of this Agreement, Consultant
is, at any time, required or obligated to pay Interest on the
principal balance at a rate in excess of such maximum rate, then the
rate of Interest under this Agreement shall be deemed to be
immediately reduced to such maximum rate, and Interest payable
hereunder shall be computed at such maximum rate, and any portion of
all prior Interest payments in excess of such maximum rate shall be
applied, and/or shall retroactively be deemed to have been payments
made, in reduction of the balance due;
(c) No later than ten (10) business days after
receipt by the Company of the written request and undertaking of
Consultant, together with receipts, invoices or other written
documentation evidencing the Reimbursed Expenses to be covered by the
advance, the Company shall make the advance requested, in one or more
payments, to Consultant or according to his written instructions; and
(d) Any advances contemplated under Section 11(a) above, shall be
made to Consultant unless, at the time the advance is requested, such
advance would be prohibited under the law of Delaware or the state in
which the Company may then be domiciled; the Company may rely on the
written advice of its counsel in determining whether an advance is so
prohibited.
12. Effective Date. The Effective Date of this
Agreement shall be deemed to be the "Effective Date" as such term is
defined in the Settlement Agreement.
13. Representation by Counsel. Consultant acknowledges
that the Company has advised Consultant to seek the advice of counsel
in connection with Consultant's rights with respect to this Agreement,
the Settlement Agreement and the Related Agreements. In connection
therewith, Consultant has been represented by and has consulted with
counsel of his own choice, Anthony J. Handzlik of Reinhardt, Boerner,
VanDeuren, Norris & Rieselach, throughout the negotiation, drafting
and execution of this Agreement. In connection with the foregoing,
Consultant and the Company acknowledge that the Company has been
represented by its general outside counsel, the firm of Jeffer,
Mangels, Butler & Marmaro LLP ("JMBM") in connection with the
negotiation, documentation and execution of this Agreement.
14. Consultant's Employment Status. Consultant is not
an employee of or employed by the Company with respect to his
performance of Consulting Services to the Company during the Term of
this Agreement; accordingly, Consultant shall indemnify the Company
<PAGE>
against any and all withholding and/or employment taxes charged
against the Company with respect to Consultant's performance of
Consulting Services during the Term of this Agreement.
15. Miscellaneous.
(a) This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company. This
Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company or by any merger, reorganization or other
transaction in which the Company is not the surviving or resulting
corporation or upon any transfer of all or substantially all of the
assets of Company in the event of any such merger, or transfer of
assets. The provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving business entity or the
business entity to which such assets shall be transferred in the same
manner and to the same extent that the Company would be required to
perform it if no such transaction had taken place. This Agreement
shall inure to the benefit of and be enforceable by Consultant's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
(b) Except as otherwise provided by law or
elsewhere herein, Consultant shall be entitled to all benefits as set
forth herein and the Term of this Agreement shall continue to run
through the occurrence of the following events:
(i) any act of force majeure which
materially and adversely affects the Company's business and
operations, including but not limited to, the Company having sustained
a material loss, whether or not insured, by reason of fire,
earthquake, flood, epidemic, explosion, accident, calamity or other
act of God; or
(ii) any strike or labor dispute or court
or government action, order or decree; or
(iii) a banking moratorium having been
declared by federal or state authorities; or
(iv) an outbreak of major armed conflict,
blockade, embargo, or other international hostilities or restraints or
orders of civic, civil defense, or military authorities, or other
national or international calamity having occurred; or
(v) any act of public enemy, riot or civil
disturbance or threat thereof; or
(vi) a pending or threatened legal or
governmental proceeding or action relating generally to the Company's
<PAGE>
business, or a notification having been received by the Company of
the threat of any such proceeding or action, which could materially
adversely affect the Company.
(c) This Agreement may not be modified, altered or
amended except by an instrument in writing signed by the parties
hereto.
(d) This Agreement shall be construed in
accordance with the laws of the State of California except to the
extent that any provision of Sections 8 or 11 hereof may relate to an
interpretation of the corporation laws of Delaware, the state in which
the Company is domiciled, in which case such provision shall be
construed in accordance with the corporation laws of that state.
(e) Nothing in the Agreement is intended to
require or shall be construed as requiring the Company to do or fail
to do any act in violation of applicable law. The Company's inability
pursuant to court order to perform its obligations under this
Agreement shall not constitute a breach of this Agreement. If any
provision of this Agreement is invalid or enforceable, the remainder
of this Agreement shall nevertheless remain in full force and effect.
If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall, nevertheless, remain in full force
and effect in all other circumstances.
(f) The parties hereto agree that any and all
disputes hereunder shall be submitted to a court located in Los
Angeles, California and in this regard, the parties agree that they
shall consent to personal jurisdiction in any state and/or the United
States District Court for the Central District of California sitting
in Los Angeles, California and agree to venue in the State of
California. All costs and expenses (including attorneys' fees)
incurred by the parties in connection with any dispute arising under
this Agreement, shall be apportioned between the parties by a court
based upon such court's determination of the merits of their
respective positions. The burden of proving that indemnification or
any advance under Sections 8 or 11 is not appropriate shall be on the
Company.
(g) Any notice to the Company required or
permitted hereunder shall be given in writing to the Company, either
by personal service, facsimile or, if by mail, by registered or
certified mail return receipt requested, postage prepaid, duly
addressed to the Secretary of the Company at its then principal place
of business with a copy to Barry L. Burten, Esq., Jeffer, Mangels,
Butler & Marmaro LLP, 2121 Avenue of the Stars, 10th Floor, Los
Angeles, California 90067. Any such notice to Consultant shall be
given in a like manner, and if mailed shall be addressed to Consultant
at Consultant's home address then shown in the files of the Company
with a copy to Anthony J. Handzlik, Reinhardt, Boerner, VanDeuren,
<PAGE>
Norris & Rieselach, 1000 North Water Street, Milwaukee, Wisconsin
53202-0900. For the purpose of determining compliance with any time
limit herein, a notice shall be deemed given on the fifth business day
following the postmarked date, if mailed, or the date of delivery if
personally delivered or delivered by facsimile.
(h) A waiver by either party of any term or
condition of this Agreement or any breach thereof, in any one
instance, shall not be deemed or construed to be a waiver of such term
or condition or of any subsequent breach thereof.
(i) The section and subsection headings contained
in this Agreement are solely for convenience and shall not be
considered in its interpretation.
(j) This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
(k) Consultant represents and agrees that
Consultant has carefully read and fully understands all of the
provisions of this Agreement and is voluntarily entering into this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Consulting Agreement as of the day and year first written above.
COMPANY:
MAXICARE HEALTH PLANS, INC.
a Delaware corporation
By: /s/ Alan Bloom
Its: Secretary
CONSULTANT:
/s/ Elwood I. Kleaver
Elwood I. Kleaver
Exhibit 10.91a
EXHIBIT A
MAXICARE HEALTH PLANS, INC.
STOCK OPTION AGREEMENT
Maxicare Health Plans, Inc., a Delaware corporation (the
"Company"), hereby grants as of this 16th day of April, 1999 (the
"Grant Date"), to Elwood I. Kleaver, Jr. (the "Optionee"), an option
to purchase a maximum of Fifty Thousand (50,000) shares of its common
stock (the "Common Stock"), at the per share Exercise Price set forth
below (the "Option") on the following terms and conditions:
1. Exercise Price. The "Exercise Price" shall be equal
to the Closing Price of the Common Stock on the last trading date
immediately preceding the Grant Date. The "Closing Price" for each
trading day shall mean the closing bid price (or average of bid
prices) of the Common Stock as reported by the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ-NMS") or if the Common Stock is not traded on NASDAQ, on such
national or regional securities exchange or quotation system where the
Common Stock is traded. Each Option granted pursuant to the terms
hereof shall have a ten (10) year term.
2. Grant Under 1995 Stock Plan. The Option is granted
pursuant to and is governed by the Company's 1995 Stock Option Plan
(the "Plan") and, unless the context otherwise requires, terms used
and/or defined herein shall have the same meaning as in the Plan.
Determinations made in connection with this Option pursuant to the
Plan shall be governed by the Plan as it exists on this date. This
Option is not intended to be and shall not be treated as an incentive
stock option under Section 422 of the Internal Revenue Code.
3. Extent of Option. If the Optionee has continued to
serve in the capacity of either (i) a consultant and a director or
(ii) an employee of the Company (or a subsidiary thereof, as the case
may be) on the following dates, the Optionee may, subject to Section
14 hereof, exercise this Option for only such portion of the total
number of shares subject to this Option set opposite the applicable
date:
Less than one month from the Grant - 0 shares
Date
One month but less than two months - 6,000 shares
from the Grant Date
Two months but less than three months - 12,000 shares
<PAGE>
from the Grant Date
Three months but less than four months - 18,000 shares
from the Grant Date
Four months but less than five months - 24,000 shares
from the Grant Date
Five months but less than six months - 28,000 shares
from the Grant Date
Six months but less than seven months - 32,000 shares
from the Grant Date
Seven months but less than eight months - 36,000 shares
from the Grant Date
Eight months but less than nine months - 40,000 shares
from the Grant Date
Nine months but less than ten months - 44,000 shares
from the Grant Date
Ten months but less than eleven months - 48,000 shares
from the Grant Date
Eleven months but less than twelve months - 50,000 shares
from the Grant Date
The foregoing rights are cumulative and, while the Optionee continues
to serve as either (i) a consultant and a director or (ii) an employee
of the Company (or a subsidiary thereof, as the case may be), may be
exercised up to and including the earlier of the date which is ten
(10) years from the date this Option is granted (the "Tenth
Anniversary Date"). For purposes of this Agreement, any accrued
installment shall be referred to as an "Accrued Installment". All of
the foregoing rights are subject to Sections 4 and 5 hereof, as
appropriate, if the Optionee ceases to serve as either (i) a
consultant and a director or (ii) an employee of the Company (or a
subsidiary thereof, as the case may be) or becomes disabled or dies
while serving as either (i) a consultant and a director or (ii) an
employee of the Company (or a subsidiary thereof, as the case may be).
4. Termination of Business Relationship. If the
Optionee ceases to remain either (i) a consultant and a director or
(ii) an employee of the Company (or subsidiary thereof, as the case
may be), other than by reason of death or disability as defined in
Section 5, any unexercised Accrued Installments of the Option shall
expire and become unexercisable as of the earlier of: (a) the Tenth
Anniversary Date, or (b) one (1) year following (i) the termination of
Optionee's consulting or directorship services if Optionee is then a
consultant and director of the Company and is not immediately
thereafter hired as an employee by the Company, or (ii) the
termination of Optionee's employment services if Optionee is then an
employee of the Company (the "Termination Date"). No portion of the
Option which was not exercisable on the Termination Date shall become
exercisable after the Termination Date. The Optionee's only rights
hereunder shall be those which are properly exercised before the
termination of this Option. Any portion of an Option that expires
<PAGE>
hereunder shall remain unexercisable and be of no effect whatsoever
after such expiration notwithstanding that such Optionee may again
become a consultant, employee or director of, the Company (or a
subsidiary thereof, as the case may be). For purposes of the vesting
schedule provided in Section 3, Optionee's consulting, employment or
directorship services shall be deemed terminated on the date such
services discontinue. However, where Optionee is terminated without
cause under Section 6(d) of the Consulting Agreement entered into by
and between Consultant and the Company of even date herewith (the
"Consulting Agreement"), Optionee's consulting, employment or
directorship services are deemed terminated (y) at the end of the
Four-Month Period (as defined in the Consulting Agreement) if Optionee
is terminated before the end of the Four-Month Period or (z) thirty
(30) days after Optionee's services cease if Optionee is terminated on
or after the Four-Month Period.
5. Death or Disability. In the event of the death of
the Optionee while either (i) a consultant and a director or (ii) an
employee of the Company (or a subsidiary thereof, as the case may be),
or in the event of termination of Optionee's consulting, employment or
directorship services by reason of the Optionee's Disability (as
defined in the Plan), any unexercised Accrued Installments of the
Option granted to Optionee shall expire and become unexercisable as of
the earlier of: (i) the Tenth Anniversary Date, (ii) the first
anniversary date of the Optionee's death (if applicable) or (iii) the
first anniversary date of the termination of Optionee's consulting,
employment or directorship services by reason of Disability (if
applicable). Any such Accrued Installments of a deceased Optionee may
be exercised prior to their expiration by (and only by) the person or
persons to whom the Optionee's Option rights shall pass by will or by
the laws of descent and distribution. Any installments under a
deceased Optionee's Option that have not accrued as of the date of his
death shall expire and become unexercisable as of said date of death.
For purposes of this Agreement, the Optionee shall be deemed to be a
consultant, employee or director of the Company (or a subsidiary
thereof, as the case may be) during any period of leave of absence
from his consulting, employment or directorship services by the
Company (or a subsidiary thereof, as the case may be).
6. Partial Exercise. Exercise of this Option up to the
extent above stated may be in part at any time and from time to time
with the above limits, except that this Option may not be exercised
for a fraction of a share. Upon the exercise of the final installment
of this Option, the Optionee shall be entitled to receive cash with
respect to the value of any fraction of a share (in lieu of any said
fractional share).
7. Payment of Exercise Price. The Exercise Price is
payable in United States dollars and may be paid in cash or by
certified or cashier's check, or any combination of the foregoing,
<PAGE>
equal in amount to the Exercise Price. In the alternative, Optionee
may satisfy the Exercise Price by providing a copy of instructions, in
a format and upon such terms as the Company shall approve, to a broker
directing such broker to sell the Common Stock for which such Option
is exercised, and to remit to the Company the aggregate Exercise Price
of such Options (a "cashless exercise").
8. Investment Representations; Restrictions on
Transfer. The Optionee represents, warrants and covenants to the
Company that:
(a) Any Common Stock acquired by the Optionee upon
exercise of the Option will be acquired for the Optionee's own account
and not with a view to resale or distribution in violation of the
Securities Act of 1933, as amended (the "1933 Act").
(b) The Optionee has such knowledge and experience
in business and financial matters as to be capable of utilizing the
information which is available to the Optionee to evaluate the merits
and risks of an investment in the Common Stock, and is able to bear
the economic risks of any Common Stock or other securities which the
Optionee may acquire upon exercise of the Option.
9. Method of Exercising Option. Subject to the terms
and conditions of this Agreement, this Option may be exercised by
written notice to the Company, at the principal executive office of
the Company, or to such transfer agent as the Company shall designate.
Such notice shall state the election to exercise this Option and the
number of shares in respect of which it is being exercised and shall
be signed by the Optionee or person or persons entitled to so exercise
this Option. Such notice shall be accompanied by payment of the full
Exercise Price of such shares or by making a cashless exercise
pursuant to Section 7 hereof, and the Company shall deliver a
certificate or certificates representing such shares as soon as
practicable after the notice is received. The certificate or
certificates for the shares as to which this Option shall have been so
exercised shall be registered in the name of the person or persons so
exercising this Option (or, if this Option shall be exercised by the
Optionee and if the Optionee shall so request in the notice exercising
this Option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship) and shall be
delivered to or upon the written order of the person or persons
exercising this Option. In the event this Option shall be exercised,
pursuant to Section 5 hereof, by any person or persons other than the
Optionee, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise this Option. All shares
that shall be purchased upon the exercise of this Option as provided
herein shall be fully paid and non-assessable.
10. Option Not Transferable; Transfer of Stock. This
Option is not transferable or assignable except by will or by the laws
<PAGE>
of descent and distribution. During the Optionee's lifetime, only
the Optionee may exercise this Option. Common Stock issued pursuant
to the exercise of this Option or any interest in such Common Stock,
may be sold, assigned, gifted, pledged, hypothecated, encumbered or
otherwise transferred to alienated in any manner by the holder(s)
thereof, subject, however, to the provisions of the Plan, including
any representations or warranties requested pursuant to the Plan.
11. No Obligation to Exercise Option. The grant and
acceptance of this Option imposes no obligation on the Optionee to
exercise it.
12. No Obligation to Continue as Director, Consultant or
Employee. Neither the Company nor any subsidiary thereof is by the
Plan or this Option obligated to continue to employ Optionee as a
consultant, employee or renominate Optionee as a director and neither
the Plan nor this Option shall otherwise interfere with the Company's
or any of the Company's subsidiary's right to terminate, discharge or
retire any consultant, employee or director, including Optionee, at
any time.
13. No Rights as Stockholder Until Exercise. The
Optionee shall have no rights as a stockholder with respect to shares
subject to this Agreement until a stock certificate therefore has been
issued to the Optionee and is fully paid for. Except as is expressly
provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to the
date such stock certificate is issued.
14. Reorganization of Company.
(a) Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the
Company as a result of which the Company's outstanding Common Stock is
changed into or exchanged for cash or property or securities not of
the Company's issue, or upon a sale of all or substantially all
property of the Company to, or the acquisition of all or substantially
all of the Common Stock of the Company then outstanding by, another
corporation or person, the Plan shall terminate, and the Option
granted hereunder shall terminate; provided, however, if Optionee is
entitled to exercise any unexercised installment of the Option then
outstanding, then Optionee may, at such time prior to the consummation
of the transaction causing such termination as the Company shall
designate, to exercise the unexercised installments of the Option
including all unaccrued installments thereof which would, but for this
subsection 14(a), not yet be exercisable. Notwithstanding the
foregoing, in the event that any transaction causing such termination
is not consummated, any unexercised unaccrued installments that had
become exercisable solely by reason of the provisions of this
<PAGE>
subsection 14(a) shall again become unaccrued and unexercisable as of
said termination of such transaction, subject, however, to such
installments accruing pursuant to the normal accrual schedule provided
in the terms under which the Option was granted.
(b) In addition to and not in lieu of those rights
granted pursuant to subsection 14(a) above, if provisions shall be
made in writing in connection with such transaction for the
continuance of the Plan and/or the assumption of options theretofore
granted, or the substitution for such options of options covering the
stock of the successor corporation, or a parent or subsidiary thereof
with appropriate adjustments as to the number and kind of shares and
prices, the unexercised Option shall continue in the manner and under
the terms so provided.
(c) The Company shall have no obligation to
provide for the continuance, assumption or substitution of the Plan or
the Option by any successor corporation or parent or subsidiary
thereof.
15. Withholding Taxes. The Optionee hereby agrees that
the Company (or a subsidiary thereof, as the case may be) may withhold
from the Optionee's wages or other remuneration the appropriate amount
of federal, state and local taxes attributable to the Optionee's
exercise of any installment of this Option. The Optionee further
agrees that, if the Company (or a subsidiary thereof, as the case may
be) does not withhold an amount from the Optionee's wages or other
remuneration sufficient to satisfy the Company's (or any such
subsidiary's) withholding obligation, the Optionee will reimburse the
Company (or any such subsidiary) on demand, in cash, for the amount
underwithheld.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California
applicable to agreements made and to be performed entirely within such
State and without regard to the conflict of law principles thereof.
17. Amendments. No amendment, modification, termination
or waiver of any provision of this Agreement shall be effective unless
the same shall be in writing signed by all parties hereto.
18. Counterparts. This Agreement may be signed in one
or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
19. Survival of Representations. All representations,
covenants and warranties of the parties hereto shall survive the
execution of this Agreement.
<PAGE>
20. Registration of Common Stock. The Company will use
its best efforts, within a period of no more than ninety (90) days of
the Grant Date, to file an amendment to the S-8 Registration Statement
covering the offer and sale of the Common Stock issuable upon exercise
of the Option by Optionee which amendment will revise the Form S-3
Resale Prospectus contained therein to include Optionee as a selling
shareholder thereunder.
IN WITNESS WHEREOF the Company and the Optionee have
caused this instrument to be executed as of the date first written
above, and the Optionee whose signature appears below acknowledges
receipt of a copy of the Plan and acceptance of an original copy of
this Agreement.
THE COMPANY:
MAXICARE HEALTH PLANS, INC.
By:/s/ Alan Bloom
Its: Secretary
OPTIONEE:
/s/ Elwood I. Kleaver
Elwood I. Kleaver
Address:
4670 Somerset Court
Brookfield, Wisconsin 53045-8156
Exhibit 10.3n
AMENDMENT NO. 4 TO THE AMENDED AND RESTATED
EMPLOYMENT AND INDEMNIFICATION AGREEMENT
This Amendment No. 4 to the Amended and Restated
Employment and Indemnification Agreement dated as of April 1, 1996, as
amended by Amendment No. 1 thereto dated as of February 11, 1997,
Amendment No. 2 thereto dated March 28, 1998 and Amendment No. 3
thereto dated May 8, 1998 (collectively the "Agreement"), is made by
and between MAXICARE HEALTH PLANS, INC., a Delaware corporation (the
"Company"), and Peter J. Ratican, an individual (the "Executive") and
is dated as of April 16, 1999 (the "Execution Date").
R E C I T A L S
WHEREAS, the Executive presently serves as Chairman of
the Board, Chief Executive Officer and President of the Company
pursuant to the Agreement;
WHEREAS, the Company has entered into a Settlement and
Release Agreement of even date herewith (the "Settlement Agreement")
with the Executive whereunder the terms of the Agreement will
terminate on June 30, 1999, (the "Termination Date");
WHEREAS, in connection with the Settlement Agreement and this
Amendment No. 4, the Company and Executive have entered into Related
Agreements as defined in the Settlement Agreement;
WHEREAS, the Company and the Executive wish to amend the
Agreement to clarify Executive's duties and rights of the Company and
the Executive under the Agreement through the Termination Date; and
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the Company and the Executive agree as follows:
1. This Amendment No. 4 to the Agreement shall become
effective upon the occurrence of all of the following conditions: (i)
the occurrence of the "Effective Date" as such term is defined in the
Settlement Agreement; (ii) delivery of the fully executed Settlement
Agreement and Related Agreements; (iii) the Effective Date of the
Consulting Agreement between the Company and Elwood I. Kleaver, Jr.
("Kleaver") pursuant to which Kleaver agrees to function as the
Company's Chief Operating Officer ("COO"); and (iv) unanimous approval
of this Amendment No. 4 by the Board provided, however, that if such
approval is not unanimous, Executive may elect to declare the
Settlement Agreement and the Related Agreements null and void.
2. The following definition shall be added to Section
1:
<PAGE>
"Executive Committee of the Board" means the group
comprised of Claude S. Brinegar, Thomas W. Field, Jr.,
Elwood I. Kleaver, Jr. and Paul R. Dupee, Jr. and/or any
other individual(s) named by the Board of Directors."
3. Section 2 shall be changed to add at the end of the
last sentence thereof the following:
"As of the Effective Date (as such term is defined
in the Settlement and Release Agreement between
Executive and the Company), Executive will serve as
Chairman of the Board, Chief Executive Officer and
President of the Company, but may only have such duties
as may be assigned to him by the Executive Committee of
the Board or the Board of Directors."
4. Section 4(b) shall be deleted in its entirety and
any references to Section 4(b) and any provisions addressing only
Section 4(b) are hereby deleted.
5. Section 7 shall be deleted in its entirety and
replaced with the following:
"7. Term of Employment. The term of employment
hereunder shall commence as of April 1, 1996, and shall
continue until June 30, 1999, unless earlier terminated
as herein provided (the "Termination Date"). This
Agreement shall terminate upon the occurrence of any of
the following events:
(a) The death of Executive; or
(b) Executive voluntarily leaves the employ of the
Company, with or without the consent of the Company, and
with or without Good Reason;
or
(c) The Incapacity of Executive; or
(d) The Company terminates this Agreement for
Cause; or
(e) [deleted]; or
(f) Executive elects to terminate pursuant to
Section 9(a) prior to June 30, 1999, below.
<PAGE>
6. Any references to Section 7(e) and any provisions
addressing only Section 7(e) are hereby deleted.
7. Section 8(a)(iv) is hereby amended by deleting the
reference to "March 31, 2001" and replacing it with "June 30, 1999".
8. Section 8(c) is hereby deleted in its entirety and
any references to Section 8(c) and any provisions addressing only
Section 8(c) are hereby deleted.
9. Section 10 is hereby deleted in its entirety and any
references to Section 10 and any provisions addressing only Section 10
are hereby deleted.
10. A new Section 19 shall be added to the end of the
Agreement to read as follows:
"19. Surviving Provisions upon the Termination Date.
The rights and/or obligations of the Company and
Executive under Sections 11, 12, 13, 14, 18(d) and 18(g)
of this Agreement shall not be affected by the
termination of this Agreement upon the Termination Date.
The rights and/or obligations under such Sections shall
survive in accordance with the terms of this Agreement.
As of the Termination Date, all other terms and
provisions of this Agreement shall be terminated and no
longer of any force or effect."
11. Except as expressly set forth herein, all of the
terms and conditions contained in the Agreement shall remain in full
force and effect and shall not be modified by the terms hereof.
12. Executive agrees that he shall resign as a member of
the Executive Committee of the Board as of the effectiveness of this
Amendment No. 4 and said resignation shall not constitute a breach of
the Agreement by Executive or the Company.
13. Executive acknowledges that he has received all
compensation and benefits due and payable to him through the
"Effective Date" as such term is defined in the Settlement Agreement.
14. If this Amendment No. 4 does not become effective,
the Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 4 to the
Agreement has been executed as of this 16th day of April, 1999.
MAXICARE HEALTH PLANS, INC.
/s/ Richard A. Link
By: Richard A. Link
Its:Executive Vice President and
Chief Financial Officer
/s/ Alan Bloom
By: Alan Bloom
Its: Secretary
EXECUTIVE
/s/ Peter J. Ratican
Peter J. Ratican
Exhibit 10.82c
AMENDMENT NO. 1 TO
THE STOCK OPTION AGREEMENT DATED APRIL 1, 1996
This Amendment No. 1 to the Stock Option Agreement dated
as of April 1, 1996 (the "Agreement") is made by and between Peter J.
Ratican (the "Executive") and Maxicare Health Plans, Inc., a Delaware
corporation (the "Company") and dated as of April 16, 1999.
R E C I T A L S
WHEREAS, the Company has entered into a Settlement and
Release Agreement of even date herewith (the "Settlement Agreement")
with Peter J. Ratican ("Ratican") whereunder the terms of that certain
Amended and Restated Employment and Indemnification Agreement dated as
of April 1, 1996, as amended by Amendment No. 1 thereto, dated
February 11, 1997, Amendment No. 2 thereto, dated March 28, 1998,
Amendment No. 3 thereto, dated May 8, 1998 and Amendment No. 4 thereto
of even date herewith by and between the Company and Ratican
(collectively, the "Employment Agreement") will terminate on June 30,
1999 (the "Termination Date");
WHEREAS, in connection with the Settlement Agreement and
this Amendment No. 1, the Company and Executive have entered into
Related Agreements as defined in the Settlement Agreement;
WHEREAS, in connection with the Settlement Agreement and
Related Agreements, Ratican and the Company agreed to extend the
expiration date and adjust the exercise price of the stock options
provided under the Agreement; and
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, the Company and the Executive agree
as follows:
1. The effectiveness of this Amendment No. 1 shall be
conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment No. 1 by the Board provided,
however, that if such approval is not unanimous, Executive may elect
to declare the Settlement Agreement and the Related Agreements null
and void.
<PAGE>
2. The last sentence of Section 1 shall be restated as
follows:
"Subject to the preceding sentence, the Options
shall be granted on the following dates:
(a) an Option to purchase 70,000 Option Shares on
the date on which resolutions are adopted by the Shareholders app
roving this Agreement;
(b) an Option to purchase 70,000 Option Shares on
January 1, 1997;
(c) an Option to purchase 70,000 Option Shares on
January 1, 1998;
(d) an Option to purchase 70,000 Option Shares on
January 1, 1999;
(e) [deleted]."
3. All references to Section 1(e) and any provisions
relating only to Section 1(e) are hereby deleted.
4. Section 2(a) shall be deleted in its entirety and
restated as follows:
"(a) The Option Price with respect to the Option
Shares for each of the Options set forth in 1(a) through
1(c) above shall be $1.875 over the average closing pric
e for the last five trading days immediately preceding
the Effective Date. For purposes hereof, "Effective
Date" shall be defined as set forth in the Settlement
and Release Agreement between Executive and the
Company."
5. Section 2(b) shall be renumbered Section 2(c).
6. A new Section 2(b) shall be added to read as
follows:
"(b) The Option Price with respect to the Option
Shares for the options set forth in 1(d) above shall be
the closing price of the Common Stock on the last
trading date immediately preceding the grant date of the
Option set forth in Section 1(d) above."
7. Section 4 shall be amended and restated in its
entirety as follows:
<PAGE>
"Each Option granted pursuant to Sections 1(a)
through 1(d) above, may be exercised in whole or in part
at any time or from time to time by Executive on or
before 12:00 midnight, California time on January 1,
2005 (the "Expiration Date")."
8. The following shall be added to the end of the last
sentence of the first paragraph of Section 5(a):
"Instead of a payment by cashier's or certified
check, Executive may pay the Option Price by providing a
copy of instructions, in a format and upon such terms as
the Company shall approve, to a broker directing such
broker to sell the Common Stock for which such Option is
exercised, and to remit to the Company the aggregate
Option Price of such Options (a "cashless exercise")."
9. Except as expressly set forth herein, all of the
terms and conditions contained in the Agreement shall remain in full
force and effect and shall not be modified by the terms hereof.
10. If this Amendment No. 1 does not become effective,
the provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has executed this
Amendment No. 1 as of the 16th day of April, 1999.
MAXICARE HEALTH PLANS, INC.
By: /s/ Alan Bloom
Its: Secretary
"EXECUTIVE"
/s/ Peter J. Ratican
Peter J. Ratican
Exhibit 10.84b
MAXICARE HEALTH PLANS, INC.
SENIOR EXECUTIVES
1996 STOCK OPTION PLAN
AMENDMENT NUMBER TWO
WHEREAS, Maxicare Health Plans, Inc. (the "Company")
adopted, and the Company's stockholders approved, the Maxicare Health
Plans, Inc. Senior Executives 1996 Stock Option Plan, as amended by
Amendment Number One (the "Plan"), which Plan was effective on July
26th, 1996; and
WHEREAS, pursuant to Section 9 of the Plan, the Board of
Directors of the Company (the "Board") has the power to amend the Plan
as of this 16 day of April, 1999; and
WHEREAS, the Company has entered into a Settlement and
Release Agreement of even date herewith (the "Settlement Agreement")
with Peter J. Ratican ("Ratican") whereunder the terms of that certain
Amended and Restated Employment and Indemnification Agreement dated as
of April 1, 1996, as amended by Amendment No. 1 thereto, dated
February 11, 1997, Amendment No. 2 thereto, dated March 28, 1998,
Amendment No. 3 thereto, dated May 8, 1998 and Amendment No. 4 thereto
of even date herewith by and between the Company and Ratican
(collectively, the "Employment Agreement") will terminate on June 30,
1999 (the "Termination Date").
WHEREAS, in connection with the Settlement Agreement and
this Amendment Number Two, the Company and Ratican have entered into
Related Agreements as defined in the Settlement Agreement;
WHEREAS, pursuant to the Settlement Agreement, Ratican
is to be able to exercise certain options previously granted to him
under the Plan through January 1, 2005 regardless of his termination;
WHEREAS, in order to allow Ratican to exercise the
options in this manner, the Board wishes to amend the Plan in the
manner set forth below; and
WHEREAS, such amendments do not require the approval of
the Company's stockholders and will not adversely affect any
Optionee's rights under the Plan with respect to any Option heretofore
granted;
NOW, THEREFORE, the Plan is amended, as follows:
<PAGE>
1. The effectiveness of this Amendment Number Two shall
be conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment Number Two by the Board provided,
however, that if such approval is not unanimous, Ratican may elect to
declare the Settlement Agreement and the Related Agreements null and
void.
2. Section 8.4 is amended by adding the following
sentence to the end thereof:
"The Company may, in its sole discretion, provide
for an extension of the term of the Option beyond the
term provided in (b) and/or (c) of this Section 8.4, but
such extension shall not exceed the term provided in (a)
of this Section 8.4."
3. Except as expressly set forth herein, all of the
terms and conditions contained in the Plan shall remain in full force
and effect and shall not be modified by the terms hereof.
4. If this Amendment Number Two does not become
effective, the provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused its duly
authorized officer to execute this instrument of amendment on the 16
day of April, 1999.
MAXICARE HEALTH PLANS, INC.
By: /s/ Alan Bloom
ATTEST:
By:/s/ Richard A. Link
Exhibit 10.14b
AMENDMENT NO. 2 TO
THE STOCK OPTION AGREEMENT DATED AUGUST 31, 1989
This Amendment No. 2 to the Stock Option Agreement dated
as of August 31, 1989, as amended by Amendment No. 1 (the "Agreement")
is made by and between Peter J. Ratican (the "Executive") and Maxicare
Health Plans, Inc., a Delaware corporation (the "Company") and dated
as of April 16, 1999.
R E C I T A L S
WHEREAS, the Company has entered into a Settlement and
Release Agreement of even date herewith (the "Settlement Agreement")
with Peter J. Ratican ("Ratican") whereunder the terms of that certain
Amended and Restated Employment and Indemnification Agreement dated as
of April 1, 1996, as amended by Amendment No. 1 thereto, dated
February 11, 1997, Amendment No. 2 thereto, dated March 28, 1998,
Amendment No. 3 thereto, dated May 8, 1998 and Amendment No. 4 thereto
of even date herewith by and between the Company and Ratican
(collectively, the "Employment Agreement") will terminate on June 30,
1999 (the "Termination Date");
WHEREAS, in connection with the Settlement Agreement and
this Amendment No. 2, the Company and Executive have entered into
Related Agreements as defined in the Settlement Agreement
WHEREAS, in connection with the Settlement Agreement and
the Consulting Agreement, Ratican and the Company agreed to adjust the
expiration date of the stock options provided under the Agreement; and
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, the Company and the Executive agree
as follows:
1. The effectiveness of this Amendment No. 2 shall be
conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment No. 2 by the Board provided,
however, that if such approval is not unanimous, Executive may elect
to declare the Settlement Agreement and the Related Agreements null
and void.
<PAGE>
2. Paragraph 3 is hereby amended and restated in its
entirety to read as follows:
"The Option may be exercised in whole or in part at
any time or from time to time by Executive on or before
12:00 midnight, California time on December 5, 2000 (the
"Expiration Date")."
3. The following shall be added to the end of the last
sentence of the first paragraph of Section 4(a):
"Instead of a payment by cashier's or certified
check, Executive may pay the Option Price by providing a
copy of instructions, in a format and upon such terms as
the Company shall approve, to a broker directing such
broker to sell the Common Stock for which such Option is
exercised, and to remit to the Company the aggregate
Option Price of such Options (a "cashless exercise")."
4. Paragraph 9(b) of is hereby deleted in its entirety.
5. Except as expressly set forth herein, all of the
terms and conditions contained in the Agreement shall remain in full
force and effect and shall not be modified by the terms hereof.
6. If this Amendment No. 2 does not become effective,
the provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has executed this
Amendment No. 2 to the Stock Option Agreement as of the 16 day of
April, 1999.
MAXICARE HEALTH PLANS, INC.
By: /s/ Alan Bloom
Its: Secretary
"EXECUTIVE"
/s/ Peter J. Ratican
Peter J. Ratican
Exhibit 10.87c
AMENDMENT NO. 3 TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Amendment No. 3 to the Supplemental Executive
Retirement Plan, as amended by Amendments No. 1 and No. 2 (the "Plan")
of Maxicare Health Plans, Inc., a Delaware corporation (the "Company")
is hereby adopted effective as of April 16, 1999.
R E C I T A L S
WHEREAS, the Company has entered into a Settlement and
Release Agreement of even date herewith (the "Settlement Agreement")
with Peter J. Ratican ("Ratican") whereunder the terms of that certain
Amended and Restated Employment and Indemnification Agreement dated as
of April 1, 1996, as amended by Amendment No. 1 thereto, dated
February 11, 1997, Amendment No. 2 thereto, dated March 28, 1998,
Amendment No. 3 thereto, dated May 8, 1998 and Amendment No. 4 thereto
of even date herewith by and between the Company and Ratican
(collectively, the "Employment Agreement") will terminate on June 30,
1999 (the "Termination Date");
WHEREAS, in connection with the Settlement Agreement and
this Amendment No. 3, the Company and Ratican have entered into
Related Agreements as defined in the Settlement Agreement;
WHEREAS, the Company wishes to amend the Plan to allow
Ratican to continue to accrue rights and benefits under the Plan
during the term of the Consulting Agreement; and
NOW, THEREFORE, in consideration of the terms and
conditions hereinafter set forth, the Company agrees as follows:
1. The effectiveness of this Amendment No. 3 shall be
conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment No. 3 by the Board provided,
however, that if such approval is not unanimous, Ratican may elect to
declare the Settlement Agreement and the Related Agreements null and
void.
2. A new Section 9.09 shall be added to the Plan as
follows:
<PAGE>
"9.09. Peter J. Ratican Plan Benefits.
(a) Notwithstanding any Plan provisions to the
contrary, Ratican will continue to accrue rights and benefits under
the Plan as if he were employed as an Executive during the Term of the
Consulting Agreement entered into between the Company and Ratican (the
"Consulting Agreement"). If there is a Company Default as such term
is defined in the Consulting Agreement of even date herewith entered
into between the Company and Ratican, Ratican will continue to accrue
rights and benefits under the Term of the Consulting Agreement as if
he were employed and paid as an Executive. "Term" shall be defined as
set forth in the Consulting Agreement.
(b) Ratican's status as an Executive under Section
1.14 may not be revoked by the Board of Directors or the Committee."
3. Except as expressly set forth herein, all of the
terms and conditions contained in the Plan shall remain in full force
and effect and shall not be modified by the terms hereof.
4. If this Amendment No. 3 does not become effective,
the provisions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has executed this
Amendment No. 3 to the Supplemental Executive Retirement Plan as of
the 16 day of April, 1999.
MAXICARE HEALTH PLANS, INC.
By: /s/ Alan Bloom
Its: Secretary
Exhibit 10.3o
AMENDED AND RESTATED SECURED PROMISSORY NOTE
$2,229,028.13 April 16, 1999
This Amended and Restated Secured Promissory Note (this
"Note") amends, restates, supersedes and replaces in its entirety,
that certain Secured Promissory Note executed on February 18, 1997 by
PETER J. RATICAN (the "Borrower") to MAXICARE HEALTH PLANS, INC., a
Delaware corporation (the "Lender").
- ---------------------------------------------------------------------
1. FOR VALUE RECEIVED, the Borrower promises to pay to
the order of the Lender the sum of Two Million Two Hundred Twenty Nine
Thousand Twenty Eight Dollars and Thirteen Cents ($2,229,028.13),
together with interest thereon from the date of the Loan at the lowest
Applicable Federal Rate, compounded monthly.
2. As set forth in that certain Loan Agreement dated as
of February 18, 1997 by and between the Borrower and the Lender (as
amended by Amendment One to the Loan Agreement, dated of even date
herewith, and as may be further amended, supplemented or modified from
time to time, the "Loan Agreement"), this Note shall continue to
accrue interest through the Maturity Date.
3. All accrued interest and unpaid principal of this
Note (the "Balance") shall be due and payable on June 30, 2003 (the
"Maturity Date"), except as otherwise provided herein.
4. On the Maturity Date, the Balance shall be reduced
to zero (the "Reduction") subject to and conditioned upon the
following: (a) the Borrower is not in default of the Loan Agreement
(as defined in the Loan Agreement); (b) either (i) Consulting
Agreement entered into between the Lender and the Borrower of even
date herewith has not been terminated pursuant to Sections 7(c) and
7(d) thereof, or (ii) the Amended Employment Agreement entered into
between the Lender and the Borrower of even date herewith (the
"Amended Employment Agreement") was terminated prior to the
Termination Date, as defined therein, for any reason except (y) by
Employee pursuant to Section 7(b) of the Amended Employment Agreement
without "Good Reason" or (z) for "Cause" pursuant to Section 7(d) of
the Amended Employment Agreement; and (c) Borrower pays to the Lender
on or before the Maturity Date an amount equal to the then-applicable
minimum state and federal withholding amounts and FICA due in
<PAGE>
connection with the Reduction (the "Withholding Amount"). If the
Borrower does not satisfy any one or more of the conditions set forth
in 4(a) through (c) above, there will be no Reduction and the Borrower
will remain obligated to pay the full amount of the Balance.
5. If, on the Maturity Date, to the extent that the
Borrower has sold any shares of stock of the Lender included in the
Collateral [as defined in that certain Pledge Agreement dated as of
February 18, 1997 by and between the Borrower and the Lender (as
amended by Amendment One to the Pledge Agreement, dated of even date
herewith, and as may be further amended, supplemented or modified from
time to time, the "Pledge Agreement")], the amount held in escrow by
the Lender, including interest thereon (as provided in Section 2.5 of
the Loan Agreement), shall be applied to the Withholding Amount or the
Balance as the case may be and the Borrower shall pay the balance of
the Withholding Amount or Balance to Lender in cash. In the event
that the amount held in escrow by the Lender, including interest
thereon, exceeds the Withholding Amount or Balance, the Borrower will
receive the excess as a refund after the Withholding Amount has been
satisfied.
6. This Note is a recourse note unless there exists a
Company Default as such term is defined in that certain Consulting
Agreement of even date herewith between the Lender and the Borrower
("Consulting Agreement").
7. All payments in respect of this Note shall be made
in lawful money of the United States of America in same day funds to
the office of the Lender located at 1149 South Broadway Street, Suite
910, Los Angeles, California 90015 or at such other place as shall be
designated in writing by the Lender to the Borrower. Until notified
in writing of the transfer of this Note, the Borrower shall be
entitled to deem the Lender, or such person who has been so identified
by the transferor in writing to the Borrower as the holder of this
Note, as the owner and holder of this Note. Each of the Lender and any
subsequent holder of this Note agrees that before disposing of this
Note or any part hereof it will make a notation hereon of all payments
previously made hereunder; provided, however, that the failure to make
notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Borrower hereunder with respect to
payment on this Note.
8. This Note is the Note referred to in, and is
entitled to all of the rights, benefits and privileges provided for in
the Loan Agreement. For the purposes hereof, unless otherwise defined
herein, all capitalized terms contained in this Note shall have the
meanings ascribed to them in the Loan Agreement. The Loan Agreement,
among other things, (a) provides for the making of the Loan (the
"Loan") by the Lender to the Borrower in the principal amount of Two
Million Two Hundred Twenty Nine Thousand Twenty Eight Dollars and
<PAGE>
Thirteen Cents ($2,229,028.13), the indebtedness of the Borrower
resulting from such Loan being evidenced by this Note, and (b)
contains provisions for acceleration of the Maturity Date hereof upon
the happening of certain stated events.
9. This Note is secured by the Pledge Agreement.
10. No reference herein to the Loan Agreement or the
Pledge Agreement and no provision of this Note, the Loan Agreement or
the Pledge Agreement shall alter or impair the obligation of the
Borrower, which is absolute and unconditional, to pay this Note at the
place and at the time herein prescribed.
11. The Borrower promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred in the collection and
enforcement of this Note. The Borrower hereby consents to renewals
and extensions of time at or after the maturity hereof, without
notice, and hereby waives diligence, presentment, protest, demand and
notice of every kind.
12. Except as expressly defined herein, capitalized
terms shall have the meaning ascribed to them in that certain Amended
and Restated Employment and Indemnification Agreement dated as of
April 1, 1996, as amended by Amendment No. 1 thereto, dated February
11, 1997, Amendment No. 2 thereto, dated March 28, 1998, Amendment No.
3 thereto, dated May 8, 1998 and Amendment No. 4 thereto of even date
herewith by and between the Company and Consultant.
13. The effectiveness of this Note shall be conditioned
upon (i) the occurrence of the "Effective Date" as such term is
defined in the Settlement Agreement; (ii) delivery of the fully
executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Note by the Board provided, however, that
if such approval is not unanimous, Borrower may elect to declare the
Settlement Agreement and the Related Agreements null and void.
14. If this Note does not become effective, the
provisions of the original Secured Promissory Note executed on
February 18, 1997 by and between Lender and Borrower shall remain in
full force and effect.
IN WITNESS WHEREOF, the Borrower has executed and
delivered this Note as of the day and year and place first above
written.
BORROWER:
/s/ Peter J. Ratican
PETER J. RATICAN
Exhibit 10.3p
AMENDMENT ONE TO THE LOAN AGREEMENT
This Amendment One to the Loan Agreement (this
"Amendment") is entered into as of April 16, 1999, by and between
MAXICARE HEALTH PLANS, INC., a Delaware corporation ("Lender") and
PETER J. RATICAN ("Borrower"), in light of the following:
RECITALS
WHEREAS, Lender and Borrower have entered into that
certain Settlement and Release Agreement (the "Settlement Agreement")
of even date herewith and in connection with the Settlement Agreement,
Lender and Borrower have also entered into Related Agreements as
defined in the Settlement Agreement;
WHEREAS, Lender and Borrower have entered into that
certain Amended and Restated Secured Promissory Note (the "Amended and
Restated Note"), of even date herewith, which amends, restates and
supersedes, in its entirety, that certain Secured Promissory Note (the
"Original Note") executed on February 18, 1997 by and between Lender
and Borrower;
WHEREAS, Lender and Borrower have entered into that
certain Amendment One to the Pledge Agreement ("Amendment One to the
Pledge Agreement") of even date herewith, which amends that certain
Pledge Agreement entered into as of February 18, 1997, by and between
Lender and Borrower (the "Pledge Agreement");
AND WHEREAS, in connection with the Settlement
Agreement, the Related Agreements (as defined in the Settlement
Agreement), the Amended and Restated Note, and Amendment One to the
Pledge Agreement, Lender and Borrower desire to enter into this
Amendment One to that certain Loan Agreement entered into as of
February 18, 1997, by and between Lender and Borrower (the "Loan
Agreement").
NOW, THEREFORE, for valuable consideration the receipt
of which is hereby acknowledged, the parties agree as follows:
1. The effectiveness of this Amendment shall be
conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
<PAGE>
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment by the Board provided, however,
that if such approval is not unanimous, Borrower may elect to declare
the Settlement Agreement and the Related Agreements null and void.
2. All terms used herein shall have the same meaning as
in the Loan Agreement, and this Amendment shall be considered a part
of the Loan Agreement.
3. In Section 1.8 of the Loan Agreement, the date
"April 1, 2001" is hereby replaced with "June 30, 2003."
4. By clerical error, a second Section 1.9 exists in
the Loan Agreement, operating to define the term "Pledge Agreement."
This section defining "Pledge Agreement" is hereby re-numbered as
Section 1.10. However, this re-numbering in no way changes the
language or effect of the definition of "Pledge Agreement," which
refers not only to the Pledge Agreement but also to any amendment of
the Pledge Agreement, including but not limited to Amendment One to
the Pledge Agreement.
5. Section 2.5 is deleted in its entirety and replaced
with the following:
"The Balance as determined in the Amended and
Restated Note shall be payable on the Maturity Date."
6. Except as expressly set forth herein, all of the
terms and conditions contained in the Loan Agreement shall remain in
full force and effect and shall not be modified by the terms hereof.
7. If this Amendment does not become effective, the
provisions of the Loan Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have executed
this Amendment as of the date first written above.
LENDER:
MAXICARE HEALTH PLANS, INC., a
Delaware corporation
By: /s/ Richard A. Link
Name: Richard A. Link
Its: Executive Vice President and
Chief Financial Officer
By: /s/ Alan Bloom
Name: Alan Bloom
Its: Secretary
BORROWER:
/s/ Peter J. Ratican
PETER J. RATICAN
Exhibit 10.3q
AMENDMENT ONE TO THE PLEDGE AGREEMENT
This Amendment One to the Pledge Agreement (this
"Amendment") is entered into as of April 16, 1999, by and between
MAXICARE HEALTH PLANS, INC., a Delaware corporation ("Lender") and
PETER J. RATICAN ("Borrower"), in light of the following:
RECITALS
WHEREAS, Lender and Borrower have entered into that
certain Settlement and Release Agreement (the "Settlement Agreement")
of even date herewith and in connection with the Settlement Agreement,
Lender and Borrower have also entered into Related Agreements as
defined in the Settlement Agreement;
WHEREAS, Lender and Borrower have entered into that
certain Amended and Restated Secured Promissory Note (the "Amended and
Restated Note"), of even date herewith, which amends, restates and
supersedes, in its entirety, that certain Secured Promissory Note (the
"Original Note") executed on February 18, 1997 by and between Lender
and Borrower;
WHEREAS, Lender and Borrower have entered into that
certain Amendment One to the Loan Agreement of even date herewith
("Amendment One to the Loan Agreement"), which amends that certain
Loan Agreement entered into as of February 18, 1997, by and between
Lender and Borrower (the "Loan Agreement");
AND WHEREAS, in connection with the Settlement
Agreement, Related Agreements (as defined in the Settlement
Agreement), the Amended and Restated Note, and Amendment One to the
Loan Agreement, Lender and Borrower desire to make this Amendment to
that certain Pledge Agreement entered into as of February 18, 1997, by
and between Lender and Borrower (the "Pledge Agreement").
NOW, THEREFORE, for valuable consideration the receipt
of which is hereby acknowledged, the parties agree as follows:
1. The effectiveness of this Amendment shall be
conditioned upon (i) the occurrence of the "Effective Date" as such
term is defined in the Settlement Agreement; (ii) delivery of the
fully executed Settlement Agreement and Related Agreements; (iii) the
Effective Date of the Consulting Agreement between the Company and
Elwood I. Kleaver, Jr. ("Kleaver") pursuant to which Kleaver agrees to
function as the Company's Chief Operating Officer ("COO"); and (iv)
unanimous approval of this Amendment by the Board provided, however,
<PAGE>
that if such approval is not unanimous, Borrower may elect to declare
the Settlement Agreement and the Related Agreements null and void.
2. Unless otherwise stated, all of the terms used
herein shall have the same meaning as in the Pledge Agreement, and
this Amendment shall be considered a part of the Pledge Agreement.
3. Wheresoever in the body of the Pledge Agreement
reference is made to the "Note" or the "Promissory Note" or any other
like term, such reference shall be deemed to refer to the Amended and
Restated Note, not the Original Note.
4. Wheresoever in the body of the Pledge Agreement
reference is made to the "Loan Agreement" or any other like term, such
reference shall be deemed to refer to the Loan Agreement as modified
by Amendment One to the Loan Agreement.
5. Section 7(a) of the Pledge Agreement is deleted in
its entirety and replaced with the following:
"The Balance as determined under the Note shall be
payable onthe Maturity Date."
6. Sections 11.1(a) and 11.1(b) shall be deleted in
their entirety and any references to such Sections or provisions
relating only to such Sections are hereby deleted.
7. A new Section 27 is hereby added to read as follows:
"SECTION 27. Substitution of Collateral. Pledgor
shall be entitled to sell or withdraw, at any time, all
or any portion of the Collateral provided that Pledgor
substitute in lieu thereof, cash, treasury notes, U.S.
government backed securities or comparable collateral
acceptable to the Company at the time of delivery and
that has a fair market value of not less than $800,000
on the delivery date. In addition, upon a Company
Default as such term is defined in the Consulting
Agreement of even date herewith between the Lender and
the Borrower, Borrower can withdraw such additional
amounts of Collateral as provided in the Consulting
Agreement."
8. Except as expressly set forth herein, all of the
terms and conditions contained in the Pledge Agreement shall remain in
full force and effect and shall not be modified by the terms hereof.
9. If this Amendment One does not become effective, the
provisions of the Pledge Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have executed
this Amendment as of the date first written above.
LENDER:
MAXICARE HEALTH PLANS, INC., a
Delaware corporation
By: /s/ Alan Bloom
Name: Alan Bloom
Its: Secretary
BORROWER:
/s/ Peter J. Ratican
PETER J. RATICAN
Exhibit 99.10
MAXICARE ANNOUNCES MANAGEMENT TRANSITION AND BOARD CHANGES
LOS ANGELES, April 19, 1999 -- MAXICARE HEALTH PLANS, INC. (NASDAQ-
NMS:MAXI) announced that Peter J. Ratican, Chairman, President and
Chief Executive Officer, will be leaving the Company to pursue
personal business interests. The Board of Directors has formed a
Search Committee to identify an appropriate successor.
Mr. Ratican said, "We have worked successfully to return Maxicare to
profitability and I am pleased that our strategic restructuring
program has accomplished that goal. Today the Company is on an
improved financial footing and is a more focused enterprise with
attractively positioned and growing operations in California, Indiana,
and Louisiana. It is an appropriate time for the Company to consider
new leadership as Maxicare moves to the next level of profitable
growth."
To ensure a smooth transition, Mr. Ratican has agreed to remain in his
position as Chairman, President and Chief Executive Officer until June
30, 1999. In addition, Elwood I. Kleaver, Jr., a current Maxicare
Board member, has agreed to become Interim Chief Operating Officer to
assist during the period of transition. It is intended that these
agreements will become effective April 24, 1999.
The Company also announced that Alan S. Manne will be retiring as a
Director when his term expires at the 1999 Annual Meeting of
Shareholders. The Board expressed its thanks to Mr. Manne for his
many contributions to the Board over the years. In addition, the
Board announced that two new nominees, George H. Bigelow and Simon
Whitmey will be joining current director Thomas W. Field, Jr. as
nominees for election to the Board of Directors at the 1999 Annual
Meeting of Shareholders. Mr. Bigelow is managing member of Americana
Group, LLC, a real estate investment advisor. Mr. Whitmey is
President and Chief Executive Officer of Acralight, Inc., a
<PAGE>
closely held California corporation that manufactures and installs
glazing systems. Mr. Field is President of Field & Associates, a
management consulting firm and Director of Campbell Soup Company and
Stater Bros. Markets.
As previously announced, the Company's 1999 Annual Meeting of
Shareholders will be held at 8:00 a.m. on Wednesday, June 30, 1999 in
Los Angeles, California.
Maxicare is a managed health care company with operations in
California, Indiana, and Louisiana, which currently have approximately
478,000 members. The Company also offers various employee benefit
packages through its subsidiaries Maxicare Life and Health Insurance
Company and HealthAmerica Corporation.
