SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Act of 1934 for the quarterly period ended
September 30, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-12024
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MAXICARE HEALTH PLANS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-3615709
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1149 South Broadway Street, Los Angeles, California 90015
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213)765-2000
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ X ] No [ ]
Common Stock, $.01 par value - 17,925,381 shares outstanding as
of November 12, 1999.
<PAGE>
PART I: FINANCIAL INFORMATION
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Item 1: Financial Statements
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MAXICARE HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents................................. $ 62,504 $ 48,507
Marketable securities..................................... 3,758 11,345
Accounts receivable, net.................................. 25,643 36,587
Deferred tax asset........................................ 5,095 5,082
Prepaid expenses.......................................... 6,267 5,502
Other current assets...................................... 271 470
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TOTAL CURRENT ASSETS.................................... 103,538 107,493
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PROPERTY AND EQUIPMENT
Leasehold improvements.................................... 5,461 5,450
Furniture and equipment................................... 18,044 17,717
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23,505 23,167
Less accumulated depreciation and amortization.......... 21,961 21,714
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NET PROPERTY AND EQUIPMENT.............................. 1,544 1,453
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LONG-TERM ASSETS
Restricted investments.................................... 8,089 13,749
Deferred tax asset........................................ 13,111 13,085
Intangible assets, net.................................... 532 474
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TOTAL LONG-TERM ASSETS.................................. 21,732 27,308
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TOTAL ASSETS............................................ $ 126,814 $ 136,254
============= ============
CURRENT LIABILITIES
Estimated claims and other health care costs payable...... $ 59,756 $ 62,494
Accounts payable.......................................... 2,069 1,591
Deferred income........................................... 2,034 7,416
Accrued salary expense.................................... 2,348 2,157
Other current liabilities................................. 7,986 9,075
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TOTAL CURRENT LIABILITIES............................... 74,193 82,733
LONG-TERM LIABILITIES....................................... 2,528 565
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TOTAL LIABILITIES....................................... 76,721 83,298
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SHAREHOLDERS' EQUITY
Common stock, $.01 par value - 40,000 shares authorized,
1999 - 17,925 shares and 1998 - 17,925 shares issued and
outstanding............................................. 179 179
Additional paid-in capital................................ 254,250 254,250
Notes receivable from shareholders ....................... (2,614) (5,159)
Accumulated deficit....................................... (201,716) (196,348)
Accumulated other comprehensive income.................... (6) 34
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TOTAL SHAREHOLDERS' EQUITY.............................. 50,093 52,956
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 126,814 $ 136,254
============= ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
MAXICARE HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
REVENUES
<S> <C> <C> <C> <C>
Commercial premiums................................. $103,369 $119,390 $306,857 $358,160
Medicaid premiums................................... 49,812 52,403 153,499 152,637
Medicare premiums................................... 23,534 15,134 65,106 41,053
-------- -------- -------- --------
TOTAL PREMIUMS.................................... 176,715 186,927 525,462 551,850
-------- -------- -------- --------
Investment income................................... 971 1,279 2,772 4,253
Other income........................................ 415 407 4,738 1,612
-------- -------- -------- --------
TOTAL REVENUES.................................... 178,101 188,613 532,972 557,715
-------- -------- -------- --------
EXPENSES
Physician services.................................. 66,918 75,441 202,031 222,124
Hospital services................................... 65,786 68,780 198,185 201,864
Outpatient services................................. 24,509 26,218 71,755 86,444
Other health care services.......................... 4,038 3,392 10,150 11,995
-------- -------- -------- --------
TOTAL HEALTH CARE EXPENSES........................ 161,251 173,831 482,121 522,427
Marketing, general and administrative expenses...... 15,398 13,966 47,071 46,575
Depreciation and amortization....................... 201 182 648 557
Loss contracts, divestiture costs and management
settlement charges................................ 8,500 10,000
-------- -------- -------- --------
TOTAL EXPENSES.................................... 176,850 187,979 538,340 579,559
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS.......................... 1,251 634 (5,368) (21,844)
INCOME TAX BENEFIT.....................................
-------- -------- -------- --------
NET INCOME (LOSS)...................................... $ 1,251 $ 634 $ (5,368) $(21,844)
======== ======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Basic:
Basic Earnings (Loss) per Common Share.............. $ .07 $ .04 $ (.30) $ (1.22)
======== ======== ======== ========
Weighted average number of common shares
outstanding....................................... 17,925 17,925 17,925 17,929
======== ======== ======== ========
Diluted:
Diluted Earnings (Loss) per Common Share............ $ .07 $ .04 $ (.30) $ (1.22)
======== ======== ======== ========
Weighted average number of common and common
dilutive potential shares outstanding............. 17,926 17,937 17,925 17,929
======== ======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
MAXICARE HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................... $ (5,368) $ (21,844)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization.................................. 648 557
Benefit from deferred income taxes............................. (39) (98)
Loss contracts, divestiture costs and management settlement
charges...................................................... 5,214 4,444
Amortization of restricted stock............................... 58
Changes in assets and liabilities:
(Increase) decrease in accounts receivable................... 10,944 (13,789)
Increase (decrease) in estimated claims and other health
care costs payable......................................... (2,738) 990
Decrease in deferred income.................................. (5,382) (5,079)
Changes in other miscellaneous assets and liabilities........ (2,264) (4,512)
--------- ---------
Net cash provided by (used for) operating activities.............. 1,015 (39,273)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................ (372) (473)
Dispositions of property and equipment......................... 421
Decrease in restricted investments............................. 5,660 30
Reductions to long-term receivables............................ 509
Proceeds from sales of marketable securities................... 10,747 38,895
Purchases of marketable securities............................. (3,200) (12,438)
--------- ---------
Net cash provided by investing activities......................... 13,256 26,523
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations.......................... (274) (271)
Stock options exercised........................................ 160
Repurchase of restricted stock................................. (344)
--------- ---------
Net cash used for financing activities............................ (274) (455)
--------- ----------
Net increase (decrease) in cash and cash equivalents.............. 13,997 (13,205)
Cash and cash equivalents at beginning of period.................. 48,507 51,881
--------- ---------
Cash and cash equivalents at end of period........................ $ 62,504 $ 38,676
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for -
Interest..................................................... $ 21 $ 66
Supplemental schedule of non-cash investing activities:
Capital lease obligations incurred for purchase of property
and equipment................................................ $ 414 $ 63
Forgiveness of note receivable from shareholder................ $ 145
Allowance for forgiveness of note receivable from shareholder.. $ 2,542
See notes to consolidated financial statements.
</TABLE>
<PAGE>
MAXICARE HEALTH PLANS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Number of Additional Other
Common Common Paid-in Accumulated Comprehensive
Shares Stock Capital Other Deficit Income (Loss) Total
--------- -------- ---------- ------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997.... 17,936 $ 179 $ 254,376 $ (4,704) $ (168,815) $ 81,036
Comprehensive income (loss)
Net loss..................... (27,533) (27,533)
Other comprehensive income,
net of tax, related to
unrealized gains on
marketable securities........ $ 34 34
--------
Comprehensive income (loss).. (27,499)
Stock options exercised........ 20 160 160
Restricted stock amortized..... 58 58
Retirement of restricted
stock........................ (31) (344) (344)
Notes receivable from
shareholders................. (455) (455)
--------- -------- --------- -------- ---------- ------------ --------
Balances at December 31, 1998.... 17,925 179 254,250 (5,159) (196,348) 34 52,956
Comprehensive income (loss)
Net loss..................... (5,368) (5,368)
Other comprehensive income,
net of tax, related to
unrealized gains on
marketable securities........ (40) (40)
--------
Comprehensive income (loss).... (5,408)
Notes receivable from
shareholders................. (142) (142)
Forgiveness of note receivable
from shareholders............ 2,687 2,687
--------- -------- --------- -------- --------- ------------ --------
Balances at September 30, 1999... 17,925 $ 179 $ 254,250 $ (2,614) $(201,716) $ (6) $ 50,093
========= ========== ========== ======== ========= ============ ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
MAXICARE HEALTH PLANS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
- ---------------------
Maxicare Health Plans, Inc., a Delaware corporation ("MHP"), is a
holding company which owns various subsidiaries, primarily health
maintenance organizations ("HMOs"). The accompanying unaudited
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments considered necessary for a fair presentation, which
consist solely of normal recurring adjustments, have been
included. All significant inter-company balances and
transactions have been eliminated.
For further information on MHP and subsidiaries (collectively the
"Company") refer to the consolidated financial statements and
accompanying footnotes included in the Company's annual report on
Form 10-K as filed with the Securities and Exchange Commission
for the year ended December 31, 1998.
Other Income
- ------------
Other Income includes the recognition of $4.1 million in the
first quarter of 1999 related to a settlement reached by the
Company in connection with the operation of a Medicaid managed
care program from 1986 through 1989. On March 26, 1999, the
United States Bankruptcy Court approved the settlement and the
order became final on April 19, 1999. Pursuant to the settlement
agreement the Company received the settlement funds in early May
1999.
NOTE 2 - LOSS CONTRACTS AND MANAGEMENT SETTLEMENT CHARGES
In the first quarter of 1999, the Company incurred charges of
$3.0 million for loss contracts associated with the Company's
commercial healthcare operations in North and South Carolina.
The Company has ceased offering commercial health care coverage
in the Carolinas health plans beyond March 1999. The Company
recorded in the first quarter of 1999 a $5.5 million management
settlement charge related to a settlement with the Company's
Chief Executive Officer, Peter J. Ratican pursuant to which Mr.
Ratican terminated his employment agreement, retired as President
and CEO of the Company and did not seek re-election to the Board
of Directors.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations
The Company reported net income of $1.3 million for the three
months ended September 30, 1999, compared to net income of $.6
million for the same three month period in 1998. Net income per
common share was $.07 for the third quarter of 1999 compared to
$.04 for the same period in 1998. The Company's premium revenues
for its core operations increased by $11.5 million or 7.0% over
the prior year quarter as a result of premium rate increases in
all lines of business and enrollment growth in the Medicare line
of business generated by the California and Indiana health plans.
Last year, Maxicare implemented a strategic restructuring program
to exit unprofitable markets by asset sales or plan closings and
concentrate on its health care businesses in California, Indiana
and Louisiana (the "core operations"). As of September 30, 1999,
these core health plans accounted for commercial membership of
approximately 280,500 members, Medicaid membership of
approximately 175,200 members and Medicare membership of
approximately 15,000 members.
Premium revenues for the third quarter of 1999 decreased by $10.2
million to $176.7 million, a decrease of 5.5% as compared to 1998.
This decrease was a result of a $21.7 million decrease in premium
revenues related to the Company's non-core operations which
have been fully divested as of September 30, 1999 offset in part
by an $11.5 million increase in premium revenues related to the
Company's core operations.
Commercial premiums for the third quarter of 1999 decreased $16.0
million to $103.4 million as compared to $119.4 million for 1998.
The Company's commercial premiums for its core operations
increased by $2.6 million to $103.4 million for 1999 as compared
to $100.8 million for 1998 primarily due to premium rate increases
offset in part by a decrease in membership. The Company's
commercial membership for its core operations of 280,500 members
as of September 30, 1999 decreased by 6,100 members from September
30, 1998 primarily as a result of the Company's decision to exit
certain commercial business in southern Indiana. The average
commercial premium revenue per member per month ("PMPM") for the
third quarter of 1999 increased 7.0% as compared to 1998.
Medicaid premiums for the third quarter of 1999 decreased $2.6
million to $49.8 million as compared to $52.4 million for 1998.
The Company's Medicaid premiums for its core operations increased
by $.5 million as a result of premium rate increases in California
<PAGE>
and Indiana and a 5.2% membership increase in Indiana offset in
part by a 10.1% membership decrease in California. As of September
30, 1999 the California and Indiana health plans had 109,000 and
66,200 Medicaid members, respectively. The average Medicaid
premium PMPM for the core operations increased by 6.4% primarily
due to premium rate increases in California and Indiana.
Medicare premiums for the third quarter of 1999 increased $8.4
million to $23.5 million as compared to 1998 as a result of
premium rate increases and membership growth in both the
California and Indiana health plans. As of September 30, 1999 the
California and Indiana health plans had 9,100 and 5,900 members,
respectively, representing an increase in membership of 4,800 from
1998 primarily as a result of growth in California. The average
Medicare PMPM increased by 5.4% due to premium rate increases in
both California and Indiana and due to greater membership growth
in California, which has a higher average Medicare premium PMPM as
compared to that of Indiana.
Investment income for the third quarter of 1999 decreased by $.3
million to $.9 million as compared to 1998 due to lower cash and
investment balances as well as lower investment yields.
Health care expenses for the third quarter of 1999 were $161.2
million as compared to $173.8 million for 1998. This decrease of
$12.6 million was primarily due to the decrease in health care
expenses associated with the divestitures of the Company's
Illinois and Wisconsin health plans and Carolinas commercial line
of business offset in part by an increase to health care expenses
as a result of growth in the core operations and an increase in
pharmacy costs. Although prescription drug costs are expected to
continue to rise, the Company believes this trend will be
partially mitigated by the changes implemented in the third
quarter of 1998, benefit design changes implemented in 1999 and
the continued implementation of enhanced procedures and controls
to promote cost effective use of prescription drug benefits.
Marketing, general and administrative ("M,G&A") expenses for the
third quarter of 1999 increased $1.4 million to $15.4 million as
compared to $14.0 million for 1998. M,G&A expenses for the third
quarter of 1998 excluded approximately $2.3 million of maintenance
costs which were applied against the $10.0 million reserve for
loss contracts and divestiture costs established at June 30, 1998.
Including the $2.3 million of maintenance costs, M,G&A expenses
were 8.7% of premium revenues for the third quarter of 1999 and
1998.
The Company reported a net loss of $5.4 million or $.30 per share
for the nine months ended September 30, 1999, which included an
$8.5 million charge for loss contracts and management settlement
costs and $4.1 million of other income from a litigation
<PAGE>
settlement as compared to a net loss of $21.8 million or $1.22 per
share for the comparable period a year ago, which included a $10.0
million charge for loss contracts and divestiture costs related to
health plans identified for disposition. Premium revenues for the
nine months ended September 30, 1999 decreased $26.4 million to
$525.5 million as compared to $551.9 million for 1998. The
Company's premiums for its core operations increased $42.2 million
to $520.5 million for 1999 as compared to $478.3 million for 1998
primarily due to commercial premium rate increases and
governmental membership growth. Health care expenses for the nine
months ended September 30, 1999 decreased $40.3 million to $482.1
million as compared to $522.4 million for 1998. This decrease was
primarily due to the decrease in health care expenses associated
with the divestitures of the Company's Illinois and Wisconsin
health plans and Carolinas commercial line of business offset in
part by an increase to health care expenses as a result of growth
in the core operations, an increase to health care claims reserves
for unanticipated and high dollar claim costs and an increase to
pharmacy costs. M,G& A expenses for the nine months ended
September 30, 1999 increased $.5 million to $47.1 million as
compared to $46.6 million for 1998. M,G&A expenses for the nine
months ended September 30, 1998 excluded approximately $2.3
million of maintenance costs which were applied against the $10.0
million reserve for loss contracts and divestiture costs
established at June 30, 1998. Including the $2.3 million of
maintenance costs, which were applied against the reserve for lost
contracts and divestiture costs, MG& A expenses were 9.0% and 8.9%
of premium revenues for the nine months ended September 30, 1999
and 1998, respectively.
Liquidity and Capital Resources
All of MHP's operating subsidiaries are direct subsidiaries of
MHP. The operating HMOs and Maxicare Life and Health Insurance
Company ("MLH") currently pay monthly fees to MHP pursuant to
administrative services agreements for various management,
financial, legal, computer and telecommunications services. The
Company's HMOs are federally qualified and are licensed in the
states where they operate. MLH is licensed in 35 states as of
September 30, 1999 including the three states in which the
Company's core HMOs operate. The Company's HMOs and MLH are
subject to state regulations which require compliance with certain
statutory deposit, dividend distribution and net worth
requirements. To the extent the operating HMOs and MLH must
comply with these regulations, they may not have the financial
flexibility to transfer funds to MHP. MHP's proportionate share
of net assets (after inter-company eliminations) which, at
September 30, 1999 may not be transferred to MHP by subsidiaries
in the form of loans, advances or cash dividends without the
consent of a third party is referred to as "Restricted Net
Assets". Restricted Net Assets of these operating subsidiaries
<PAGE>
were $29.4 million at September 30, 1999, with deposit
requirements and limitations imposed by state regulations on the
distribution of dividends representing $8.0 million and $7.6
million of the Restricted Net Assets, respectively, and net worth
requirements in excess of deposit requirements and dividend
limitations representing the remaining $13.8 million. The
Company's total Restricted Net Assets at September 30, 1999 were
$29.4 million. In addition to the $ 2.4 million in cash, cash
equivalents and marketable securities held by MHP, approximately
$2.6 million in funds held by operating subsidiaries could be
considered available for transfer to MHP at September 30, 1999
(collectively, the "Available Cash").
In September and October 1998, MHP completed the sale of its
Wisconsin and Illinois health plans. Under the terms of the
respective stock sales agreements, MHP retained certain assets and
liabilities of the health plans (including premium receivables and
estimated claims payable) which related to the operations of the
health plans prior to October 1, 1998. In September 1998, the
Company announced it would cease offering in North and South
Carolina commercial health care coverage beyond March 1999. As of
September 30, 1999 the Company's estimated claims payable related
to the Wisconsin, Illinois and Carolinas health plans (the
"divested health plans") aggregated approximately $.6 million. As
of September 30, 1999 the divested health plans had cash and cash
equivalents and marketable securities of $.1 million and
restricted investments of $1.1 million. The $1.1 million in
restricted investments is on deposit with the North Carolina
Department of Insurance and South Carolina Department of
Insurance. The Company believes the cash resources of the divested
health plans and the Available Cash will be adequate to fund the
payment of the estimated claims payable balance as of September
30, 1999 of the divested health plans and additional cash
requirements, if any, that may be imposed by the regulators of the
divested health plans.
The Company believes the restructuring program implemented in 1998
along with other operational initiatives will result in the core
HMO operations returning to profitability in 1999. In addition,
the Company believes the core HMO operations will generate
positive cash flow from operations in 1999. The Company believes
that for the foreseeable future it will have sufficient resources
to fund ongoing operations and obligations and remain in
compliance with statutory financial requirements for its
California, Indiana and Louisiana HMOs and MLH.
Although the Company believes it will have sufficient cash
resources to operate for the foreseeable future, the Company
intends to seek to obtain a committed line of credit or another
source of financing to provide it with additional working capital.
However, the Company cannot state with any degree of certainty at
<PAGE>
this time whether it could obtain such line of credit or another
source of financing, and if available, whether such financing
would be at terms and conditions acceptable to the Company.
General - This Quarterly Report on Form 10-Q contains and
incorporates by reference forward looking statements within the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Reference is made in particular to the
discussion set forth under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations". Such
statements are based on certain assumptions and current
expectations that involve a number of risks and uncertainties, many
of which are beyond the Company's control. These risks and
uncertainties include unanticipated costs and losses related to the
sales of the Company's Wisconsin and Illinois health plans,
unanticipated costs and losses related to terminating the Carolinas
business, limitations on premium levels, greater than anticipated
increases in healthcare expenses, loss of contracts with providers,
insolvency of providers, benefit mandates, variances in anticipated
enrollment as a result of competition or other factors, changes to
the laws or funding of Medicare and Medicaid programs, and
increased regulatory requirements for dividending, minimum capital,
reserve and other financial solvency requirements. The effects of
the aforementioned risks and uncertainties could have a material
adverse impact on the liquidity and capital resources of MHP and
the Company. These statements are forward looking and actual
results could differ materially from those projected in the forward
looking statements, which statements involve risks and
uncertainties. In addition, past financial performance is not
necessarily a reliable indicator of future performance and
investors should not use historical performance to anticipate
results or future period trends. Shareholders are also directed to
disclosures in this and other documents filed by the Company with
the SEC.
Business Strategy - The Company's business strategy includes
strengthening its position in the core markets it serves by:
marketing an expanded range of managed care products and services,
providing superior service to the Company's members and employer
groups, enhancing long-term relationships and arrangements with
health care providers, and selectively targeting geographic areas
within a state for expansion through increased penetration or
development of new areas. The Company continually evaluates
opportunities to expand its business as well as evaluates the
investment in these businesses.
Business Risk - The Company is faced with various risks to its
operations which include, but are not limited to, the following: 1)
loss of profitable membership as a result of inability to retain
existing members or attract new members due to competition from
large competitors and other factors, the effect of premium
<PAGE>
increases, and the loss of Medicaid and/or Medicare contracts; 2)
reduction in premium rates as a result of competitive commercial
pricing and reductions in premium reimbursement for Medicaid and
Medicare programs; 3) loss of significant provider contracts due to
provider network instability, provider insolvencies, failure to
secure continuation of existing provider contracts or failure to
secure new cost-effective provider contracts; and 4) unfavorable
governmental regulation including benefit mandates, malpractice
liability legislation, limitation on capitated provider
arrangements, increases to required capital and other financial
solvency requirements (such as the National Association of
Insurance Commissioners proposal that states adopt risk-based
capital standards requiring new minimum capitalization thresholds
for HMOs and other risk-bearing health care entities). These risks
could result in a material adverse effect on the Company's
operations, financial position, results of operations and cash
flows.
The Company's California HMO had a multi-year capitated contract
arrangement with MedPartners Provider Network, Inc. ("MPN"), a
wholly owned subsidiary of Caremark Rx, Inc.., formerly known as
MedPartners, Inc. ("MedPartners"), that as of June 30, 1999
provided health care services to approximately 29,700 commercial
members, 1,800 Medicare members and 3,500 Medicaid members. In
November 1998, MedPartners announced its intention to divest its
physician groups and physician practice management business which
includes the operations of MPN. On March 11, 1999 the California
Department of Corporations (the "DOC") appointed a conservator to
manage the operations of MPN; and the conservator, on behalf of
MPN, filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court (the
"Bankruptcy Court") for the Central District of California (the
"DOC Actions"). In connection with MPN's Chapter 11 filing,
certain non-contracted providers of MPN have asserted that the
health plans contracting through MPN remain liable for any unpaid
obligations of MPN related to the provision of covered health care
services to the members of the respective health plans. Under an
amended and restated settlement agreement among the DOC, MPN and
MedPartners (the "Global Settlement"), MedPartners has agreed to
fund, subject to the satisfaction of certain conditions and funding
commitment limitations, MPN's liabilities to its providers and the
liabilities of MedPartners' affiliated medical groups. The Global
Settlement provides for the sale of MedPartners California
physician practice groups (the "California Operations"). The sale
of the California Operations will facilitate continuity of care for
the Company's California HMO's members by allowing members to
maintain their existing physician relationship. As of mid August
1999, MedPartners had completed the sales of its California
Operations. In connection with the sale of certain of the
California Operations, the Company's California HMO and other
California HMOs have been asked to collectively loan $12 million
<PAGE>
for the benefit of the purchaser (the "Plan Loan") to assure that
the purchaser has adequate working capital and that continuity of
care can be maintained. If consented to, the California HMO's
share of the Plan Loan would be approximately $500,000 and would
depend on an acceptable agreement being reached on the terms and
conditions for the Plan Loan by and among the California HMOs,
MedPartners and the purchaser. The terms and provisions of the
Plan Loan are subject to negotiations among the parties to the Plan
Loan and have not been finalized.
Effective June 1, 1999 the California HMO assumed the financial
risk for institutional care of its members from MPN. MPN has filed
a plan of reorganization with the Bankruptcy Court on November 5,
1999 (the "Proposed Plan"). The Proposed Plan has not been
approved by MPN's creditors or the Bankruptcy Court. The Company
has not had an opportunity to fully review the Proposed Plan and
cannot state what effect, if any, the Proposed Plan will have on
the Global Settlement. Neither the effect of the DOC Actions, the
Global Settlement, the Proposed Plan nor the Company's potential
business and financial risks associated with its contractual
arrangement with MPN is known at this point in time; however, the
effect of these risks could have a material effect on the Company's
operations, financial position, results of operations and cash
flows.
Year 2000 - The Company has initiated a Year 2000 readiness program
to assess Year 2000 issues relative to its major computing
information systems and related business processes. The Company
formalized the program in 1997 with an initial focus on the
Company's existing core legacy software application systems. The
program has been expanded to include a company-wide inventory of
desktop systems, networks, telecommunications and other non-
information technology systems. In conjunction with the inventory
process, the Company is identifying the critical business functions
and assessing the related business risks and Year 2000 compliance
status of the various systems and system elements. In support of
this assessment effort, the Company has initiated a communication
and education effort within the Company to promote a thorough
understanding of the Year 2000 issue and associated risks. As a
result of the assessment process, selected systems are being
retired and replaced with packaged software from large vendors that
is Year 2000 compliant. The total estimated cost of the program
incurred since 1997 is approximately $1,200,000 and projected
future costs of the program are estimated to approximate an
additional $300,000 most of which will be expended during the
fourth quarter of 1999. Implementation costs are expensed as
incurred. Given its experience in developing and managing its core
legacy systems, the Company believes that its internal personnel
resources are adequate to meet most Year 2000 compliance needs and
that, accordingly, such implementation costs are not expected to
have a material impact on the Company's consolidated financial
<PAGE>
position, results of operations or cash flows. As of September 30,
1999, the Company's core legacy systems are approximately 95%
complete as to testing and confirmation as Year 2000 compliant.
The Company expects its legacy and other systems to be Year 2000
compliant the end of by November 1999.
The Company continues the process of contacting its major vendors
and customers, primarily employer groups, governmental contractors,
and healthcare providers, to evaluate their Year 2000 readiness and
to gain reasonable assurance regarding Year 2000 compliance. The
Company cannot ensure that the systems of its vendors and customers
will be timely updated to be Year 2000 compliant or the failure of
a vendor or customer to become Year 2000 compliant would not have a
material adverse effect on the Company. Based upon the outcome of
its contacts with major vendors and customers, the Company is
developing and refining business process contingency plans to
mitigate Year 2000 issues. As part of the contingency planning
process, the Company will estimate the cost of implementing its
contingency plans. The Company expects the contingency planning
process to be substantially completed by October 1999.
PART II: OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
-----------------
The information contained in "Part I, Item 3 Legal Proceedings" of
the Company's 1998 Annual Report on Form 10-K is hereby
incorporated by reference and the following information updates the
information contained in the relevant subparts thereof.
a. ALPHA HEALTH SYSTEMS, INC. AND CALIFORNIA FAMILY CARE SERVICES
, INC.
For a discussion of Alpha Health Systems, Inc. ("Alpha") and
California Family Services, Inc. ("Cal") reference is made to pages
32 through 33 of the Company's Annual Report on Form 10-K.
Effective August 31, 1999 Maxicare, the Company's California HMO
subsidiary, terminated its contracts with Alpha and Cal as
participating providers in Maxicare's Los Angeles County Medi-Cal
program.
b. MANAGED HEALTH SERVICES
On June 30, 1999 Maxicare Indiana, Inc. ("Maxicare Indiana"), a
wholly owned subsidiary of Maxicare Health Plans, Inc., received a
"Written Notice of Dispute" from Coordinated Care Corporation of
Indiana, Inc. d.b.a. Managed Health Services ("MHS") concerning a
capitated contract arrangement between MHS and Maxicare Indiana,
effective as of July 1, 1998, in which MHS agreed to administer
Maxicare Indiana's Medicaid program for the Southern Region of
<PAGE>
Indiana (the "MHS Contract"). Thereafter, on August 31, 1999, MHS
filed a Complaint in Marion Superior Court No. 11 in Indianapolis,
Indiana against Maxicare Indiana under Cause No. 49D11 9908
CP001241 (the "Complaint").
In the Complaint, MHS alleged that Maxicare Indiana misrepresented
certain facts upon which MHS relied when negotiating the MHS
Contract. MHS also alleged that Maxicare Indiana acted in bad
faith in negotiating the MHS Contract. MHS amended the Complaint
on or about September 24, 1999, to include a demand of
approximately $6 million in contractual damages, as well as
punitive damages and rescission of the MHS Contract.
MHS and Maxicare Indiana have entered into a settlement to fully
resolve the claims at issue in MHS' Written Notice of Dispute and
the Complaint. The settlement between MHS and Maxicare Indiana is
comprised of an Amendment to the MHS Contract (the "Amendment") and
a full Release Agreement (the "Release"). Pursuant to the
Amendment, MHS specifically acknowledges and affirms that MHS will
remain a party to the MHS Contract until the expiration of the
regular term on December 31, 2000. The Amendment also calls for
some slight modifications to the capitation payment terms which
will not have a material adverse effect on Maxicare Indiana. The
Release between MHS and Maxicare Indiana requires the parties to
completely release each other from all claims or liabilities
arising from the factual and legal claims made in MHS' Written
Notice of Dispute and the Complaint. The Release also states that
the parties acknowledge that Maxicare Indiana admits no liability
for the claims raised in MHS' Written Notice of Dispute and the
Complaint, and that settlement was reached for the sole purpose of
avoiding the time and expense associated with further litigation.
Finally, under the Release, MHS is required to stipulate to
dismissal of the MHS Complaint, with prejudice.
c. CALIFORNIA MEDICAL ASSOCIATION
On July 15, 1999, the California Medical Association, a California
nonprofit Corporation ("CMA"), initiated an action in San Diego
County Superior Court against seven California HMOs and the Company
(the "Defendants"), entitled: California Medical Association, a
California nonprofit Corporation, Plaintiff, v. Aetna U.S.
Healthcare, Blue Cross of California, Blue Shield of California,
Healthnet, Maxicare Health Plans, Inc., Pacificare of California,
Prudential Healthcare, United Health Care of California, Inc., and
DOES 1-100, Defendants (the "Action"). CMA filed a First Amended
Complaint ("Amended Complaint") in the Action on or about September
1, 1999. The Amended Complaint contains ten (10) causes of action,
including claims for damages based upon alleged violations of
Health & Safety Code 1371, negligence, the California Unfair
Practices Act, breach of express and implied contracts and
<PAGE>
declaratory relief. CMA is purporting to sue as the assignee of
the purported claims of certain physicians and physician groups who
assert that they are owed money by the Defendants for health and
medical care that they have rendered to members of the Defendants.
The Amended Complaint alleges in substance that despite the fact
that the Defendants have not contracted directly with the
physicians, but rather with various intermediaries, and that the
Defendants have paid the intermediaries pursuant to the Defendants'
contracts with the intermediaries, the intermediaries nevertheless
have not paid the physicians. Hence, the physicians assert that
pursuant to California Health & Safety Code 1371 and other alleged
authorities, the Defendants should be required to pay the
physicians directly. The Amended Complaint seeks various forms of
relief against the defendants, including unspecified compensatory
damages, punitive damages, declaratory relief and injunctive
relief.
The Defendants have entered into a joint defense agreement among
themselves which will, among other things, permit the sharing of
crucial information relating to the defense of the Action on an
attorney-client privileged basis. The Company believes that the
Amended Complaint suffers from numerous procedural and substantive
deficiencies. In connection therewith, the Defendants filed a
consolidated demurrer to the Amended Complaint on November 10,
1999. The demurrer challenges the sufficiency of the Amended
Complaint, asserting that the Amended Complaint fails to state any
cause of action against the Defendants. The hearing on the
demurrer is scheduled for December 17, 1999.
The Company believes that the Action is without merit, intends to
contest the Action vigorously and believes it will prevail in the
Action. Notwithstanding the foregoing, if there is an adverse
determination in the Action such determination could have a
material adverse effect on the Company.
d. OTHER LITIGATION
The Company is a defendant in a number of other lawsuits arising in
the ordinary course from its operations, including cases in which
the plaintiffs assert claims against the Company or third parties
that assert breach of contract, indemnity or contribution claims
against the Company for malpractice, negligence, bad faith in the
failure to pay claims on a timely basis or denial of coverage
seeking compensatory, fraud and, in certain instances, punitive
damages in an indeterminate amount which may be material and/or
seeking other forms of equitable relief. The Company does not
believe that the ultimate determination of these cases will either
individually or in the aggregate have a material, adverse effect on
the Company's business or operations.
<PAGE>
Item 2: Change in Securities
--------------------
None
Item 3: Defaults Upon Senior Securities
-------------------------------
None
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5: Other Information
-----------------
None
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
3.4c Maxicare Health Plans, Inc. Bylaws Amended Through
July 31, 1999
10.44a Form of Stock Option Agreement related to the
Maxicare Health Plans, Inc. 1990 Stock Option Plan
10.91b Termination of Consulting Agreement between Elwood
I. Kleaver, Jr. and the Company dated August 3,
1999
10.92a Form of Stock Option Agreement related to the
Maxicare Health Plans, Inc. 1999 Stock Option Plan
<PAGE>
(b) Reports on Form 8-K
-------------------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MAXICARE HEALTH PLANS, INC.
---------------------------
(Registrant)
November 15, 1999 /s/ Richard A. Link
--------------- ---------------------------
Date Richard A. Link
Chief Operating Officer,
Chief Financial Officer and
Executive Vice President -
Finance and Administration
Exhibit 3.4c
MAXICARE HEALTH PLANS, INC.
BYLAWS
As Amended Through July 31, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. OFFICERS............................... 1
Section 1. PRINCIPAL OFFICE....................... 1
Section 2. OTHER OFFICES.......................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS............... 1
Section 1. PLACE OF MEETINGS...................... 1
Section 2. ANNUAL MEETINGS OF STOCKHOLDERS........ 1
Section 3. SPECIAL MEETINGS....................... 1
Section 4. NOTICE OF STOCKHOLDERS' MEETINGS....... 2
Section 5. MANNER OF GIVING NOTICE;
AFFIDAVIT OF NOTICE.................. 2
Section 6. QUORUM................................. 2
Section 7. ADJOURNED MEETING AND NOTICE THEREOF... 2
Section 8. ORGANIZATION........................... 3
Section 9. VOTING................................. 3
Section 10. WAIVER OF NOTICE OR CONSENT BY ABSENT
STOCKHOLDERS......................... 3
Section 11. RECORD DATE............................ 3
Section 12. PROXIES................................ 4
Section 13. INSPECTORS OF ELECTION................. 4
Section 14. NOTICE OF STOCKHOLDER BUSINESS AND
NOMINATIONS.......................... 5
ARTICLE III. DIRECTORS.............................. 7
Section 1. POWERS................................. 7
Section 2. NUMBERS OF DIRECTORS................... 7
Section 3. RESIGNATIONS; VACANCIES................ 7
Section 4. PLACE OF MEETINGS AND TELEPHONIC
MEETINGS............................. 8
Section 5. ANNUAL MEETINGS........................ 8
Section 6. OTHER REGULAR MEETINGS................. 8
Section 7. SPECIAL MEETINGS....................... 8
Section 8. DISPENSING WITH NOTICE................. 8
Section 9. QUORUM................................. 9
Section 10. ADJOURNMENT............................ 9
Section 11. ACTION WITHOUT MEETING................. 9
Section 12. FEES AND COMPENSATION OF DIRECTORS..... 9
ARTICLE IV. COMMITTEES............................. 9
Section 1. COMMITTEES OF DIRECTORS................ 9
Section 2 MEETINGS AND ACTION OF COMMITTEES...... 10
<PAGE>
ARTICLE V. OFFICERS............................... 10
Section 1. OFFICERS............................... 10
Section 2. ELECTION OF OFFICERS................... 10
Section 3. SUBORDINATE OFFICERS, ETC.............. 10
Section 4. REMOVAL AND RESIGNATION OF OFFICERS.... 10
Section 5. VACANCIES IN OFFICES................... 11
Section 6. CHAIRMAN OF THE BOARD.................. 11
Section 7. VICE CHAIRMAN OF THE BOARD............. 11
Section 8. PRESIDENT.............................. 11
Section 9. VICE PRESIDENTS........................ 11
Section 10. SECRETARY.............................. 12
Section 11. TREASURER.............................. 12
ARTICLE VI. RECORDS AND REPORTS.................... 12
Section 1. MAINTENANCE AND INSPECTION OF SHARE
REGISTER............................. 12
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS... 13
Section 3. MAINTENANCE AND INSPECTION OF OTHER
CORPORATE RECORDS.................... 13
Section 4. INSPECTION BY DIRECTORS................ 13
ARTICLE VII. GENERAL CORPORATE MATTERS.............. 13
Section 1. CHECKS, DRAFTS, EVIDENCES OF
INDEBTEDNESS......................... 13
Section 2. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED............................. 13
Section 3. CERTIFICATES FOR SHARES................ 14
Section 4. LOST CERTIFICATES...................... 14
Section 5. TRANSFER OF SHARES..................... 14
Section 6. TRANSFER AND REGISTRY AGENTS........... 15
Section 7. REGULATIONS............................ 15
Section 8. RESTRICTION ON TRANSFER OF STOCK....... 15
Section 9. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS......................... 15
Section 10. DIVIDENDS, SURPLUS, ETC................ 15
ARTICLE VIII. GENERAL................................ 16
Section 1. CONSTRUCTION AND DEFINITIONS........... 16
Section 2. SEAL................................... 16
Section 3. FISCAL YEAR............................ 16
ARTICLE IX. AMENDMENTS............................. 16
Section 1. AMENDMENT BY STOCKHOLDERS.............. 16
Section 2. AMENDMENT BY DIRECTORS................. 17
<PAGE>
BYLAWS
OF
MAXICARE HEALTH PLANS, INC.
ARTICLE I.
OFFICERS
Section 1. PRINCIPAL OFFICE. The Board of Directors
shall fix the location of the principal executive office of the
Corporation at any place within or outside the State of Delaware.
Section 2. OTHER OFFICES. The Board of Directors may at
any time establish branch or subordinate offices at any place or
places where the Corporation shall determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETING. Meetings of stockholders
shall be held at any place within or outside the State of
Delaware designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the
principal executive office of the Corporation.
Section 2. ANNUAL MEETINGS OF STOCKHOLDERS. The annual
meeting of stockholders shall be held each year on a date and at
a time designated by the Board of Directors. At each annual
meeting directors shall be elected and any other proper business
may be transacted.
Section 3. SPECIAL MEETINGS. A special meeting of the
stockholders may be called at any time for any purpose by the
Board of Directors, the Chairman or Vice-President of the Board,
the President of the Corporation or by a committee of the Board
which has been duly designated by the Board and whose powers and
authority, as provided in a resolution of the Board or in these
Bylaws, include the power to call such meetings, and such special
meetings shall be called by the President of the Corporation at
the request in writing of stockholders owning at least a majority
in amount of the entire capital stock of the Corporation issued
and outstanding and entitled to vote. Such stockholders' request
<PAGE>
shall state the purpose or purposes of the proposed meeting.
Business transacted at any special meeting shall be limited to
matters relating to the purpose or purposes stated in the notice
of meeting.
Section 4. NOTICE OF STOCKHOLDERS' MEETINGS. All
notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 5 of this Article II not less
than ten (10) nor more than sixty (60) days before the date of
the meeting being noticed. The notice shall specify the place,
date and hour of the meeting and in the case of a special
meeting, the purpose(s) for which the meeting is called. The
notice of any meeting at which directors are to be elected shall
include the name of any nominee or nominees.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall be given either
personally or by first-class mail or telegraphic or other written
communication, charges prepaid, addressed to the stockholder at
the address of such stockholder appearing on the books of the
Corporation. If mailed, notice is given when deposited in the
United States mail, postage prepaid, directed to the stockholder
at his address as it appears on the records of the Corporation.
An affidavit of the mailing or other means of giving a
notice of any stockholders' meeting shall be executed by the
Secretary, Assistant Secretary or any transfer agent of the
Corporation giving such notice, and shall be filed and maintained
in the minute books of the Corporation.
Section 6. QUORUM. At all meetings of stockholders,
except as otherwise required by statute or by the Certificate of
Incorporation, the presence in person or by proxy of the holders
of a majority of the shares of stock outstanding and entitled to
vote at any meeting of stockholders shall constitute a quorum for
the transaction of business. The stockholders present at a duly
called or held meeting at which a quorum is present may continue
to do business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any
stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the
majority of the shares represented at such meeting, either in
person or by proxy.
<PAGE>
When any meeting, of stockholders, either annual or special,
is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or
unless the adjournment is for more than thirty (30) days from the
date set for the original meeting, in which case the Board or
Directors shall set a new record date. Notice of any such
adjourned meeting, if required, shall be given to each
stockholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 4 and 5 of this
Article II. At any adjournment meeting the Corporation may
transact any business which might have been transacted at the
original meeting.
Section 8. ORGANIZATION. At every meeting of
stockholders, the President, or in his absence the Chairman or
Vice Chairman of the Board, shall act as chairman of the meeting
and the Secretary shall act as secretary of the meeting. In case
none of the officers designated above to act as chairman or
secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, may
be chosen by a majority of the votes cast at such meeting by the
holders of shares present in person or represented by proxy and
entitled to vote at the meeting.
Section 9. VOTING. The stockholders entitled to vote at
any meeting of stockholders shall be determined in accordance
with the provisions of Section 11 of this Article II, subject to
the provisions of Section 217 the Delaware General Corporation
Law (relating to voting rights of fiduciaries, pledgors and joint
owners of stock). Any stockholder entitled to vote on any matter
(other than the election of directors) may vote part of the
shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal but, if the
stockholder fails to specify the number of shares such
stockholder is voting affirmatively, it will be conclusively
presumed that the stockholder's approving vote is with respect to
all shares such stockholder is entitled to vote. If a quorum is
present, the affirmative vote of the majority of the shares
represented at the meeting and voting on any matter shall be the
act of the stockholders, unless the vote of a greater number or
voting by classes is required by these Bylaws, the Certificate of
Incorporation or by statute. Directors shall be elected by a
plurality of the votes of the shares represented at the meeting
and entitled to vote on the election of directors. No stockholder
shall be entitled to cumulate votes on any matter at any meeting
of stockholders.
<PAGE>
Section 10. WAIVER OF NOTICE OR CONSENT BY ABSENT
STOCKHOLDERS. Whenever notice is required to be given to the
stockholders under any provision of the General Corporation Law
or the Certificate of Incorporation or the Bylaws, a written
waiver thereof, signed by a stockholder entitled to notice,
whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders
need be specified in any written waiver of notice.
Section 11. RECORD DATE. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and which record date: (1)
in the case of determination of stockholders entitled to vote at
any meeting of stockholders or adjournment thereof, shall not be
more than sixty (60) nor less than ten (10) days before the date
of such meeting; (2) in the case of determination of stockholders
entitled to express consent to corporate action in writing
without a meeting, shall not be more than ten (10) days from the
date upon which the resolution fixing the record date is adopted
by the Board of Directors; and (3) in the case of any such
action, shall not be more than sixty (60) days prior to such
other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record
date for determining stockholders entitled to express consent to
corporate action in writing without a meeting when no prior
action of the Board of Directors is required by law shall be the
first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at
<PAGE>
the close of business on the day on which the Board of Directors
adopts the resolution relating to taking such prior action; and
(3) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 12. PROXIES. Each stockholder entitled to vote at
a meeting of stockholders may authorize another person or persons
to act for him by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy
provides for a longer period.
Section 13. INSPECTORS OF ELECTION. The Board, in advance
of any meeting of stockholders, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at such
meeting may, and on the request of any stockholder entitled to
vote thereat shall, appoint one or more inspectors. In case any
person appointed fails to appear or act, the vacancy may be
filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according
to the best of his ability. The inspector or inspectors shall
determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive
votes or ballots, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate
all votes or ballots, determine the result, and shall do such
acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
meeting or any stockholder entitled to vote thereat, the
inspector or inspectors shall make a report in writing of any
challenge, question or matter determined by him or them and
execute a certificate of any fact found by him or them. Any
report or certificate made by the inspector or inspectors shall
be prima facie evidence or the facts stated and of the vote as
certified by him or them.
Section 14. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) ANNUAL MEETING OF STOCKHOLDERS
(1) Nominations of persons for election to the Board of
<PAGE>
Directors of the Corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of
meeting delivered pursuant to Section 4 of Article II of these
Bylaws, (b) by or at the direction of the Chairman of the Board
of Directors, or (c) by any stockholder who is entitled to vote
at the meeting, who complied with the notice procedures set forth
in clauses (2) and (3) or this sub-section (A) and this Bylaw and
who was a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of the foregoing subsection (A) (1) of this Bylaw, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than seventy (70)
days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than twenty (20) days or delayed by more than
seventy (70) days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than
the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the seventieth
(70th) day prior to such annual meeting or the tenth (10th) day
following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person who the stockholder proposes to
nominate for election or reelection as a director, all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being
named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such stockholder
and the beneficial owner, if any on whose behalf the proposal is
made, and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made,
(i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner, and (ii)
the class and number of shares of the capital stock of the
Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
<PAGE>
(3) Notwithstanding anything in the second sentence of
subsection (a) (2) of this Bylaw to the contrary, in the event
that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by
the Corporation at least eight (80) days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary of the Corporation at the principal executive
offices of the Corporation not later than the close of business
on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS.
As set forth in Section 3 of Article II above, only such
business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to Section
4 of Article II of these Bylaws. Nominations of persons for
election to the Board of Directors shall be made at a special
meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors, or (b) by any stockholder of
the Corporation who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this Bylaw and
who is a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation. Nominations by
stockholders of person for election to the Board of Directors may
be made at such a special meeting of stockholders if the
stockholder's notice as required by subsection (A) (2) of this
Bylaw shall be delivered to the Secretary of the Corporation at
the principal executive offices of the Corporation no later than
the close of business on the thirtieth (30th) day prior to such
special meeting or, if fewer than thirty (30) days notice of such
meeting is given, no later than the fifth (5th) day following the
day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(C) GENERAL
(1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting
of stockholders as shall have been brought before the meeting in
<PAGE>
accordance with the procedures set forth in this Bylaw. Except
as otherwise provided by law, the Restated Certificate of
Incorporation of the Corporation, as amended, or these Bylaws,
the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the
procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the
Securities Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw,
a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III.
DIRECTORS
Section 1. POWERS. The Board of Directors shall
exercise all of the powers of the Corporation except such as are
by law, or by the Certificate of Incorporation of the Corporation
or by these Bylaws, conferred upon or reserved to the
stockholders.
Section 2. NUMBER OF DIRECTORS. The number of directors
which shall constitute the Board of Directors of the Corporation
shall initially be nine (9). The number of directors may from
time to time be changed, by resolution of the Board of Directors
or by the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote thereon. The directors shall,
except for filling vacancies (whether resulting from an increase
in the number of directors, resignations, removals or otherwise),
be elected at the annual meeting of the stockholders and each
director shall be elected to serve until his successor is elected
and qualifies. Directors need not be stockholders.
Section 3. RESIGNATIONS; VACANCIES. Any director or
member of a committee may resign at any time. Such resignation
<PAGE>
shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of
its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
Vacancies in the Board of Directors may be filled in the manner
provided in the Certificate of Incorporation. A vacancy or
vacancies in the Board of Directors shall be deemed to exist in
the case of the death, resignation or removal of any director, or
if the authorized number of directors be increased, or if the
stockholders fail, at any meeting of stockholders at which any
director or directors are elected, to elect the full authorized
number of directors to be voted for that meeting.
No reduction of the authorized number of directors shall
have the effect of removing any director prior to the expiration
of his term of office.
Section 4. PLACE OF MEETING AND TELEPHONIC MEETINGS.
Regular meetings of the Board of Directors may be held at any
place within or without the State of Delaware that has been
designated from time to time by resolution of the Board of
Directors. In the absence of such designation, regular meetings
shall be held at the principal executive office of the
Corporation. Special meetings of the Board of Directors shall be
held at any place within or without the State of Delaware that
has been designated in the notice of the meeting or, if not
stated in the notice or there is no notice, at the principal
executive office of the Corporation. Any meeting, regular or
special, may be held by conference, telephone or similar
communication equipment, so long as all directors participating
in such meeting can hear one another, and all such directors
shall be deemed to be present in person at such meeting.
Section 5. ANNUAL MEETINGS. Immediately following each
annual meeting of stockholders, the Board of Directors shall hold
a regular meeting for the purpose of organization, any desired
election of officers and the transaction of other business.
Notice of this meeting shall not be required.
Section 6. OTHER REGULAR MEETINGS. Other regular
meetings of the Board of Directors shall be held without call at
such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice.
Section 7. SPECIAL MEETINGS. Special meetings of the
Board of Directors for any purpose or purposes may be called at
any time by the Chairman of the Board or the President or any
Vice President or the Secretary or any two directors.
<PAGE>
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail, telegram or facsimile, charges prepaid,
addressed to each director at his or her address as it is shown
upon the records of the Corporation. In case such notice is
mailed, it shall be deposited in the United States mail at least
four (4) days prior to the time of the holding of the meeting.
In case such notice is delivered personally, or by telephone,
telegram or facsimile, it shall be delivered personally or by
telephone or the telegraph company at least forty-eight (48)
hours prior to the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated to
either the director or to a person at the office of the director
who the person giving the notice has reason to believe will
promptly communicate it to the director. The notice need not
specify the purpose of the meeting nor the place if the meeting
is to be held at the principal executive office of the
Corporation.
Section 8. DISPENSING WITH NOTICE. The transaction of
any business at any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though
had at a meeting duly, held after regular call and notice if a
quorum be present and if, either before or after the meeting,
each of the directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the
minutes thereof. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents
and approvals shall be filed with the corporate records or made a
part of the minutes of the meeting. Notice of a meeting need not
be given to any director who attends the meeting without
protesting, prior thereto or at its commencement, the lack of
notice to such director.
Section 9. QUORUM. A majority of the authorized number
of directors shall constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. Every act or
decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded
as the act of the Board of Directors, subject to the provisions
of Section 144 of the Delaware General Corporation Law (approval
of contracts or transactions in which a director has a financial
interest), Section 141 (c) (appointment of committees), and
Section 145 (indemnification of directors). A meeting at which a
quorum is initially present may continue to transact business
notwithstanding the withdrawal or directors, if any action taken
is approved by at least a majority of the required quorum of such
meeting.
<PAGE>
Section 10. ADJOURNMENT. A majority of the directors
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 11. ACTION WITHOUT MEETING. Any action required
or permitted to be taken by the Board of Directors may be taken
without a meeting, if all members of the Board of Directors shall
individually or collectively consent to writing to such action.
Such action by written consent shall have the same force and
effect as a unanimous vote of the Board of Directors. Such
written consent or consents shall be filed with the minutes of
the proceedings of the Board of Directors.
Section 12. FEES AND COMPENSATION OF DIRECTORS.
Directors and members of committees may receive such
compensation, if any, for their services, and such reimbursement
of expenses, as may be fixed or determined by resolution of the
Board of Directors. Nothing contained in these Bylaws shall be
construed to preclude any director from serving the Corporation
in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation for such services.
ARTICLE IV.
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The Board of
Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees,
each consisting of two or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors may
designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of
the committee. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have all the
authority of the Board of Directors, except with respect to the
power of authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of
all or substantially all the Corporations's property and assets,
recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or amending the Bylaws of the
Corporation; and, unless the resolution designating such
committee or the Certificate of Incorporation expressly so
provide, no such committee shall have the power of authority to
declare a dividend or to authorize the issuance or stock. Such
committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board
of Directors.
<PAGE>
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings
and action of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these
Bylaws, Section 4 (place of meetings), 6 (regular meetings), 7
(special meetings and notice), 8 (dispensing with notice), 9
(quorum), 10 (adjournment), and 11 (action without meeting), with
such changes in the context of those Bylaws as are necessary to
substitute the committee and its members for the Board of
Directors and its members, except that the time of regular
meetings of committees may be determined by resolution of the
Board of Directors as well as the committee, special meetings of
committees may also be called by resolution of the Board of
Directors and notice of special meetings of committees shall also
be given to alternate members, who shall have the right to attend
all meetings of the committee. The Board of Directors and any
committee may adopt rules for the government of any committee not
inconsistent with the provisions of these Bylaws.
ARTICLE V.
OFFICERS
Section 1. OFFICERS. The officers of the Corporation
shall be a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of
Directors, a Chairman and/or Vice Chairman of the Board, one or
more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this
Article V. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of
the Corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article V,
shall be chosen by the Board of Directors, and each shall serve
at the pleasure of the Board of Directors, subject to the rights,
if any; of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of
Directors may appoint, and may empower the President to appoint,
such other officers as the business of the Corporation may
require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without
cause, by the Board of Directors, at any regular or special
<PAGE>
meeting thereof, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice
to the Corporation. Any such resignation shall take effect at
the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective. Any such resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which
the officer is a party.
Section 5. VACANCIES IN OFFICERS. A vacancy in any
office because of death, resignation, removal, disqualification
or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the
Board, if such an officer be elected, shall, if present, preside
at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these
Bylaws. If there is no President, the Chairman of the Board
shall in addition be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in
Section 8 of this Article V.
Section 7. VICE CHAIRMAN OF THE BOARD. The Vice
Chairman of the Board, if such an officer is elected, shall, in
the absence or disability of the Chairman, perform all the duties
of the Chairman, and when so acting, shall have all the powers
of, and be subject to all the restrictions upon the Chairman.
The Vice Chairman shall exercise and perform such other powers
and duties as may be from time to time assigned to him by the
Board of Directors or prescribed by these Bylaws.
Section 8. CHIEF EXECUTIVE OFFICER. Subject to such
supervisory powers, if any, as may be given by the Board of
Directors to the Chairman or Vice Chairman of the Board, if there
be such an officer or officers, the Chief Executive Officer of
the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the
business and the officers of the Corporation. He shall preside
at meetings of the stockholder and, in the absence of the
Chairman or Vice Chairman of the Board, or if there be none, at
all meetings of the Board of Directors. He shall have the
general powers and duties of management usually vested in the
office of the Chief Executive Officer of a corporation and shall
have such other powers and duties as may be prescribed by the
<PAGE>
Board of Directors or these Bylaws.
Section 9. PRESIDENT. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the
Chairman or Vice Chairman of the Board or the Chief Executive
Officer, if there be such an officer or officers, the President
shall, subject to the control of the Board of Directors, and the
Chief Executive Officer, have general supervision, direction and
control of the business and the officers of the Corporation.
Subject to the powers granted to the Chief Executive Officer, the
President shall have the general powers and duties of management
usually vested in the office of the President of a corporation
and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
Section 10. CHIEF OPERATING OFFICER ("COO"). Subject
to the supervisory powers of the CEO and the President, the Chief
Operating Officer shall have the responsibility to direct the
business and the activities of the officers of the Corporation.
In the absence or disability of the President, the COO shall
perform all the duties of the President, and when so acting shall
have all the powers of, and be subject to all the restrictions
upon the President. The COO shall have the general powers and
duties of management usually vested in the office of the COO of a
corporation and shall have such other powers and duties as may be
prescribed respectively by the Board of Directors, these Bylaws,
or the CEO, President, or the Chairman or Vice Chairman of the
Board if there is no CEO or President.
Section 11. VICE PRESIDENTS. In the absence or
disability of the CEO, COO and President, the Vice Presidents, if
any, in order of their rank as fixed by the Board of Directors
or, if not ranked, a Vice President designated by the Board of
Directors, shall perform all the duties of the CEO, COO, and
President, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the CEO, COO, and
President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors, these Bylaws, or
the CEO, COO, President or the Chairman or Vice Chairman of the
Board if there is no CEO, COO or President.
Section 12. SECRETARY. The Secretary shall keep or
cause to be kept, at the principal executive office or such other
place as the Board of Directors may order, a book, of minutes of
all meetings and actions of directors, committees of directors
and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice
thereof given, the names of those present at director's and
committee meetings, the number of shares present or represented
at stockholders' meetings, and the proceedings thereof.
<PAGE>
The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the
Board of Directors, a share register, or a duplicate share
register, showing the names of all stockholders and their
addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation.
The Secretary shall give, or cause to be given, notice of
all meetings of the stockholders and of the Board of Directors
required by these Bylaws or by law to be given, and he shall keep
the seal of the Corporation in safe custody, and shall have such
other powers and perform such other duties as may be prescribed
by the Board of Directors or by these Bylaws.
Section 13. TREASURER. The Treasurer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account
shall be open at all reasonable times to inspection by any
director.
The Treasurer shall deposit all moneys and other valuables
in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the
Corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or these
Bylaws.
ARTICLE VI.
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.
The Corporation shall keep at its principal executive office, or
at the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the Board of
Directors, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of shares
held by each stockholder.
<PAGE>
Any stockholder, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose
thereof, have the right during the usual hours for business to
inspect for any proper purpose the Corporation's stock ledger and
a list of its stockholders and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to do act on behalf of the
stockholder. The demand under oath shall be directed to the
Corporation at its registered office in the State of Delaware or
at its principal place of business.
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The
Corporation shall keep at its principal executive office the
original or a copy of these Bylaws as amended to date, which
shall be open to inspection by the stockholders at all reasonable
times during usual business hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS. The accounting books and records and minutes of
proceedings of the stockholders and the Board of Directors and
any committee or committees of the Board of Directors shall be
kept at such place or places designated by the Board of
Directors, or, in the absence of such designation, at the
principal executive office of the Corporation. The minutes shall
be kept in written form and the accounting books and records
shall be kept either in written form or in any other form capable
of being converted into written form. Such minutes, accounting
books and records shall be open to inspection upon the written
demand of any stockholder in the same manner and subject to the
same limitations specified in Section 1 of this Article VI with
respect to the identities of stockholders.
Section 4. INSPECTION BY DIRECTORS. Any director shall
have the right to examine the Corporation's stock ledger, a list
of its stockholders and its books and records for a purpose
reasonably related to his position as a director.
ARTICLE VII.
GENERAL CORPORATE MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS.
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable
by the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
<PAGE>
Section 2. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED. The Board of Directors, except as otherwise provided
in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in
the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances; and, unless so
authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or to any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of the Common Stock of the Corporation
shall be issued to each stockholder when any such shares are
fully paid, and the Board of Directors may authorize the issuance
of certificates or shares as partly paid provided that such
certificates shall state the amount of the consideration to be
paid therefor and the amount paid thereon. All certificates
shall be signed in the name of the Corporation by the Chairman or
Vice Chairman of the Board or the President or Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or
any Assistant Secretary. Any or all of the signatures on the
certificate may be facsimile, if the certificate is countersigned
by a transfer agent or registered by a registrar other than the
Corporation itself or its employee. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if such person were an officer, transfer agent
or registrar at the date of issue.
Section 4. LOST CERTIFICATES. Except as hereinafter in
this Section 5 provided, no new certificate for shares shall be
issued in lieu of an old certificate unless the latter is
surrendered to the Corporation and canceled at the same time.
The Board of Directors may in case any share certificate or
certificate for any other security is lost, stolen or destroyed,
authorize the issuance of a new certificate in lieu thereof, upon
such terms and conditions as the Board of Directors may require,
including provision for indemnification of the Corporation
secured by a bond or other adequate security sufficient to
protect the Corporation against any claim that may be made
against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
<PAGE>
Section 5. TRANSFER OF SHARES. Transfers of shares of
capital stock of the Corporation shall be made only on the books
of the Corporation by the holder thereof or by his duly
authorized attorney appointed by a power of attorney duly
executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates
representing such shares of capital stock properly endorsed for
transfer and upon payment of all necessary transfer taxes. Every
certificate exchanged, returned or surrendered to the Corporation
shall be marked "Canceled," with the date of cancellation, by the
Secretary or an Assistant Secretary or the transfer agent of the
Corporation. A person in whose name shares of capital stock
shall stand on the books of the Corporation shall be deemed the
owner thereof to receive dividends, to vote as such owner and for
all other purposes as respects the Corporation, its stockholders
and creditors for any purpose, until such transfer shall have
been entered on the books of the Corporation by an entry showing
from and to whom transferred.
Section 6. TRANSFER AND REGISTRY AGENTS. The
Corporation may from time to time maintain one or more transfer
offices or agents and registry offices or agents at such place or
places as may be determined from time to time by the Board.
Section 7. REGULATIONS. The Board may make rules and
regulations as it may deem expedient, not inconsistent with the
Bylaws or with the Certificate of Incorporation, concerning the
issue, transfer and registration of certificates representing
shares of its capital stock.
Section 8. RESTRICTION ON TRANSFER OF STOCK. A written
restriction on the transfer or registration of transfer of
capital stock of the Corporation, if permitted by Section 202 of
the General Corporation Law and noted conspicuously on the
certificate representing such capital stock, may be enforced
against the holder of the restricted capital stock of any
successor or transferee of the holder including an executor,
administrator, trustee, guardian or other fiduciary entrusted
with like responsibility for the person or estate of the holder.
A restriction on the transfer or registration of transfer of
capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number
of stockholders or among such stockholders and the Corporation.
No restriction so imposed shall be binding with respect to
capital stock issued prior to the adoption of the restriction
unless the holders of such capital stock are parties to an
agreement or voted in favor of the restriction.
<PAGE>
Section 9. REPRESENTATION OF SHARES OF OTHER
CORPORATION. The Chairman of the Board, the President, or any
Vice President, or any other person authorized by resolution of
the Board of Directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the Corporation any
and all shares of any other corporation or corporations, foreign
or domestic, standing in the name of the Corporation. The
authority herein granted to said officers to vote or represent on
behalf of the Corporation any and all shares held by the
Corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person
authorized to do so by proxy duly executed by said officer.
Section 10. DIVIDENDS, SURPLUS, ETC. Subject to the
provisions of the Certificate of Incorporation and of applicable
law, the Board of Directors:
(a) may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such
amounts and at such time or times as, in its discretion, the
condition of the affairs of the Corporation shall render
advisable;
(b) may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares
of capital stock of the Corporation, or purchase warrants
therefor, in accordance with law, or any of its bonds,
debentures, notes, scrip or other securities or evidences
indebtedness;
(c) may set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think
proper, as a reserve fund to meet contingencies, or for
equalizing dividends or for the purpose of maintaining or
increasing the property or business of the Corporation, or for
any other purpose it may think conducive to the best interests of
the Corporation.
ARTICLE VIII.
GENERAL
Section 1. CONSTRUCTION AND DEFINITIONS. Unless the
context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation
Law shall govern the construction of these Bylaws. Without
limiting the generality of the foregoing, the singular number
includes the plural, the plural number includes the singular, and
the term "person" includes both a corporation and a natural
person.
<PAGE>
Section 2. SEAL. The corporate seal of the Corporation
shall bear the name of the Corporation and the words "Delaware
[year]." The Corporation may also have such other seals as the
Board of Directors shall deem appropriate, including "OFFICIAL
CORPORATE SEAL." A corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced.
Section 3. FISCAL YEAR. The fiscal year of the
Corporation shall be determined, and may be changed, by
resolution of the Board of Directors.
ARTICLE IX.
AMENDMENTS
Section 1. AMENDMENT BY STOCKHOLDERS. New Bylaws may
be adopted or these Bylaws may be amended or repealed by the vote
of holders of a majority of the outstanding share entitled to
vote, unless, as to a particular provision, a higher vote is
required by the Certificate of Incorporation or by statute,
provided, however, that Section 3 of Article II and Sections 1
and 2 of Article IX of these Bylaws may not be amended or
repealed in any respect except by the affirmative vote of the
holders of not less than eighty percent (80%) of the outstanding
shares entitled to vote thereon ("Voting Shares"), regardless of
class and voting class, and where such action is proposed by an
Interested Stockholder or by an Associate or Affiliate of an
Interested Stockholder (as such capitalized terms are defined in
the Certificate of Incorporation of the Corporation), the
affirmative vote of the holders of a majority of all Voting
Shares, regardless of class and voting together as a single
class, other than shares held by the Interested Stockholder which
proposed (or the Affiliate or Associate of which proposed) such
action, or any Affiliate or Associate of such Interested
Stockholder; provided, however, that where such action is
approved by a majority of the Disinterested Directors (as defined
in the Certificate of Incorporation of the Corporation),the
affirmative vote of a majority of the Voting Shares, regardless
of class and voting class, shall be required for approval of such
action.
Section 2. AMENDMENT BY DIRECTORS. Subject to the
rights of the Stockholders as provided in Section I of this
Article IX to adopt, amend or repeal bylaws, bylaws may be
adopted, amended or repealed by the Board of Directors.
Exhibit 10.44a
Maxicare Health Plans, Inc.
1990 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK OPTION
(Nonqualified Stock Option)
Name: _____________________
Location: _____________________
Grant of Option
You have been granted an option to buy shares of common stock of
Maxicare Health Plans, Inc. as follows:
Grant Date: ________________
Option Price per Share ________________
Total Number of Shares: ________________
Expiration Date: ________________
Vesting Schedule
The option shall become exercisable with respect to the number of
shares of the aforementioned Total Number of Shares as set forth
below:
Number of Shares Vesting Date
______________ ____________
______________ ____________
______________ ____________
Agreement
By your signature and Maxicare Health Plans, Inc.'s signature
below, you and Maxicare Health Plans, Inc. agree that this option
is granted under and governed by the terms of the Maxicare Health
Plans, Inc. 1990 Stock Option Plan, and the Nonqualified Stock
Option Agreement which is attached hereto and incorporated herein
by this reference . PLEASE READ SUCH AGREEMENT.
"COMPANY" "OPTIONEE"
Maxicare Health Plans, Inc. Name: ___________________
1149 South Broadway Street Address:_________________
Los Angeles, CA 90015 _________________________
By:_______________________ _________________________
Chief Executive Officer Optionee Signature
<PAGE>
MAXICARE HEALTH PLANS, INC.
1990 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
(Nonqualified Stock Option)
This Nonqualified Stock Option Agreement is made and
entered into by and between Maxicare Health Plans, Inc., a Delaware
corporation ("Company"), and the Employee or Director identified in
the "Maxicare Health Plans, Inc. 1990 Stock Option Plan Notice of
Grant of Stock Option" ("Grant Notice") which is attached hereto
("Optionee"), as of the "Grant Date" set forth in the Grant Notice,
with respect to the following facts:
A. The Company has adopted and the
stockholders of the Company have approved the
Maxicare Health Plans, Inc. 1990 Stock Option Plan
("Plan") pursuant to which the Company is
authorized to grant stock options to employees of
the Company or its subsidiaries;
B. Optionee has received and reviewed a
copy of the Plan; and
C. Optionee is an employee or director
of the Company or a subsidiary.
NOW, THEREFORE, in consideration of the premises and
intending to be legally bound, the parties agree as follows:
1. Grant of Stock Option. Subject to the terms and
conditions set forth herein, the Company hereby
grants to Optionee a nonqualified stock option
("Stock Option") to purchase from the Company, at
the "Option Price per Share" set forth in the
Grant Notice, the "Total Number of Shares" of the
Company's authorized and unissued or reacquired
shares of Common Stock set forth in the Grant
Notice. The Stock Option granted pursuant to this
Agreement is subject to and conditioned upon, in
its entirety, the terms of the Plan. In the event
of any discrepancy between the terms of the
Agreement and the terms of the Plan, the terms of
the Plan shall prevail.
2. Nonqualified Stock Option. The Stock Option
granted to Optionee pursuant to this Agreement is
intended to be a "nonqualified stock option" and
is not subject to the qualification requirements
and limitations applicable to incentive stock
options under Section 422 of the Internal Revenue
Code of 1986, as amended ("Code"').
<PAGE>
3. Administration. The Plan provides that the Plan
Administrator shall be the Board of Directors of
the Company ("Board"), so long as all members of
the Board are "outside directors", or a committee
("Committee") consisting of not less than two (2)
individuals who are "outside directors" and "non-
employee directors" appointed by the Board.
Subject to the provisions of the Plan, the Plan
Administrator shall have sole authority to
construe and interpret the Plan and this
Agreement, to promulgate, amend, and rescind rules
and regulations relating to the administration of
the Plan and this Agreement, and to make all of
the determinations necessary or advisable for
administration of the Plan and this Agreement.
The interpretation and construction by the Plan
Administrator of any provision of this Agreement,
shall be final and binding upon all parties. No
member of the Board or Committee nor the Plan
Administrator shall be liable for any action or
determination undertaken or made in good faith
with respect to the Plan or this Agreement.
4. Term of Stock Option. Unless earlier exercised
pursuant to Section 5 below, the Stock Option
shall terminate on, and shall not be exercisable
after, the expiration of the earliest of (a) ten
(10) years after the Grant Date set forth in the
Grant Notice; (b) the Termination Date set forth
in the Grant Notice; (c) thirty (30) days after
the date Optionee's employment with the Company
and its subsidiaries terminates, if such
termination is for any reason other than
Disability or death; or (d) one (1) year after the
date Optionee's employment with the Company and
its subsidiaries terminates, if such termination
is a result of death or Disability (as defined in
the Plan).
5. Exercise.
(a) Exercisability. Subject to the
terms and conditions of this Agreement, the Stock
Option shall become exercisable on a cumulative
basis as set forth in the Vesting Schedule set
forth in the Grant Notice. The Stock Option may
be exercised by Optionee with respect to any
shares of Common Stock of the Company covered by
the Stock Option at any time on or after the date
<PAGE>
on which the Stock Option becomes exercisable with
respect to such shares; provided that the Stock
Option may not be exercised at any one time with
respect to less than one hundred (100) shares of
Common Stock of the Company, unless the number of
shares with respect to which the Stock Option is
exercised is the Total Number of Shares with
respect to which the Stock Option is exercisable
at that time.
Anything set forth in this Agreement to the
contrary notwithstanding, the Stock Option may not
be exercised after the time Optionee ceases to be
an employee of the Company and its subsidiaries
(irrespective of the cause) except to the extent
it would have been exercisable by Optionee at such
time.
(b) Notice of Exercise. Optionee shall
exercise the Stock Option by delivering to the
Company, in person or mailed by first-class mail
(return receipt requested), telex, telecopy, or
overnight courier, written notice of election to
exercise and payment in full of the purchase price
as provided in Subsection 5.3 of this Agreement.
The written notice shall set forth the whole
number of shares with respect to which the Stock
Option is being exercised.
(c) Payment of Purchase Price. The
purchase price for any shares of Common Stock of
the Company with respect to which Optionee
exercises this Stock Option shall be paid in full
at the time Optionee delivers to the Company the
written notice of election to exercise. The
purchase price shall be paid (i) in cash or check
for an amount equal to the aggregate Option Price
for the number of shares being purchased; (ii) in
the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall
approve, by a "cashless exercise"); or (iii) in
the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall
approve, by a "stock-for-stock exercise" in
accordance with the terms of the Plan. In
addition to the purchase price, the Optionee shall
pay the amount of tax required to be withheld (if
any) by the Company or any parent or subsidiary
corporation as a result of the exercise of a Stock
Option. At the discretion of the Plan
Administrator, upon such terms as the Plan
<PAGE>
Administrator shall approve, the Optionee may pay
all or a portion of the tax withholding by (i)
cash or check payable to the Company, (ii)
cashless exercise, (iii) stock-for-stock exercise,
or (iv) a combination of (i), (ii) and (iii).
Notwithstanding the foregoing, the Company, in its
sole discretion, may extend and maintain, or
arrange for the extension and maintenance of,
credit to Optionee to finance payment of the
purchase price on such terms as may be approved by
the Plan Administrator.
6. Issuance of and Restriction on Shares. Promptly
after the Company's receipt of the written notice
of election provided for in Section 5.2 hereof and
Optionee's payment in full of the purchase price
provided for in Section 5.3 hereof, the Company
shall deliver, or cause to be delivered to
Optionee, certificates for the whole number of
shares with respect to which the Stock Option is
being exercised by Optionee. Shares shall be
registered in the name of Optionee. If any law or
regulation of the Securities and Exchange
Commission or of any other federal or state
governmental body having jurisdiction shall
require the Company or Optionee to take any action
prior to issuance to Optionee of the shares of
Common Stock of the Company specified in the
written notice of election to exercise, or if any
listing agreement between the Company and any
national securities exchange requires such shares
to be listed prior to issuance, the date for the
delivery of such shares shall be adjourned until
the completion of such action and/or such listing.
7. Fractional Shares. In no event shall the Company
be required to issue fractional shares upon the
exercise of any portion of the Stock Option.
8. Rights as a Stockholder. Optionee shall have no
rights as a stockholder of the Company with
respect to any shares covered by the Stock Option
until the date of the issuance of a share
certificate for such shares. No adjustment shall
be made for any dividends (ordinary or
extraordinary, whether cash, securities, or other
property) or distributions or other rights for
which the record date is prior to the date such
share certificate is issued, except as provided in
Section 9 hereof.
<PAGE>
9. Capital Structure Adjustments. Except as
otherwise provided herein, appropriate and
proportionate capital structure adjustments shall
be made in the number and class of shares subject
to the Stock Option and the purchase price of such
shares in the event of a stock dividend (but only
on Common Stock), stock split, reverse stock
split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the
corporate or capital structure of the Company. In
the event of a liquidation of the Company, or a
merger, reorganization, or consolidation of the
Company in which the Company is not the surviving
corporation or the Company becomes a wholly owned
subsidiary of another corporation, or the sale of
all or substantially all of the property of the
Company, any unexercised portion of this Stock
Option shall be deemed canceled unless the
surviving corporation in any such merger,
reorganization, or consolidation elects to assume
this Stock Option or to use substitute options in
place thereof; provided, however, that,
notwithstanding the foregoing, if such Stock
Options would otherwise be canceled in accordance
with the foregoing, the Optionee shall have the
right, exercisable during a ten-day period ending
on the fifth day prior to such liquidation,
merger, or consolidation, to exercise this Stock
Option without regard to any restrictions on
exercisability. To the extent that the foregoing
adjustments relate to Common Stock of the Company,
such adjustments shall be made by the Plan
Administrator, the determination of which shall be
final, binding, and conclusive.
10. No Transfer of Stock Option. Optionee may not
transfer all or any part of the Stock Option
except by will or the laws of descent and
distribution, and the Stock Option shall not be
exercisable during the lifetime of Optionee by any
person other than Optionee.
11. Investment Representation. Optionee hereby
represents and warrants to the Company that he is
acquiring the Stock Option and the Common Stock
thereto for his own account and not with a view to
or for resale or distribution in violation of the
Securities Act of 1933, as amended (the "Act").
<PAGE>
Optionee hereby further represents and warrants
to, and agrees with, the Company that, if he
exercises the Stock Option in whole or in part at
a time when there is not in effect under the Act a
registration statement covering the shares
issuable upon exercise of the Stock Option, that
Optionee may be required, as a condition of
issuance of the shares of Common Stock of the
Company covered by the Stock Option, to represent
to the Company that the shares issued pursuant to
the exercise of the Stock Option are being
acquired for investment and without a view to
distribution thereof; and that in such case the
Company may place a legend on the certificate(s)
evidencing the shares of the Common Stock of the
Company issued upon exercise of the Stock Option
reflecting the fact that the shares were acquired
for investment and cannot be sold or transferred
unless registered under said Act or unless counsel
for the Company is satisfied that the
circumstances of the proposed transfer do not
require such registration. In addition, the
Company may place a legend on the certificates
evidencing the shares reflecting the fact that
they are subject to restrictions on transfer under
the terms of Section 6 hereof.
12. General Provisions.
(a) Entire Agreement. This Agreement is
subject to and conditioned upon, in its entirety,
the terms of the Plan and contains the entire
understanding between the parties with respect to
the subject matter hereof, and supersedes any and
all prior written or oral agreements between the
parties with respect to the subject matter hereof.
There are no representations, agreements,
arrangements, or understandings, either written or
oral, between or among the parties with respect to
the subject matter hereof which are not set forth
in this Agreement.
(b) Governing Law. This Agreement shall
be governed by, and construed in accordance with,
the laws of the State of California.
(c) Notices. Any notice given pursuant
to this Agreement may be delivered in person or
mailed by first-class mail (return receipt
<PAGE>
requested), telex, telecopy, or overnight courier,
to the party to be notified, addressed as set
forth by the party's signature of this Agreement
or at such other address as such party may
designate in writing from time to time. Any
notice given as provided in the preceding sentence
shall be deemed delivered when given, if
personally served, or ten (10) business days after
mailing, if mailed.
(d) Further Acts. Each party to this
Agreement agrees to perform such further acts and
to execute and deliver such other and additional
documents as may be reasonably necessary to carry
out the provisions of this Agreement.
(e) Severability. If any term,
provision, covenant, or condition of this
Agreement is held by a court of competent
jurisdiction to be invalid, illegal, or
unenforceable for any reason, such invalidity,
illegality, or unenforceability shall not affect
any of the other terms, provisions, covenants, or
conditions of this Agreement, each of which shall
be binding and enforceable.
(f) Modification and Amendment. This
Agreement may not be modified, extended, renewed
or substituted without an amendment or other
agreement in writing signed by the parties to this
Agreement.
"COMPANY" Maxicare Health Plans, Inc.
1149 South Broadway Street
Los Angeles, CA 90015
By:_____________________________
Chief Executive Officer
"OPTIONEE"
Name:___________________________
Address: _______________________
________________________________
________________________________
Optionee Signature
Exhibit 10.91b
MAXICARE HEALTH PLANS, INC.
1149 South Broadway Street
Los Angeles, CA 90015
August 3, 1999
Elwood I. Kleaver, Jr.
4670 Somerset Court
Brookfield, Wisconsin 53045
Re: Maxicare Health Plans, Inc. (the "Company")
Termination of Consulting Agreement with the
Company (the "Agreement")
Dear Elwood:
In connection with your letter of termination of the
aforementioned Agreement dated July 30, 1999 and our subsequent
conversation on such date, this will confirm the following:
1. You have agreed to relinquish the title of Chief
Operating Officer of the Company, effective July
30, 1999;
2. The Company has agreed that your services will no
longer be needed in Los Angeles during the thirty-
day notice period under the Agreement; provided,
however, you agree to be available to assist the
Company, as necessary from your offices in
Wisconsin during such period; and
3. The Company agrees to pay your Consultancy Fee
under the Agreement through August 31, 1999. In
addition, your stock options shall continue to
vest through August 31, 1999.
If the foregoing comports with your understanding of our
agreement, please date and execute two copies of this letter
<PAGE>
agreement in the spaces provided below and return the fully
executed copy of the letter agreement to the undersigned.
Very truly yours,
MAXICARE HEALTH PLANS, INC.
By: /s/ Paul R. Dupee, Jr.
Paul R. Dupee, Jr.,
Chairman of the Board and
Chief Executive Officer
AGREED TO AND ACCEPTED
THIS 4th DAY OF AUGUST, 1999
By: /s/ Elwood I. Kleaver, Jr.
Elwood I. Kleaver, Jr.
Exhibit 10.92a
Maxicare Health Plans, Inc.
1999 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK OPTION
(Nonqualified Stock Option)
Name: _____________________
Location: _____________________
Grant of Option
You have been granted an option to buy shares of common stock of
Maxicare Health Plans, Inc. as follows:
Grant Date: ________________
Option Price per Share ________________
Total Number of Shares: ________________
Expiration Date: ________________
Vesting Schedule
The option shall become exercisable with respect to the number of
shares of the aforementioned Total Number of Shares as set forth
below:
Number of Shares Vesting Date
______________ ____________
______________ ____________
______________ ____________
Agreement
By your signature and Maxicare Health Plans, Inc.'s signature
below, you and Maxicare Health Plans, Inc. agree that this option
is granted under and governed by the terms of the Maxicare Health
Plans, Inc. 1999 Stock Option Plan, and the Nonqualified Stock
Option Agreement which is attached hereto and incorporated herein
by this reference . PLEASE READ SUCH AGREEMENT.
"COMPANY" "OPTIONEE"
Maxicare Health Plans, Inc. Name: ___________________
1149 South Broadway Street Address:_________________
Los Angeles, CA 90015 _________________________
By:_______________________ _________________________
Chief Executive Officer Optionee Signature
<PAGE>
MAXICARE HEALTH PLANS, INC
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
(Nonqualified Stock Option)
This Nonqualified Stock Option Agreement is made and entered into
by and between Maxicare Health Plans, Inc., a Delaware corporation
("Company"), and the Employee or Director identified in the
"Maxicare Health Plans, Inc. 1999 Stock Option Plan Notice of Grant
of Stock Option" ("Grant Notice") which is attached hereto
("Optionee"), as of the "Grant Date" set forth in the Grant Notice,
with respect to the following facts:
A. The Company has adopted and the stockholders of the
Company have approved the Maxicare Health Plans, Inc. 1999 Stock
Option Plan ("Plan") pursuant to which the Company is authorized to
grant stock options to employees of the Company or its
subsidiaries;
B. Optionee has received and reviewed a copy of the Plan; and
C. Optionee is an employee or director of the Company or a
subsidiary.
NOW, THEREFORE, in consideration of the premises and intending to
be legally bound, the parties agree as follows:
1. Grant of Stock Option. Subject to the terms and
conditions set forth herein, the Company hereby grants to Optionee
a nonqualified stock option ("Stock Option") to purchase from the
Company, at the "Option Price per Share" set forth in the Grant
Notice, the "Total Number of Shares" of the Company's authorized
and unissued or reacquired shares of Common Stock set forth in the
Grant Notice. The Stock Option granted pursuant to this Agreement
is subject to and conditioned upon, in its entirety, the terms of
the Plan. In the event of any discrepancy between the terms of the
Agreement and the terms of the Plan, the terms of the Plan shall
prevail.
2. Nonqualified Stock Option. The Stock Option granted to
Optionee pursuant to this Agreement is intended to be a
"nonqualified stock option" and is not subject to the qualification
requirements and limitations applicable to incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended
("Code"').
3. Administration. The Plan provides that the Plan
Administrator shall be the Board of Directors of the Company
<PAGE>
("Board"), so long as all members of the Board are "outside
directors", or a committee ("Committee") consisting of not less
than two (2) individuals who are "outside directors" and "non-
employee directors" appointed by the Board. Subject to the
provisions of the Plan, the Plan Administrator shall have sole
authority to construe and interpret the Plan and this Agreement, to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan and this Agreement, and to make all
of the determinations necessary or advisable for administration of
the Plan and this Agreement. The interpretation and construction
by the Plan Administrator of any provision of this Agreement, shall
be final and binding upon all parties. No member of the Board or
Committee nor the Plan Administrator shall be liable for any action
or determination undertaken or made in good faith with respect to
the Plan or this Agreement.
4. Term of Stock Option. Unless earlier exercised pursuant
to Section 5 below, the Stock Option shall terminate on, and shall
not be exercisable after, the expiration of the earliest of (a) ten
(10) years after the Grant Date set forth in the Grant Notice; (b)
the Termination Date set forth in the Grant Notice; (c) thirty (30)
days after the date Optionee's employment with the Company and its
subsidiaries terminates, if such termination is for any reason
other than Disability or death; or (d) one (1) year after the date
Optionee's employment with the Company and its subsidiaries
terminates, if such termination is a result of death or Disability
(as defined in the Plan).
5. Exercise.
(a) Exercisability. Subject to the terms and conditions of
this Agreement, the Stock Option shall become exercisable on a
cumulative basis as set forth in the Vesting Schedule set forth in
the Grant Notice. The Stock Option may be exercised by Optionee
with respect to any shares of Common Stock of the Company covered
by the Stock Option at any time on or after the date on which the
Stock Option becomes exercisable with respect to such shares;
provided that the Stock Option may not be exercised at any one time
with respect to less than one hundred (100) shares of Common Stock
of the Company, unless the number of shares with respect to which
the Stock Option is exercised is the Total Number of Shares with
respect to which the Stock Option is exercisable at that time.
Anything set forth in this Agreement to the contrary
notwithstanding, the Stock Option may not be exercised after the
time Optionee ceases to be an employee of the Company and its
subsidiaries (irrespective of the cause) except to the extent it
would have been exercisable by Optionee at such time.
(b) Notice of Exercise. Optionee shall exercise the Stock
Option by delivering to the Company, in person or mailed by first
<PAGE>
class mail (return receipt requested), telex, telecopy, or
overnight courier, written notice of election to exercise and
payment in full of the purchase price as provided in Subsection 5.3
of this Agreement. The written notice shall set forth the whole
number of shares with respect to which the Stock Option is being
exercised.
(c) Payment of Purchase Price. The purchase price for any
shares of Common Stock of the Company with respect to which
Optionee exercises this Stock Option shall be paid in full at the
time Optionee delivers to the Company the written notice of
election to exercise. The purchase price shall be paid (i) in cash
or check for an amount equal to the aggregate Option Price for the
number of shares being purchased; (ii) in the discretion of the
Plan Administrator, upon such terms as the Plan Administrator shall
approve, by a "cashless exercise"); or (iii) in the discretion of
the Plan Administrator, upon such terms as the Plan Administrator
shall approve, by a "stock-for-stock exercise" in accordance with
the terms of the Plan. In addition to the purchase price, the
Optionee shall pay the amount of tax required to be withheld (if
any) by the Company or any parent or subsidiary corporation as a
result of the exercise of a Stock Option. At the discretion of the
Plan Administrator, upon such terms as the Plan Administrator shall
approve, the Optionee may pay all or a portion of the tax
withholding by (i) cash or check payable to the Company, (ii)
cashless exercise, (iii) stock-for-stock exercise, or (iv) a
combination of (i), (ii) and (iii). Notwithstanding the foregoing,
the Company, in its sole discretion, may extend and maintain, or
arrange for the extension and maintenance of, credit to Optionee to
finance payment of the purchase price on such terms as may be
approved by the Plan Administrator.
6. Issuance of and Restriction on Shares. Promptly after the
Company's receipt of the written notice of election provided for in
Section 5.2 hereof and Optionee's payment in full of the purchase
price provided for in Section 5.3 hereof, the Company shall
deliver, or cause to be delivered to Optionee, certificates for the
whole number of shares with respect to which the Stock Option is
being exercised by Optionee. Shares shall be registered in the
name of Optionee. If any law or regulation of the Securities and
Exchange Commission or of any other federal or state governmental
body having jurisdiction shall require the Company or Optionee to
take any action prior to issuance to Optionee of the shares of
Common Stock of the Company specified in the written notice of
election to exercise, or if any listing agreement between the
Company and any national securities exchange requires such shares
to be listed prior to issuance, the date for the delivery of such
shares shall be adjourned until the completion of such action
and/or such listing.
<PAGE>
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any
portion of the Stock Option.
8. Rights as a Stockholder. Optionee shall have no rights as
a stockholder of the Company with respect to any shares covered by
the Stock Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for any
dividends (ordinary or extraordinary, whether cash, securities, or
other property) or distributions or other rights for which the
record date is prior to the date such share certificate is issued,
except as provided in Section 9 hereof.
9. Capital Structure Adjustments. Except as otherwise
provided herein, appropriate and proportionate capital structure
adjustments shall be made in the number and class of shares subject
to the Stock Option and the purchase price of such shares in the
event of a stock dividend (but only on Common Stock), stock split,
reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the corporate or
capital structure of the Company. In the event of a liquidation of
the Company, or a merger, reorganization, or consolidation of the
Company in which the Company is not the surviving corporation or
the Company becomes a wholly owned subsidiary of another
corporation, or the sale of all or substantially all of the
property of the Company, any unexercised portion of this Stock
Option shall be deemed canceled unless the surviving corporation in
any such merger, reorganization, or consolidation elects to assume
this Stock Option or to use substitute options in place thereof;
provided, however, that, notwithstanding the foregoing, if such
Stock Options would otherwise be canceled in accordance with the
foregoing, the Optionee shall have the right, exercisable during a
ten-day period ending on the fifth day prior to such liquidation,
merger, or consolidation, to exercise this Stock Option without
regard to any restrictions on exercisability. To the extent that
the foregoing adjustments relate to Common Stock of the Company,
such adjustments shall be made by the Plan Administrator, the
determination of which shall be final, binding, and conclusive.
10. No Transfer of Stock Option. Optionee may not transfer
all or any part of the Stock Option except by will or the laws of
descent and distribution, and the Stock Option shall not be
exercisable during the lifetime of Optionee by any person other
than Optionee.
11. Investment Representation. Optionee hereby represents and
warrants to the Company that he is acquiring the Stock Option and
the Common Stock thereto for his own account and not with a view to
<PAGE>
or for resale or distribution in violation of the Securities Act of
1933, as amended (the "Act"). Optionee hereby further represents
and warrants to, and agrees with, the Company that, if he exercises
the Stock Option in whole or in part at a time when there is not in
effect under the Act a registration statement covering the shares
issuable upon exercise of the Stock Option, that Optionee may be
required, as a condition of issuance of the shares of Common Stock
of the Company covered by the Stock Option, to represent to the
Company that the shares issued pursuant to the exercise of the
Stock Option are being acquired for investment and without a view
to distribution thereof; and that in such case the Company may
place a legend on the certificate(s) evidencing the shares of the
Common Stock of the Company issued upon exercise of the Stock
Option reflecting the fact that the shares were acquired for
investment and cannot be sold or transferred unless registered
under said Act or unless counsel for the Company is satisfied that
the circumstances of the proposed transfer do not require such
registration. In addition, the Company may place a legend on the
certificates evidencing the shares reflecting the fact that they
are subject to restrictions on transfer under the terms of Section
6 hereof.
12. General Provisions.
(a) Entire Agreement. This Agreement is subject to and
conditioned upon, in its entirety, the terms of the Plan and
contains the entire understanding between the parties with respect
to the subject matter hereof, and supersedes any and all prior
written or oral agreements between the parties with respect to the
subject matter hereof. There are no representations, agreements,
arrangements, or understandings, either written or oral, between or
among the parties with respect to the subject matter hereof which
are not set forth in this Agreement.
(b) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
(c) Notices. Any notice given pursuant to this Agreement may
be delivered in person or mailed by first-class mail (return
receipt requested), telex, telecopy, or overnight courier, to the
party to be notified, addressed as set forth by the party's
signature of this Agreement or at such other address as such party
may designate in writing from time to time. Any notice given as
provided in the preceding sentence shall be deemed delivered when
given, if personally served, or ten (10) business days after
mailing, if mailed.
(d) Further Acts. Each party to this Agreement agrees to
perform such further acts and to execute and deliver such other and
<PAGE>
additional documents as may be reasonably necessary to carry out
the provisions of this Agreement.
(e) Severability. If any term, provision, covenant, or
condition of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, or unenforceable for any
reason, such invalidity, illegality, or unenforceability shall not
affect any of the other terms, provisions, covenants, or conditions
of this Agreement, each of which shall be binding and enforceable.
(f) Modification and Amendment. This Agreement may not be
modified, extended, renewed or substituted without an amendment or
other agreement in writing signed by the parties to this Agreement.
"COMPANY" Maxicare Health Plans, Inc.
1149 South Broadway Street
Los Angeles, CA 90015
By:_____________________________
Chief Executive Officer
"OPTIONEE"
Name:___________________________
Address:________________________
________________________________
________________________________
Optionee Signature
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the September
30,1999 financial statements and is
qualified in its entirety by reference
to such financial statements.
<S> <C>
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<PERIOD-TYPE> 9-MOS
<CASH> 62,504
<SECURITIES> 3,758
<RECEIVABLES> 29,565
<ALLOWANCES> 3,922
<INVENTORY> 0
<CURRENT-ASSETS> 103,538
<PP&E> 23,505
<DEPRECIATION> 21,961
<TOTAL-ASSETS> 126,814
<CURRENT-LIABILITIES> 74,193
<BONDS> 0
0
0
<COMMON> 179
<OTHER-SE> 49,914
<TOTAL-LIABILITY-AND-EQUITY> 126,814
<PAGE>
<SALES> 525,462
<TOTAL-REVENUES> 532,972
<CGS> 482,121
<TOTAL-COSTS> 538,340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> (5,368)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,368)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
