EXHIBIT A
AGREEMENT dated as of May 8,1998 among American Opportunity Trust, Xxxx X.
Xxxxx, Xx., X.X. Xxxxxx Capital Management Limited and North Atlantic Smaller
Companies Investment Trust (collectively, the "Subscribing Shareholders") and
Maxicare Health Plans, Inc. (the "Company"). Xx. Xxxxx is also referred to
herein as the "Soliciting Shareholder."
WHEREAS, the parties have entered into this Agreement to settle disputes
between the Company and the Soliciting Shareholder arising out of the Soliciting
Shareholder's solicitation of written consents from the Company's shareholders
(the "Consent Solicitation"), including litigation between the Soliciting
Shareholder and the Company and certain other parties;
NOW, THEREFORE, in consideration of the agreements contained herein, the
parties agree as follows:
1. Increase in Size of Board, Designation of Directors. Simultaneously with
the execution of this Agreement, the board of directors of the Company (the
"Board") has adopted resolutions (a) increasing the number of directors which
constitute the Board to nine pursuant to Article III, Section 2 of the Company's
bylaws (the "Bylaws") and (b) filling the one existing vacancy and two newly
created directorships on the Board with the following individuals, pursuant to
Article Fifth, Section C of the Company's certificate of incorporation (the
"Certificate"): Xxxxxxx Xxxxxxx, Xxxx X. Xxxxx, Xx. and Xxxxxx X. Xxxxxx
(collectively, the "New Directors"). Messrs. Xxxxxxx and Xxxxx have been named
Class II directors, and Xx. Xxxxxx has been named a Class I director. Xx. Xxxxx
has been added to the Board's executive committee, which has been increased in
size from three to four members.
2. Renomination of Class II Directors. Messrs. Xxxxxxx and Xxxxx and Xx.
Xxxxxxxx X. Xxxxxxxxxx will be included in the slate of nominees recommended by
the Board for election as directors (the "Board Slate") at the Company's 1998
annual meeting of shareholders (the "1998 Annual Meeting"). The Company will
file preliminary proxy materials for such meeting with the Securities and
Exchange Commission not later than June 1, 1998, and the record date for such
meeting will be not later than June 15, 1998. The Company will use its best
efforts to hold such meeting by July 31, 1998 and to hold the 1999 annual
meeting of shareholders ("1999 Annual Meeting") by June 30, 1999; and if it is
not reasonably practicable to hold any such meeting by such date, the Company
shall use its best efforts to hold such meeting at the earliest possible date
thereafter.
3. Amendments to Bylaws and Certificate Proposed at 1998 Annual Meeting.
The Board has approved the amendments to the Bylaws, Certificate and the rights
agreement between the Company and American Stock Transfer & Trust Company, as
Rights Agent, dated as of February 24, 1998 (the "Rights Agreement") attached as
Exhibit A (the "Amendments"), subject to approval of the Amendments by a
majority of the outstanding shares of common stock, par value $.01 per share
(the "Shares") at the 1998 Annual Meeting. The Board will submit the Amendments
to a shareholder vote at the 1998 Annual Meeting and will recommend approval of
the Amendments by shareholders and will use its best efforts to obtain proxies
from the
Company's shareholders to vote in favor of the Amendments, the Board Slate and
the reimbursement of Soliciting Shareholder expenses pursuant to Section 5. The
Subscribing Shareholders will support, and will cooperate with the Company to
cause shareholders to vote in favor of, the election of the Board Slate, the
adoption of the Amendments and the reimbursement of such shareholder expenses.
If approved by shareholders, the Amendments will become effective immediately,
subject (in the case of amendments to the Company's Certificate) to any required
filings of such amendments. Prior to such shareholder vote, the Board will not
change the number of directors who constitute the Board.
4. Restrictions on Issuance of Voting Stock. Prior to the beginning of the
term of the directors elected at 1999 Annual Meeting, the Company will not issue
or agree to issue voting stock (excluding stock issued pursuant to the Rights
Plan and shares issuable under currently outstanding stock options plus
additional option grants consistent with past practice under existing stock
option plans) that in the aggregate carries more than 20% of the voting power of
the Shares outstanding on the date hereof without the approval of the requisite
vote of the Board, including the affirmative vote of at least two of the New
Directors (the "Required Director Vote") or approval by a shareholder vote. Any
voting stock so approved by the Required Director Vote or by a shareholder vote
shall not count against such 20% limit unless otherwise provided in such
approval. Any preferred stock (other than preferred stock issued pursuant to the
Rights Agreement) that the Company issues or agrees to issue after the date
hereof and prior to the conclusion of the 1999 Annual Meeting ("New Preferred
Stock") will not have the right to vote as a class except as otherwise provided
in the first sentence of Section 242(b)(2) of the Delaware General Corporation
Law. Any New Preferred Stock which is convertible into Shares ("New Convertible
Preferred Stock") shall not be entitled to more than one vote per share
multiplied by the number of Shares into which a share of such New Convertible
Preferred Stock is convertible. Any New Preferred Stock that is not convertible
into Shares ("New Non-convertible Preferred Stock") shall not be entitled to
more votes per share than the number of Shares having a market price equal to
the fair market value of such New Non-convertible Preferred Stock at the time
such New Non-convertible Preferred Stock is issued, taking into account the
illiquidity and rights and preferences of such Non-convertible Preferred Stock.
5. Agreements by Shareholder; Reimbursement of Expenses. Simultaneously
with the execution of this Agreement, the Soliciting Shareholder is hereby
terminating the Consent Solicitation. The Company will reimburse the Soliciting
Shareholder's fees and expenses (not to exceed $450,000) related to the Consent
Solicitation and the negotiation of this Agreement promptly after the
satisfaction of the conditions to such reimbursement subject to reasonable
documentation of such fees and expenses and approval of such reimbursement by
(a) holders of at least 50% of the outstanding Shares (with such approval deemed
to have been given by all Shares beneficially owned by the Subscribing
Shareholders or covered by agreements with the Company to vote in favor of the
reimbursement of such expenses at the 1998 Annual Meeting), or (b) the
affirmative vote of the majority of the Shares present in person or by proxy at
the 1998 Annual Meeting and entitled to vote on such matter. Unless the approval
referred to in (a) above has previously been obtained, the Board will submit
such reimbursement to a shareholder vote at the 1998 Annual Meeting and will
recommend approval of such reimbursement by shareholders.
6. Joint Press Release. Simultaneously with the execution of this
Agreement, the Company and the Soliciting Shareholder are issuing a joint press
release approved by both parties.
7. Voting Agreement of Subscribing Shareholders. Each of the Subscribing
Shareholders agrees that all Shares as to which such Subscribing Shareholder or
any of its affiliates has the power to direct the vote on the record date for
the 1998 Annual Meeting, shall be voted at such meeting in favor of the Board
Slate, the Amendments and the reimbursement of the Soliciting Shareholder's
expenses. If any Shares as to which a Subscribing Shareholder has the power to
direct the vote are transferred prior to such record date, such Subscribing
Shareholder shall obtain an agreement from the transferee assuming such
Subscribing Shareholder's obligations under this sentence and the immediately
preceding sentence. Each of the Subscribing Shareholders agrees that it will not
take any of the following actions in respect of the Company prior to the 1999
Annual Meeting: execute a written consent of shareholders in lieu of a meeting,
or solicit any such consents, or vote for shareholders to call a special meeting
of stockholders or solicit votes for shareholders to call such a meeting.
8. Termination of Litigation. Promptly after the execution of this
Agreement, the parties shall execute stipulations of dismissal in the forms
annexed hereto as Exhibits I and II dismissing with prejudice and with each
party to bear its own costs the action entitled Xxxxx v. Maxicare Health Plans,
Inc., Case No. 98-127 (D. Del.), pending in the United States District Court for
the District of Delaware, and the action entitled Xxxxx v. Maxicare Health
Plans, Inc. et al., Civil Action No. 16274NC (Del. Ch.), pending in the Delaware
Court of Chancery, including all claims and counterclaims asserted or that could
have been asserted in those actions; provided, however, that such dismissals
shall not have, and no party shall contend that such dismissals have, any res
judicata, collateral estoppel or other preclusive effect with respect to any
claims arising from or relating to, in part or in whole, any action by the
Company or the Board (or members thereof) or the Soliciting Shareholder or any
other shareholder taken or not taken on or after the date of this Agreement or
with respect to any claims arising out of any proxy solicitation or consent
solicitation undertaken by the Soliciting Shareholder or any other shareholder
after the date of this Agreement in accordance with the terms of this Agreement.
9. Voting Agreements with Other Shareholders. The Company has delivered to
the Soliciting Shareholder correct copies of voting agreements it has entered
into with Franklin Resources, Inc. Heartland Advisors, Inc., King Investment
Advisors, Inc., Par Capital and Xxxxxx Capital Management, L.P. The Company will
not alter, amend, change, waive, terminate or otherwise modify any such
agreements without the written consent of the Soliciting Shareholder.
10. Miscellaneous.
(a) This agreement shall not be altered, amended, changed, waived,
terminated or otherwise modified except by a writing signed by the party to
be charged.
(b) This agreement shall be interpreted and enforced in accordance
with the laws of the State of Delaware applicable to contracts made and to
be performed there, and any legal
action or proceeding with respect to this agreement may be brought in the courts
of the State of Delaware or the United States District Court for the District of
Delaware, and each party accepts the exclusive jurisdiction of such courts.
(c) This agreement may be executed in several counterparts, each of
which shall be deemed an original.
(d) Each of the parties acknowledges and agrees that irreparable
damages would occur if any of the provisions of this agreement were not
performed in accordance with their specific terms or were otherwise
breached. Accordingly, it is agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this agreement and to
enforce specifically the terms of this agreement in any court having
jurisdiction, in addition to any other remedy to which they may be entitled
at law or equity.
(e) The parties acknowledge and agree that this Agreement is not an
agreement, arrangement or understanding of the type referred to in Section
1(d)(iii) of the Company's Shareholders Rights Plan, and the Subscribing
Shareholders and the persons entering into the agreements referred to in
Section 9 shall not be deemed Acquiring Persons as that term is used in the
Shareholders Rights Plan by virtue of anything contained in this Agreement
or those agreements or any acts or transactions contemplated thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
MAXICARE HEALTH PLANS, INC.
By /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
/s/ Xxxx X. Xxxxx, Xx.
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Xxxx X. Xxxxx, Xx.
AMERICAN OPPORTUNITY TRUST PLC
By /s/ X.X. Xxxxxx
--------------------
Name: X.X. Xxxxxx
Title: Authorized Signatory
NORTH ATLANTIC SMALLER COMPANIES
INVESTMENT TRUST PLC
By /s/ X.X. Xxxxxx
---------------------
Name: X.X. Xxxxxx
Title: Authorized Signatory
X.X. XXXXXX CAPITAL MANAGEMENT LIMITED
By /s/ X.X. Xxxxxx
---------------------
Name: X.X. Xxxxxx
Title: Authorized Signatory
