Exhibit 10.89
AGREEMENT dated as of May 8, 1998 among American
Opportunity Trust, Xxxx X. Xxxxx, Xx., X.X. Xxxxxx Capital
Management Limited, X.X. Xxxxxx Investment Management, 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"): Xxxxxx 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
Name:
Title:
/s/ Xxxx X. Xxxxx, Xx.
Xxxx X. Xxxxx, Xx.
EXHIBIT "A" TO THE XXXXX GROUP SETTLEMENT AGREEMENT
RESOLUTIONS TO BE ADOPTED BY THE SHAREHOLDERS OF
MAXICARE HEALTH PLANS, INC. AT THE 1998 ANNUAL MEETING
RESOLVED, that subject to the election of Xxxxxxxx Xxxxxxxxxx,
Xxxx Xxxxx, and Xxxxxx Xxxxxxx at this 1998 Annual Meeting of
Shareholders of Maxicare Health Plans, Inc. (the "Company") for
three year terms ending at the Company's 2001 Annual Meeting of
Shareholders ("Board Nominees"), the Shareholders of the Company
hereby authorize and approve amendments to the Company's
Certificate of Incorporation which would amend Article FIFTH
thereof and to add new Article THIRTEENTH as follows (the
"Amendments to the Articles"):
a. Article FIFTH shall be amended to delete the
existing Section "A." thereof and to replace such Section "A."
with the following:
"A. Number of Directors. From the effective
date of this amendment until the
conclusion of the Corporation's 1999
Annual Meeting of Stockholders (the
"Amendment Termination Date"), the
number of directors who shall constitute
the board of directors of the
Corporation (the "Board") shall be nine
(9); thereafter, the number of directors
who shall constitute the Board shall be
fixed in accordance with the Bylaws of
the Corporation."
b. New Article THIRTEENTH shall be added as
follows:
"Article THIRTEENTH: Written Consents and
Special Meetings of
Stockholders.
A. Sunset Provision. The provision of this
Article THIRTEENTH shall terminate and
be of no force and effect after the
Amendment Termination Date.
B Written Consents. From the effective
date of this amendment until the
Amendment Termination Date (the "Written
Consent Period"), the stockholders of
this Corporation shall not be able to
take any action by written consent.
During the Written Consent Period
stockholders may only take action at an
annual or special meeting of
stockholders.
C. Special Meetings of Stockholders.
During the Written Consent Period
stockholders of this Corporation may not
call any special meetings of
stockholders and special meetings of
stockholders may only be called by the
Board as provided for in the Bylaws of
this Corporation.
BE IT FURTHER RESOLVED, that solely in the event the stockholders
of the Company approve the election of the Board Nominees at this
Annual Meeting of Stockholders and adoption of Amendments to the
Articles as provided for above; then the Company's Amended and
Restated Bylaws dated January 28, 1994, as amended on March 20,
1998 (the "Bylaws"), shall be further amended as follows (the
"Bylaw Amendments"):
1. Article II, Section 3. SPECIAL MEETINGS.
Article II, Section 3 shall be amended to add at the end thereof
the following:
"Notwithstanding anything to the
contrary contained above from and after
the effective date of this amendment
until the conclusion of the
Corporation's 1999 Annual Meeting of
Stockholders, the Stockholders of the
Corporation may not call any special
meeting of stockholders and special
meetings of stockholders may only be
called by the Board of Directors of the
Corporation."
2. Article II. A new Section 15 shall be added
to Article II as follows:
"Section 15. 1999 ANNUAL MEETING OF
STOCKHOLDERS. Prior to the conclusion
of the 1999 Annual Meeting of
Stockholders, the Board of Directors
will not adopt any Bylaws or take any
other actions that interfere with the
rights of stockholders to nominate and
elect three directors at such meeting in
accordance with the existing Bylaws,
unless such actions have been approved
by the stockholders."
3. Article III, Section 2. NUMBER OF DIRECTORS.
Article III, Section 2 shall be amended to delete the remainder
of the second sentence after "directors" on the fourth line and
insert in lieu thereof:
"or a majority vote of the outstanding
shares entitled to vote thereon."
4. Article IX, Section 1. AMENDMENT BY
STOCKHOLDERS. Article IX, Section 1 shall be amended to delete
"Sections 3 and 14 of Article II, Section 2 of Article III and
Sections 1 and 2 of Article IX" commencing on the fifth line
thereof and insert in lieu thereof:
"Section 3 of Article II and Sections 1
and 2 of Article IX"
5. Except as expressly set forth herein the
Bylaws shall remain in full force and effect.
BE IT FURTHER RESOLVED, that solely in the event the stockholders
of the Company approve the election of the Board Nominees at this
Annual Meeting of Stockholders, the adoption of Amendments to the
Articles and the Bylaw Amendments, as provided for above, then
the following amendments to the Shareholders Rights Plan
previously adopted by the Board shall be submitted to the
stockholders for approval (the "Rights Plan Amendments"):
1. Sections 1(h) and 1(i) of the Rights Agreement
between this Corporation and American Stock Transfer & Trust
Corporation, as rights agent, dated February 24, 1998 is hereby
amended to read as follows:
"(h) "Continuing Directors" shall have the
same meaning as "Disinterested Director" as
defined in Section 1(i) hereof.
(i) "Disinterested Directors" shall mean
the members of the Board of Directors who are
not (i) officers or employees of the
Corporation, (ii) Acquiring Persons or their
Affiliates or Associates or representatives of
any of them, or (iii) any Person who was
directly or indirectly proposed or nominated
as a director of the Corporation by an
Acquiring Person or a Transaction Person."
2. Except as specifically set forth herein, the
Rights Agreement shall remain in full force and effect, except
that any amendment to Sections 1(h) or 1(i) shall require the
approval of the shareholders.
BE IT FURTHER RESOLVED, that the officers of this Company, or
any of them, be and they hereby are authorized, empowered and
directed in the name of and on behalf of this Company to take all
such actions and to execute and deliver all such documents as
they or any of them may deem necessary or appropriate in their
opinion to carry out the purpose and comply with and effectuate
the intent of the foregoing resolutions, including but not
limited to filing any necessary amendments to the Certificate of
Incorporation with the Delaware Secretary of State and filing the
Bylaw Amendments in the Minute Books of the Company; and
BE IT FURTHER RESOLVED, that any actions previously taken by any
officer of the Company on behalf of the Company in connection
with any of the foregoing resolutions be, and they hereby are,
ratified, adopted and approved in all particulars as acts of the
Company.
Exhibit I
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
XXXX X. XXXXX, XX., )
)
)
Plaintiff, )
)
) C.A. No.98-127 (RRM)
)
)
MAXICARE HEALTH PLANS, INC., )
a Delaware corporation, )
)
)
Defendant )
--------------------------------- )
MAXICARE HEALTH PLANS, INC., a )
Delaware corporation, )
)
Counterclaimant, )
)
)
)
XXXX X. XXXXX, XX., XXXXXX X. )
XXXXXXX, XXXXXX X. XXXXXX, )
XXXXXXX X. XXXX, XXXXXXX X. )
GITTES, XXXXX XXXXXX, )
XXXXXXXXXXX X. XXXXX, XXXXXXX )
X. XXXXXXX, XXXXXXXX X. )
XXXXXX, XXXXX XXXXXX, X.X )
HAMBRO CAPITAL MANAGEMENT )
LTD., NORTH ATLANTIC SMALLER )
COMPANIES INVESTMENT TRUST, )
PLC, AND AMERICAN OPPORTUNITY )
TRUST PLC, )
)
)
Counterclaim )
Defendants. )
-----------------------------------
STIPULATION OF DISMISSAL
IT IS HEREBY STIPULATED AND AGREED, this ____ day of
_____, 1998, by and among the parties hereto, through their
undersigned counsel, that the above-captioned action, including all
claims and counterclaims, is hereby dismissed with prejudice
pursuant to Rule 41(a)(1)(ii), Fed. R. Civ. P., each party to pay
its own costs; provided however, that this dismissal shall not
have, and no party shall contend that this dismissal has, 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 taken or failed to be taken on or after May 8,
1998 by Maxicare Health Plans, Inc. (the "Company"), the Company's
Board of Directors (or members thereof), Xxxx X. Xxxxx, Xx., or any
other current or future shareholder of the Company, including
(without limitation) any issues arising from the application of the
Federal Securities Laws to any such action or inaction.
POTTER XXXXXXXX & XXXXXXX LLP
By___________________________
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxxxx X. Xxxx
Hercules Plaza
Post Office Box 951
Wilmington, Delaware 1998
(000) 000-0000
Attorneys for Plaintiff and
Counterclaim Defendants
OF COUNSEL:
Xxxxx X. Xxxxxx
Xxxx X. Xxxxx
Xxxxxx X. Xxxxxxxxxx
ESANU KATSKY XXXXXX & SIGER, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
(000) 000-0000
XXXXXXXX XXXXX XXXXXXX
KRISTOL & XXXXXX
By__________________________
Xxxxxxx Xxxxxxxx (#941)
Xxxx X. Small (#664)
Xxxxxx X. Xxxxx, Xx.(#2849)
0000 Xxxx Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Defendant/
Counterclaimant
OF COUNSEL:
Xxxxx X. Xxxxxx
Xxxxx Xxxxxxx
XXXXXX XXXXXXX, XXXXXX
& XXXXXXX LLP
2121 Avenue of the Stars
Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
(000) 000-0000
Dated: May ____, 1998
Exhibit II
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
XXXX X. XXXXX, XX., )
)
)
Plantiff/ )
Counterclaim )
Defendant, )
) X.X.Xx. 16274 NC
)
)
)
MAXICARE HEALTH PLANS, INC., XXXXXX )
X. XXXXXXXX, XXXXXXX X. XXXXX, )
XXXXXXXX X. XXXXXXXXXX, XXXXXX X. )
FIELD, JR., XXXX X. XXXXX, and )
XXXXX X. XXXXXXX )
)
)
Defendants/ )
Counterclaimants. )
STIPULATION OF DISMISSAL
IT IS HEREBY STIPULATED AND AGREED, this _____ day of
____________, 1998, by and among the parties hereto, that the
above-captioned action, including all claims and counterclaims, is
hereby dismissed with prejudice, subject to the provisions of
Chancery Court Rule 41(a)(1)(ii), each party to pay its own costs;
provided, however, that this dismissal shall not have, and no party
shall contend that this dismissal has, 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 taken
or failed to be taken on or after May 8, 1998 by Maxicare Health
Plans, Inc. (the "Company"), the Company's Board of Directors (or
members thereof), Xxxx X. Xxxxx, Xx., or any other current or
future shareholder of the Company, including (without limitation)
any issues arising from the application of Delaware law or the
Company's Certificate of Incorporation or Bylaws to any such action
or inaction.
POTTER XXXXXXXX & XXXXXXX,LLP
By___________________________
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxxxx X. Xxxx
Hercules Xxxxx
Xxxx Xxxxxx Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Plaintiffs/
Counterclaim Defendants
OF COUNSEL:
Xxxxx X. Xxxxxx
Xxx X. Xxxxx
Xxxxxx X. Xxxxxxxxxx
ESANU KATSKY XXXXXX & SIGER, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
(000) 000-0000
XXXXXXX XXXXX XXXXXXX KRISTOL &
XXXXXX
By_____________________________
Xxxxxxx Xxxxxxxx
Xxxx X. Small
Xxxxxx X. Xxxxx, Xx.
0000 Xxxx Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Defendants/
Counterclaimants
OF COUNSEL:
Xxxxx X. Xxxxxx
Xxxxx Xxxxxxx
JEFFER, MANGELS, XXXXXX
& MARMARO LLP
2121 Avenue of the Stars
Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
(000) 000-0000
Dated: May _____,1998
