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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   Form 10-K   (Mark One) þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004 or o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-12024    Maxicare Health Plans, Inc. (Exact name of registrant as specified in its charter)
 Delaware
    
    95-3615709(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)14241 East Firestone Boulevard, La Mirada, California
    
    90638(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (562) 293-4064 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchangeNone
    
    None
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class) 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 þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Securities Exchange Act of 1934). o Yes þ No The aggregate market value of Common Stock held by non-affiliates of the Registrant as of June
30, 2004, the last business day of our most recently completed second fiscal quarter, was
approximately $1,760,875 (based upon the closing price for shares of the Registrants Common Stock
as reported by OTC Bulletin Board on such date). As of April 12, 2005, approximately 9,991,926 shares of the Registrants Common Stock, $0.01
par value per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE None.




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2




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TABLE OF CONTENTS PagePART IItem 1. Business

4Item 2. Properties

5Item 3. Legal Proceedings

5Item 4. Submission of Matters to a Vote of Security Holders

6PART IIItem 5. Market for the Registrants Common Stock and Related Shareholder Matters

7Item 6. Selected Financial Data

9Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

11Item 7a. Quantitative and Qualitative Disclosures About Market Risk

13Item 8. Financial Statements and Supplementary Data

14Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

33Item 9A. Controls and Procedures

33PART IIIItem 10. Directors and Executive Officers of the Registrant

34Item 11. Executive Compensation

35Item 12. Security Ownership of Certain Beneficial Owners and Management

37Item 13. Certain Relationships and Related Transactions

37Item 14. Principal Accounting Services and Fees

38PART IVItem 15. Exhibits, Financial Statement Schedules

39SIGNATURES

40EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1
 3




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PART I 
 Item 1.Business General Since March 15, 2002 we have not been engaged in any active business and we have no reasonable
prospects of obtaining or generating any ongoing business. At December 31, 2004 we had a
substantial capital deficiency. As noted above, we have no continuing business activities. We are in the process of exploring
possible strategies to realize any possible value remaining in the Company. It is likely, however,
that it will be necessary for us to liquidate. We cannot give assurance that any liquidation would
provide any value to our shareholders. We are a Delaware Corporation, organized on January 5, 1981. Our executive offices are located
at 14241 East Firestone Boulevard, La Mirada, California 90638 and our telephone number is (562)
293-4064. Disposition of Subsidiaries Through our wholly-owned subsidiaries, we formerly operated health maintenance organizations
(HMOs) in California (through May 25, 2001) and Indiana (through May 3, 2001). Maxicare Life and
Health Insurance Company, Inc., our licensed insurance company, operated preferred provider
organizations (PPOs) in California (through December 31, 2001) and Indiana (through May 3, 2001)
in conjunction with the HMO products of Maxicare (our California HMO) and Maxicare Indiana, Inc.
(our Indiana HMO). As of January 1, 2002 our operations were substantially terminated. On March 14, 2003 the California HMOs Liquidating Plan of Reorganization was confirmed in the
United States Bankruptcy Court. We will not receive any distribution of assets from the California
HMO. The Indiana HMO was formally placed into liquidation on July 3, 2001. On that date the Indiana
Commissioner of Insurance was appointed as Liquidator. It is very unlikely that we will receive any
distribution of assets from the Indiana HMO. On January 28, 2002 the Missouri Department of Insurance placed Maxicare Life and Health
Insurance Company, Inc. into rehabilitation. On March 4, 2003 the Board of Directors of Maxicare
Life and Health Insurance Company, Inc. agreed to its liquidation. We cannot say at this time
whether we will receive any distribution of assets from Maxicare Life and Health Insurance Company. We also own and operate Health Care Assurance Company, Ltd., a captive insurer that provided
certain insurance coverage to us and our subsidiaries. Effective January 31, 2002, Health Care
Assurance Company, Ltd. ceased providing all such insurance. Forward Looking Statements Statements in this Form 10-K annual report may be forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements that express our intentions, beliefs, expectations,
strategies, predictions or any other statements relating to our future activities or other future
events or conditions. These statements are based on current expectations, estimates and projections
about our business based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual outcomes and results may, and probably will, differ
materially from what is expressed or forecasted in the forward-looking statements due to numerous
factors, including those described above and those risks discussed from time to time in this Form
10-K annual report, including the risks described under Risks Factors and Managements
Discussion and Analysis of Financial Condition and Results of Operations and in other documents
which we file with the Securities and Exchange Commission. In addition, such statements could be
affected by risks and uncertainties related to our financial condition, as well as general market
conditions and growth rates, and general economic conditions. Any forward-looking statements speak
only as of the date on which they are made, and we do not undertake any obligation to update any
forward-looking statements to reflect events or circumstances after the date of this Form 10-K. 4




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Risk Factors Because we have no ongoing operations and no prospects of generating funds, we may not be able to
continue in existence. At December 31, 2004:  
    We had a consolidated working capital deficiency of approximately $2.9 million.
    We had a deficiency in shareholders equity of approximately $4.7 million.
    Of our total cash and cash equivalents of $3.3 million at December 31, 2004, $1.2
million was held at Health Care Assurance Company, Ltd. The transfer of cash to MHP from
Health Care Assurance Company, Ltd. requires the approval of regulatory authorities.
    We had no means of generating cash or working capital.
    The Commissioner of the Indiana Department of Insurance has made claims against us
that may exceed $48.0 million and are far in excess of liabilities accrued by us in
connection with the claims. Additionally, substantial claims may be made against us in
connection with a pharmacy services agreement. As a result, we cannot give any assurance that it will not be necessary for us to seek
protection under the Bankruptcy Code or liquidate without paying any consideration to our
shareholders. Because our shares are not listed on a stock exchange, our shares are subject to the penny stock
rules, which make it difficult to purchase or sell our shares. Our common stock is subject to the SECs penny-stock rules, which impose additional sales
practice requirements on broker-dealers who sell our stock to persons other than established
customers and institutional accredited investors. These rules may affect the ability of
broker-dealers to sell our common stock and may affect the ability of our shareholders to sell any
common stock they may own. Employees As of March 31, 2005 we had no full-time employees. Certain employees of the California HMO
work for us on a part time basis. We reimburse the California HMO for the cost of their time under
an established agreement. 
 Item 2.Properties Our executive offices are located at 14241 East Firestone Boulevard, Suite 400, La Mirada,
California 90638, pursuant to a month-to-month lease with a sixty day termination notice
requirement. Under the terms of this lease, we pay a monthly rental of approximately $2,000. 
 Item 3.Legal Proceedings On or about June 25, 2001, the Commissioner of the Indiana Department of Insurance (the
Commissioner), as the rehabilitator of Maxicare Indiana, Inc., our Indiana HMO, filed a complaint
(the Complaint) in the Marion County Circuit Court of Indiana against us and the five directors
of the Indiana HMO, one of whom was a director of the Company. The Commissioner amended the
Complaint on February 1, 2002. The Complaint, as amended, alleges, in substance, that: (1) the
directors of the Indiana HMO breached their fiduciary duty by failing to maintain a plan providing
for continuation of care benefits in the event that the Indiana HMO was placed in receivership, and
that the Company is also liable for such failure; (2) the Company fraudulently concealed the
financial condition of the Indiana HMO; (3) the Company manipulated the finances of the Indiana HMO
for the Companys own benefit; and (4) the Company received preferential and/or fraudulent
transfers of money from the Indiana HMO. While the amended Complaint requests money damages in
largely unspecified amounts, we understand the Commissioners claims against us to be in excess of
$48.0 million. All defendants answered the amended Complaint on April 5, 2002. Pre-trial discovery
has not been completed. We believe that the claims against us are without merit and intend to
vigorously defend the suit. 5




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In or about December 2004, three alleged former employees of our Indiana HMO commenced an
action against us in which they claim that we breached a severance agreement with each of them.
Plaintiffs claim aggregate compensatory damages for breach of contract of at least $250,000, plus
additional damages of $250,000 for alleged violations of California and Indiana statutes respecting
payment of employee wages, together with unspecified punitive damages and attorneys fees. We
answered the complaint in February 2005. Pre-trial discovery has been commenced but is not yet
completed. We believe that the claims against us are without merit and intend to vigorously defend
the suit. 
 Item 4.Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the three months ended December
31, 2004. 6




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PART II 
 Item 5.Market for the Registrants Common Stock and Related Shareholder Matters (a)Market Information Our Common Stock trades on the OTC Bulletin Board under the trading symbol MAXI. The following table sets forth the high and low sale prices per share of our common stock on
the OTC Bulletin Board. The quotations are interdealer prices without retail mark-ups, markdowns,
or commissions, and may not represent actual transactions. Common Stock Sale PriceHigh
    
    
    Low2004First Quarter
    
    $
    0.44
    
    
    $
    0.18Second Quarter
    
    $
    0.25
    
    
    $
    0.11Third Quarter
    
    $
    0.45
    
    
    $
    0.16Fourth Quarter
    
    $
    0.23
    
    
    $
    0.132003First Quarter
    
    $
    0.01
    
    
    $
    0.01Second Quarter
    
    $
    0.05
    
    
    $
    0.01Third Quarter
    
    $
    0.18
    
    
    $
    0.01Fourth Quarter
    
    $
    0.47
    
    
    $
    0.11
 Our common stock is subject to the SECs penny-stock rules, which impose additional sales
practice requirements on broker-dealers who sell our stock to persons other than established
customers and institutional accredited investors. These rules may affect the ability of
broker-dealers to sell our common stock and may affect the ability of our shareholders to sell any
common stock they may own. (b) Holders There
were approximately 11,000 holders of record of our Common Stock as of December 31, 2004. (c) Dividends We have not paid any cash dividends on our Common Stock and have no intention of doing so in
the near future. (d) Sales of Unregistered Equity Security During 2004 we had no sales of unregistered equity securities. (e) Securities Authorized for Issuance Under Equity Compensation Plans No securities were authorized for issuance during 2004 pursuant to equity compensation plans. 7




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Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2004) The following table sets forth information concerning shares available for issuance pursuant
to equity compensation plans. Number of sharesremaining available forfuture issuance underNumber of shares to be
    
    
    Weighted average
    
    equity compensationissued upon exercise of
    
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    securities reflected inwarrants and rights
    
    
    warrants and rights
    
    column (a)Plan Category
    
    (a)
    
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    202,080
    (1)
    
    $16.69
    
    
    1,123,173
    (2)
   (1)
    
    Options to purchase shares of our common stock issued under the 1995 Stock Option Plan, the
1999 Stock Option Plan, the 2000 Stock Option Plan, the Outside Directors 1996 Formula Stock
Option Plan and Senior Executive 1996 Stock Option Plan. All options were vested as of
December 31, 2004.(2)
    
    Includes shares issuable under the 1995 Stock Option Plan, the 1999 Stock Option Plan, the
2000 Stock Option Plan, the Outside Directors 1996 Formula Stock Option Plan and Senior
Executive 1996 Stock Option Plan. Includes 148,333 shares issuable under the 1995 Stock
Option Plan that will no longer be issuable upon that Plans termination on July 27, 2005. 8




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Item 6.Selected Financial Data For the Years Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(Amounts in thousands except per share data)Continuing operations(1):RevenuesPremiums
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,819
    
    
    $
    2,343Investment income(2)
    
    
    39
    
    
    
    33
    
    
    
    569
    
    
    
    239
    
    
    
    529Inter-company service agreement income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,599Other income
    
    
    9
    
    
    
    3,471
    
    
    
    268
    
    
    
    971
    
    
    
    398Total revenues
    
    
    48
    
    
    
    3,504
    
    
    
    837
    
    
    
    3,029
    
    
    
    14,869ExpensesHealth care expenses (credits)
    
    
    
    
    
    
    (1,146
    )
    
    
    (312
    )
    
    
    582
    
    
    
    2,615Salary, general and administrative expenses
    
    
    1,279
    
    
    
    1,833
    
    
    
    1,062
    
    
    
    4,998
    
    
    
    23,147Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    704
    
    
    
    962Impairment of leased assets
    
    
    
    
    
    
    
    
    
    
    1,036
    
    
    
    
    
    
    
    Charges for litigation and management settlements(3)
    
    
    
    
    
    
    75
    
    
    
    209
    
    
    
    
    
    
    
    1,510Total expenses
    
    
    1,279
    
    
    
    762
    
    
    
    2,115
    
    
    
    6,284
    
    
    
    28,234Income (loss) from continuing operations before income
taxes
    
    
    (1,231
    )
    
    
    2,742
    
    
    
    (1,278
    )
    
    
    (3,255
    )
    
    
    (13,365
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,229
    )Income (loss) from continuing operations
    
    
    (1,231
    )
    
    
    2,742
    
    
    
    (1,278
    )
    
    
    (3,255
    )
    
    
    (31,594
    )Discontinued operations:Loss from discontinued operations (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,095
    )
    
    
    (33,352
    )Write-off of excess of rehabilitated and bankrupt
subsidiaries liabilities over assets (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,423
    
    
    
    Loss from discontinued operations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (11,672
    )
    
    
    (33,352
    )Net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )
    
    $
    (14,927
    )
    
    $
    (64,946
    )Net income (loss) per common share:Basic:(6)Basic income (loss) per common share from continuing
operations
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )
    
    $
    (0.33
    )
    
    $
    (6.46
    )Basic loss per common share from discontinued
operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1.20
    )
    
    $
    (6.81
    )Weighted average number of common shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742
    
    
    
    9,742
    
    
    
    4,894Diluted:(6)Diluted income (loss) per common share from continuing
operations
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )
    
    $
    (0.33
    )
    
    $
    (6.46
    )Diluted loss per common share from discontinued
operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1.20
    )
    
    $
    (6.81
    )Weighted average number of common and common
dilutive potential shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742
    
    
    
    9,742
    
    
    
    4,894
 At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Balance Sheet Data:Assets of continuing operations
    
    $
    3,367
    
    
    $
    5,386
    
    
    $
    2,643
    
    
    $
    5,136
    
    
    $
    13,198Liabilities of continuing operations(7)
    
    $
    8,055
    
    
    $
    8,843
    
    
    $
    12,250
    
    
    $
    12,942
    
    
    $
    17,099Net assets of discontinued operations(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,042Shareholders equity (deficit)
    
    $
    (4,688
    )
    
    $
    (3,457
    )
    
    $
    (9,607
    )
    
    $
    (7,806
    )
    
    $
    7,141
 9




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NOTES TO SELECTED FINANCIAL DATA The selected financial data should be read in conjunction with Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial
Statements and Supplementary Data.  (1)
    The placement of our Indiana HMO into rehabilitation on May 4, 2001 and the bankruptcy filing
of our California HMO on May 25, 2001 have effectively ended our involvement in the managed
care industry. As a result, we have treated our HMO subsidiaries as discontinued operations in
the preparation of these financial statements. Although our remaining operations (parent and
Health Care Assurance Company, Ltd.) are insignificant and financially dependent upon our
HMOs, they represent services not intrinsically linked to the managed care industry and have
been treated as continuing operations.(2)
    In 2002 we recorded investment income of $521,000 in connection with the March, 2003
collection of a note that had been issued by a former executive officer of the Company. (See
Item 8. Financial Statements and Supplementary Data  Note 5 to our Consolidated Financial
Statements.)(3)
    In 2003 we recognized a gain of $580,000 in connection with the settlement of a dispute
regarding a Services Agreement for Back Office Administration that we had previously entered
into for the benefit of our subsidiaries; we recognized expense of $250,000 in connection with
the settlement of a dispute involving an information services contract that we had previously
entered into; and we recognized expense of $405,000 in connection with the settlement of an
action brought by a former executive. In 2002 we recognized a gain of $671,000 in connection
with the settlement of a former executives benefits under our Supplemental Executive
Retirement Plan. In 2002 we also accrued litigation-related expense of $880,000 in connection
with the previously noted Services Agreement for Back Office Administration. (See Item 8.
Financial Statements and Supplementary Data  Note 2 to our Consolidated Financial
Statements.) In 2000 we recorded charges of $785,000 for employee severance costs and
$725,000 in litigation reserves for costs associated with the defense and settlement of
various legal actions.(4)
    The loss from discontinued operations in 2000 includes charges of $4.9 million, for losses
associated with certain of our capitated provider arrangements.(5)
    The results of discontinued operations for the year ended December 31, 2001 include a gain of
$16.4 million realized by MHP in the second quarter of 2001 upon the placement of the Indiana
HMO into rehabilitation, the subsequent disposition of Maxicare Life and Health Insurance
Company, Inc., and the placement of the California HMO into Chapter 11 bankruptcy. This gain
represents the extent to which consolidated losses of those entities through May 3, 2001 (the
Indiana HMO and Maxicare Life and Health Insurance Company, Inc.) and May 24, 2001 (the
California HMO) exceeded MHPs investment in those subsidiaries.(6)
    All share and per share amounts have been retroactively restated to reflect the one for five
reverse stock split completed on March 27, 2001.(7)
    Includes long-term liabilities of $1.8 million, $1.9 million, $2.1 million, $3.8 million and
$5.1 million, in 2004, 2003, 2002, 2001 and 2000, respectively.   10




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Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Current Status We have had no active business since March 15, 2002 and have no reasonable prospects of
obtaining or generating any active business. We have no means of generating additional cash. Management is exploring possible strategies to realize any possible value remaining in the
Company; however, given our financial condition, our stock price and the claims against us, it is
very possible that management will not be successful in these efforts, and we may seek protection
under the Bankruptcy Code. Liquidity/ Working Capital Deficiency As noted above, we have terminated all operations. At December 31, 2004, we had a consolidated
working capital deficiency of approximately $2.9 million and a deficiency in shareholders equity
of approximately $4.7 million. Furthermore, of our total cash and cash equivalents of $3.3 million
at December 31, 2004, $1.2 million was held at Health Care Assurance Company, Ltd. The transfer of
cash to MHP from Health Care Assurance Company, Ltd. requires the approval of regulatory
authorities. MHP has certain contractual undertakings for which it may be liable and there are various
alleged claims that may be asserted against it, including, among others, undertakings to and/or
purported claims against it by vendors and former employees of its subsidiaries who have provided
goods or services to those subsidiaries. We are involved in various legal actions brought against us in the normal course of business,
some of which seek damages in amounts that exceed those accrued in our consolidated balance sheets.
The ultimate liability for these legal actions cannot be determined and could materially affect our
consolidated financial position, results of operations or cash flows, if resolved unfavorably. See
Item 8, Note 3  Commitments and Contingencies to our Consolidated Financial Statements. Disposition of Subsidiaries The California and Indiana HMOs and Maxicare Life and Health Insurance Company, Inc. are
currently in liquidation. We will receive no distribution of assets from the California HMO, are
very unlikely to receive any distribution from the Indiana HMO, and may or may not receive a
distribution from Maxicare Life and Health Insurance Company, Inc.. Any distribution from Maxicare
Life and Health Insurance Company, Inc. if assets ultimately are available for distribution, will
require regulatory approval. Results of Operations Year Ended December 31, 2004 Compared to Year Ended December 31, 2003 We had no operations in either 2004 or 2003. We reported a net loss of approximately $1.2
million ($0.12 per share basic and diluted) for the year ended December 31, 2004 compared to net
income of approximately $2.7 million ($0.28 per share basic and diluted) for the year ended
December 31, 2003. We had no revenue other than insignificant amounts of interest and
miscellaneous income during 2004. As we have no operations, all expenses during 2004 were salary,
general and administrative expenses. Net income in 2003 reflects the following events that occurred
in that year:  
    The recognition of other income of approximately $3.4 million in connection with a
settlement recovering the underpayment of amounts due to us for health care coverage
provided to employees of the United States Office of Personnel Management;
    The recognition of $1.146 million of income, reflected as negative health care expense,
in connection with the expiration of certain notice periods for certain insurance provided
by our Health Care Assurance Company, Ltd. subsidiary;
    The recognition of $250,000 of expense in regards to the settlement of litigation with a
provider of information services; 11




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
    The recognition of $405,000 of expense in connection with the settlement of an action
brought by a former executive for consulting fees he was due; and
    The recognition of a gain of $580,000 in connection with the settlement of a dispute
involving a Services Agreement for Back Office Administration that we had previously
entered into for the benefit of our subsidiaries. See Item 8, Note 2  Charges for Litigation and Management Settlements and Item 8, Note 2 
Health Care Expense Recognition to our Consolidated Financial Statements for a further discussion
of these matters. Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 We had no operations in 2003 and no substantive operations in 2002. We reported net income of
approximately $2.7 million ($0.28 per share basic and diluted) for the year ended December 31, 2003
compared to a loss of approximately $1.3 million ($0.13 per share basic and diluted) for the year
ended December 31, 2002, Net income for 2003 was result of the factors discussed above. Net
income for the year ended December 31, 2002 reflects the following events that occurred in that
year :  
    The recognition of $521,000 of investment income recorded in connection with the
collection of a note that had been issued by a former executive officer of the Company;
    The recognition of a gain of $671,000 in connection with the settlement of a former
executives benefits under our Supplemental Executive Retirement Plan;
    The accrual of a litigation-related liability of $880,000 in connection with the
previously noted Services Agreement for Back Office Administration; and
    An impairment charge of approximately $1.0 million recorded in connection with certain
high volume copying equipment held by us under a capital lease agreement. The termination
of our business operations eliminated our need for such equipment and we returned it to the
lessor in early 2002. The liability associated with these leased assets remains on our
consolidated balance sheets. Contractual Obligations In the table below, we set forth our contractual obligations as of December 31, 2004. Some of
the figures we include in this table are based on managements estimates and assumptions about
these obligations, including their duration, anticipated actions by third parties, and other
factors. Because these estimates and assumptions are necessarily subjective, the contractual
obligations we will actually pay in future periods may vary from those reflected in the table.
Amounts are in thousands. 2006 and2005
    
    
    beyondOperating lease obligations
    
    $
    39
    
    
    $
    10Capital lease obligations (1)
    
    
    1,038
    
    
    
    Supplemental executive retirement plan obligations (2)
    
    
    
    
    
    
    1,837Total contractual obligations
    
    $
    1,077
    
    
    $
    1,847
   (1)
    
    We have made no payments to the lessor in connection with the leased assets since the first
quarter of 2002. This amount represents our entire potential liability under the lease. This
liability remains on our consolidated balance sheets.(2)
    
    Amount of benefits owed and payment periods are dependent upon a number of factors, among
them the life expectancies of the participants. In December 2004, the Compensation Committee
of our Board of Directors, as allowed by certain provisions of the Supplemental Executive
Retirement Plan, suspended payments under the plan through December 2005. Payments will
resume in January 2006. 12




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##### Table of Contents



Forward Looking Information Statements in this Form 10-K annual report may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements that express our intentions, beliefs, expectations,
strategies, predictions or any other statements relating to our future activities or other future
events or conditions. These statements are based on current expectations, estimates and projections
about our business based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual outcomes and results may, and probably will, differ
materially from what is expressed or forecasted in the forward-looking statements due to numerous
factors, including those described above and those risks discussed from time to time in this Form
10-K annual report, including the risks described under Risk Factors and Managements Discussion
and Analysis of Financial Condition and Results of Operations and in other documents which we file
with the Securities and Exchange Commission. In addition, such statements could be affected by
risks and uncertainties related to our financial condition, as well as general market conditions
and growth rates, and general economic conditions. Any forward-looking statements speak only as of
the date on which they are made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of this Form 10-K. 
 Item 7a.Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2004, we had approximately $3.3 million in cash and cash equivalents, no
marketable securities and no restricted investments. Our investment policies emphasize return of
principal and liquidity and are focused on fixed returns that limit volatility and risk of
principal. Because of our investment policies, the primary market risk associated with our
portfolio is interest rate risk. As of December 31, 2004, we did not have any outstanding bank borrowings or debt obligations. 13




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##### Table of Contents



Item 8.Financial Statements and Supplementary Data 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Maxicare Health Plans, Inc. We have audited the accompanying consolidated balance sheets of Maxicare Health Plans, Inc.
and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated
statements of operations, shareholders equity and cash flows for each of the three years in the
period ended December 31, 2004. These consolidated financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Maxicare Health Plans, Inc and
subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31, 2004, in conformity
with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming that Maxicare Health Plans,
Inc. will continue as a going concern. As more fully described in Note 1, the Company no longer has
operations, has incurred recurring net losses and deficiencies in working capital and shareholders
equity. These conditions raise substantial doubt about the Companys ability to continue as a going
concern. The financial statements do not reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities that may result from
this uncertainty. /s/ ERNST & YOUNG LLP Los Angeles, California
April 1, 2005 14




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##### Table of Contents



MAXICARE HEALTH PLANS, INC. 
 CONSOLIDATED BALANCE SHEETS December 31,2004
    
    
    2003(Amounts in thousandsexcept par value)Current AssetsCash and cash equivalents
    
    $
    3,345
    
    
    $
    5,361Other current assets
    
    
    22
    
    
    
    25Total Assets
    
    $
    3,367
    
    
    $
    5,386Current LiabilitiesAccounts payable
    
    $
    154
    
    
    $
    Accrued salary expense
    
    
    86
    
    
    
    91Other current liabilities
    
    
    5,978
    
    
    
    6,814Total Current Liabilities
    
    
    6,218
    
    
    
    6,905Long-Term Liabilities
    
    
    1,837
    
    
    
    1,938Total Liabilities
    
    
    8,055
    
    
    
    8,843Commitments and ContingenciesShareholders Equity (Deficit)Common stock, $.01 par value  80,000 shares authorized, 9,992 shares issued and outstanding
    
    
    98
    
    
    
    98Additional paid-in capital
    
    
    283,466
    
    
    
    283,466Accumulated deficit
    
    
    (288,252
    )
    
    
    (287,021
    )Total Shareholders Deficit
    
    
    (4,688
    )
    
    
    (3,457
    )Total Liabilities and Shareholders Equity (Deficit)
    
    $
    3,367
    
    
    $
    5,386
 See notes to consolidated financial statements. 15




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##### Table of Contents



MAXICARE HEALTH PLANS, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousandsexcept per share data)RevenuesInvestment income
    
    $
    39
    
    
    $
    33
    
    
    $
    569Other income
    
    
    9
    
    
    
    3,471
    
    
    
    268Total Revenues
    
    
    48
    
    
    
    3,504
    
    
    
    837ExpensesHealth care expenses (credits)
    
    
    
    
    
    
    (1,146
    )
    
    
    (312
    )Salary, general and administrative expenses
    
    
    1,279
    
    
    
    1,833
    
    
    
    1,062Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    120Impairment of capital assets
    
    
    
    
    
    
    
    
    
    
    1,036Charges for litigation and management settlements
    
    
    
    
    
    
    75
    
    
    
    209Total Expenses
    
    
    1,279
    
    
    
    762
    
    
    
    2,115Income (loss) before income taxes
    
    
    (1,231
    )
    
    
    2,742
    
    
    
    (1,278
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )Basic income (loss) per common share:
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )Weighted average number of common shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742Diluted income (loss) per common share
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )Weighted average number of common and common dilutive potential shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742
 See notes to consolidated financial statements. 16




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##### Table of Contents



MAXICARE HEALTH PLANS, INC. 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT) (Amounts in thousands) Notes
    
    
    
    
    
    
    AccumulatedNumber of
    
    
    
    
    
    
    Additional
    
    
    Receivable
    
    
    
    
    
    
    OtherCommon
    
    
    Common
    
    
    Paid-in
    
    
    from
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Stock
    
    
    Capital
    
    
    Shareholders
    
    
    Deficit
    
    
    Income
    
    
    TotalBalances at December
31, 2001
    
    
    9,742
    
    
    $
    98
    
    
    $
    283,466
    
    
    $
    (2,887
    )
    
    $
    (288,485
    )
    
    $
    2
    
    
    $
    (7,806
    )Comprehensive income
(loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,278
    )
    
    
    
    
    
    
    (1,278
    )Other comprehensive
income, net of tax,
related to
unrealized gains on
marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,280
    )Interest earned on note
receivable from
shareholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (521
    )
    
    
    
    
    
    
    
    
    
    
    (521
    )Balances at December 31,
2002
    
    
    9,742
    
    
    
    98
    
    
    
    283,466
    
    
    
    (3,408
    )
    
    
    (289,763
    )
    
    
    0
    
    
    
    (9,607
    )Comprehensive income
(loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,742
    
    
    
    
    
    
    
    2,742Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,742Common shares issued to
settle litigation
    
    
    250Collection of note from
shareholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,408
    
    
    
    
    
    
    
    
    
    
    
    3,408Balances at December 31,
2003
    
    
    9,992
    
    
    
    98
    
    
    
    283,466
    
    
    
    0
    
    
    
    (287,021
    )
    
    
    0
    
    
    
    (3,457
    )Comprehensive income
(loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,231
    )
    
    
    
    
    
    
    (1,231
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,231
    )Balances at December 31,
2004
    
    
    9,992
    
    
    $
    98
    
    
    $
    283,466
    
    
    $
    0
    
    
    $
    (288,252
    )
    
    $
    0
    
    
    $
    (4,688
    )
 See notes to consolidated financial statements. 17




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##### Table of Contents



MAXICARE HEALTH PLANS, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands)Cash Flows from Operating Activities:Net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )Adjustments to reconcile net income (loss) to net cash used for
operating activities:Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    120Impairment of capital assets
    
    
    
    
    
    
    
    
    
    
    1,036Charges for litigation and management settlements
    
    
    
    
    
    
    75
    
    
    
    209Changes in assets and liabilities:Decrease in estimated claims and other health care costs payable
    
    
    
    
    
    
    (736
    )
    
    
    (314
    )Decrease in deferred income
    
    
    
    
    
    
    
    
    
    
    (113
    )Changes in other miscellaneous assets and liabilities
    
    
    (785
    )
    
    
    (2,764
    )
    
    
    (233
    )Net cash used for operating activities
    
    
    (2,016
    )
    
    
    (683
    )
    
    
    (573
    )Cash Flows from Investing Activities:Loan to shareholder
    
    
    
    
    
    
    3,408
    
    
    
    (521
    )Proceeds from sales and maturities of marketable securities
    
    
    
    
    
    
    
    
    
    
    304Net cash provided by (used for) investing activities
    
    
    
    
    
    
    3,408
    
    
    
    (217
    )Cash Flows from Financing Activities:
    
    
    
    
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (2,016
    )
    
    
    2,725
    
    
    
    (790
    )Cash and cash equivalents at beginning of year
    
    
    5,361
    
    
    
    2,636
    
    
    
    3,426Cash and cash equivalents at end of year
    
    $
    3,345
    
    
    $
    5,361
    
    
    $
    2,636
 See notes to consolidated financial statements. 18




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##### Table of Contents



MAXICARE HEALTH PLANS, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2004 Note 1  Business Description Maxicare Health Plans, Inc., a Delaware corporation (MHP or the Company), is a holding
company that formerly operated health maintenance organizations and other subsidiaries, primarily
in the field of managed care. As of March 15, 2002 all operations of MHP and its subsidiaries were
terminated. MHP and its subsidiaries have not engaged in any business activities since that date.
At December 31, 2004 we had negative net worth of $4.7 million and a working capital deficiency of
$2.9 million. See Liquidity and Going Concern below. All significant subsidiaries formally operated by MHP (the California and Indiana HMOs and
Maxicare Life and Health Insurance Company, Inc.) were placed into bankruptcy, rehabilitation and
administrative supervision, respectively, in May of 2001 and are currently in liquidation. As a
result, the operations and accounts of these former subsidiaries have been excluded from the
consolidated financial statements since May 2001. We will receive no distribution of assets from
the California HMO, are very unlikely to receive any distribution of assets from the Indiana HMO,
and cannot determine whether or not we will receive a distribution of assets from Maxicare Life and
Health Insurance Company, Inc. Any distribution from Maxicare Life and Health Insurance Company,
Inc., if assets ultimately are available for distribution, will require regulatory approval. We own Health Care Assurance Company, Ltd. (HCAC), a captive insurer that provided certain
insurance coverage to MHP and its subsidiaries. Effective January 31, 2002, all policies
underwritten by Health Care Assurance Company, Ltd., have terminated or expired. We also served as
administrator of the California Access for Infants and Mothers (AIM) program through another of
our subsidiaries. Administration of the AIM program was transferred to another health care provider
effective March 15, 2002. Liquidity and Going Concern At December 31, 2004 we had a consolidated working capital deficiency of approximately $2.9
million, and a deficiency in shareholders equity of approximately $4.7 million. Furthermore, of
our total cash and cash equivalents of $3.3 million at December 31, 2003, $1.2 million was held at
Health Care Assurance Company, Ltd. The transfer of cash to MHP from Health Care Assurance Company,
Ltd. requires the approval of regulatory authorities. As noted above, we had no continuing business activities after March 15, 2002. We have no
access to cash that is held at Health Care Assurance Company, Ltd. except to the extent regulatory
authorities approve the transfer of cash to MHP. As set forth below in Note 3 Commitments and
Contingencies, substantial claims have been or may be asserted against us. Such claims, when
resolved, may be far in excess of liabilities reported in the Consolidated Balance Sheets. These conditions raise substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classifications of liabilities that
may result from the outcome of these uncertainties. Management is exploring possible strategies to realize any possible value remaining in the
Company; however, given our financial condition, our stock price and the claims against us, it is
very possible that management will not be successful in these efforts, and we may seek protection
under the Bankruptcy Code. 19




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##### Table of Contents



Note 2  Significant Accounting Policies Basis of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could
differ from these estimates. Cash and Cash Equivalents We consider all highly liquid investments that are both readily convertible into known amounts
of cash and mature within 90 days from their date of purchase to be cash equivalents. Cash and cash equivalents consist of the following at December 31: 2004
    
    
    2003(Amounts inthousands)Cash
    
    $
    72
    
    
    $
    26Money market funds
    
    
    3,273
    
    
    
    5,335$
    3,345
    
    
    $
    5,361
 Other Current Liabilities Other current liabilities include estimated liabilities related to litigation and contract
termination costs and lease obligations (see Note 3  Commitments and Contingencies). Health Care Expense Recognition From February 1, 1997 through May 4, 2001, HCAC provided certain reinsurance coverage to
Transamerica Occidental Life Insurance Company (Transamerica), a nonaffiliated company, in
connection with excess of loss health care claims and continuation of care / insolvency coverage
for Medicaid HMO claims arising under coverage provided by Transamerica to Maxicare Indiana, Inc.
(the Indiana HMO). This coverage terminated on May 4, 2001, when the Indiana Department of
Insurance placed Maxicare Indiana, Inc. into rehabilitation. As a result of the termination of the
claim notice period in April 2003 in regards to its contract with Maxicare Indiana, Inc.,
Transamerica informed HCAC in July, 2003 that it would be returning to HCAC approximately $410,000
held for the payment of claims under that agreement. Transamerica forwarded the payment to HCAC in
August 2003. As a result of these events, we reduced our claims reserves of $736,000 under this coverage to
zero, and recorded a receivable from Transamerica in the amount of $410,000 at June 30, 2003. The
Consolidated Statements of Operations accordingly reflect a credit in health care expenses of
$1,146,000 for the year ended December 31, 2003. The $312,000 credit in healthcare expenses in 2002
represents reductions to estimated claims payable as other policies and claim notice periods
expired. Stock Based Compensation At December 31, 2004, we had several stock-based employee compensation plans as described in
Note 4. We account for the plans under the recognition and measurement principles (the
intrinsic-value method) prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. Compensation cost for stock options is
reflected in net income and is measured as the excess of the market price of our stock at the date
of grant over the amount an employee must pay to acquire the stock. We have adopted the disclosure
provisions required by Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based CompensationTransition and Disclosure. 20




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##### Table of Contents



We currently utilize the Black-Scholes standard option pricing model to measure the fair value
of the stock options granted to employees. Since all outstanding options have vested in prior years
and no options were granted during 2002 to 2004, the net income (loss) as reported equals the net
income (loss) if we had applied the fair value disclosure provisions under SFAS 148 The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions including the expected stock
price volatility. Because our employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee stock options. In
December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS 123R is a revision
of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB 25. Among other items,
SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires
companies to recognize the cost of employee services received in exchange for awards of equity
instruments, based on the grant date fair value of those awards, in the financial statements. The
effective date of SFAS 123R is the first reporting period beginning after June 15, 2005, which is
third quarter 2005 for calendar year companies, although early adoption is allowed. SFAS 123R
permits companies to adopt its requirements using either a modified prospective method, or a
modified retrospective method. Under the modified prospective method, compensation cost is
recognized in the financial statements beginning with the effective date, based on the requirements
of SFAS 123R for all share-based payments granted after that date, and based on the requirements of
SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the
modified retrospective method, the requirements are the same as under the modified prospective
method, but also permits entities to restate financial statements of previous periods based on pro
forma disclosures made in accordance with SFAS 123. While SFAS 123R permits us to continue to use the Black-Scholes model, the standard also
permits the use of a lattice model. We have not yet determined which model we will use to measure
the fair value of employee stock options upon the adoption of SFAS 123R effective July 1, 2005;
however, we do not expect the adoption of SFAS 123R to have a significant effect on our operations
as we do not anticipate granting significant share-based payments in
the future and do not have
unvested share based payments outstanding. Net Income Per Common Share Basic earnings per share are computed by dividing net income (loss) available to common
shareholders by the weighted average number of shares of common stock outstanding. Diluted earnings
per share is computed by dividing net income (loss) by the weighted average number of shares of
common stock outstanding, after giving effect to stock options with an exercise price less than the
average market price for the period. The following is a reconciliation of the numerators and
denominators used in the calculation of basic and diluted earnings per share for each period
presented in the financial statements: Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands except per share values)Basic income (loss) per share of common stock:Numerator  net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )Denominator  Weighted average number of common shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742Basic income (loss) per common share
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )Diluted income (loss) per share of common stock:Numerator  net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )Denominator  Weighted average number of common and common
dilutive shares outstanding
    
    
    9,992
    
    
    
    9,867
    
    
    
    9,742Diluted income (loss) per common share
    
    $
    (0.12
    )
    
    $
    0.28
    
    
    $
    (0.13
    )
 Stock options are excluded from the calculation of the weighted average number of dilutive
shares outstanding for 2004, 2003 and 2002 because the inclusion of stock options would have an
anti-dilutive effect. 21




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##### Table of Contents



Restrictions on Fund Transfers Health Care Assurance Company, Ltd., our wholly-owned subsidiary, holds $1.2 million of our
cash. The transfer of cash to MHP from Health Care Assurance Company, Ltd. requires the approval of
regulatory authorities. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist
primarily of cash equivalents. Our funds are managed within the guidelines established by the board
of directors, which, as a matter of policy, limit the amounts that may be invested in any one
issuer. As of December 31, 2004, we believe that we had no significant concentrations of credit
risk. Other Income In or about November 1999, MHP, on its own behalf and also on behalf of various closed and
then operating subsidiaries, commenced an action in the United States Court of Federal Claims
against the United States, seeking recovery in connection with the underpayment of amounts due for
health care coverage provided to employees of the United States Office of Personnel Management. On or about June 9, 2003 a settlement with the Office of Personnel Management was approved by
the Court. The net settlement amount, after payment of attorneys fees and expenses, was
approximately $5.3 million. Of this amount, MHP received approximately $3.4 million, which included
reimbursement of litigation expenses. The balance of the net settlement amount was payable directly
to the liquidators / receivers / debtors in possession of certain subsidiaries. The amount received
by MHP of $3.4 million was recorded as Other Income in the Consolidated Statements of Operations
for the year ended December 31, 2003. Other income in 2002 includes revenue from the AIM program, which terminated March 15, 2002.
Other income in 2002 also includes $100,000 received in connection with the sale of certain
intellectual property rights. Charges for Litigation and Management Settlements In March 2003, the TriZetto Group, Inc. (TriZetto) sued us in California State court,
alleging that we breached an information services contract and claiming over $12,000,000 in
damages, including over $1,000,000 in amounts due under the contract and $11,000,000 in termination
fees. On or about June 30, 2003, this action was settled. Pursuant to the settlement agreement, we
paid $1,250,000 to TriZetto, issued 250,000 shares of our common stock to TriZetto and returned to
TriZetto certain warrants that TriZetto had issued to us. The action may be revived in certain
circumstances in the event that a judgment is obtained against TriZetto by a third-party based on
TriZettos receipt of the $1,250,000 settlement payment. We recorded a litigation and contract
settlement charge of $250,000 in the second quarter of 2003 to record the amount by which the cash
settlement paid Trizetto exceeded amounts previously accrued. We issued common shares to TriZetto
on July 1, 2003, but no cost was recorded in the Consolidated Statements of Operations for the
shares issued to TriZetto since the fair value of the shares was immaterial. Effective February 2, 2000, we entered into a Services Agreement for Back Office
Administration with Nichols TXEN Corporation calling for Nichols TXEN to provided certain claims
adjudication services to certain of our subsidiaries in exchange for a predetermined per member per
month fee. Subsequently, CSC Healthcare Inc. (CSC), the successor in interest to Nichols TXEN,
commenced an arbitration (the Arbitration) in Atlanta against us before the American Arbitration
Association, claiming our breach of the parties Service Agreement for Back Office Administration
and contract damages of approximately $1,300,000. On December 1, 2003, the Arbitration and a
related case brought by CSC against us in Alabama state court were settled and all claims and
counterclaims dismissed. Pursuant to such settlement, we paid CSC $300,000 and recognized a gain,
reflected as negative litigation and management settlement charges, of $580,000 in the fourth
quarter of 2003, for the difference between the liability previously accrued in connection with
this matter and the ultimate settlement of $300,000. 22




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##### Table of Contents



On or about February 10, 2003, Peter J. Ratican, a shareholder and former executive officer
and director of MHP, commenced an action against us in the Superior Court of the State of
California, alleging that we had breached his consulting agreement with us and claiming damages. On
March 11, 2003, Mr. Ratican obtained an attachment in the amount of $767,000 against us in
connection with his claim. In February 2004, we entered into a Settlement Agreement and Mutual
Release with Mr. Ratican under the terms of which we paid Mr. Ratican $550,000 in addition to the
amount already attached, for a total payment of $1,317,000. As a result of the Settlement Agreement
and Mutual Release we recorded a litigation and management settlement charge of $405,000 in the
fourth quarter of 2003 for the amount paid Mr. Ratican in excess of amounts previously accrued. In 2002 we recognized a gain of $671,000 in connection with the settlement of a former
executives claim under our Supplemental Executive Retirement Plan. This gain was recognized in
conjunction with the collection of a note issued by the same executive. Please see Note 5  Notes
Receivable From Shareholders. Also in 2002 we recorded $880,000 in litigation and management
settlement charges in connection with the previously discussed Services Agreement for Back Office
Administration. Note 3  Commitments and Contingencies Litigation and Contract Terminations On or about June 25, 2001, the Commissioner of the Indiana Department of Insurance (the
Commissioner), as the rehabilitator of Maxicare Indiana, Inc., our Indiana HMO, filed a complaint
(the Complaint) in the Marion County Circuit Court of Indiana against us and the five directors
of the Indiana HMO, one of whom was a director of the Company. The Commissioner amended the
Complaint on February 1, 2002. The Complaint, as amended, alleges, in substance, that: (1) the
directors of the Indiana HMO breached their fiduciary duty by failing to maintain a plan providing
for continuation of care benefits in the event that the Indiana HMO was placed in receivership, and
that the Company is also liable for such failure; (2) the Company fraudulently concealed the
financial condition of the Indiana HMO; (3) the Company manipulated the finances of the Indiana HMO
for the Companys own benefit; and (4) the Company received preferential and/or fraudulent
transfers of money from the Indiana HMO. While the amended Complaint requests money damages in
largely unspecified amounts, we understand the Commissioners claims against us to be in excess of
$48.0 million. All defendants answered the amended Complaint on April 5, 2002. Pre-trial discovery
has not been completed. We believe that the claims against us are without merit and intend to
vigorously defend the suit. The amounts sought by the Commissioner are significantly in excess of
liabilities recorded on our Consolidated Balance Sheets. The ultimate resolution of this matter, if
unfavorable, could materially affect our consolidated financial position, results of operations and
cash flows. Effective January 1, 2001, we entered into a Pharmacy Benefits Management Agreement (the PBM
Agreement) with Medimpact Healthcare Systems, Inc. (Medimpact). The PBM Agreement called for
Medimpact to process and fill within its network of contracting pharmacies prescriptions for
members of Maxicare Life and Health Insurance Company, Inc., the California HMO and the Indiana
HMO. The PBM agreement called for the Company to reimburse Medimpact for the cost of drugs
dispensed and to pay per transaction administrative fees on a bi-weekly basis. As a result of the
Indiana HMO being placed in rehabilitation and the California HMOs bankruptcy, Medimpact allegedly
has not received reimbursement for certain prescriptions filled on behalf of the members of those
subsidiaries. Although it has yet to do so, Medimpact may seek reimbursement from us for such costs
in an amount not presently known. We, in turn, believe that we have claims against Medimpact for
rebates due to us. By order dated March 9, 2001, the Missouri Department of Insurance approved the transfer of
all of the outstanding shares of Maxicare Life and Health Insurance Company, Inc. (MLH) from the
Company to Maxicare Indiana, Inc., on the condition that control of MLH remain with the Company. We
believe that this condition has not been complied with and that, accordingly, the transfer of the
MLH shares by us to Maxicare Indiana, Inc. is null and void. We intend to present our position to
the Missouri Department of Insurance at the appropriate time. In or about December 2004, three alleged former employees of our Indiana HMO commenced an
action against us in which they claim that we breached a severance agreement with each of them.
Plaintiffs claim aggregate compensatory damages for breach of contract of at least $250,000, plus
additional damages of $250,000 for alleged violations of California and Indiana statutes respecting
payment of employee wages, together with unspecified punitive damages and attorneys fees. We
answered the complaint in February 2005. Pre-trial discovery has been commenced but is not yet
completed. We believe that the claims against us are without merit and intend to vigorously defend
the suit. 23




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##### Table of Contents



Other than those noted above, no claims have been filed against us by the creditors of
Maxicare Life and Health Insurance Company, Inc., the California HMO or the Indiana HMO. However,
such creditors may file claims against us in the future. Leases We have operating leases for certain equipment. The lease for our office space is on a
month-to-month basis. Rental expense is recognized on a straight-line basis and totaled $142,000,
$200,000 and $100,000 for the years ended December 31, 2004, 2003 and 2002, respectively. In the first quarter of 2002 we determined that the termination of our business operations
eliminated our need for certain equipment held under capital lease agreements (principally high
volume copying equipment). We have returned that equipment to the lessor. We have removed the
leased assets from our balance sheet via a $1.0 million impairment charge in March, 2002. We have
made no payments to the lessor in connection with the leased assets since the first quarter of
2002. The estimated liability associated with these leased assets remains on our consolidated
balance sheets. Future minimum lease commitments for noncancelable leases at December 31, 2004 were as
follows: Operating
    
    
    CapitalizedLeases
    
    
    Leases(Amounts in thousands)2005
    
    $
    39
    
    
    $
    1,0382006
    
    
    10
    
    
    
    2007 and beyond
    
    
    
    
    
    
    Total minimum obligations
    
    $
    49
    
    
    
    1,038Amount representing interest
    
    
    
    
    
    
    (145
    )Less current obligations
    
    
    
    
    
    
    (893
    )Long-term obligations
    
    
    
    
    
    $
    
 Note 4  Capital Stock We are authorized to issue 80,000,000 shares of common stock, par value $.01 per share, and
5,000,000 shares of preferred stock, par value $.01 per share. The board of directors has the right
to determine the rights, preferences and privileges of one or more series of preferred stock. The
board of directors has created two series of preferred stock  Series A Convertible Cumulative
Preferred Stock, consisting of 2,500,000 shares, and Series B Preferred Stock, consisting of
500,000 shares. As of December 31, 2004, there were no shares of either series of preferred stock
outstanding. At December 31, 2004, 9,991,926 shares of common stock were issued and outstanding; 202,000
shares were reserved for stock options (all of which had vested); and 107,000 shares were reserved
for the exercise of warrants. Warrants having an exercise price of $7.50 per share for 81,000
shares expire on November 3, 2007. Warrants having an exercise price of $7.50 per share for 20,000
shares expire on September 12, 2005. Warrants having an exercise price of $6.25 per share for 6,000
shares expire on January 3, 2006. Restrictions on Transfers of Common Stock On September 14, 2000 our shareholders approved an amendment to our certificate of
incorporation that would prohibit transfer of our stock, unless approved by the Board of Directors
(the Board), to the extent the transfer would (i) cause the ownership interest of the transferee
or any other person to equal 5% or more of the our fair market value; or (ii) increase the
ownership interest of the transferee or any other person where such transferees or other persons
ownership interest equaled 5% or more of our fair market value before the transfer. Shareholder Rights Plan On February 24, 1998, our Board adopted a Shareholder Rights Plan (the Rights Plan) designed
to assure that in the event of an unsolicited or hostile attempt to acquire the Company, the Board
would have the opportunity to consider and implement a course of action which would best maximize
shareholder value. Additionally, on February 24, 1998, the Board declared a dividend distribution

of one preferred share purchase right (a Right) for each outstanding share of Common Stock. 24




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##### Table of Contents



The dividend was paid to the shareholders of record on March 16, 1998, and with respect to
Common Stock issued thereafter, until the Distribution Date (as defined below) and, in certain
circumstances, with respect to Common Stock issued after the Distribution Date. Each Right entitled the holder thereof to purchase 1/500 of a share of our Series B Preferred
Stock (the Series B Preferred) for $45.00 (the Exercise Price). Each 1/500 Series B Preferred
(the Preferred Fraction) share shall be entitled to one vote in all matters being voted on by the
holders of Common Stock and shall also be entitled to a liquidation preference of $0.20. The Rights initially attached to our Common Stock and will not be exercisable until a
shareholder, or group of shareholders acting together, without the approval of the Board, announce
their intent to become a 15% or more owner in our Common Stock. At that time, certificates
evidencing the Rights shall be distributed to shareholders (the Distribution Date) and the Rights
shall detach from the Common Stock and shall become exercisable. When such buyer acquires 15% or
more of our Common Stock, all Rights holders, except the non-approved buyer, will be entitled to
acquire an amount of the Preferred Fraction at a rate equal to twice the Exercise Price divided by
the then market price of the Common Stock. In addition, if we are acquired in a non-approved
merger, after such an acquisition, all Rights holders, except the aforementioned 15% or more buyer,
will be entitled to acquire stock in the surviving corporation at a 50% discount in accordance with
the Rights Plan. The Rights were attached to all common shares held by our shareholders of record
as of the close of business on March 16, 1998. Shares of Common Stock newly-issued after that date
will also carry Rights until the Rights become detached from the Common Stock. The Rights will
expire on February 23, 2008. We may redeem the Rights for $.01 each at any time before a
non-approved buyer acquires 15% or more of the Companys Common Stock. Any current holder that had
previously advised us of owning an amount in excess of 15% of our Common Stock as of the date
hereof has been grandfathered with respect to their current position, including allowance for
certain small incremental additions thereto. In order to further protect our tax loss carry forward, from the impact of an ownership
change, the Board on June 6, 2000 voted to amend the Rights Plan to provide that the exercisability
of the Share Purchase Rights is triggered in the event any party acquires 5% or more of our Common
Stock or any party which currently holds 5% or more of the Common Stock acquires additional shares,
without the approval of the Board. Stock Option Plans In July 1995, our shareholders approved the 1995 Stock Option Plan (the 1995 Plan). Under
the 1995 Plan, we may issue up to 200,000 nonqualified or incentive stock options to directors,
officers and other employees. In June 1999, our shareholders approved the 1999 Stock Option Plan
(the 1999 Plan). Under the 1999 Plan, we may issue up to 150,000 nonqualified or incentive stock
options to directors, officers and other employees. In September 2000, our shareholders approved
the 2000 Stock Option Plan (the 2000 Plan). Under 2000 Plan, we may issue up 800,000 nonqualified
or incentive stock options to directors, officers and other employees. Under the 1995 Plan, the
1999 Plan and the 2000 Plan, stock options granted to date have been nonqualified stock options
which expire no later than 10 years from the date of grant. Stock options granted to date under the
1995 Plan, the 1999 Plan and the 2000 Plan have been at an exercise price equal to or greater than
the fair market value of the stock at the date of grant. In July 1996, our shareholders approved the Outside Directors 1996 Formula Stock Option Plan
(the Formula Plan). Under the Formula Plan, we may issue up to 25,000 nonqualified stock options
to directors who are not employees or officers of the Company (the Outside Directors). On the
date the Formula Plan was adopted, each Outside Director received a grant of stock options to
purchase 1,000 shares of Common Stock. Commencing January 2, 1997 and each January 2nd thereafter,
each Outside Director then serving on the Board shall receive a grant of stock options to purchase
1,000 shares of Common Stock. Options granted under the Formula Plan are at an exercise price equal
to the fair market value of the stock at the date of grant, vest six months from the date of grant
and expire 10 years from the date of grant. No options have been granted under the Formula Plan
subsequent to January 1999. 25




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##### Table of Contents



In July 1996, our shareholders approved the Senior Executives 1996 Stock Option Plan (the
Senior Executives Plan). Under the Senior Executives Plan, we were authorized to issue up to
140,000 nonqualified stock options to Peter J. Ratican and Eugene L. Froelich, former Chief
Executive Officer and Chief Financial Officer of the Company, respectively (the Senior Executives
and individually the Senior Executive). On the date the Senior Executives Plan was adopted, each
Senior Executive received a grant of stock options to purchase 14,000 shares of Common Stock.
Commencing January 1, 1997, and each January 1st thereafter through and including January 1, 2000,
each Senior Executive then employed by us was to receive a grant of stock options to purchase
14,000 shares of Common Stock. Mr. Froelichs continuing participation in the Senior Executives
Plan ceased when his employment with us was terminated in December 1997. Mr. Raticans continuing
participation in the Senior Executives Plan ceased when his employment with us terminated effective
June 30, 1999. Options granted under the Senior Executives Plan are at an exercise price equal to
the fair market value of the stock at the date of grant, vest immediately and expire 10 years from
the date of grant. No options have been granted under the Senior Executives Plan subsequent to
January 1999. A summary of our stock option activity and related information for the years ended December 31
follows: 2004
    
    
    2003
    
    
    2002Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Options
    
    
    Average
    
    
    Options
    
    
    Average
    
    
    Options
    
    
    Average(000)
    
    
    Exercise Price
    
    
    (000)
    
    
    Exercise Price
    
    
    (000)
    
    
    Exercise PriceOutstanding beginning of year
    
    
    207
    
    
    $
    16.86
    
    
    
    209
    
    
    $
    16.91
    
    
    
    385
    
    
    $
    15.76Granted
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    0ExercisedForfeited
    
    
    (5
    )
    
    
    23.29
    
    
    
    (2
    )
    
    
    22.28
    
    
    
    (176
    )
    
    
    15.55Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Outstanding end of year
    
    
    202
    
    
    
    16.69
    
    
    
    207
    
    
    
    16.86
    
    
    
    209
    
    
    
    16.91Exercisable end of year
    
    
    202
    
    
    
    16.69
    
    
    
    207
    
    
    
    16.86
    
    
    
    209
    
    
    
    16.91
 The following table summarizes information about stock options outstanding at December 31,
2004: Options Outstanding
    
    
    
    
    
    
    Options ExercisableNumberNumber
    
    
    Weighted-Average
    
    
    
    
    
    
    ExercisableOutstanding
    
    
    Remaining
    
    
    
    
    
    
    atat 12/31/04
    
    
    Contractual Life
    
    
    Weighted-Average
    
    
    12/31/04
    
    
    Weighted-AverageRange of Exercise Prices
    
    (000)
    
    
    (# of Months)
    
    
    Exercise Price
    
    
    (000)
    
    
    Exercise Price$  5.00
- $  5.94
    
    
    112
    
    
    
    70
    
    
    $
    5.00
    
    
    
    112
    
    
    $
    5.00$22.50 - $36.44
    
    
    90
    
    
    
    18
    
    
    
    25.10
    
    
    
    90
    
    
    
    25.10$  5.00
- $36.44
    
    
    202
    
    
    
    49
    
    
    
    16.69
    
    
    
    202
    
    
    
    16.69
 Note 5  Notes Receivable from Shareholders On February 18, 1997 we entered into recourse loan agreements with Peter J. Ratican and Eugene
L. Froelich, who at that date served as our Chief Executive Officer and Chief Financial Officer,
respectively (collectively the Executives and individually the Executive), whereby we loaned to
each Executive $2,229,028 in connection with the exercise of certain stock options granted to the
Executives on February 25, 1992 (the 1997 Ratican Note and the 1997 Froelich Note,
respectively). The 1997 Ratican Note and the 1997 Froelich Note are evidenced by a secured
Promissory Note which provides for interest compounding monthly at the one year London Interbank
Offered Rate plus 50 basis points. All principal and accrued interest were due at the maturity date
of April 1, 2001 or upon an event of default. In connection with a settlement agreement with Mr. Ratican, as of April 24, 1999, the 1997
Ratican Note and related loan documents were amended extending the term from April 1, 2001 to June
30, 2003 (the Restated 1997 Ratican Note). The Restated 1997 Ratican Note provides that on the
maturity date, in lieu of payment of the original principal balance and all accrued interest
thereon (the Maturity Balance), Ratican may fully satisfy his obligations under the Restated 1997
Ratican Note through the payment to us for payment to the applicable state and Federal tax
authorities the applicable minimum state and federal withholding amounts and FICA taxes due from
Mr. Ratican resulting from the reduction of the Maturity Balance to zero. At December 31, 2003 Mr.
Ratican had not satisfied his obligations under Restated 1997 Ratican Note, which accordingly
remained open at that date. As a result of the Settlement Agreement and Mutual Release we entered
into with Mr. Ratican in February 2004 (see Note 2  Charges for Litigation and Management
Settlements) such note became non-recourse to Mr. Ratican in the first quarter of 2004. We have
fully reserved for the Restated 1997 Ratican Note. 26




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##### Table of Contents



On April 1, 2001, the 1997 Froelich Note came due and was not paid. We commenced an action in
California state court to collect on the note. On October 18, 2001, the court granted summary
adjudication and judgment was entered in our favor. On November 14, 2002, the California Court of
Appeals affirmed the judgment.On or about March 14, 2003, Mr. Froelich satisfied the judgment in
the net stipulated amount of $3,407,500 by paying $2,583,000 to us and by paying over $767,000 to
the Sheriff pursuant to an attachment by Peter J. Ratican, as more fully set forth in Note 2 
Charges for Litigation and Management Settlements. Offset against the judgment of $3,407,500 was
$57,500 that Mr. Froelich agreed to accept in full settlement of his claim against us in connection
with his benefits under our Supplemental Executive Retirement Plan. In connection with the
settlement of the 1997 Froelich Note and Mr. Froelichs Supplemental Executive Retirement Plan
benefits, we recognized $521,000 of investment income and a gain of $671,000 (included in charges
for litigation and management settlements) in 2002. The principal and accrued interest on notes receivable from shareholders at December 31, 2002
have been reflected as a reduction of shareholders equity. There were no such amounts recorded at
December 31, 2004 or 2003. Note 6  Income Taxes The provision (benefit) for income taxes at December 31 consisted of the following: 2004
    
    
    2003
    
    
    2002(Amounts in thousands)Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    0Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    0Provision for income taxes
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 The federal and state deferred tax liabilities (assets) are comprised of the following at
December 31: 2004
    
    
    2003(Amounts in thousands)Noncurrent deferred tax assets:Loss carryforwards
    
    $
    (67,718
    )
    
    $
    (99,554
    )Other
    
    
    (1,033
    )
    
    
    (1,033
    )Gross deferred tax assets
    
    
    (68,751
    )
    
    
    (100,587
    )Deferred tax assets valuation allowance
    
    
    68,751
    
    
    
    100,587Deferred tax assets
    
    $
    0
    
    
    $
    0
 The differences between the benefit for income taxes at the federal statutory rate of 34% and
that shown in the Consolidated Statements of Operations are summarized as follows for the years
ended December 31: 2004
    
    
    2003
    
    
    2002(Amounts in thousands)Tax provision (benefit) at statutory rate
    
    $
    (419
    )
    
    $
    934
    
    
    $
    (438
    )State income taxes
    
    
    4
    
    
    
    4
    
    
    
    4Utilization of NOL carryforward
    
    
    
    
    
    
    (938
    )
    
    
    Limitation on current-year tax benefit due to unrealized NOL carryforwards
    
    
    415
    
    
    
    
    
    
    
    434Income tax provision
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 27




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##### Table of Contents



At December 31, 2004, we had net operating loss carryforwards (NOLs) for federal tax
purposes expiring as follows (amounts are in millions): Year of Expiration
    
    NOL2005
    
    $
    7.22006
    
    
    2.12007
    
    
    1.12012
    
    
    25.72018
    
    
    73.82019
    
    
    3.82020
    
    
    19.52021
    
    
    3.32022
    
    
    2.72023
    
    
    56.82024
    
    
    1.2Total NOL carryforwards
    
    $
    197.2
 The NOLs presented above exclude certain additional benefits that may be realized upon the ultimate
disposition of the Indiana HMO and Maxicare Life and Health Insurance Company, Inc. On December 5, 1990 (the Effective Date) the Company emerged from protection under Chapter
11 pursuant to our joint plan of reorganization, as modified (the Reorganization Plan). Upon the
Effective Date of the Reorganization Plan, we experienced a change of ownership pursuant to
applicable provisions of the Internal Revenue Code (the IRC). As a result of the ownership
change, our pre-change NOL carryforwards of approximately $7.2 million are subject to limitation
under provisions of Section 382 of the IRC. We are unable to quantify to what extent, if any, we
may be able to fully utilize our remaining pre-change NOLs prior to their expiration. Should we
experience a second change of ownership, the limitation under Section 382 of the IRC on NOLs
would be recalculated. We use the liability method of accounting for income taxes as set forth in SFAS 109,
Accounting for Income Taxes. Deferred taxes are determined on the difference between the financial
statement and tax bases of assets and liabilities using the enacted tax rates in effect in the
years in which the differences are expected to reverse. Deferred tax assets are recognized and
measured based on the likelihood of the related tax benefit in the future. Accordingly, we have reserved the full amount of the deferred tax assets at December 31, 2004.
Deferred taxes will be recorded when realized in income tax returns. Any future benefits from a
reduction of the valuation allowance will reduce our income tax expense. Note 7  Employee Benefit Plans We previously adopted the Maxicare Health Plans, Inc. Supplemental Executive Retirement Plan
(the SERP) covering five key executives selected by the Board, all of whom are no longer employed
by us. Benefits are based on years of service and average compensation in the last three years of
employment. No executives who joined us subsequent to January 1, 1997 are participants in the SERP.
No expense was recognized for the years ended December 31,2004, 2003 and 2002. In 2003, we
settled the SERP liability due to our former chief financial officer as discussed in Note 5  Notes
Receivable from Shareholders. Our remaining liability under the SERP at December 31, 2004 is
estimated at $1.8 million. In December 2004, the Compensation Committee of our Board of Directors,
as allowed by certain provisions of the supplemental executive retirement plan, suspended payments
under the plan through December 2005. Payments will resume in January 2006. 28




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##### Table of Contents



Note 8  Quarterly Results of Operations (Unaudited) The following is a tabulation of the quarterly results of operations for the years ended
December 31, 2004 and 2003. Three Months Ended,March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(Amounts in thousands, except per share data)2004Revenues
    
    $
    8
    
    
    $
    7
    
    
    $
    18
    
    
    $
    15Loss
    
    
    (321
    )
    
    
    (256
    )
    
    
    (537
    )
    
    
    (117
    )Net income (loss) per common share:Basic
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.05
    )
    
    $
    (0.01
    )Diluted
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.05
    )
    
    $
    (0.01
    )2003Revenues
    
    $
    5
    
    
    $
    3,409
    
    
    $
    21
    
    
    $
    69Income (loss)
    
    
    (549
    )
    
    
    4,063
    
    
    
    (516
    )
    
    
    (256
    )Net income (loss) per common share:Basic
    
    $
    (0.06
    )
    
    $
    0.42
    
    
    $
    (0.05
    )
    
    $
    (0.03
    )Diluted
    
    $
    (0.06
    )
    
    $
    0.42
    
    
    $
    (0.05
    )
    
    $
    (0.03
    )
 29




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##### Table of Contents



Note 9  Condensed Financial Information of Registrant The net assets of Health Care Assurance Company, Ltd. are restricted and exceed 25% of the
consolidated net assets of the Company. The following are the condensed balance sheets, statements
of operations and cash flows of the Registrant and accompanying notes. CONDENSED BALANCE SHEETS December 31,2004
    
    
    2003(Amounts In thousands)Current AssetsCash and cash equivalents
    
    $
    2,181
    
    
    $
    2,867Other current assets
    
    
    22
    
    
    
    25aaaaaaTotal Current Assets
    
    
    2,203
    
    
    
    2,892Investment in Subsidiaries
    
    
    1,177
    
    
    
    2,507Total Assets
    
    $
    3,380
    
    
    $
    5,399Current LiabilitiesAmounts due to subsidiaries
    
    $
    38
    
    
    $
    48Other current liabilities
    
    
    6,193
    
    
    
    6,870Total Current Liabilities
    
    
    6,231
    
    
    
    6,918Other Long-Term Liabilities
    
    
    1,837
    
    
    
    1,938Total Liabilities
    
    
    8,068
    
    
    
    8,856Commitments and ContingenciesTotal Shareholders Equity
    
    
    (4,688
    )
    
    
    (3,457
    )Total Liabilities and Shareholders Equity
    
    $
    3,380
    
    
    $
    5,399
 See notes to condensed financial information of registrant. 30




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##### Table of Contents



CONDENSED STATEMENTS OF OPERATIONS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands)RevenuesEquity in earnings (losses) of subsidiaries
    
    $
    (30
    )
    
    $
    1,099
    
    
    $
    505Investment income
    
    
    23
    
    
    
    16
    
    
    
    523Other income
    
    
    9
    
    
    
    3,471
    
    
    
    100Total revenues
    
    
    2
    
    
    
    4,586
    
    
    
    1,128ExpensesSalary, general and administrative expenses
    
    
    1,233
    
    
    
    1,769
    
    
    
    1,041Impairment of capital assets
    
    
    
    
    
    
    
    
    
    
    1,036Charges for litigation and management settlements
    
    
    
    
    
    
    75
    
    
    
    209Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    120Total Expenses
    
    
    1,233
    
    
    
    1,844
    
    
    
    2,406Income (loss) from operations
    
    
    (1,231
    )
    
    
    2,742
    
    
    
    (1,278
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )
 CONDENSED STATEMENTS OF CASH FLOWS Years Ended December 31,2004
    
    
    2003
    
    
    2002(Amounts in thousands)Cash Flows from Operating Activities:Net income (loss)
    
    $
    (1,231
    )
    
    $
    2,742
    
    
    $
    (1,278
    )Adjustments to reconcile net income (loss) to net cash used for operating activities:Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    120Impairment of capital assets
    
    
    
    
    
    
    
    
    
    
    1,036Charges for litigation and management settlements
    
    
    
    
    
    
    75
    
    
    
    209Equity in (earnings) losses of subsidiaries
    
    
    30
    
    
    
    (1,099
    )
    
    
    (505
    )Changes in other assets and liabilities
    
    
    (785
    )
    
    
    (2,521
    )
    
    
    (186
    )Net cash used for operating activities
    
    
    (1,986
    )
    
    
    (803
    )
    
    
    (604
    )Cash Flows from Investing Activities:Loans to shareholders
    
    
    
    
    
    
    3,408
    
    
    
    (521
    )Capital contributions to subsidiaries, net
    
    
    
    
    
    
    (233
    )
    
    
    Dividends received from subsidiaries
    
    
    1,300
    
    
    
    312
    
    
    
    1,230Net cash provided by investing activities
    
    
    1,300
    
    
    
    3,487
    
    
    
    709Net increase (decrease) in cash and cash equivalents
    
    
    (686
    )
    
    
    2,684
    
    
    
    105Cash and cash equivalents at beginning of year
    
    
    2,867
    
    
    
    183
    
    
    
    78Cash and cash equivalents at end of year
    
    $
    2,181
    
    
    $
    2,867
    
    
    $
    183
 See notes to condensed financial information of registrant. 31




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##### Table of Contents



NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT Note A  General The condensed financial information of the registrant (MHP) should be read in conjunction
with the consolidated financial statements and the notes to consolidated financial statements. Note B  Disposition of Subsidiaries On May 25, 2001, the California HMO filed for Chapter 11 bankruptcy protection. On March 14,
2003 the Bankruptcy Court issued an order confirming the liquidating Plan of the California HMO.
Effective March 24, 2003 the effective control of this entity passed to a Board of Directors with
80% of its membership selected by and representing the creditors. We will not receive any
distribution of assets from the California HMO. The Indiana HMO is incorporated under the laws of the state of Indiana and is primarily
regulated by the Indiana Department of Insurance. On May 4, 2001, the Indiana Department of
Insurance placed the Indiana HMO into rehabilitation. The Indiana HMO was formally placed into
liquidation on July 3, 2001. We are very unlikely to receive any distribution of assets from the
Indiana HMO. Maxicare Life and Health Insurance Company, Inc. is incorporated under the laws of the state
of Missouri and is primarily regulated by the Missouri Department of Insurance. On March 9, 2001 we
contributed the capital stock of Maxicare Life and Health Insurance Company, Inc. to the Indian
HMO. On May 24, 2001 the Missouri Department of Insurance placed Maxicare Life and Health Insurance
Company, Inc. under administrative supervision. On January 28, 2002 the Missouri Department of
Insurance placed Maxicare Life and Health Insurance Company, Inc. into rehabilitation. On March 4,
2003 the Board of Directors of Maxicare Life and Health Insurance Company, Inc. agreed to its
liquidation. We may or may not receive any distribution of assets from Maxicare Life and Health
Insurance Company, Inc. As a result of these events, equity in earnings (losses) of these subsidiaries have been
excluded from the Condensed Statements of Operations of the Registrant in each of the three years
ended December 31, 2004. During 2004, 2003 and 2002, the Registrant received $1,300,000 and $312,000 and
$1,230,000 in dividends from Health Care Assurance Company Limited, which have been approved by the
regulatory authorities. Note C  Dividends During 2004, 2003 and 2002, the Registrant received $1,300,000 and $312,000 and
$1,230,000 in dividends from Health Care Assurance Company Limited, which have been approved by the
regulatory authorities. 32




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##### Table of Contents



Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. 
 Item 9A.Controls and Procedures Our chief executive officer and chief financial officer have supervised and participated in an
evaluation of the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report, and, based on their evaluations, they believe that our disclosure
controls and procedures (as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934, as
amended) are designed to ensure that information required to be disclosed by us in the reports that
we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time periods specified in the Commissions rules and forms. As a result of the
evaluation, there were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their evaluation. 33




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##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant The following table sets forth certain information concerning our directors and executive
officers as of March 31, 2005: NAME
    
    AGE
    
    POSITIONPaul R. Dupee, Jr.
    
    
    61
    
    
    Chief Executive Officer and Chairman of the Board of DirectorsGeorge H. Bigelow
    
    
    62
    
    
    DirectorJohn H. Gutfreund
    
    
    75
    
    
    DirectorSimon J. Whitmey
    
    
    58
    
    
    DirectorPatricia A. Fitzpatrick
    
    
    53
    
    
    Treasurer and SecretaryJoseph W. White
    
    
    46
    
    
    Vice President, Chief Financial Officer and Director
 Paul R. Dupee, Jr.was appointed Chairman of our Board of Directors in June 1999 and our Chief
Executive Officer in August 1999. For more than five years prior hereto, Mr. Dupee has been a
private investor. From 1996 through 2000, he served as a Director of the Lynton Group, Inc. serving
as Chairman from 1998 to 2000. From 1986 through 1996, Mr. Dupee was Director and Vice Chairman of
the Boston Celtics Limited Partnership, which owns the National Basketball Association team, the
Boston Celtics. Mr. Dupee has been one of our directors since May 1998. Joseph W. Whitehas served as our Chief Financial Officer since November 2001. Prior to
November 2001 Mr. White served as our Controller and Interim Chief Financial Officer since February
2001. Mr. White was named one of our Directors in March 2002 and has served in various financial
positions with us since March 1987. Mr. White has served as Vice President, Accounting of Molina
Healthcare, Inc. since June 2003. Mr. White is a certified public accountant. Patricia A. Fitzpatrickhas served as our Treasurer since July 1998. Ms. Fitzpatrick was also
named our Secretary in October 2004. Previously, Ms. Fitzpatrick served as our Assistant Treasurer
from July 1988 to July 1998. John H. Gutfreundhas been our Director since 2000. Mr. Gutfreund is a Managing Director of
C.E. Unterberg, Towbin and has been the President of Gutfreund & Company, Inc., an investment
banking and consulting firm, for more than five years. In addition, Mr. Gutfreund serves as a
Director of Accuweather, Inc.; Evercel, Inc.; LCA-Vision, Inc.; Nutrition 21, Inc. (formerly AMBI,
Inc.); and the Universal Bond Fund. George H. Bigelowhas been our Director since 1999. Mr. Bigelow was a managing member of
Americana Group, LLC, a real estate investment advisor from January 1998 to September 2002 Since
2002 he has been a managing member of Americana Investment Group LLC, a private investor. Simon J. Whitmeyhas been our Director since 1999. Since October 2003, Mr. Whitmey has served
as a Project Director with Shea Homes, the homebuilding division of the J F Shea Companies, a major
privately held California heavy engineering and real estate development company. Prior to that,
Mr. Whitmey was President and Chief Executive Officer of Acralight, Inc., a privately owned
California corporation (and a California licensed contractor) that manufactures and installs
glazing systems from 1995. Compliance With Section 16(A) of The Securities Exchange Act of 1934 Based solely upon our review of the Forms 3, 4 and 5 and amendments thereto furnished to us,
we believe that there were no instances where our executive officers or directors failed to file
all required reports on a timely basis. Meetings and Committees of the Board of Directors Our board of directors has two committees  the audit committee and the compensation
committee. The Audit Committee consists of three independent directors: Mr. Bigelow, Mr. Gutfreund and
Mr. Whitmey. Mr. Whitmey is chairman of the Audit Committee. The audit committee met with our
independent auditors and chief financial officer prior to the filing of our Form 10-K annual report
to review the 2004 audited financial statements. We have designated Mr. Bigelow as our Audit
Committee financial expert. 34




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##### Table of Contents



The Compensation Committee, which is composed of Mr. Bigelow, Mr. Whitmey and Mr. Dupee,
serves as the stock option committee for our stock option plans and approves any employment
agreements with management and changes in compensation for our executive officers. The Compensation
Committee did not grant any options or rights during 2004. Mr. Dupee is our Chief Executive
Officer. Excluding actions by unanimous written consent, during 2004, the Board of Directors held five
meetings and the Audit Committee held four meetings. Our Compensation Committee met once in 2004. During 2004, all of our directors attended at least 75% of the meetings of the board and any
committee of which they are members. Code of Ethics We have adopted a code of ethics. A copy of our code of ethics can be obtained without charge
by writing to Maxicare Health Plans, Inc., Code of Ethics, Attn: Patricia Fitzpatrick, 14241 East
Firestone Boulevard, La Mirada, California, 90638. 
 Item 11. Executive Compensation Shown below is information concerning the annual and long-term compensation for services in
all capacities for the years ended December 31, 2004, 2003 and 2002, of (i) our chief executive
officer and (ii) the other two executive officers for 2004: SUMMARY COMPENSATION TABLE LONG-TERMCOMPENSATIONANNUAL COMPENSATION
    
    
    STOCKOPTIONS
    
    
    ALL OTHERNAME AND PRINCIPAL POSITION
    
    YEAR
    
    
    SALARY
    
    
    BONUS
    
    
    AWARDS(#)
    
    
    COMPENSATIONPaul R. Dupee
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    34,500Chief Executive Officer
    
    
    2003
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    32,2502002
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    33,000Patricia A. Fitzpatrick, Treasurer
    
    
    2004
    
    
    $
    201,462
    
    
    $
    25,000
    
    
    
    
    
    
    $
    13,6992003
    
    
    $
    165,000
    
    
    
    
    
    
    
    
    
    
    $
    18,0252002
    
    
    $
    165,000
    
    
    
    
    
    
    
    
    
    
    $
    Joseph W. White
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    73,938Vice President and
    
    
    2003
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    74,750Chief Financial Officer
    
    
    2002
    
    
    $
    179,000
    
    
    
    
    
    
    
    
    
    
    $
    26,000
 Annual salary for 2004, 2003 and 2002 for Ms. Fitzpatrick includes amounts paid to her by
Maxicare, the Companys California HMO, and Maxicare Life and Health Insurance Company, Inc. (in
2003 and 2002) pursuant to formal agreements with each of those entities. Substantially all
compensation for Ms. Fitzpatrick in 2003 and 2002 (approximately 90%) was paid by the California
HMO and Maxicare Life and Health Insurance Company, Inc. Approximately 70% of Ms. Fitzpatricks
salary was paid by the California HMO in 2004. The California HMO is likely to continue paying
compensation to Ms. Fitzpatrick, although likely at reduced rates. The bonus earned by Ms.
Fitzpatrick in 2004 was paid entirely by Maxicare Health Plans Inc. All Other Compensation
earned by Ms. Fitzpatrick in 2004 and 2003 consisted of a creditor claim paid to her by the
California HMO. Annual salary for Mr. White for 2002 includes amounts paid to him by the California HMO and
Maxicare Life and Health Insurance Company, Inc. pursuant to formal agreements with each of those
entities. Such amounts constituted approximately 90% of Mr. Whites annual salary. Mr. Dupee earned no salary or bonus in 2004, 2003 or 2002. All Other Compensation earned by
Mr. Dupee in 2004, 2003 and 2002 is comprised of director fees. 35




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Effective August 9, 2002, Mr. White resigned as a full-time employee of the Company. On that
date, he entered into a consulting agreement with the Company that calls for him to be compensated
for his services at the rate of $125 per hour, with a minimum weekly payment of $500. Commencing
August 1, 2002 Mr. White also became eligible for compensation as a director of the Company. All
Other Compensation earned by Mr. White in 2004 is comprised of consulting fees of approximately
$40,188 and Director fees of $33,750. All Other Compensation earned by Mr. White in 2003 is
comprised of consulting fees of approximately $42,500 and Director fees of $32,250. All Other
Compensation earned by Mr. White in 2002 is comprised of consulting fees of approximately $12,000
and Director fees of $14,000. Option Grants There were no stock option grants in 2004. Option Exercises and Fiscal Year-end Values Officers listed in the Summary Compensation Table exercised no options in 2004. Shown below is
information with respect to unexercised options to purchase common stock held by those officers at
December 31, 2004. NUMBER OF UNEXERCISED
    
    
    VALUE OF UNEXERCISEDOPTIONS HELD AT
    
    
    IN-THE-MONEY OPTIONS ATDECEMBER 31, 2004
    
    
    DECEMBER 31, 2004(1)NAME
    
    EXERCISABLE
    
    
    UNEXERCISABLE
    
    
    EXERCISABLE
    
    
    UNEXERCISABLEPaul R. Dupee, Jr.
    
    
    131,000
    
    
    
    0
    
    
    $
    0
    
    
    $
    0Patricia A. Fitzpatrick
    
    
    3,020
    
    
    
    0
    
    
    $
    0
    
    
    $
    0Joseph W. White
    
    
    20
    
    
    
    0
    
    
    $
    0
    
    
    $
    0
   (1)
    
    Based on the closing price on the Over the Counter Bulletin Board on December 31, 2004 of
$0.13 per share, none of the options were in-the-money. Compensation of Directors During 2004, outside directors received compensation for their services as directors. These
directors were George H. Bigelow, John H. Gutfreund and Simon J. Whitmey. During 2004, Mr. Bigelow
received $37,500; Mr. Whitmey received $37,500; and Mr. Gutfreund received $36,750. During 2005,
the Companys directors will receive cash compensation for their services in the amount of $30,000
per year, plus $750 per meeting attended. In addition, directors are entitled to reimbursement for
all reasonable out-of-pocket expenses incurred in connection with their service as directors of the
Company. There were no grants of stock options in 2004, 2003 or 2002. Previously, the outside directors
have received options to purchase shares of common stock at an exercise price equal to the market
price at the date of grant. Set forth below is a schedule of the options that have been granted to
our present non-employee directors: # OF
    
    
    
    
    
    
    EXERCISE PRICEDIRECTOR
    
    OPTIONS
    
    
    DATE OF GRANT
    
    
    PER SHAREGeorge H. Bigelow
    
    
    4,000
    
    
    November 3, 2000
    
    $
    5.00John H. Gutfreund
    
    
    4,000
    
    
    November 3, 2000
    
    $
    5.00Simon J. Whitmey
    
    
    4,000
    
    
    November 3, 2000
    
    $
    5.00
 The options vest six months from the date of grant and expire ten years from the date of grant
provided the director continues to serve as a director of the Company. In the event of termination
of the directorship, such options expire one year from the date of such termination. Compensation Committee Interlocks and Insider Participation Paul R. Dupee, Jr., our chief executive officer, served as an ex-officio member of the
compensation committee for 2004. Mr. Dupee did not participate in any decisions regarding his own
compensation as an executive officer, which was determined by our board of directors, with Mr.
Dupee not participating. 36




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management The following table and discussion provides information as to the shares of common stock
beneficially owned on March 31, 2005 by:  
    each director;
    our chief executive officer and our other executive officers;
    each person owning of record or known by us, based on information provided to us by
the persons named below, to own beneficially at least 5% of our common stock; and
    all officers and directors as a group. No person is known to us to beneficially own 5% or more of our Common Stock. NAME
    
    SHARES
    
    
    PERCENTPaul R. Dupee, Jr.
    
    
    281,020
    
    
    
    2.8
    %John H. Gutfreund
    
    
    4,000
    
    
    
    *George H. Bigelow
    
    
    11,150
    
    
    
    *Simon J. Whitmey
    
    
    7,000
    
    
    
    *Patricia A. Fitzpatrick
    
    
    3,036
    
    
    
    *Joseph W. White
    
    
    20
    
    
    
    *All Directors and Executive Officers as a group (6 individuals)
    
    
    306,226
    
    
    
    3.0
    %
   *
    
    less than one percent The number of shares owned by our directors and officers shown in the table include shares of
common stock which are issuable upon the exercise of options and warrants that are exercisable on
March 31, 2005 or will become exercisable within 60 days after that date. Set forth below is the
number of shares issuable upon exercise of those options for those of our directors and officers
named in the foregoing table and for all officers and directors as group. Paul Dupee
    
    
    131,000George Bigelow
    
    
    4,000John Gutfreund
    
    
    4,000Simon Whitmey
    
    
    4,000Patricia A. Fitzpatrick
    
    
    3,020Joseph W. White
    
    
    20All officers and directors as a group (6 individuals holding stock options)
    
    
    146,040
 
 Item 13. Certain Relationships and Related Transactions None. 37




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##### Table of Contents



Item 14. Principal Accounting Services and Fees Ernst & Young, LLP served as our Independent Registered Public Accountant during 2004 and
2003. Fees earned by Ernst & Young LLP for years ended December 31, 2004 and 2003 were as follows: December 312004
    
    
    2003Audit Fees including our annual audit and review of our quarterly reports on Form 10-Q
    
    $
    68,490
    
    
    $
    67,200Audit Related Fees including employee benefit plan audit and accounting consultations
    
    $
    21,200
    
    
    $
    18,000Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    
 The Audit Committee has considered the nature of the services underlying these fees and does
not consider them to be incompatible with the independent accountants independence. 38




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##### Table of Contents



PART IV 
 Item 15.Exhibits, Financial Statement Schedules (a) The consolidated financial statements and exhibits listed below are filed as part of this
report. (1) The companys consolidated financial statements, the notes thereto and the report of the
Independent Registered Public Accounting Firm are on pages 14 through
32 of this Annual Report on
Form 10-K and are incorporated by reference. Report of Independent Registered Public Accounting Firm
Consolidated Balance SheetsAt December 31, 2004 and 2003
Consolidated Statements of OperationsYears ended December 31, 2004, 2003, and 2002
Consolidated Statements of Changes in Shareholders Equity (Deficit)Years ended December 31, 2004, 2003, and 2002
Consolidated Statements of Cash FlowsYears ended December 31, 2004, 2003, and 2002
Notes to Consolidated Financial Statements (2) Exhibits  2.1
    Bankruptcy Court Stipulation. Incorporated by reference from the Companys Report on
Form 8-K dated June 8, 2001.3.1
    Charter of Maxicare Health Plans, Inc., a Delaware corporation as amended through
December 31, 2000. Incorporated by reference from the Companys Registration Statement on
Form 10, declared effective March 18, 1991.3.2
    Bylaws of Maxicare Health Plans, Inc. in effect at December 31, 2000. Incorporated by
reference from the Companys Annual Report on Form 10-K for the year ended December 31,
2000.4.1
    Rights Agreement, dated as of February 24, 1998, between Maxicare Health Plans, Inc.
and American Stock Transfer & Trust Company, as Rights Agent, which includes, as Exhibit A
thereto, the Certificate of Designation of Series B Preferred Stock of Maxicare Health
Plans, Inc., as Exhibit B thereto, the Form of Right Certificate, Form of Assignment, and
Form of Election to Purchase, and as Exhibit C thereto, the Summary of Rights Agreement.
Incorporated by reference from the Companys Report on Form 8-K dated February 24, 1998.4.2
    First Amendment to Rights Agreement of Maxicare Health Plans, Inc., entered into
and between Maxicare Health Plans, Inc. and American Stock Transfer & Trust Company as of
October 9, 1998. Incorporated by reference from the Companys Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998.4.3
    Second Amendment to Rights Agreement of Maxicare Health Plans, Inc., entered into
by and between Maxicare Health Plans, Inc. and American Stock Transfer & Trust Company as of
June 6, 2000. Incorporated by reference from the Companys Registration Statement on Form
S-2 (No. 333-4150) as filed with the Securities and Exchange Commission on July 14, 2000.14.1
    Code of Ethics of Maxicare Health Plans, Inc. by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.21.1
    List of Subsidiaries.23.1
    Consent of Independent Registered Public Accounting Firm31.1
    Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. 39




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 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. /s/ PAUL R. DUPEE, JR.Paul R. Dupee, Jr.Chief Executive Officer
 Date: April 12, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated. Signatures
    
    Title
    
    Date/s/ PAUL R. DUPEE, JR.

Paul R. Dupee, Jr.
    
    Chairman and Director
Principal Executive Officer
    
    April 12, 2005/s/ Joseph W. White

Joseph W. White
    
    Chief Financial Officer
and Director
Accounting Officer
    
    April 12, 2005/s/ George H. Bigelow

George H. Bigelow
    
    Director
    
    April 12, 2005/s/ John H. Gutfreund

John H. Gutfreund
    
    Director
    
    April 12, 2005/s/ Simon J. Whitmey

Simon J. Whitmey
    
    Director
    
    April 12, 2005
 40