As filed with the Securities and Exchange Commission on November 1, 1999
Registration No. 333-03641
Securities and Exchange Commission
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------------
UNIVERSAL AMERICAN FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
-------------------------------
New York 6719/6311 11-2580136
- ------------------------------ --------------------- ---------------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification Code
Number)
Universal American Financial Corp.
6 International Drive, Suite 190
Rye Brook, NY 10573
914-934-5200
(Address, including zip code, and telephone number, including
area code of registrant's principal executive office)
Richard A. Barasch, President
Universal American Financial Corp.
6 International Drive, Suite 190
Rye Brook, NY 10573
914-934-5200
With a copy to
Irving I. Lesnick
Harnett Lesnick & Ripps, P.A.
150 East Palmetto Park Road, Suite 500
Boca Raton, FL 33432
561-368-1995
(Address, including zip code, and telephone number, including
area code of agent for service)
The Registrant hereby amends this Post Effective Amendment to the
Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
UNIVERSAL AMERICAN FINANCIAL CORP.
Cross Reference Sheet showing the location in the Prospectus of information
required by items of Form S-2.
<TABLE>
<S> <C>
1. Forepart of the Registration Statement and Outside Front Facing Page, Cross Reference Sheet
Cover Page of Prospectus...................................... and Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus....... Inside Front Cover Page
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges
(a) Prospectus Summary............................ Prospectus Summary
(b) Address and Telephone Numbers................. Prospectus Summary
(c) Risk Factors.................................. Risk Factors
(d) Ratio of Earnings to Fixed Charges............ Not Applicable
4. Use of Proceeds............................................... Use of Proceeds
5. Determination of Offering Price............................... Not Applicable
6. Dilution...................................................... Not Applicable
7. Selling Security Holders...................................... Not applicable
8. Plan of Distribution ......................................... How to Exercise Unregistered Warrants
9. Description of Securities to be Registered.................... Description of Securities
10. Interest of Named Experts and Counsel......................... Description of Plans Under Which
Common Stock Is Being Offered
11. Information with Respect to the Registrant ................... Documents Incorporated by Reference
12. Incorporation of Certain Information by Reference............. Documents Incorporated by Reference
13. Disclosure of Commission Position
on Indemnification for Securities Act Liabilities............. Not applicable
</TABLE>
<PAGE>
PRELIMINARY PROSPECTUS DATED OCTOBER 29, 1999
1,311,301 Shares
UNIVERSAL AMERICAN FINANCIAL CORP.
COMMON STOCK
1,311,301 shares of Common Stock, par value $.01 per share (the "Common Stock"),
of Universal American Financial Corp. ("the Company") will be offered for sale
pursuant to the following plans maintained by the Company:
(i) 471,000 shares to employees of the Company and its
subsidiaries pursuant to the Company's Incentive Stock Option Plan
("ISOP");
(ii) 396,999 shares to qualifying agents of the Company
pursuant to its Agents Stock Purchase Plan ("ASPP");
(iii) 192,002 shares to the Trustee of the Company's Deferred
Compensation Plan for Agents ("DCP"); and
(iv) 51,300 shares to directors of the Company pursuant to the
Company's Stock Option Plan for Directors ("SOPD"); and
(v) 200,000 shares to agents of the Company's subsidiaries and
others pursuant to its Non-qualified Stock Option Plans for Agents and
Others ("NQSOP");
In the case of sales pursuant to the ISOP, the SOPD and the NQSOP, the Common
Stock will be offered at the option price provided in the particular grants
under the applicable Plan. In case of sales to the Trustee under the DCP, the
Common Stock will be offered at the Market Price, defined below. In the case of
sales pursuant to the ASPP, the Common Stock will be offered and sold at the Bid
Price, defined below.
"Market Price" means the average of the closing price reported on
Nasdaq on each day during such twenty (20) day period on which a sale is so
reported and the "Bid Price" as to each sale of Common Stock means the average
of the closing Bid Price reported on Nasdaq and each of the twenty (20) trading
days preceding such sale.
The entire proceeds of each such sale will be received by the Company
with no underwriting commission or discounts. The Company is paying the expenses
of the offering, estimated at $25,000.
The Common Stock is listed on the Nasdaq National Market under the
symbol "UHCO".
Prospective investors should carefully consider the factors set forth
in "Risk Factors".
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is October 29, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
iv
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................1
The Company and Its Business..........................................1
Use of Proceeds.......................................................2
The Offering..........................................................2
RISK FACTORS...................................................................3
The 1999 Acquisition..................................................3
Competition...........................................................5
Government Regulation.................................................7
Other Possible Changes in Legislation.................................8
Asset Liability Matching..............................................9
Reliance on Reinsurance..............................................11
Control by Capital Z ................................................11
Possible Anti-Takeover Effects of the Restated Certificate
of Incorporation, Insurance Law Provisions and of the 1998 Plan....12
Impact of Year 2000..................................................12
Market in Publicly Traded Securities.................................13
Effect of Future Sales of Additional Shares .........................13
USE OF PROCEEDS...............................................................14
ADDITIONAL INFORMATION DOCUMENTS .............................................14
Incorporated by Reference............................................14
Registration Statement...............................................16
Annual Reports.......................................................17
DESCRIPTION OF PLANS UNDER WHICH COMMON STOCK IS BEING OFFERED................17
Incentive Stock Option Plan ("ISOP"). ...............................17
Stock Option Plan for Directors("SOPD")..............................18
Agents Stock Purchase Plan ("ASPP")..................................19
Deferred Compensation Plan ("DCP")...................................19
Non-Qualified Stock Option Plan for Agents and Others ("NQSOP"). ....20
DESCRIPTION OF SECURITIES.....................................................21
Common Stock.........................................................22
Certain Provisions of Certificate of Incorporation,
Bylaws and New York Law............................................22
Warrants 25
1999 Warrants........................................................25
Transfer Agent.......................................................25
LEGAL MATTERS.................................................................25
EXPERTS.......................................................................26
<PAGE>
The Company is a holding company which owns certain insurance company
subsidiaries domiciled in Florida, Pennsylvania, New York, North Carolina, Texas
and Ontario, Canada. The insurance laws of these jurisdictions provide that no
person may acquire control of the Company, and thus indirect control of these
insurance company subsidiaries, unless such person has given prior written
notice to such insurance company subsidiaries and received the prior approval of
the regulatory authority of domiciliary jurisdiction. Any purchaser or holder of
voting securities of the Company possessing more than a specified portion of the
voting power of such voting securities--5% under Florida Law, 10% under the laws
of the other United States jurisdictions, and 10% under Canadian Law -- would be
presumed to have acquired such control, unless the relevant state insurance
regulatory agency, upon application, determines otherwise.
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of any offer to buy, the Common
Stock in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
the information herein is correct as of any time subsequent to the date hereof
or that there has been no change in the affairs of the Company since such date.
<PAGE>
xxvi
PROSPECTUS SUMMARY
The Company and Its Business
The Company is an insurance holding company representing the strategic
combination of nine life insurance companies (collectively, the "Insurance
Subsidiaries"), and WorldNet Services Corp. ("WorldNet"), an international
managed care company. The Insurance Subsidiaries are: American Progressive Life
and Health Insurance Company of New York ("American Progressive"), American
Pioneer Life Insurance Company ("American Pioneer"), American Exchange Life
Insurance Company ("American Exchange"), Constitution Life Insurance Company
("Constitution Life "), Peninsular Life Insurance Company ("Peninsular Life"),
Pennsylvania Life Insurance Company ("Penn Life"), PennCorp Life Insurance
Company of Canada ("Penn Corp Life"), Marquette National Life Insurance Company
("Marquette"), and Union Bankers Insurance Company ("Union Bankers"). The latter
six Insurance Subsidiaries were acquired by the Company on July 30, 1999.
Historical information about the Company, American Progressive,
American Pioneer, American Exchange and WorldNet and their business is set forth
in the Company's Annual Report on Form 10-K for 1998, and subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. Historical information
about the Company's other subsidiaries, for periods prior to their acquisition
on July 30, 1998, and unaudited Pro Forma Financial Information giving effect to
the acquisition of these subsidiaries as of January 1, 1998, are set forth in
the Company's Proxy Statement dated July 12, 1999. Future information about the
Company, its subsidiaries and its business will be set forth in its future Form
10-Ks, 10-Qs and 8-Ks. All of the Annual, Quarterly and Current 10-K, 10-Q and
8-K and the relevant portions of the Proxy Statement referred to in this
paragraph, and any amendments thereto, are incorporated herein by reference.
See "Documents Incorporated by Reference"
The principal executive office of the Company is located at 6
International Drive, Suite 190, Rye Brook, NY 10573. The Company's telephone
number is (914) 934-5200.
Use of Proceeds
The entire proceeds of this offering will be received by the Company,
which will pay the cost of the Offering, estimated at $25,000. The proceeds will
be used as working capital by the Company and its subsidiaries.
<PAGE>
The Offering
Securities Offered:
1,311,301 Shares of Common Stock, of which
200,000 shares are reserved for sale pursuant to the NQSOP,
471,000 shares are reserved for sale pursuant to the ISOP,
51,300 shares are reserved for sale pursuant to the SOPD,
396,999 shares are reserved for sale pursuant to the ASPP, and
192,002 shares are reserved for sale to the Trustee of the DCP
Securities Outstanding Prior to the Offering:
Common Stock 43,159,302 Shares (1)
1999 Warrants 2,612,187 (2)
Securities to be Outstanding after Completion of the Offering:
Common Stock 47,082,790 Shares (3)
(1) As of September 30, 1999. Does not include 3,566,784 shares of Common Stock
reserved for issuance under the Plans.
(2) Each Warrant is exercisable for the purchase of one share of Common Stock
for $1.00, subject to adjustment pursuant to anti-dilution provisions, and
expires on December 31, 1999. 596,427 of the 1999 Warrants were registered
under the Securities Act upon their issuance. The Company intends to
register the shares of common stock issuable for exercises of the
remaining 2,015,760 warrants which were issued in a private placement.
(3) Assuming that all of the shares offered hereby are sold, and that all of
the 1999 Warrants are exercised prior to their expiration on
December 31, 1999.
Risk Factors
An investment in the securities offered hereby involves substantial
risk. See "Risk Factors."
Nasdaq Symbols
Common Stock UHCO
1999 Warrants UHCOW
<PAGE>
RISK FACTORS
The securities being offered hereby involve substantial risks.
Prospective investors, prior to making an investment, should carefully consider
all of the information contained in this Prospectus including the documents
incorporated by reference, and in particular the following risks and speculative
factors inherent in and affecting the business of the Company and the Offering.
The 1999 Acquisition
On July 30, 1999, the Company acquired all of the outstanding stock of
Constitution Life, Peninsular Life, Penn Life, PennCorp Life, Marquette and
Union Bankers (the "Acquired Companies"). The Acquired Companies were purchased
from PennCorp Financial Group, Inc. for $130.5 million in cash. To finance the
acquisition, the Company issued 29,897,519 shares of its common stock for
$94,177,184 ($3.15 per share), of which 26,144,060 shares were issued to Capital
Z Financial Services Fund II L.P. and affiliates ("Capital Z"), and the
remainder to managers and agents of the Company (including the Acquired
Companies) and pursuant to the exercise of preemptive rights by former holders
of the Company's Series C-1 Preferred Stock. The balance of the funds were
provided by a senior debt financing of $80 million through a bank credit
facility provided by a syndicate of banks led by the Chase Manhattan Bank and
Chase Securities, Inc.
The acquisition of the Acquired Companies is expected to enable the
Company to expand its product and policyholder base, generating growth which
will allow the Company to achieve long-term economies of scale, to cut costs and
increase profits. However, there is no guarantee that these benefits will
materialize.
The factors that could prevent the Company from realizing these
benefits and could possibly materially and adversely affect the Company's
financial condition and results of operation, include:
-The Company may not be successful in coordinating and integrating the
operations and business enterprises of the Company and the Acquired
Companies and, consequently, the Company may not realize the expected
benefits of the acquisition.
-The Company will have to service a greater amount of debt after the
acquisition which will require dividend payments from the Insurance
Subsidiaries and the ability of its subsidiaries to make such dividend
payments is subject to certain legal restrictions. Greater leverage
presents a greater degree of financial risk and the failure of the Company
to meet its debt obligations would likely have a significant adverse
financial impact on the Company.
-The primary strategic reason for the acquisition is to add a new
distribution channel to the Company -- namely, the career agency system of
Penn Life. This career agency system, which will continue to write business
with Penn Life, will operate independently from the general agency system
that will continue to write business through the other Insurance
Subsidiaries of the Company. The addition of this new channel is expected
to have no effect on the compensation or operations of the general agency
system. However, the change in the Company's operating strategy caused by
the utilization of the career sales force of Penn Life may not be
successful.
-The anticipated long-term economies of scale may fail to materialize,
adversely affecting the Company's cash flow and earnings before taxes.
<PAGE>
Competition
Most of the markets in which the Company competes are highly
competitive. The Insurance Subsidiaries are in direct competition with a large
number of insurance companies, many of which offer a greater number of products
through a greater number of agents and have greater resources than the Company.
This competitive environment could result in lower premiums, less favorable
underwriting terms and conditions, loss of underwriting opportunities and
reduced profitability.
Increased public and regulatory concerns regarding the financial
stability of insurance companies have resulted in policyholders placing greater
emphasis upon company ratings and have created some measure of competitive
advantage for insurance carriers with higher ratings. As of the date of this
Prospectus, A.M. Best & Co., a leading insurance company rating agency, has
assigned a "B+"1 rating to American Pioneer, American Progressive, Constitution
Life, PennLife and Union Bankers. A.M. Best has rated Peninsular Life "FPR5".2
The other Insurance Subsidiaries are not rated by A.M. Best. For more current
information, consult the subsequent reports of the Company which are
incorporated by reference. See "Documents Incorporated by Reference." If those
ratings were downgraded from their current levels, sales of the Company's
products could be adversely affected.
- --------
1 In evaluating a company's financial and operating performance, A.M.
Best reviews profitability, leverage and liquidity as well as the quality of the
book of business, the adequacy and soundness of reinsurance programs, the
quality and estimated market value of assets, reserve adequacy and the
experience and competence of management. A.M. Best's ratings are based upon
factors relevant to policyholders, agents, insurance brokers and intermediaries
and are not directed to the protection of investors. According to A.M. Best's
published material, a "B+" rating is assigned to companies which, in its
opinion, have demonstrated very good overall performance when compared to the
standards it has established. Companies rated B+ have a good ability to meet
their obligations to policyholders. The Insurance Subsidiaries are not known to
be currently rated by the Standard & Poors, Duff and Phelps or Moody's rating
organizations.
2 According to A.M. Best's published material, an FPR5 rating is
assigned to companies which, in its opinion, based primarily on a quantitative
evaluation of a company's financial strength and operating performance.
<PAGE>
Health Care Reform
From time to time numerous proposals have been introduced in Congress
and the state legislatures to reform the current health care system. Proposals
have included, among other things, employer-based insurance systems, subsidized
premiums for lower income people, "managed competition" among health plans,
programs to regulate policy availability and affordability and public and
private programs. Changes in health care policy could significantly affect the
Company's health insurance business.
Whether or not Congress passes any of these measures in the foreseeable
future, it is likely that these items will reappear on the legislative agenda in
the near future. Federal comprehensive major medical insurance, if implemented,
could partially or fully replace some of the Company's current products. Reform
proposals also could involve standardization of major medical or long-term care
coverages, impose mandated or target loss ratios or rate regulation, require the
use of community rating or other means that limit the ability of insurers to
differentiate among risks, or mandate utilization review or other managed care
concepts to determine what benefits would be paid by insurers. These or other
proposals could increase or decrease the level of competition among health
insurers. In addition, changes could be made in Medicare that could necessitate
revisions in the Company's Medicare supplement products. Other potential
initiatives, designed to tax insurance premiums or shift medical care costs from
government to private insurers, could have an adverse effect on the Company's
business. The Company is unable to predict what changes to the country's health
care system will be enacted, if any, or their effects on the Company's business.
Since April 1, 1993, New York State has required all health insurance
sold to individuals and groups with less than 50 employees, to be offered on an
open enrollment and community rated basis. This legislation has had a limited
effect on the Company's business, primarily on the Medicare supplement and
senior hospital cash business being written by American Progressive, as well as
a limited amount of its other in force medical insurance. The adoption of
similar legislation in other states where the Company writes or has in force
health insurance written on the basis of medical underwriting could have an
adverse effect on such business and could require the Company to curtail or
eliminate the writing of such business.
Government Regulation
The Insurance Subsidiaries are subject to regulation and supervision by
the Insurance Departments of their domiciliary jurisdictions -- Texas in the
case of American Exchange, Constitution Life, Marquette and Union Bankers,
Florida in the case of American Pioneer, New York in the case of American
Progressive, North Carolina in the case of Peninsular Life, Pennsylvania in the
case of Penn Life and provincial and federal law of Canada in the case of
PennCorp Life. Each is also subject to regulation and supervision in the
Insurance Department of each of the other states in which they are admitted.
Such supervision and regulation are largely for the benefit and protection of
policyholders and not shareholders. Such regulation and supervision by the
Insurance Departments extend, among other things, to the declaration and payment
of dividends, the setting of rates to be charged for certain accident & health
insurance, the granting and revocation of licenses to transact business,
approval of forms, establishment of reserve requirements, regulation of maximum
commissions payable, and the form and content of statutorily-mandated financial
statements.
<PAGE>
The Company is also regulated under the insurance holding company
statutes of the jurisdictions in which the Insurance Subsidiaries are domiciled.
These laws require prior regulatory agency approval of changes in control of an
insurer and of certain transactions within the holding company structure.
Generally, these laws provide that no one may acquire control of a domiciled
insurer, such as one of the Insurance Subsidiaries, or of the holding company of
such an insurer, such as the Company, unless it has given notice to such insurer
and has obtained prior written approval of the insurance regulator for such
acquisition. Under these laws any owner of a specified percentage of the
outstanding voting securities of the Company would be presumed to have acquired
control of the Company, unless such presumption is rebutted. The specified
percentage is 5% under Florida Insurance Law, 10% under the insurance laws of
New York, North Carolina, Pennsylvania and Texas, and 10% under Canadian law.
Any person intending to acquire such control must give notice to the affected
insurer and the Insurance Department of its domiciliary jurisdiction before
consummation of such acquisition. The Insurance Department may prevent or
require reversal of such an acquisition in certain cases.
Other Possible Changes in Legislation
Since insurance is a regulated business, with a high public profile, it
is always possible that legislation may be enacted which would have an adverse
effect on the Company's business.
Another important portion of the Company's insurance business is the
sale of deferred annuities and certain life insurance products, which are
attractive to purchasers in part because policyholders generally are not subject
to federal income tax on increases in the value of an annuity or life insurance
contract until some form of distribution is made from the contract. From time to
time, Congress has considered proposals to reduce or eliminate the tax
advantages of annuities and life insurance which, if enacted, might have an
adverse effect on the ability of the Company to sell the affected products in
the future. The Company is not aware that Congress is actively considering any
legislation that would reduce or eliminate the tax advantages of annuities or
life insurance; however, it is possible that the tax treatment of annuities or
life insurance could change by legislation or other means (for example, by
Internal Revenue Service regulations or judicial decisions).
Certain changes in insurance and tax laws and regulations could have a
material adverse effect on the operations of insurance companies. Specific
regulatory developments which could have a material adverse effect on the
operation of the insurance industry include, but are not limited to, the
potential repeal of the McCarran-Ferguson Act (which exempts insurance companies
from a variety of federal regulatory requirements), and adoption of laws, such
as those already in force in New York, limiting an insurer's ability to
medically underwrite and rate health insurance policies or to exclude
pre-existing conditions from coverage. In addition, the administration of such
regulations is vested in state agencies which have broad powers and are
concerned primarily with the protection of policyholders.
Investment Performance
The assets of the Company are invested primarily in government and
corporate fixed maturity securities and cash equivalents. Under generally
accepted accounting principles ("GAAP"), fixed maturity securities owned by life
insurance companies are classified in one of three categories depending upon
whether the Company intends to hold them until maturity, regards them as
available for sale or intends to trade such securities. The fixed maturity
securities held by the Insurance Subsidiaries are in the available for sale
category and are carried on the Company's books at fair value. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity" in the Documents Incorporated by Reference.
The Company has invested in a limited number of non-investment grade
fixed maturity securities, which provide higher yields than investment grade
securities. Further information about these investments and disclosures as to
any of the Company's investments which were in default with respect to either
interest or principal is set forth in the Documents Incorporated by Reference.
Asset Liability Matching
The Company's investment policy is to balance the portfolio between
long-term and short-term investments so as to continue to achieve investment
returns consistent with the preservation of capital and maintenance of liquidity
adequate to meet payment of policy benefits and claims. This asset liability
matching policy includes the continuous analysis of market conditions and other
factors pertaining to its invested assets. The Company maintains adequate
amounts of cash and short-term investments to fund expected policy benefits and
surrenders. It therefore does not expect to have to prematurely sell securities
for such purposes. However, it may decide to sell securities as a result of
changes in interest rates, credit quality, the rate of prepayment or other
similar factors. Moreover, a significant increase in market interest rates might
result in a situation in which the Company is required to sell securities at
depressed prices to fund such payments to policyholders. Since the Company
classifies all of its fixed maturity portfolio as available for sale, which are
carried at fair value, it is expected that these securities would be sold with
no material impact on the net equity of the Company. As required by certain
state insurance departments, the Company performs tests to assess the impact of
various interest rate and lapse rate scenarios on the adequacy of the assets
held to meet policyholder liabilities.
Mortality, Morbidity and Reserves
Through underwriting and reinsurance, the Company has attempted to
limit its mortality and morbidity exposure, and has established reserves for
claims and future policy benefits based on accepted actuarial methodologies.
There can be no assurance, however, that these estimated reserves will prove to
be sufficient or that the Company will not experience adverse mortality or
morbidity experience which would result in operating losses.
Reliance on Reinsurance
In order to reduce risk and to increase its underwriting capacity, the
Company obtains reinsurance from reinsurers. The Company is subject to credit
risk with respect to its reinsurers because reinsurance does not relieve the
Company of its liability to its insureds for the risks ceded to reinsurers.
Although the Company places its reinsurance with reinsurers it believes to be
financially stable, a reinsurer's subsequent insolvency or inability to make
payments under the terms of a reinsurance treaty could have a material adverse
effect on the Company.
The amount and cost of reinsurance available to companies specializing
in life and accident & health insurance are subject, in large part, to
prevailing market conditions beyond the control of the Company. The Company's
ability to provide insurance at competitive premium rates and coverage limits on
a continuing basis depends to a significant extent upon its ability to obtain
adequate reinsurance in amounts and at rates that will not adversely affect its
competitive position.
No assurances can be given as to the Company's ability to maintain its
current reinsurance facilities, which generally are subject to annual renewals
and 90-day cancellation. Such renewal or cancellation affects new business only,
and the reinsurer remains liable on all business insured prior to non-renewal or
cancellation as long as it remains in force. If the Company were unable to
maintain or replace its reinsurance facilities upon their expiration and were
unwilling to bear the associated increase in exposure on new business, the
Company would need to reduce the amount of new business that it could
underwrite.
Control by Capital Z
As a result of the transactions described above under the heading "1999
Acquisition", Capital Z now owns 60.7% of the Company's outstanding common
stock. The Company's Board consists of nine directors. As a result of a
shareholders agreement entered into between Capital Z and certain other
shareholders, including Richard A. Barasch, Chairman, President and CEO of the
Company, and AAM Capital Partners, L.P. ("AAM"), affiliates of which own
2,399,414 shares of the Company's outstanding common stock. The parties to the
shareholders agreement are obligated to vote their shares for the election of
directors nominated as follows: Capital Z -- four; Mr. Barasch -- two, AAM --
one, and the Company -- two. Because of Capital Z's majority stock ownership,
Capital Z also effectively controls the election of the two directors that
Universal American is entitled to nominate.
Thus, Capital Z is able to elect a majority of the Board of Directors
of the Company and to approve or disapprove any corporate action submitted to a
vote of the Company's shareholders.
Possible Anti-Takeover Effects of the Restated Certificate of Incorporation,
Insurance Law Provisions and of the 1998 Plan
The concentration of ownership of the Company by Capital Z could delay
or prevent an advantageous change in control of the Company, or have a
depressive effect on the trading market for the Company's common stock.
See "Government Regulation" for a discussion of the requirement of
insurance department approval of any acquisition of control of the Company,
which may have the effect of discouraging any such acquisition.
The Company's 1998 Incentive Compensation Plan which was approved by
the shareholders of the Company in June, 1998 (the "1998 Plan"), provides for
immediate vesting of all Awards under the Plan, including stock option,
restricted stock and stock appreciation rights, in the event of a "change of
control," unless otherwise provided in part under Awards. "Change in Control" is
defined in the 1998 Plan as: (i) the acquisition by any person (as defined) of
securities having 30% or more of the combined voting power of the outstanding
securities of the Company, or a subsidiary; (ii) certain changes in the
composition of the Board; (iii) a merger or consolidation as a result of which
the shareholders of the Company immediately before the merger or consolidation
own less than 50% of the voting securities of the entities or entities surviving
the merger or consolidation, (iv) the sale or disposition of substantially all
of the Company's assets, or (v) any other event which the Board determines would
materially alter the status of the Company or its ownership.
Impact of Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a result,
those computer programs have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. For information about the status
of the Company's plans to resolve the Year 2000 issue, and the risks resulting
from the Year 2000 issue, see the Documents Incorporated by Reference.
Market in Publicly Traded Securities
The Company's Common Stock is currently listed on the Nasdaq National
Market. See the Documents Incorporated by Reference for information as to its
average daily trading volume.
Effect of Future Sales of Additional Shares
The following shares of the Company's Common Stock are, or when issued
will be, freely tradeable: (i)The Common Stock being registered, (ii) the
Company's presently outstanding Common Stock which has been registered under the
Securities Act, and (iii) the 596,427 shares of such Common Stock which will be
issuable upon exercise of the 1999 Warrants which are so registered. The Company
plans to register the shares issuable upon exercise of the 2,015,760
unregistered warrants.
Additional outstanding shares of Common Stock which have not been
registered under the Securities Act, may become eligible for sale by certain
holders either (i) under Rule 144 of the Securities Act, subject to the volume
and timing requirements of Rule 144, or (ii) pursuant to registration rights
granted to the holders thereof. The Company may also at any time in the future
issue additional Common Stock or securities convertible into Common Stock, in
transactions which are registered under the Securities Act or in transactions
exempt from such registration. In either case, the resulting Common Stock would
either immediately be freely tradeable or may become so tradeable in the future.
An increase in the number of shares of Common Stock that become
available for sale in the public market may adversely affect the trading price
of the Common Stock in the public market and could impair the Company's ability
to raise additional capital through the future sale of its equity securities.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock
offered hereby will be used by the Company for working capital.
ADDITIONAL INFORMATION
Documents Incorporated by Reference
<PAGE>
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the Commission (File No. 0-11321), and all
Annual Reports hereafter filed and amendments thereto;
(b) The Company's Proxy Statement dated July 12, 1999;
(c) All Quarterly Reports on Form 10-Q, and amendments thereto filed
hereafter with the Commission by the Company after the date of the most recent
Form 10-K; and
(d) All Current Reports on Form 8-K, and amendments thereto, filed with
the Commission by the Company after the date of the most recent Form 10-K.
The Documents Incorporated by Reference may contain statements which
are forward-looking and are identified by the use of forward-looking words or
phrases such as "intended," "will be positioned," "expects," is or are
"expected," "anticipates," and "anticipated." These forward-looking statements
are based on the Company's expectations at the time such documents are filed
with the Commission. To the extent any of the information contained in the
Documents Incorporated by Reference is a "forward-looking statement" as defined
in Section 27A(i)(1) of the Securities Act of 1933, there are a number of
important factors that could cause results to differ materially from those in
the forward-looking statement. Realization of management's beliefs and
projections will depend on a number of factors, including management's
successful execution of its business plan; the condition of the insurance
market; the pricing of products and services; overall economic trends, including
interest rate trends; impact of the Year 2000; stock market activity; employment
levels; changes in technology; changes in insurance laws and regulations; other
factors beyond the Company's control, and other factors identified in cautionary
statements included in the Documents Incorporated by Reference.
Any statement contained in a document incorporated herein by reference
which is dated prior to the date of this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein modifies or supersedes such statement. Any statement
in the Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement in a document incorporated by
reference which is dated subsequent to the date of this Prospectus modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as modified or superseded, to constitute part of this Prospectus.
This Prospectus shall be accompanied by the Company's most recent Form
10-K as well as any Form 10-Q or Form 8-K filed for any period after the end of
the year for which the Form 10-K was filed, and any amendments to any such
Reports. The Company will provide to each person to whom this Prospectus is
delivered upon written or oral request of such person, a copy of the Documents
Incorporated by Reference into this Prospectus (not including exhibits to such
documents unless the exhibits are specifically requested).
Registration Statement
Additional information regarding the Company and the shares of Common
Stock offered hereby is contained in the Registration Statement on Form S-2 and
the exhibits thereto (the "Registration Statement"), filed with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), of which
this Prospectus forms a part. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus, including statements in the Documents
Incorporated by Reference concerning the contents of any contract or other
document are not necessarily complete. In each instance where reference is made
to such contract or other document which is filed with the Commission as an
exhibit to the Registration Statement or a document incorporated by reference
filed with the Commission as an exhibit to the Registration Statement or
document by reference, each statement about such contract or other document is
qualified and amplified, in all respects, by such reference.
How to Obtain Documents Incorporated by Reference and Registration Statements.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to:
Universal American Financial Corp.
6 International Drive
Suite 190
Rye Brook, NY 10573
Attn: Corporate Secretary
(914) 934-5200
<PAGE>
The Registration Statement, and the reports, proxy statements and other
information filed by the Company with the Commission can be read and copied at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission,
including the Company. The address of the Commission's Internet site is
http://www.SEC.gov.
Annual Reports
The Company furnishes to the holders of its Common Stock and its 1999
Warrants, after the close of each fiscal year, an annual report containing
audited financial statements with a report thereon by an independent certified
public accountant. Quarterly reports containing unaudited financial information
for the first three quarters of each fiscal year may be furnished by the Company
to the holders of its Common Stock from time to time.
DESCRIPTION OF PLANS UNDER WHICH COMMON STOCK IS BEING OFFERED
Incentive Stock Option Plan ("ISOP"). 471,000 shares of Common Stock
will be offered for sale to employees of the Company and its subsidiaries
pursuant to the Company's Incentive Stock Option Plan ("ISOP"), which is part
of the Company's 1998 Incentive Compensation Plan (the "1998 Plan") approved
by its shareholders in 1998. The 1998 Plan superseded earlier incentive
stock option plans initially approved by the shareholders of the Company in
April 1983 and amended in May 1987, June 1989, June 1994 and June 1995.
All of these plans are intended to provide an additional means of providing
incentive to executives and other "key salaried employees" of the Company (which
is defined under Section 422 of the Tax Code as employees of the Company and its
subsidiaries).
The Board of Directors of the Company, on the recommendation of the
Compensation Committee, determines, within the limits of the applicable plan,
the recipients of options, the number of options to be granted under the Plan
and the purchase price and terms of each option, are determined, in its
discretion, except that in the case of options granted for services to American
Progressive, such determination must be made on the recommendation of the Board
of Directors of that subsidiary. The price for the shares covered by each option
is required to be not less than 100% of the fair market value at the date of
grant, except that under an amendment to the 1998 Plan approved by the
shareholders on July 27, 1999, options granted in connection with the closing of
the sale of shares to Capital Z were granted at $3.15 per share. Options are
non-transferable, except in the event of death, and expire on the earlier of 10
years from the date of grant, one year from the date of the grantee's death, or
3 months from the termination of the grantee's employment. Options become
exercisable in installments as determined by the Board of Directors, commencing
one year after date of grant.
Stock Option Plan for Directors("SOPD"). 51,300 shares of Common Stock
will be offered for sale pursuant to the Company's Stock Option Plan for
Directors ("SOPD"). Under the 1998 Plan, each non-employee director receives an
initial grant on options to purchase 4,500 shares upon election to the Board,
and an automatic grant of an additional 4,500 shares at the close of each annual
meeting of shareholders held more than 3 months after the initial grant, as long
as he or she continues to qualify under the Plan. These provisions of the 1998
Plan superseded, as to future grants, the stock option plan for directors,
initially approved by the Company's shareholders in 1992, which authorized the
Board to grant an option to purchase 1,000 shares of Common Stock to each
director of the Company who has completed a year of service as a Director since
the date of the last grant. Options under the SOPD are granted at the market
value of the Common Stock on the day of the grant. Options under the initial
plan became exercisable one year after they were granted and those under the
1998 Plan become exercisable in three equal annual installments. All SOPD
Options expire 10 years after their grant. The number of shares to be granted,
the exercise price and other terms of SOPD options under the 1998 Plan are
subject to change by Board resolution.
Agents Stock Purchase Plan ("ASPP"). 396,999 shares of Common Stock
will be offered for sale to qualifying agents of the Insurance Subsidiaries
pursuant to the Company's Agents Stock Purchase Plan ("ASPP"). In order to
qualify for participation in this Plan, an agent must meet certain
qualifications established by the Company from time to time. Qualifying agents
may purchase shares under the ASPP no more frequently then quarterly. Shares may
be purchased under the ASPP only in whole numbers of shares, and payment must
be made upon delivery of the certificates for the shares. Shares purchased
under the ASPP may not be transferred, except by gift, for six months after
purchase. The Company may decline to accept further orders from an agent if it
believes that the agent is using the Plan to purchase shares other than for
bona-fide long term investment. Shares will be sold under the ASPP at a price
equal to their "Bid Price," which is defined by the Plan as the average of th
closing Bid Price reported on Nasdaq, if any, on each of the twenty (20)
trading days preceding such sale.
<PAGE>
Deferred Compensation Plan ("DCP"). 192,002 shares of Common Stock
will be offered for sale to the Trustee of the Company's Deferred Compensation
Plan for Agents ("DCP"). Under this Plan, agents of the Company's insurance
subsidiaries which have elected to participate in the DCP may elect to defer
receipt between 5% and 100% of their first year commission they thereafter
earn as such agents, which deferral will be matched by a contribution by the
applicable subsidiary, initially set at 25% of the amount of the deferral, up
to a maximum of 5% of the agent's commissions. Both the agent's participation
in the Plan and the Company's obligation to match the agent's deferral are
subject to the agent satisfying and continuing to satisfy minimum earning,
production and persistency standards. The DCP Plan provides that the amounts
contributed by the Company match vest over a period of years, if the agent
continues to qualify for participation. The percentage of the "match" and
the vesting period may be changed from time to time as to future
deferrals by the Company.
The amount of the deferral and the Company match as to each participant
is assumed to be invested in Company Common Stock, and the amount which each
participating agent can withdraw will vary with changes in the market value of
the Common Stock. To aid in the administration of the DCP, the Company has
elected to make payments to a trustee equal to the amount of the deferrals and
the Company match. The trustee will use the amount paid to him to purchase
Common Stock either in the open market or from the Company pursuant to this
Offering, and will sell shares of Common Stock when required to fund withdrawals
from the DCP or will distribute shares of Common Stock in kind. The amounts paid
and received by such trustee will be used to determine the market value of the
participants' interests. Notwithstanding the establishment of the trust, the
assets in the trust are the sole property of the Company and the participating
agents, upon their withdrawal from the Plan, will be general creditors of the
Company for the value of their interest in the Plan.
The Company's DCP Plan was established effective on September 27, 1999,
and supersedes a prior deferred compensation plan established by American
Pioneer. All participants' accounts of the former American Pioneer deferred
compensation plan will become accounts under the Company's DCP on January 1,
2000.
<PAGE>
Non-Qualified Stock Option Plan for Agents and Others ("NQSOP").
200,000 shares of Common Stock will be offered for sale to agents of
the Company's subsidiaries and others pursuant to its Non-qualified Stock Option
Plan for Agents and Others ("NQSOP"). The 1998 Plan, authorizes stock option
grants to persons, other than officers and employees of the Company and its
subsidiaries "who provide services to the Company and any of its subsidiaries."
Under the 1998 Plan, the exercise price and other terms of NQSOP Options will be
determined by the Committee of the Board which administers the 1998 Plan.
These provisions of the 1998 Plan superseded, as to future grants, a
NQSOP, adopted by the Board of Directors of the Company on December 14, 1995,
and amended May 23, 1996, which allowed the Board to grant options to purchase
Common Stock to agents of the Company's Insurance Subsidiaries and to other
persons -- except officers, directors or employees of the Company or any of its
subsidiaries while they are serving as such -- as to whom the Board believed the
grant of such options will serve the best interests of the Corporation. When the
1998 Plan was adopted, 102,786 options were outstanding under the prior plan.
The exercise price in options granted under the Plan is as determined by the
Board, but not less than the Bid Price reported on the NASDAQ system on the date
of the grant (or the next preceding business day on which such a quote is
available). Such options granted under the NQSOP will have durations, fixed by
the Board, not to exceed ten (10) years. The Board had discretion to fix (i) any
vesting conditions, (ii) administrative provisions, (iii) anti-dilution
provisions, and (iv) other provisions deemed desirable by the Board, as well as
to amend any provision fixed by it, provided that no change or amendment shall
adversely affect the option holder with respect to the exercise price, vesting
conditions, and duration of a grant once made.
DESCRIPTION OF SECURITIES
General
Set forth below is a description of the material terms and provisions
of the equity securities of the Company. The following description does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and the Bylaws, as amended (the "Bylaws"), of the Company. The
Certificate of Incorporation and the Bylaws are filed or incorporated by
reference as exhibits to the Registration Statement of which this Prospectus
forms a part.
Preferred Stock
The Company is authorized to issue 2,000,000 shares of Preferred Stock.
The Board of Directors of the Company is authorized, without further shareholder
action, to divide any or all shares of the authorized Preferred Stock into
series and to fix and determine the designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereon, of any series so established, including voting powers,
dividend rights, liquidation preferences, redemption rights and conversion
privileges. There are presently no shares of preferred stock outstanding and no
plans, agreements or understandings for the authorization or issuance of any
additional shares of preferred stock.
Common Stock
The Company is authorized to issue 80 million shares of Common Stock,
par value of $.01 per share. As of September 30, 1999, the Company had
43,159,302 issued and outstanding shares of Common Stock and 3,566,784 shares
reserved for issuance pursuant to outstanding options and warrants. Holders of
Common Stock are entitled to such dividends as may be declared by the Board of
Directors from assets legally available for that purpose and are entitled at all
meetings of shareholders to one vote for each share held by them, without
provision for cumulative voting. In the event of the liquidation of the Company,
all assets available for distribution to the holders of the Common Stock, after
payment of the amount, if any, distributable to the holders of preferred stock,
are distributable among them according to their respective holdings. The Common
Stock is not redeemable and has no preemptive rights. The shares offered hereby
will be, and all of the outstanding shares of Common Stock are, fully paid and
nonassessable.
Certain Provisions of Certificate of Incorporation, Bylaws and New York
The Company's Restated Certificate of Incorporation provides that a
merger or consolidation of the Company with another corporation (the "Acquiror")
which, together with its affiliates (as defined in the Restated Certificate of
Incorporation) owns or controls, directly or indirectly, 5% or more of
outstanding voting power of the Company, or the sale of substantially all of the
Company's assets or business to the Acquiror, shall require the affirmative vote
of the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power
of all outstanding shares of the Company's outstanding Common Stock, unless (a)
such transaction was approved by resolution of the Company's Board of Directors
prior to the acquisition of 5% of the outstanding shares by the Acquiror or its
affiliates, or (b) the Company owns 50% or more of the total voting power of the
Acquiror.
The Company's Restated Certificate of Incorporation also requires that
the following actions by the Company require approval of not less than sixty-six
and two-thirds percent (66-2/3%) of the total number of directors:
(a)(i) a merger or consideration of the Company or a material
subsidiary, or in which the Company's securities are being issued, in which the
Company's shareholders do not own a majority of the post-transaction voting
securities entitled to elect the board of directors; (ii) the sale of all or
substantially all of the Corporation's assets or properties; (iii) the
disposition of any shares of a material subsidiary or all or substantially all
of the assets of such a subsidiary; (b) changes the number of directors; (c)
changes in the Certificate of Incorporation; (d) electing or removing executive
officers, or changing the employment agreement entered into between Richard
Barasch and the Company on July 30, 1999; (e) dissolving the Company or seeking
protection of bankruptcy laws; and (f) approving dividends or other
distributions with respect to Common Stock.
The Company is subject to several anti-takeover provisions under New
York law that apply to certain public corporations, including those organized
under New York law, namely Section 912 (Requirements Relating to Certain
Business Combinations) and Article 16 (Security Takeover Disclosure Act) of the
New York Business Corporation Act. Among other things, these provisions prohibit
a publicly-held New York corporation from engaging in a "business combination"
with an "interested shareholder" for a period of five years after the date of
the transaction in which the person became an interested shareholder, unless (a)
the business combination is approved by a majority of the non-interested
shareholders, (b) the transaction in which such person became an interested
shareholder was approved by the Board of Directors of the corporation, or (c)
the cash and other consideration to be issued to the holder of each share of
common stock of the corporation, valued as provided in the statute, is at least
equal to a per share value determined in a manner, and as of a date, provided in
the statute. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the shareholder. An "interested
shareholder" is a person who, together with affiliates and associates, owns (or,
in the case of affiliates and associates of the issuer, did own within the last
five years) 20% or more of the corporation's voting stock.
These provisions also require certain persons making a tender offer or
a takeover bid for outstanding shares of certain New York corporations to file a
registration statement with the Attorney General and with the corporation for
whose stock the tender is being made. The registration statement should include
the items designated in the statute. Additional requirements, as provided in the
statute, apply to takeover bids not subject to the requirements of Section 14(d)
of the Exchange Act. A "takeover bid" means the acquisition of or offer to
acquire, pursuant to a tender offer or request or invitation for tenders, any
equity security of a target company, if after acquisition, the offeror would,
directly or indirectly, be a beneficial owner of more than five percent of any
class of the issued and outstanding equity securities of such target company. A
"takeover bid" does not include (a) bids made by a dealer for his or her own
account in the ordinary course of business of buying and selling such security;
(b) an offer to acquire such equity security solely in exchange for other
securities, or the acquisition of such equity security pursuant to such offer,
for the sole account of the offeror, in good faith and not for the purpose of
avoiding this Section, and not involving any public offering of such other
securities within the meaning of Section four of title one of the Securities Act
of 1933, (c) any other offer to acquire an equity security, or the acquisition
of such equity security pursuant to such offer, for the sole account of the
offeror, from not more than fifty offerees, in good faith and not for the
purpose of avoiding provisions of this article, or (d) any offer, where prior to
making the offer, the offeror owns a majority of the voting equity securities of
the target company.
Warrants
1999 Warrants. Each of the 1999 Warrants entitles the holder to
purchase one share of the Company's Common Stock at a price of $1.00 at anytime
prior to December 31, 1999, subject to adjustments under anti-dilution
provisions. 596,427 of the 1999 warrants are registered under the Exchange Act,
and traded on NASDAQ under the symbol "UHCOW". The Company intends to register
the 2,015,760 shares issuable pursuant to the unregistered warrants prior to
December 31, 1999.
Holders of the Warrants have no voting rights and are not entitled to
dividends with respect to such Warrants. In the event of liquidation,
dissolution or winding up of the Company, holders of the Warrants are not
entitled to participate in the Company's assets.
Transfer Agent
The transfer agent for the Company's Common Stock and the registered
1999 Warrants is American Stock Transfer & Trust Company.
LEGAL MATTERS
Certain legal matters in connection with the validity of the securities
offered hereby will be passed upon for the Company by the law firm of Harnett
Lesnick & Ripps P.A., of Boca Raton, Florida.
Bertram Harnett, Irving I. Lesnick and Judith A. Ripps, shareholders in
such law firm, in the aggregate directly own 85,304 shares of the Company's
Common Stock, 1999 Warrants to purchase 12,095 shares of the Company's Common
Stock and non-qualified options to acquire 30,500 additional shares of Common
Stock. A trust established by Mr. Harnett for the benefit of members of his
family, owns 50,000 shares of Common Stock and 339,901 of the 1999 Warrants, in
which Mr. Harnett disclaims any beneficial interest. The law firm was paid
$317,864 during the calendar year 1998, on account of its legal services to, as
well as reimbursement for disbursements made on behalf of, the Company.
EXPERTS
<PAGE>
The consolidated financial statements of Universal American Financial
Corp. and subsidiaries appearing in Universal American Financial Corp.'s Annual
Report (Form 10-K) for the year ended December 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing. The combined financial statements of Certain Insurance Operations of
PennCorp Financial Group, Inc., as of December 31, 1998 and 1997, and for each
of the years in the three-year period ended December 31, 1998, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
<PAGE>
1,311,301 Shares
UNIVERSAL AMERICAN FINANCIAL CORP.
Common Stock
-------------------------
PROSPECTUS
------------------------
October 29, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Other expenses of issuance and distribution of the securities being
offered are estimated, for purposes of this Offering, as follows:
Securities and Exchange Commission
Registration Fee $ 2,000
NASD Fee (1) 6,000
Legal fees and expenses 5,000
Blue Sky fees and expenses 3,000
Accounting fees and expenses 5,000
Printing 2,000
Transfer agent fees 1,500
Miscellaneous expenses 500
----------
Total $ 25,000
==========
(1) Fees are paid when securities are issued.
Item 15. Indemnification of Directors and Officers.
As permitted by Section 722 and 723 of New York's Business Corporation
Law ("BCL"), Article 16 of the Company By-Laws requires the Company to indemnify
to the greatest extent allowed by law, each of its directors, officers and
employees and persons serving as an officer, director, employee or agent of
another Corporation at the Company's request, against liability (whether by
judgment or settlement) and reasonable expenses (including attorney fees)
necessarily incurred in defending any action or proceeding, brought or
threatened against him, by reason of his service as such officer, director,
employee or agent.
The Company's Restated Certificate of Incorporation supplements the
indemnification rights of directors under the Company By-Laws so that no
director of the Corporation shall be held personally liable to the Corporation
or to its shareholders for damages for any breach of duty while acting as
director, unless (a) it is found, by a judgment of a court of competent
jurisdiction, or by other adjudication, (i) that said breach of duty, whether an
act or omission, was committed in bad faith, or involved intentional misconduct
or knowing violation of the law; (ii) that said director personally gained a
financial profit or other advantage to which the director was not legally
entitled; or (iii) that the director's acts violated Section 719 of the Business
Corporation Law; or that the act or omission was committed before the adoption
of such provision on October 16, 1988.
<PAGE>
Item 16. Exhibits.
5 Proposed opinion of Harnett Lesnick & Ripps, P.A. regarding the legality
of the securities being registered.
*10 Material Contracts. Material Contracts filed as exhibits to the Documents
Incorporated by Reference are incorporated as exhibits to this Form S-2
by reference.
*11 Statement re computation of per share earnings. Statements re computation
of per share earnings presented in Documents Incorporated by References
are incorporated by reference.
21 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of KPMG LLP
23.3 Consent of Harnett Lesnick & Ripps, P.A.,
24 Powers of attorney (included on signature page).
* Incorporated by reference as indicated.
Item 17. Undertakings.
1. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
2. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made a post-effective amendment to this registration
statement;
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1993;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which individually or in the aggregate represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) (' 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
3. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City and State of
New York on the 29th day of October, 1999.
UNIVERSAL AMERICAN FINANCIAL CORP.
By:
Richard A. Barasch, Chairman & CEO
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the date indicated, by the
following persons in the capacities and on the dates indicated:
Each person whose signature appears below constitutes and appoints
Richard A. Barasch as his attorney-in-fact, with power of substitution for him
in any and all capacities, to sign this registration statement and any
amendments and post-effective amendments hereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute or substitutes may do or cause to be
done by virtue hereof.
October 29, 1999
Richard A. Barasch, Chief
Chairman Executive
Officer, President and Director
(Principal Executive Officer)
October 29, 1999
Bertram Harnett, Director
October 29, 1999
Bradley Cooper, Director
October 29, 1999
Susan S. Fleming, Director
October 29, 1999
Mark M. Harmeling, Director
October 29, 1999
Patrick McLaughlin, Director
October 29, 1999
Robert Spass, Director
October 29, 1999
Richard Veed, Director
October 29, 1999
Robert Wright, Director
October 29, 1999
Robert A. Waegelein, Senior Vice
President and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
EXHIBIT 5
HARNETT LESNICK & RIPPS P.A.
Nationsbank Tower
150 East Palmetto Park Road
Suite 150
Boca Raton, Florida 33432-4832
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(561) 368-1995
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Telecopier: (561) 368-4315
October 29, 1999
Universal American Financial Corp.
6 International Drive
Suite 190
Rye Brook, New York 10573
RE: POST EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-03641
As counsel to Universal American Financial Corp. ("the Company"), we
have examined and are familiar with (1) the Restated Certificate of
Incorporation of the Company, with all amendments thereto, (2) the By-Laws of
the Company, as amended to date, (3) the Registration Statement on Form S-2
(Registration No. 333-03641), including the exhibits (the "Registration
Statement"), and the Prospectus forming a part of the Registration Statement,
filed by the Company with the Securities and Exchange Commission for the
registration under the Securities Act of 1933, as amended, of 1,897,500 shares
of the Common Stock, par value $0.01 each ("The Shares"), Post Effective
Amendment No. 1 to the Registration Statement including the exhibits thereto and
the Prospectus included them covering the 1,311,301 Shares remaining unsold (the
"Amended Registration Statement") and (5) all corporate proceedings taken by the
Company in connection with the Amended Registration Statement and the issuance
and sale of the Shares, subject to the Registration Statement becoming
effective.
Based upon the foregoing, and upon the examination of such corporate
proceedings, documents and records as we have deemed necessary for the purposes
of this opinion, we are of the opinion that:
<PAGE>
(1) the Company is duly organized and validly existing under the
laws of the State of New York;
(2) the Shares, when they have been sold by the Company for cash
and paid for, as set forth in the Prospectus, will be, in the
hands of the purchasers, duly issued, fully paid for and
non-assessable.
We hereby consent to the use of this opinion or reference thereto in
that Registration Statement and the Prospectus filed by the Company under the
Securities Act of 1933, as amended, in connection with the Shares.
Very truly yours,
HARNETT LESNICK & RIPPS, P.A.
By: _________________________________
Irving I. Lesnick, Vice President
<PAGE>
EXHIBIT 21
Subsidiaries of Universal American Financial Corp.
The following are the material subsidiaries of Universal American Financial
Corp. The jurisdiction of incorporation is indicated parenthetically.
Universal American Financial Corp. owns 100% of
American Exchange Life Insurance Company (Texas)
American Pioneer Life Insurance Company (Florida)
American Progressive Life and Health Insurance Company of New York (New York)
Constitution Life Insurance Company (Texas)
Peninsular Life Insurance Company (North Carolina)
Pennsylvania Life Insurance Company (Pennsylvania)
Union Bankers Insurance Company (Texas), which owns 100% of
Marquette National Life Insurance Company (Texas)
UAFC (Canada), Inc, (Canada) which owns 100% of
PennCorp Life Insurance Company (Canada)
WorldNet Services Corp (Florida)
PennCorp Financial, Inc. (Delaware)
Universal American Financial Corp. owns 50% of
Security Health Providers, Inc (Delaware)
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-2) and related Prospectus of Universal American
Financial Corp. and subsidiaries for the registration of 1,311,301 shares of its
common stock and to the incorporation by reference therein of our report dated
March 30, 1999, with respect to the consolidated financial statements and
schedules of Universal American Financial Corp. and subsidiaries included in its
Annual Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
October 29, 1999
<PAGE>
EXHIBIT 23.2
The Board of Directors
PennCorp Financial Group, Inc.:
We consent to the incorporation by reference in the registration statement (No.
333-03641) on Form S-2/A of Universal American Financial Corp. of our report
dated April 14, 1999, except as to Note 18 which is as of May 26, 1999, with
respect to the combined balance sheets of Certain Insurance Operations of
PennCorp Financial Group, Inc. as of December 31, 1998 and 1997, and the related
combined statements of income, changes in business equity, comprehensive income,
and cash flows for each of the years in the three-year period ended December 31,
1998 which report also appears in the Proxy Statement of Universal American
Financial Corp. dated July 12, 1999. We also consent to the reference of our
firm under the heading "Experts" in the Form S-2/A
KPMG LLP
Dallas, Texas
October 29, 1999
<PAGE>
EXHIBIT 23.3
HARNETT LESNICK & RIPPS P.A.
Nationsbank Tower
150 East Palmetto Park Road
Suite 150
Boca Raton, Florida 33432-4832
-----
(561) 368-1995
-----
Telecopier: (561) 368-4315
October 29, 1999
Universal American Financial Corp.
6 International Drive
Suite 190
Rye Brook, New York 10573
RE: POST EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 333-03641
UNIVERSAL HOLDING CORP. - $0.01 PAR VALUE
We are counsel to Universal American Financial Corp. ("the Company"),
in connection with the Registration Statement on Form S-2 being filed
contemporaneously herewith for the registration under the Securities Act of
1933, as amended, of 1,311,301 shares of the Common Stock, par value $0.01 each
("The Shares").
We hereby consent to the use of our opinion which will be filed as an
exhibit to such Registration Statement and reference thereto in the Registration
Statement and the Prospectus filed by the Company under the Securities Act of
1933, as amended, in connection with the Shares.
Very truly yours,
HARNETT LESNICK & RIPPS, P.A.
By: _________________________________
Irving I. Lesnick, Vice President
