<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
UNITED INSURANCE COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PRELIMINARY PROXY
UNITED INSURANCE COMPANIES, INC.
4001 MCEWEN DRIVE, SUITE 200
DALLAS, TEXAS 75244
_____________________________
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
_____________________________
This statement is furnished to the stockholders of United Insurance
Companies, Inc. (the "Company") in connection with the Board of Directors'
solicitation of proxies to be used at the Annual Meeting of Stockholders on
April 16, 1996 at the Company's offices located at 4001 McEwen Drive, Suite
200, Dallas, Texas 75244, and at any adjournment thereof. All proxies
delivered pursuant to this solicitation are revocable at the option of the
person executing the same at any time before the voting thereof. Proxies in
the form enclosed, unless previously revoked, will be voted at the meeting.
Where a choice or instruction is specified by the stockholder thereon, the
proxy will be voted in accordance with such specification. Where a choice or
instruction is not specified by such stockholder, the proxy will be voted as
recommended by the Board of Directors.
The Company's Common Stock trades on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol: UICI. This proxy statement is
being mailed on or about March 29, 1996 to stockholders of record at the close
of business on March 7, 1996, who are the only stockholders entitled to receive
notice of and to vote at the meeting. At March 7, 1996 the Company had
outstanding 38,263,745 shares of common stock. Each share of the outstanding
common stock is entitled to one vote. A simple majority of the total shares
outstanding is required to elect directors and ratify or approve the other
items being voted on at this time.
1. ELECTION OF DIRECTORS
The Board of Directors (the "Board") has fixed the number of directors
for the ensuing year at eight (8). At the meeting, it is intended that such
number of directors will be elected to hold office until the next Annual
Meeting of Stockholders and until their respective successors are chosen and
qualified. It is intended that the proxies will be voted to elect as directors
the nominees listed below. Although the Board does not anticipate that any of
such nominees will be unable to serve as a director, in the event of such
occurrence, the proxy holders shall have the right to vote for such substitute,
if any, as the present Board of Directors may designate.
NOMINEES
The following table sets forth the name and age of each nominee for
director, his principal occupation for the past five years, the year he became
a director of the Company, the number of shares of common stock of the Company
which he beneficially owned as of March 7, 1996 and the percentage of the
outstanding shares of common stock which that number of shares represents.
1
<PAGE> 3
<TABLE>
<CAPTION>
================================================================================================================
YEAR FIRST SHARES OF COMMON
NOMINEE, PRINCIPAL OCCUPATION, AGE AND ELECTED STOCK BENEFICIALLY PERCENT OF
DIRECTORSHIPS DIRECTOR OWNED 3/7/96 CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RONALD L. JENSEN has served as Chairman of the 1983 8,118,544(1) 21.2%
Board of Directors of the Company and its
predecessor Company since December 1983. Mr.
Jensen served as President of the Company until
January 1995 and the preceding five years except
for a three-month period in 1992. Mr. Jensen is a
member of the Executive and Stock Option Committees
of the Board of Directors. Mr. Jensen is the sole
owner of United Group Association ("UGA").
Age: 65
1984 150,524(2)(3) (4)
GARY L. FRIEDMAN, has served as a Director of the
Company since 1984. He is a member of the Stock
Option Committee of the Board of Directors. Mr.
Friedman has served as Director and Treasurer of
UGA since August 1985, and as Secretary of UGA
since July 1990. Mr. Friedman has served as a
Director and Secretary of Matrix Telecom, Inc.
since 1994.
Age: 41 1989 25,325 (4)
J. MICHAEL JAYNES has served as a Director of the
Company since January 1989. He is a member of the
Audit and Stock Option Committees of the Board of
Directors. Mr. Jaynes has been a sole practitioner
of law in Irving, Texas since 1974.
Age: 48 1989 69,746(5)(6) (4)
RICHARD J. ESTELL has served as Executive Vice
President and Director of the Company since January
1989. He is a member of the Executive, Investment
and Audit Committees of the Board of Directors.
Mr. Estell has served as Chairman of the Board for
Mid-West National Life Insurance Company of
Tennessee ("Mid-West") and The MEGA Life and Health
Insurance Company ("MEGA") and as President of MEGA
since January 1989. He has served as Chairman of
the Board of The Chesapeake Life Insurance Company
("Chesapeake") since November 1991.
Age: 50 1991 8,340 (4)
RICHARD T. MOCKLER has served as a Director of the
Company since January 1991. Mr. Mockler is a
member of the Audit Committee of the Board of
Directors. Mr. Mockler retired as a partner with
Ernst & Young, CPA's, in 1989, after 27 years of
service. Mr. Mockler served as a member of the
Board of Directors of Georgetown Railroad Company
from 1990 to 1991 and has served as a member of the
Board of Directors of Georgetown Rail Equipment
Company since 1994. Mr. Mockler has served as a
Director of Snead Research Labs since 1995.
Age: 58
================================================================================================================
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
================================================================================================================
YEAR FIRST SHARES OF COMMON STOCK PERCENT OF
NOMINEE, PRINCIPAL OCCUPATION, AGE AND ELECTED BENEFICIALLY CLASS
DIRECTORSHIPS DIRECTOR OWNED 3/7/96
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VERNON R. WOELKE has served as a Director of the 1991 194,510(5) (4)
Company since January 1991 and as Vice President
and Treasurer since 1985. Mr. Woelke is a member
of the Executive and Investment Committees of the
Board of Directors. He has served as a Director of
MEGA since 1988, Vice President since April 1991
and Treasurer from April 1988 to April 1991; and as
President of Mid-West since 1988 and as a Director
since 1987. He has also served as a Director and
Executive Vice President of Chesapeake since
November 1991.
Age: 47
1995 450,977(2)(5) 1.2%
W. BRIAN HARRIGAN has served as President and Chief
Executive Officer ("CEO") of the Company since
January 1995 and as a Director since February 1995.
Mr. Harrigan has served as President of WinterBrook
Holdings, Inc. since October 1993. From July 1987
until October 1993, Mr. Harrigan served as
Executive Vice President of Westport Management
Services, Inc.
Age: 41 1996 104,285(5) (4)
CHARLES T. PRATER has been a division manager of
the Company since 1983. He has served as a Vice
President of the Company since 1993 and as a
Director since March 1996. Mr. Prater is Chairman
of the Investment Committee of the Board of
Directors.
Age: 44
================================================================================================================
</TABLE>
_________________________
(1) Does not include shares owned directly or indirectly by Mr. Jensen's
five adult children, or shares owned by the R.L. Jensen Foundation
Charitable Trust as to which Mr. Jensen disclaims beneficial
ownership. Mr. Jensen's adult children directly own in the aggregate
approximately 7.6% of the outstanding common stock. Mr. Jensen's
adult children are also the stockholders of Onward & Upward, Inc.,
which owns approximately 8.2% of the outstanding common stock.
(2) Includes shares of common stock held as of March 7, 1996 by the
Trustees of a retirement trust.
(3) Includes 1,200 shares indirectly owned by Mr. Friedman through his
interest in a partnership.
(4) Owns less than 1% of the outstanding common stock.
(5) Includes shares of common stock held as of March 7, 1996 by the
Trustees under the Company's Employee Stock Ownership Plan. (The
shares held under the Plan purchased with contributions made by the
Company are subject to the vesting requirements of the Plan.)
(6) Includes 8,000 shares owned by Mr. Estell's wife and 800 shares owned
by his minor son.
3
<PAGE> 5
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the name and address of each person known by
management to own beneficially five percent or more of the Company's common
stock as of March 7, 1996, the number of shares beneficially owned by such
person and the percent of the class so owned and the amount of common stock
beneficially owned by all directors and officers as a group and the percent of
the class so owned.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
TITLE OF CLASS NAME & ADDRESS OWNED OF CLASS
- -------------- -------------- ------------ --------
<S> <C> <C> <C>
Common Stock Ronald L. Jensen 8,118,544(1) 21.2%
5215 N. O'Connor, Suit 300
Irving, Texas 75039
Common Stock Onward & Upward, Inc. 3,088,444 8.1%
2121 Precinct Line Road
Hurst, Texas 76054
Common Stock All officers and directors 9,164,317(1)(2)(3)(5)(6)(7) 24.0%
as a group (10 individuals)
</TABLE>
_________________________
For references (1), (2), (3), (5), and (6), see footnotes on previous page.
(7) Includes 16,000 shares subject to options granted under the Company's
Employee Stock Option Plan.
Under the securities laws of the United States, the Company's directors,
executive and certain officers, and any persons holding more than ten percent
of the Company's common stock are required to report their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission (the "Commission") and, in the Company's case, the National
Association of Securities Dealers, Inc. Specific due dates for these reports
have been established and the Company is required to report in this proxy
statement any failure to file by these dates during 1995. All of these filing
requirements were satisfied by the Company's directors, officers and ten
percent holders, except that Richard T. Mockler failed to report one indirect
acquisition. In making this statement, the Company has relied on the written
representations of its incumbent directors, officers and ten percent holders
and copies of the reports filed with the Commission.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 1995, the Board of Directors
of the Company held twelve meetings.
The Audit Committee consists of three directors: namely, Richard J.
Estell, J. Michael Jaynes and Richard T. Mockler. The Committee held two
meetings during 1995. The Audit Committee recommends engagement of the
independent auditors, considers the fee arrangement and scope of the audit,
reviews the financial statements and the independent auditors' report, reviews
the activities and recommendations of the Company's internal financial and
accounting staff, considers comments made by the independent auditors with
respect to the Company's internal control structure, and reviews internal
accounting procedures and controls with the Company's financial and accounting
staff.
4
<PAGE> 6
The Executive Committee consists of four directors: namely, Ronald L.
Jensen, W. Brian Harrigan, Richard J. Estell and Vernon R. Woelke. The
Committee met three times during 1995. The Executive Committee has all of the
authority of the full Board of Directors in the management of the business and
affairs of the Company.
The Investment Committee consists of three directors: namely, Richard
J. Estell, Vernon R. Woelke and Charles T. Prater. The Committee met seven
times during 1995. The Investment Committee oversees the Company's
investments.
The Stock Option Plan Committee met one time during 1995. Ronald L.
Jensen, Gary L. Friedman and J. Michael Jaynes have been committee members
since the last annual meeting. The Committee administers the Stock Option
Plan.
The Company does not have a Nominating Committee. Board of Director
nominees are proposed by existing Board members and Company management.
COMPENSATION OF DIRECTORS
The two outside directors of the Company, J. Michael Jaynes and
Richard T. Mockler, are entitled to receive compensation for each Board meeting
and each Audit Committee meeting attended. During 1995, Messrs. Jaynes and
Mockler received $1,500 for each Board meeting attended and $750 for each Audit
Committee meeting attended as compensation for their services.
EXECUTIVE COMPENSATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors is not directly involved in the executive
compensation policies of the Company. Mr. Jensen performs the duties of the
compensation committee and informs the Board of Directors of the proposed
compensation for the executive officers of the Company. The factors considered
by Mr. Jensen include the individual's contribution to the long-term financial
goals of the Company, his perception of the individual's potential to
contribute to the future of the Company, planned or actual changes in
functional responsibility, and other factors which he considers important.
Submitted by the Company's Board of Directors:
Ronald L. Jensen Gary L. Friedman
Richard J. Estell J. Michael Jaynes
Richard T. Mockler Vernon R. Woelke
W. Brian Harrigan Charles T. Prater
5
<PAGE> 7
The table below discloses compensation information for the CEO and the
four other most highly compensated executive officers for services rendered in
all capacities during the fiscal years ended December 31, 1995, 1994, and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Annual Compensation ------------ Securities Compen-
Name and Principal ------------------------------------- Restricted Stock Underlying sation
Position Year Salary ($) Bonus($) Other ($) Awards(a)($) Options(#) (b)($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. Brian Harrigan, 1995 226,538 --- 65,359(d) 62,000 --- 8,738
President & CEO and 1994 --- --- --- --- 400,000(e) ---
Director(c) 1993 --- --- --- --- --- ---
Richard J. Estell, 1995 200,000 282,009 --- --- --- 11,023
Executive Vice 1994 200,000 135,838 --- --- --- 10,486
President and Director 1993 200,000 85,000 --- --- --- 12,313
Charles T. Prater, 1995 119,514 126,211 --- 62,000 --- 10,140
Vice President and 1994 94,994 120,800 --- --- --- 9,010
Director 1993 94,994 114,684 --- 107,500 --- 7,236
Robert B. Vlach, Vice 1995 115,284 21,211 --- --- --- 10,212
President, Secretary 1994 101,000 15,820 --- --- --- 8,455
and General Counsel 1993 97,769 --- --- --- --- 7,358
Vernon R. Woelke, 1995 95,000 35,269 --- --- --- 9,729
Vice President,
Treasurer 1994 95,000 --- --- --- --- 8,810
and Director 1993 95,010 20,000 --- 98,000 --- 7,268
</TABLE>
Footnotes
(a) This column shows the market value of restricted stock issued on date
of grant less amount paid, if any, by the individuals listed in the
table. Dividends are paid, if any, to holders with respect to
restricted stock at the same rate paid to all stockholders. The
aggregate holdings/value of restricted stock, less amount paid, if
any, on December 31, 1995 by the individuals listed in this table,
are: W. Brian Harrigan, 16,000 shares/$228,000; Charles T. Prater,
40,000 shares/$627,000; and Vernon R. Woelke, 19,200 shares/$326,400.
(b) Includes Company contributions to its Employee Stock Ownership Plan.
(c) W. Brian Harrigan joined the Company as President and CEO in January
1995.
(d) The Company made payments on W. Brian Harrigan's behalf related to his
relocation.
(e) Restated to reflect four-for-one stock split effective June 1, 1995.
6
<PAGE> 8
The following table summarizes for each of the named executive
officers the number of stock options, if any, exercised during the year ended
December 31, 1995, the aggregate dollar value realized upon exercise, the total
number of unexercised stock options, if any, held at December 31,1995, and the
aggregate dollar value of in-the-money, unexercised stock options, if any, held
at December 31,1995.
AGGREGATED STOCK OPTION EXERCISES
IN 1995 AND YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Stock
Shares Stock Options at Year End (#) Options at Year End ($)(a)
Acquired on Value --------------------------------------------------------------
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Brian Harrigan - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Charles T. Prater - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Richard J. Estell - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Robert B. Vlach 8,000 52,750 16,000 4,000 259,875 64,000
Vernon R. Woelke - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
(a) The closing stock price at December 31, 1995 was $18.875.
7
<PAGE> 9
FIVE - YEAR PERFORMANCE COMPARISON
The graph below demonstrates a comparison of cummulative
total returns for the Company as compared with the NASDAQ
Stock Market Index and the NASDAQ Insurance Stocks Index.
[GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United Insurance Companies, Inc. (UICI) 100 145 219 283 378 839
- ----------------------------------------------------------------------------------------------------------
NASDAQ Stock Market Index 100 187 187 215 210 296
- ----------------------------------------------------------------------------------------------------------
NASDAQ Insurance Stocks Index 100 141 191 204 192 273
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested on December 31, 1990 in UICI Common
Stock, the NASDAQ Stock Market Index, and the
NASDAQ Insudrance Stocks Index.
<PAGE> 10
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan which permits the
Company to make contributions on behalf of eligible employees either in the
form of Shares of the Company or in cash which is invested in such Shares,
thereby increasing the employees' ownership in the Company. Shares contributed
to the Plan or purchased with the Company's contributions are allocated to the
participant's account at the end of each Plan Year and forfeitures are
allocated to employees who are participants on the last day of the Plan Year
based upon the ratio of each participant's annual credited compensation (up to
$40,000) to the total annual credited compensation of all participants entitled
to share in such contributions for such Plan Year. Each participant's vested
interest in the Plan is at all times nonforfeitable and is distributable only
upon death or termination of employment.
EMPLOYEE STOCK OPTION PLAN
The purpose of the United Insurance Companies, Inc. Stock Option Plan
(the "Plan") is (a) to secure and retain key personnel of outstanding ability
who are or may be employed by the Company or its subsidiaries, non-employee
Directors of the Company and/or its subsidiaries, and non-employee individuals
who contribute to the success and growth of the Company by the performance of
past, present or future services to the Company and/or its subsidiaries; and
(b) to provide additional motivation to such persons to exert their best
efforts on behalf of the Company. The Stock Option Committee has the
authority, in its sole discretion, to name optionees and to grant shares to
optionees. Each option is granted in consideration of an optionee (i) being or
agreeing to become an employee or officer of the Company or a subsidiary of the
Company, (ii) being or agreeing to become a non-employee director of the
Company or a subsidiary of the Company, or (iii) performing or agreeing to
perform services, on a non-employee or independent contract basis, for or on
behalf of the Company or a subsidiary of the Company. The option price is the
closing price at which the common stock of the Company traded on the date the
option is granted. If the stock was not traded on the date the option was
granted, then the option price is determined by using the closing price for the
stock on the last trading date preceding the date the option was granted. The
options become exercisable 20% per year beginning one year following grant.
The expiration date of an option is the thirtieth day following the fifth
anniversary of the date the option is granted, except as set forth in the Plan
for certain events, including permanent disability, death or termination.
Options are not transferrable by the optionee other than by will or by the laws
of descent and distribution. The total number of shares of common stock of the
Company reserved for issuance under the Plan is 1,259,533. Effective March,
1995, the Committee granted 20,000 options at an option price of $10 (amounts
adjusted to reflect four-for-one stock split effective June 1, 1995) to a
Senior Vice President of the Company. However, these options were forfeited
upon such individual's resignation in January 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Ronald L. Jensen, Chairman of the Board of Directors of the
Company, is the owner of United Group Association ("UGA") which receives
commissions from insurance subsidiaries of AEGON USA, Inc. (referred to
collectively as "AEGON") with respect to insurance policies that the Company
coinsures. In 1995, UGA received $45,514,000 in such commissions. In 1995,
through the coinsurance agreements with AEGON, the amount of these commissions
received by UGA attributable to the Company was $26,096,000.
UGA generates sales leads for agents and management expertise for an
insurance subsidiary of the Company. In 1995, the insurance subsidiary of the
Company paid UGA $4,265,000 for such leads.
UGA markets products which are directly underwritten by insurance
subsidiaries of the Company. During 1995, the insurance subsidiaries paid
commissions of $1,934,000 to UGA.
9
<PAGE> 11
In 1991, the Company entered into an agreement whereby it retired a
portion of the convertible subordinated debentures at par and issued a warrant
to purchase 357,600 shares of the Company's common stock for $2.00 per share
(share and per share amounts were restated to reflect four-for-one stock split
effective June 1, 1995). The agreement was with Onward and Upward, Inc. which
is a corporation owned by the five adult children of Mr. Jensen. Onward and
Upward, Inc. and the five adult children are hereinafter collectively referred
to as Onward and Upward. During 1995, 20% of the warrants were exercised and
71,520 shares of common stock were issued for proceeds of $178,800. At
December 31, 1995, there were 71,520 warrants outstanding. The remaining
warrants expire on July 1, 1996.
Onward and Upward owns common stock of various subsidiaries of the
Company. Onward and Upward has granted the Company a right of first refusal to
purchase its ownership of the subsidiaries' stock at prices based on a
predetermined formula. Onward and Upward has the right to require the Company
to purchase its ownership in the subsidiaries' stock at prices based on a
predetermined formula. This obligation at December 31,1995 was approximately
$10,250,000.
The Company's Chairman of the Board has partial ownership in Frey &
Associates, an advertising agency that provides marketing, printing and graphic
design services to the Company. In 1995, the Company paid the agency $301,470
for such services.
During 1995, the Company issued 427,900 shares of its common stock to
the Company's President and Chief Executive Officer in exchange for his 97.25%
ownership in the outstanding common stock of WinterBrook Holdings, Inc.
(WinterBrook). The Company also purchased the remaining 2.75% of WinterBrook
outstanding common stock from an unrelated individual. WinterBrook holds a
majority interest in seven companies.
In November 1994, the Company extended a $10,000,000 line of credit to
a related company in which the Chairman of the Board of the Company has an
ownership interest. The line of credit bears interest at the rate of prime
plus two percent (2%) maturing December 31, 1997. The line of credit is
collateralized by certain tangible assets that the related company presently
owns. The line of credit is guaranteed by the Company's Chairman of the Board.
At December 31, 1995, the related company had drawn the full $10,000,000 on the
line of credit. In 1995, the Company received $483,000 in interest income.
At December 31, 1995, the Company had an unsecured loan payable to the
Chairman of the Board of the Company in the amount of $10,735,000, bearing
interest at the prime rate of a local bank, and is due on demand.
On December 29, 1995, the Company sold $26,481,000 of credit card
loans to a trust established for Onward and Upward for the benefit of investors
in certificates representing undivided fractional interests in the trust.
This transaction was accounted for as a sale. The transaction did not result
in a gain or loss for the Company. The Company purchased a participating
interest in the trust totaling $11,481,000.
During 1995, the Company and UGA entered into an agreement whereby the
Company receives a 20% interest in the profits or losses of certain agency
activities. During 1995, these activities had losses of $1,638,000. It is
expected that these activities will result in a small gain for the Company
during the three-year period ending December 31, 1997.
The Chairman of the Board of Directors of the Company is partial owner
of Matrix Telecom, Inc. ("Matrix"), a telephone company. Matrix provides all
the long distance telephone services for the Company at rates which are as low
or lower than what can be obtained from unrelated long distance telephone
companies. In 1995, the Company paid Matrix $686,180 for long distance
telephone services.
10
<PAGE> 12
Charles T. Prater, Vice President and Director of the Company, has
outstanding debt owed to the Company in the amount of $128,000 at December 31,
1995. The debt is in connection with the purchase of restricted stock of the
Company. The largest aggregate amount of debt outstanding owed by Mr. Prater
to the Company during the year ended December 31,1995 was $128,000. The debt
bears interest at the prime rate of a local bank and interest is due monthly.
The outstanding amount of the debt owed to the Company at March 1, 1996 was
$58,000.
W. Brian Harrigan, President, CEO and Director of the Company, has
outstanding debt owed to the Company in the amount of $74,000 at December 31,
1995, which was also the largest amount of debt outstanding during the year
ended December 31, 1995. The debt is in connection with the purchase of
restricted stock of the Company in January 1995. The debt bears interest at
the prime rate of a local bank and interest is due monthly. The outstanding
amount of the debt owed to the Company at March 1, 1996 was $59,200.
During 1995, the Company issued 28,947 shares of its common stock to
one of the adult children of Mr. Jensen in exchange for his 80% ownership in
the outstanding common stock of Association Dental Plan, Inc ("ADP"). The
Company also purchased the remaining 20% of ADP outstanding common stock from
an unrelated individual.
2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors reappointed the firm of Ernst & Young, LLP as
the Company's independent auditors to audit the financial statements of the
Company for the fiscal year ending December 31, 1996. In recommending
ratification by the stockholders of the appointment of Ernst & Young LLP, the
Board of Directors has satisfied itself as to that firm's professional
competence and standing. Representatives of Ernst & Young LLP are not expected
to be present at the Annual Meeting.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THE
STOCKHOLDERS VOTE "FOR" THIS RATIFICATION.
3. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO CHANGE CORPORATE NAME
The Board of Directors has unanimously approved a proposed amendment
to the Company's Certificate of Incorporation, subject to approval by the
Stockholders, to change the name of the Corporation to "UICI". If a majority
of the Stockholders vote in favor of the name change, Article One of the
Certificate of Incorporation will be amended as follows:
"ARTICLE I
"THE NAME OF THE COMPANY IS UICI."
The Company is a financial services company with interests in life and
health insurance and related services, including the administration and
delivery of managed healthcare programs to select niche markets. Because of
the diversification of the Company's activities, the Board of Directors
believes it is desirable to change the name of the Company so as not to focus
solely on the business of insurance as the present name reflects.
If the change of the Company's name is approved, it will not be
necessary to surrender stock certificates to the Company for reissuance.
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<PAGE> 13
The affirmative vote of a majority of the outstanding shares of common
stock is needed to approve the proposed amendment to the Company's Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE "FOR" ADOPTION
OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY, AS DESCRIBED ABOVE, AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE.
4. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK AND
TO PROVIDE FOR NEW SERIES OF STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of 40,000,000 shares of Common Stock, $0.01 par value. As of December
31, 1995, 38,219,770 shares of Common Stock were issued and outstanding, and
1,259,533 shares are reserved for issuance under the United Insurance
Companies, Inc. Stock Option Plan.
Because of the limited number of shares of Common Stock remaining to
be issued, on January 29, 1996, the Board of Directors declared it advisable
that the Certificate of Incorporation of the Company be amended, subject to
approval by the stockholders, to increase the authorized shares of Common Stock
from 40,000,000 to 50,000,000 shares. Also, on January 29, 1996, the Board of
Directors declared it advisable that the Certificate of Incorporation of the
Company be further amended to provide for the creation of a new class of stock
to be designated Preferred Stock which shall consist of Ten Million
(10,000,000) shares each with a par value of $0.01. If a majority of the
Stockholders vote in favor of the increase in the authorized shares of Common
Stock and for the creation of the new series of stock, Article Four of the
Certificate of Incorporation will be amended as follows:
"ARTICLE IV
"The Company is authorized to issue two classes of stock to be
designated, respectively, 'Common Stock' and 'Preferred Stock'. The
total number of shares which the Company is authorized to issue is
Sixty Million (60,000,000), consisting of Fifty Million (50,000,000)
shares of Common Stock with a par value of One Cent ($0.01) per share
and Ten Million (10,000,000)) shares of Preferred Stock with a par
value of One Cent ($0.01) per share.
"The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of this Company is hereby
authorized, within the limitations and restrictions prescribed by law
or stated in this Certificate of Incorporation, and by filing a
certificate pursuant to applicable law of the State of Delaware, to
provide for the issuance of Preferred Stock in series and (i) to
establish from time to time the number of shares to be included in
each such series; (ii) to fix the voting powers, designations, powers,
preferences and relative, participating, optional or other rights,
dividend rates, conversion rights, conversion rates, voting rights,
rights and terms of redemption (including sinking fund provisions),
the redemption price or prices, and the liquidation preferences of any
wholly unissued series subsequent to the issue of shares of that
series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series."
The proposed amendment to Article Four of the Certificate of
Incorporation would increase the authorized Common Stock to Fifty Million
(50,000,000) shares, $0.01 par value, and would authorize
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<PAGE> 14
Ten Million (10,000,000) shares of Preferred Stock, $0.01 par value, which may
be divided and issued from time to time in one or more series designated by the
Board of Directors. The proposed amendment vests in the Board of Directors the
authority to fix by resolution any designations, preferences, relative rights
and limitations of the Preferred Stock and of any series thereof which may be
established by the Board of Directors.
The Board of Directors' resolutions proposing the amendment to Article
Four of the Certificate of Incorporation authorize the Board of Directors to
abandon the proposed amendment at any time prior to filing of the Certificate
of Amendment with the State of Delaware, notwithstanding the adoption of the
proposed amendment by the stockholders. The Board of Directors does not
presently foresee any circumstances that would cause the Board to abandon the
proposed amendment to Article Four of the Certificate of Incorporation.
The Board of Directors believes it is desirable to have the additional
shares of Common Stock that would be authorized by the proposed amendment
available for issuance in connection with possible future financing
transactions, acquisitions of other companies or business properties, stock
dividends or stock splits, employee benefit plans and proper corporate
purposes. Having such additional authorized shares available will give the
Company greater flexibility by permitting such shares to be issued without the
expense and delay of a special meeting of stockholders. Such a delay might
deprive the Company of the flexibility the Board views as important in
facilitating the effective use of the Company's shares. In that regard, the
Company is currently considering a public offering of Common Stock, in an
amount, and upon terms and conditions, to be determined. However, the Board
has not yet approved any such public offering. If approved, the further
authorization by the stockholders for the issuance of the Common Stock in such
offering will not be solicited. Any such offering will only be made by means
of a prospectus. The Board does not have any other current plans to issue any
of the additional shares for the purpose of a merger, consolidation,
acquisition or for any similar matters.
The additional shares of Common Stock would become part of the
existing class of Common Stock, and the additional shares, when issued, would
have the same rights and privileges as the shares of Common Stock now issued.
The holders of the Common Stock do not presently have pre-emptive rights to
subscribe for any of the Company's securities and will not have any such rights
to subscribe for the additional Common Stock proposed to be authorized.
If the proposed amendment is adopted, the Board of Directors will have
authority to cause the issuance, from time to time, of Preferred Stock and one
or more series thereof for any proper purpose without further stockholder
approval, except where, because of the particular circumstances under which any
of such shares will be issued, stockholder approval is required by law. Each
series of Preferred Stock is required to be distinctly titled and consists of
the number of shares designated by the Board of Directors. The Board of
Directors is expressly vested with the right to determine, with respect to the
Preferred Stock and each series thereof, the following: (a) whether such
shares shall be granted voting rights and, if so, to what extent and upon what
terms and conditions; (b) the rates and times at which, and the terms and
conditions on which, dividends, if any, on such shares shall be paid and any
dividend preferences or rights of cumulation; (c) whether such shares shall be
granted conversion rights and, if so, upon what terms and conditions; (d)
whether the Company shall have the right to redeem such shares and, if so, upon
what terms and conditions; (e) the liquidation rights, if any, of such shares,
including whether such shares shall enjoy any liquidation preference over the
Common Stock and, if so, to what extent; and (f) the other designations,
preferences, relative rights and limitations, if any, attaching to such shares.
In the opinion of the Board of Directors, it is desirable to authorize
such Preferred Stock so as to afford the Company the flexibility necessary to
take immediate advantage of an attractive business opportunity if one should
become available, or to aid in future financing, or for other proper business
purposes. Although at the present time the Company does not have any plans,
arrangements or understandings which contemplate the issuance of any shares of
Preferred Stock, the Board of Directors considers it advisable to have
available the shares of Preferred Stock for any proper purposes determined by
the Board of Directors. The availability of the Preferred Stock for issuance,
with authority of the Board of Directors to establish series having different
designations, preferences, relative rights and limitations, will afford the
Company a considerable degree of flexibility in meeting the needs resulting
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<PAGE> 15
from corporate developments. The Board of Directors does not presently intend
to secure any further approval from the stockholders prior to authorizing or
issuing such Preferred Stock, or any series thereof, except where such approval
is required by law.
The issuance of additional shares of Common Stock or Preferred Stock
could be used to make a change in control of the Company more difficult if the
Board caused such shares to be issued to holders who might side with the Board
in opposing a takeover bid that the Board determines is not in the best
interests of the Company and its stockholders. In addition, the availability
of the additional shares might discourage an attempt by another person or
entity to acquire control of the Company through the acquisition of a
substantial number of shares of Common Stock, since the issuance of additional
shares of Common Stock or the issuance of Preferred Stock could dilute the
stock ownership of such person or entity. Further, the existence or issuance
of such shares may make it more difficult or discourage attempts to remove
incumbent management.
The affirmative vote of a majority of the outstanding shares of Common
Stock is needed to approve the proposed amendments to the Company's Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE "FOR" ADOPTION
OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
COMPANY'S AUTHORIZED COMMON STOCK AND TO PROVIDE FOR THE CREATION OF A NEW
CLASS OF STOCK TO BE DESIGNATED PREFERRED STOCK, AS DESCRIBED ABOVE, AND YOUR
PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
5. OTHER MATTERS
As of the date of this proxy statement, the Board of Directors is not
informed of any matters, other than those stated above, that may be brought
before the meeting. However, if any matter not known is presented at the
meeting, it is the intention of the persons named in the accompanying form of
proxy to vote with respect to any such matters in accordance with their best
judgment.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders to be held in 1997 must be received by the Company on
or before November 30, 1996 for inclusion in the Company's Proxy Statement and
form of proxy relating to that Annual Meeting.
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<PAGE> 16
EXPENSES OF SOLICITATION
The Company will bear the cost of solicitation of proxies. The
solicitation of proxies by mail may be followed by telephoning or other
personal solicitation of certain stockholders and brokers by some officers or
other employees of the Company. The Company will request banks and brokers or
other similar agents or fiduciaries to transmit the proxy material to the
beneficial owners for their voting instructions and will reimburse them for
their reasonable expenses in so doing.
By Order of the Board of Directors
Robert B. Vlach, Secretary
Date: March 29, 1996
__________
IT IS URGED THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
STOCKHOLDERS ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF
PROXY.
15
<PAGE> 17
UNITED INSURANCE COMPANIES, INC.
PROXY
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Mark D. Hauptman and Robert B. Vlach
as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
common stock of United Insurance Companies, Inc. held of record by the
undersigned on March 7, 1996 at the annual meeting of stockholders to be held
on April 16, 1996 or any adjournment thereof.
1. ELECTION OF DIRECTORS FOR all nominees listed below (except
as marked to the contrary below) [ ]
WITHHOLD AUTHORITY to vote for all
nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Ronald L. Jensen, Gary L. Friedman, Richard J. Estell, J. Michael Jaynes,
Vernon R. Woelke, Richard T. Mockler, W. Brian Harrigan and Charles T. Prater:
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
public accountants for the Company:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION to change corporate name:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on other side)
<PAGE> 18
(Continued from other side)
4. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION to increase the number of
authorized shares of common stock and to provide for a new series of stock
to be known as Preferred Stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted for Proposals 1, 2, 3 and 4. Please sign exactly as name appears on the
label below. When shares are held by joint tenants, both should sign. When
signing as attorney, as executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated , 1996
----------------------------
----------------------------------------
Signature
----------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN PROXY
CARD PROMPTLY.
<PAGE> 19
UNITED INSURANCE COMPANIES, INC.
PROXY
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
Voting Instructions to ESOP Trustees
The undersigned participant in the United Insurance Companies, Inc.
Employee Stock Ownership Plan (the "ESOP") hereby instructs the Trustees of the
ESOP to vote as directed herein all shares of common stock of United Insurance
Companies, Inc. held of record on March 7, 1996 by the Trustees for the
undersigned participant's account under the ESOP. Such shares are to be voted
in person or by proxy by the Trustees at the annual meeting of stockholders to
be held on April 16, 1996 or any adjournment thereof. The substance of the
proxy solicited on behalf of the Board of Directors is set forth below.
1. ELECTION OF DIRECTORS FOR all nominees listed below (except
as marked to the contrary below)[ ]
WITHHOLD AUTHORITY to vote for all
nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Ronald L. Jensen, Gary L. Friedman, Richard J. Estell, J. Michael Jaynes,
Vernon R. Woelke, Richard T. Mockler, W. Brian Harrigan and Charles T. Prater:
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
public accountants for the Company:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION to change corporate name:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on other side)
<PAGE> 20
(Continued from other side)
4. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION to increase the number of
authorized shares of common stock and to provide for a new series of stock
known as Preferred Stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will direct the Trustees of the
Employee Stock Ownership Plan to vote in the manner directed herein. If no
direction is made by an ESOP participant, the shares so held by the ESOP for
such participant will be voted by the Trustees in the ratio of the results of
the Instructions received by the Trustees.
Please sign exactly as name appears on the label below.
Dated , 1996
----------------------------
----------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN PROXY
CARD PROMPTLY.
