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As filed with the Securities and Exchange Commission on December 22, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UICI
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(Exact name of registrant as specified in its charter)
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Delaware 75-2044750
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(State or other jurisdiction of incorporation (IRS Employer
or organization Identification No.)
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (972) 392-6700
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Vernon R. Woelke Vernon R. Woelke
4001 McEwen Drive, Suite 200 4001 McEwen Drive, Suite 200
Dallas, Texas 75244 Dallas, Texas 75244
(972) 392-6700 (972) 392-6700
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(Name, address, including zip code and telephone number, (Copies of Communications to)
including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: X
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If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item ll(A)
(1) of this Form, check the following box:
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If this Form is filed to register additional securities for an offering
pursuant to the Rule 462 (b) under the Securities Act, please check the
following box and list the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities To Be Registered . . . . . . . . . . . . . . . Common Stock, $0.01 par value
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Amount To Be Registered . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922,956 shares
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Proposed Maximum Offering Price Per Share . . . . . . . . . . . . . . . . . . . . $ 32.88
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Proposed Maximum Aggregate Offering . . . . . . . . . . . . . . . . . . . . . . . $ 30,346,793
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Amount of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,953
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(1) Calculated based on the average of the high and low reported sale
prices of a share of the Company's Common Stock as reported by NASDAQ
as of a date within five (5) business days of the date of this
Registration Statement in accordance with the provisions of Rule
457(c) under the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 22, 1997
PROSPECTUS
922,956 SHARES
UICI
COMMON STOCK
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The shares offered hereby (the "Shares") consist of 922,956 shares of
common stock, par value $0.01 per share (the "Common Stock"), of UICI, a
Delaware corporation (the "Company"). The Shares may be offered from time to
time by certain stockholders (the 'Selling Stockholders') identified herein.
See "Selling Stockholders and Plan of Distribution." The Company will not
receive any part of the proceeds from the sales of the Shares. All expenses of
registration incurred in connection herewith are being borne by the Company,
but all selling and other expenses incurred by the Selling Stockholders will be
borne by the Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific
plans for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time in transactions
(which may include block transactions) on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System at the market price
then prevailing or at prices related to prevailing prices, in negotiated
transactions at negotiated prices or otherwise. See "Selling Stockholders and
Plan of Distribution".
The Company's Common Stock trades on the NASDAQ National Market tier
of The NASDAQ Stock Market under the symbol UICI. On December 19, 1997, the
closing sale price of the Common Stock was $33 1/16 per share.
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is _____, 1997.
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained or
incorporated by reference in this Prospectus, in connection with the offering
contained herein and, if given or made, such information must not be relied
upon as having been authorized by the Company or the Selling Stockholders.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof.
TABLE OF CONTENTS
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Selling Stockholders and Plan
Available Information..................... 3 of Distribution........................... 11
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Incorporation of Certain Documents
by Reference............................ 4 Description of Capital Stock............... 12
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The Company............................... 5 Experts.................................... 13
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Risk Factors.............................. 7 Legal Matters.............................. 13
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Use of Proceeds........................... 10
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements filed by the Company may be inspected and copied at
the Public Reference Section of the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington D.C. 20549 at prescribed rates. The Company's securities are quoted
on the NASDAQ National Market. Reports and other information about the Company
may be inspected at the offices maintained by the National Association of
Securities Dealers, Inc., NASDAQ Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company; the address of such site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Act"), with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Any statements contained herein concerning the provisions of any
document are not necessarily complete and, in each
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instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. Copies of the
Registration Statement, including all exhibits thereto, may be obtained from
the Commission's principal office in Washington D.C. upon payment of the fees
prescribed by the Commission or may be examined without charge at the offices
of the Commission as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company
with the Commission are incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K/A for the year ended
December 31, 1996, filed on April 3, 1997.
(b) The Company's Quarterly Reports on Form 10-Q for quarters ended
March 31, 1997 filed on May 15, 1997, June 30, 1997 filed on August 13, 1997,
and September 30, 1997 filed on November 13, 1997.
(c) The registration statement on Form 8-A filed on March 17, 1986,
which discusses the terms of the Common Stock as updated by Quarterly Report on
10-Q for quarter ended June 30, 1996 filed on August 13, 1996.
Each document filed subsequent to the date of this Prospectus by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
Any statement contained in a document, all or a portion of which is
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents
that this Prospectus incorporates). Written or oral requests for copies should
be directed to: Investor Relations, UICI, 4001 McEwen Drive, Suite 200, Dallas,
Texas 75244-5082, (telephone number (972) 392-6700).
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THE COMPANY
UICI and subsidiaries (the "Company"), provides health, life and other
financial products to selected niche markets. The Company issues health
insurance policies to the self-employed and student markets. For the
self-employed market, which includes self-employed individuals and individuals
who work for small businesses with five or fewer employees, the Company offers
a range of health insurance products. Catastrophic hospital and basic
hospital-medical expense plans are tailored to an insured's individual needs
and include managed care options such as a Preferred Provider Organization
("PPO") plan as well as other coverage modifications. The Company markets
these products through "dedicated" agency sales forces, consisting of over
5,000 independent contractors who primarily sell the Company's products. For
the student market, the Company offers tailored insurance programs which
generally provide single school year coverage to individual students primarily
at universities but also at public and private schools for kindergarten through
grade 12. In this market, the Company sells its products through in-house
account executives who focus on colleges and universities on a national basis.
Health insurance premiums were $501.2 million in 1996, or 69% of the Company's
total revenues.
The Company issues life insurance products to selected niche markets
and acquires blocks of life insurance and annuity policies from other insurers
on an opportunistic basis. The life insurance policies issued by the Company
are marketed through a dedicated agency sales force. In addition, the Company
assists individuals with no, or troubled, credit experience in obtaining a
nationally recognized credit card by providing financial support for the card.
This product is marketed through a sales force of independent contractors. The
Company also offers advanced paperless technologies, value added administrative
and outsourcing services, and underwriting, risk management and consulting
services to clients in the health care market. In 1996, the Company acquired
an interest in a real estate organization that is focused on the development,
acquisition and management of institutional quality multifamily communities in
the Southeast, Southwest and Midwest areas of the United States. In 1997, the
Company made several acquisitions whereby it acquired a controlling interest in
a company that develops, markets, and services innovative programs that allow
students and families to finance the costs associated with obtaining a
post-secondary education. The programs provide access to an array of student
loan products and services, including federally guaranteed loans originated
according to the Higher Education Act of 1965. Also in 1997, the Company
acquired a provider of motor club services to motorists. The Company markets
and provides over 450,000 members with benefits such as road and towing
assistance, trip routing, emergency travel assistance, and accident related
indemnity benefits.
At its inception in 1984, the Company's business consisted solely of
coinsurance of health and term life insurance policies sold by United Group
Association, Inc. ("UGA") agents to the self-employed market and issued by
subsidiaries of AEGON USA, Inc. (together with its subsidiaries, "AEGON").
Principally through acquisitions of insurance companies and blocks of life
insurance and annuity policies, and the development of the underwriting and
administrative capabilities to issue insurance policies directly, the
percentage of the Company's total revenues in 1996 relating to the coinsurance
business decreased to 32% from 72% in 1986 (although in absolute terms such
revenues continued to increase over prior years).
On April 1, 1996 the Company acquired AEGON's underwriting, claims
management and administrative capabilities related to products coinsured by the
Company. In connection with this
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transaction, UGA agents began to market health insurance products of the
Company rather than the coinsured product. Effective January 1, 1997, the
Company acquired the agency force and certain assets of UGA for a price equal
to the net book value of the tangible assets acquired and assumed certain agent
commitments which are estimated not to exceed $5.0 million. UGA was owned 100%
by the Company's Chairman at December 31, 1996. The tangible assets acquired
consist primarily of agent debit balances, a building, and related furniture
and fixtures having a net book value of $13.1 million, which approximates
market value of the tangible assets. The elimination of the sharing of
business with AEGON and the acquisition of the agency force are expected to
have a positive impact on the long term future of the Company.
The Company's principal subsidiaries through which the business of the
Self-Employed Health Insurance Division, Student Health Insurance Division and
the Life Insurance and Annuity Division are conducted are The MEGA Life and
Health Insurance Company ("MEGA"), which is wholly-owned by the Company,
Mid-West National Life Insurance Company of Tennessee ("Mid-West"), in which
the Company owns 99% of the outstanding stock, and The Chesapeake Life
Insurance Company ("Chesapeake"), in which the Company owns 78% of the
outstanding stock. MEGA is an insurance company domiciled in Oklahoma and is
licensed to issue health and life insurance policies in all states except New
York. Mid-West is an insurance company domiciled in Tennessee and is licensed
to issue health and life insurance policies in Puerto Rico and all states
except Maine, New Hampshire, New York, and Vermont. Chesapeake is an insurance
company domiciled in Oklahoma and is licensed to issue health and life
insurance policies in all states except New Jersey, New York and Vermont.
MEGA is currently rated "A (Excellent)," Mid-West is currently rated "A-
(Excellent)," and Chesapeake is currently rated "B++ (Very Good)" by A.M. Best.
A.M. Best's ratings currently range from "A++ (Superior)" to "F (Liquidation)."
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.
The business of the Credit Services Division is conducted primarily
through United Credit National Bank and Specialized Card Services, Inc., both
wholly-owned subsidiaries, and United Membership Marketing Group, LLC, in which
the Company owns 85% of the outstanding equity. The student loan business is
conducted primarily through Education Finance Group, LLP in which the Company
owns a 63.6% interest. The motor club business is conducted through National
Motor Club of America, Inc. which is licensed to do business in 47 states.
The Institutional Technology and Outsourcing Division operates through
a number of wholly-owned and partially owned subsidiaries, as well as companies
in which the Company does not hold a majority interest. Effective January 1,
1997, the Company acquired the remaining interest of its subsidiaries Insurdata
Incorporated ("Insurdata") and UICI Insurance Administrators, Incorporated
("UAI"), based on a predetermined formula price of $15.1 million. The Company
acquired a majority interest in Insurdata and UAI in October 1995.
In November 1996, the Company acquired through a privately negotiated
stock exchange agreement 100% of Amli Realty Co. ("ARC"). ARC is a
full-service real estate organization whose principal investment is a 11%
equity interest in Amli Residential Properties Trust, a publicly traded real
estate investment trust. The Company, including ARC, has a 14% equity interest
in Amli Residential Properties Trust.
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In December 1997, the Company acquired through a privately negotiated
merger agreement 100% of ELA Corp. ("ELA"). ELA provides marketing and
pre-disbursement servicing of college student loans made under the Federal
Family Education Loan Program.
The Company's principal executive offices are located at 4001 McEwen
Drive, Suite 200, Dallas, Texas 75244. Its telephone number is (972) 392-6700.
RISK FACTORS
The following information, in addition to the other information
contained in this Prospectus, should be considered carefully by prospective
purchasers of the Common Stock in evaluating the Company, its business and an
investment in the shares of Common Stock offered hereby. Certain statements
set forth herein or incorporated by reference herein from the Company's filings
that are not historical facts are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. Actual results may differ
materially from those included in the forward-looking statements. These
forward-looking statements involve risks and uncertainties including, but not
limited to, the following:
HEALTH CARE REFORM
Many proposals have been introduced in Congress and various state
legislatures to reform the present health care system. Some of these proposals
are specifically directed at the small group health care market, which could
affect the Company's principal business. At the state level, a number of
states have passed or are considering legislation that would limit the
differentials in rates that carriers could charge between new business and
renewal business and with respect to similar demographic groups. Legislation
also has been adopted or is being considered that would make health insurance
available to all small groups by requiring coverage of all employees and their
dependents, by limiting the applicability of pre-existing conditions
exclusions, by requiring carriers to offer a basic plan exempt from certain
mandated benefits as well as a standard plan and by establishing a mechanism to
spread the risk of high risk employees to all small group carriers.
At the federal level, several competing proposals have been introduced
or passed in Congress. One law which was introduced by Senators Nancy
Kassebaum and Edward Kennedy (the "Kassebaum-Kennedy legislation") was passed
in 1996. The Kassebaum-Kennedy legislation builds upon state initiatives by
guaranteeing "group-to-individual" portability. Under the legislation, any
person governed by a group insurance plan for at least eighteen months will, on
leaving the group plan, have the right to buy an individual policy from any
insurance company selling individual health insurance policies in that person's
state regardless of whether that person has a preexisting condition. This
provision could result in the Company insuring individuals who under the
Company's current underwriting standards would not be insured by the Company,
which could have a material adverse effect on the Company.
The Company is unable to predict when or whether any federal or state
proposals, or some combination thereof, will be enacted or, if enacted, the
likely impact on the Company. It is possible, however, that the enactment of
such health care reform legislation could adversely affect the Company's
results of operations. The Company has ceased issuing or coinsuring insurance
in the self-employed market in several states as a result of legislative
developments.
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INCREASING HEALTH CARE COSTS
The Company's profitability from health insurance depends in large
part on its ability to predict and effectively manage claims related to health
care costs. The aging of the population and other demographic characteristics
and advances in medical technology continue to contribute to rising health care
costs. Government- imposed limitations on Medicare and Medicaid reimbursements
also have caused the private sector to bear a greater share of increasing
health care costs. Changes in health care practices, inflation, new
technologies, major epidemics, natural disasters and numerous other factors
affecting the delivery and cost of health care are beyond any company's control
and may limit the Company's ability to predict and control health care costs
and claims.
REGULATION
The Company's insurance subsidiaries, and the manner in which their
businesses are conducted, are subject to extensive regulation in their
domiciliary states and the other states in which they do business. Such
regulation is primarily intended to protect policyholders rather than
investors. Federal regulation, such as the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), also affects the manner in which the
Company's insurance subsidiaries conduct their business. Certain of the
Company's subsidiaries, and the manner in which their businesses are conducted,
are also subject to regulation not directly related to the business of
insurance, including regulation of student loans and the marketing of credit
cards.
Compliance with legal or regulatory restrictions limits the ability of
the Company's subsidiaries to conduct their operations. A failure to comply
may subject the affected subsidiary to a loss or suspension of a right to
engage in certain businesses or business practices, criminal or civil fines, an
obligation to make restitution or pay refunds or other sanctions, which could
adversely affect the manner in which the Company's subsidiaries conduct their
businesses and the Company's results of operations.
State and federal regulation is continually changing and the Company
is unable to predict whether or when any such changes will be adopted. It is
possible, however, that the adoption of such changes could adversely affect the
manner in which the Company's subsidiaries conduct their business and the
Company's results of operations.
RELIANCE ON KEY MANAGEMENT
The Company relies on its senior management, including Mr. Ronald L.
Jensen, Chairman of the Board, President and Chief Executive Officer, and the
executives who are responsible for the business of the Company's various
divisions. Such executives are given substantial responsibility for their
respective divisions. The loss of the services of any of these persons could
have a material adverse effect on the Company's results of operations.
CONFLICTS OF INTERESTS WITH MR. JENSEN AND JENSEN-OWNED COMPANIES
Mr. Jensen owns approximately 18% of the Common Stock as of the date
of this Prospectus. The Company depends on certain relationships with other
companies owned by Mr. Jensen. The interests of Mr. Jensen, and companies in
which Mr. Jensen owns an interest may conflict with the interests of the
Company, including with respect to the amount of compensation payable by the
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Company and the freedom of Mr. Jensen and such companies to engage in other
activities, and with respect to any negotiations of, disputes under, or
breaches of, any such agreements or arrangements. Certain officers and
employees of the Company, in addition to Mr. Jensen, also serve as officers or
directors of, or provide services to other companies in which Mr. Jensen owns
an interest.
Mr. Jensen, and other companies in which Mr. Jensen owns an interest
have engaged in a number of financial and other transactions with the Company.
The Board has adopted a policy that all material transactions in which there
may be a conflict of interest between the Company and Mr. Jensen are reviewed
and approved by a majority of the independent members of the Board.
CONTROL BY JENSEN FAMILY
Mr. Jensen beneficially owns approximately 18% of the outstanding
Common Stock and remains the Company's largest stockholder. In addition, his
adult children, directly and through Onward and Upward, Inc., own approximately
13% of the Common Stock. Accordingly, Mr. Jensen can be expected to have the
ability to control the direction of the Company.
COMPETITION
The Company operates in highly competitive industries. The Company's
insurance divisions compete with large national insurers, regional insurers and
specialty insurers, many of which are larger and have substantially greater
financial resources or higher A.M. Best ratings than the Company. In addition
to claims paying ratings, insurers compete on the basis of price, breadth and
flexibility of coverage, ability to attract and retain agents and the quality
and level of agent and policyholder services provided. The Company's other
divisions compete with financial services companies, managed care consultants,
and third party administrators, among others. Many of the competitors may have
greater financial resources, broader product lines or greater experience in
particular lines of business. The Institutional Technology and Outsourcing
Division has only recently been formed and therefore competes with other
companies with significantly greater experience in highly competitive markets.
There can be no assurance that the Institutional Technology and Outsourcing
Division will be successful competing in such markets.
ADEQUACY OF CLAIMS LIABILITIES
The liability for claims established by the Company are estimates of
amounts needed to pay reported and unreported claims based on facts and
circumstances known at the time the liabilities are established. Liabilities
are based on historical claims information, industry statistics and other
factors. The establishment of appropriate liabilities is an inherently
uncertain process, and there can be no assurance that the ultimate liability
will not materially exceed the Company's claims liability and have a material
adverse effect on the Company's results of operations and financial condition.
Due to the inherent uncertainty of estimating claims liabilities, it has been
necessary, and may in the future be necessary, to revise estimated future
liabilities as reflected in the Company's claims liability. When the Company
acquires blocks of insurance policies or insurers owning such blocks, the
Company's assessment of the adequacy of transferred policy liabilities is
subject to similar uncertainties. The Company has not had a revision in claims
liabilities in the last five years which resulted in recording an increase in
the liability for prior years.
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CERTAIN RISKS ASSOCIATED WITH CREDIT CARD BUSINESS
There are certain risks associated with the credit card business. The
primary risk involves the possibility of future economic downturns causing an
increase in credit losses. The Company currently targets the market of
individuals with no, or troubled, credit experience, for which market there is
generally limited historical loss information available. Accordingly, the
Company has experienced, and expects to continue to experience, higher credit
losses than industry averages. While the Company does not directly bear the
risk of credit losses on securitized credit card loans, certain risks are
associated with the securitized loans, including the risk of early amortization
upon the occurrence of certain events, which could accelerate the need for
funding. The Company's ability to sustain the recent rate of growth in its
credit card portfolio is dependent upon the success of its marketing programs.
RISKS ASSOCIATED WITH STUDENT LOAN BUSINESS
The Company has certain risks associated with the Student Loan
business. The changes in the Higher Education Act or other relevant federal or
state laws, rules and regulations and the programs implemented thereunder may
adversely impact the education credit market. In addition, existing
legislation and future measures to reduce the federal budget deficit may
adversely affect the amount and nature of federal financial assistance
available with respect to loans made through the U.S. Department of Education.
Finally, the level of competition currently in existence in the secondary
market for loans made under the Federal Loan Programs could be reduced,
resulting in fewer potential buyers of the Federal Loans and lower prices
available in the secondary market for those loans.
INVESTMENT PORTFOLIO
The Company's investment portfolio primarily consists of fixed
maturity securities such as investment grade publicly traded debt securities
and mortgage and asset backed securities, including collateralized mortgage
obligations. At September 30, 1997, approximately 75% and 13% of the Company's
invested assets were fixed maturity securities and short term investments,
respectively. Fixed maturity securities were approximately 62% fixed income
and 38% mortgage and asset backed securities. Certain risks are inherent in
connection with fixed income securities, including loss upon default and price
volatility in reaction to changes in interest rates and general market factors.
Certain additional risks are inherent with mortgage-backed securities,
including the risks associated with reinvestment of proceeds due to prepayments
of such obligations.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
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SELLING STOCKHOLDERS AND PLAN
OF DISTRIBUTION
In December 1997, the Company acquired through a negotiated merger
agreement 100% of ELA Corp. ("ELA"). The Company issued 922,956 shares of its
Common Stock for all of the outstanding Common Stock of ELA. ELA provides
marketing and pre-disbursement servicing of college student loans made under
the Federal Family Education Loan Program. The 922,956 shares offered hereby
consist of the Common Stock issued by the Company to the stockholders of ELA
pursuant to the merger agreement.
The following table sets forth as of December 22, 1997, information
regarding the beneficial ownership of the Company's Common Stock held by each
Selling Stockholder who may sell the Shares pursuant to this Prospectus as of
such date, the number of Shares offered hereunder by each such Selling
Stockholder and the net ownership of shares of Common Stock, if all such Shares
so offered are sold by each Selling Stockholder.
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Beneficial Ownership Beneficial Ownership
Before Offering After Offering
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Shares
Name of Selling Offered Percentage
Stockholder Shares(1) Percentage Hereby Shares of UICI
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Marcus A. Katz 470,708 1% 470,708 -0- (3)
Cary S. Katz 378,412(2) (3) 378,412(2) -0- (3)
Ryan D. Katz 73,836 (3) 73,832 -0- (3)
RK Trust #2 147,673 (3) 147,673 -0- (3)
</TABLE>
(1) Except as otherwise noted, all shares are beneficially owned and sole
voting and investment power is held by party named.
(2) Includes 147,673 shares held by RK Trust #2. Cary S. Katz is the
trustee of RK Trust #2 .
(3) Less than 1%.
Except as described below, none of the selling stockholders have held
within the most three years any position, office or other material relationship
with the Company or its affiliates. Prior to the Company's acquisition of ELA,
the selling stockholders were stockholders of ELA and, in the case of Marcus A.
Katz, Cary S. Katz, and Ryan D. Katz, officers and directors of ELA and have
been employed by the Company.
The Selling Stockholders may sell some or all of the Shares in
transactions involving broker/dealers, who may act as agent or acquire the
Shares as principal. Any broker/dealer participating in such transactions as
agent may receive a commission from the Selling Stockholders (and, if they act
as agent for the purchaser of such Shares, from such purchaser). Usual and
customary brokerage fees will be paid by the Selling Stockholders.
Broker/dealers may agree with the Selling Stockholders to sell a specified
number of Shares at a stipulated price per Share and, to the extent such
broker/dealer is unable to do so acting as agent for the Selling Stockholders,
to purchase as principal any unsold Shares at the price required to fulfill the
respective broker/dealer's commitment to the Selling Stockholders.
Broker/dealers who acquire Shares as principals may
11
<PAGE> 12
thereafter resell such Shares from time to time in transactions (which may
involve cross and block transactions and which may involve sales to and through
other broker/dealers, including transactions of the nature described above) in
the over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices, and in
connection will such resales may pay to or receive commissions from the
purchasers of such Shares. The Selling Stockholders also may sell some or all
of the Shares directly to purchasers without the assistance of any
broker/dealer.
The Company is bearing all costs relating to the registration of the
Shares. Any commissions or other fees payable to broker/dealers in connection
with any sale of the Shares will be borne by the Selling Stockholders or other
party selling such Shares.
The Selling Stockholders must comply with the requirements of the Act
and the Exchange Act and the rules and regulations thereunder in the offer and
sale of the Shares. In particular, during such times as the Selling
Stockholders may be deemed to be engaged in a distribution of the Common Stock,
and therefore be deemed to be underwriters, under the Act, they must comply
with Rules l0b-6 and 10b-7 under the Exchange Act, and will, among other
things:
(a) not engage in any stabilization activities in connection with
the Company's securities;
(b) furnish each broker/dealer through which Shares may be offered
such copies of this Prospectus, as amended from time to time,
as may be required by such broker/dealer; and
(c) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the
Company other than as permitted under the Exchange Act.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $0.01 per share and 10,000,000 shares of
Preferred Stock, par value $0.01 per share.
As of December 22, 1997, the Company had outstanding 46,214,507 shares
of Common Stock.
Common Stock
The Company has not paid cash dividends on its Common Stock to date.
The Company currently intends to retain all future earnings to finance
continued expansion and operation of its business and subsidiaries. Any
decision as to the payment of dividends to the stockholders of the Company will
be made by the Company's Board of Directors and will depend upon the Company's
future results of operations, financial condition, capital requirements and
such other factors as the Board of Directors considers appropriate.
12
<PAGE> 13
Transfer Agent
The Transfer Agent and registrar for the Common Stock is UICI.
EXPERTS
The consolidated financial statements of UICI appearing in UICI's
Annual Report (Form 10-K/A for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Robert B. Vlach, General Counsel of the Company. Mr. Vlach is
the beneficial owner of 27,149 shares of Common Stock.
13
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
OTHER EXPENSES
Item 14. Other Expenses of Issuance and Distribution (1)
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee: $ 8,953
Accounting fees and expenses: 7,500
Legal fees and expenses: 10,000
Blue Sky fees and expenses: 1,000
Miscellaneous: 1,000
-------
$28,453
=======
</TABLE>
(1) All amounts are estimates other than the Commission's
registration fee. No portion of these expenses will be borne
by the Selling Stockholders.
INDEMNIFICATION
Item 15. Indemnification of Directors and Officers
(a) The General Corporation Law of Delaware (Section 145) gives
Delaware corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers, subject to specified
conditions and exclusions; gives a director or officer who successfully defends
an action the right to be so indemnified; and authorizes the Company to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-laws, agreement, vote of stockholders or otherwise.
(b) Article 8.08 of the By-Laws of the Company provides for
indemnification of, and the advancement of expenses which may become subject to
indemnification under the By-Laws to, directors and officers and any person who
served at the Company's request as a director or officer of another
corporation. The indemnification and advancement of expenses provisions
contained in the By-Laws are not exclusive of any other rights.
II - 1
<PAGE> 15
EXHIBITS SCHEDULES
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2.1 Plan of Reorganization of United Group Insurance Company, as subsidiary of United Group Companies, Inc.
and Plan and Agreement of Merger of United Group Companies, Inc. into United Insurance Companies, Inc.
filed as Exhibit 2-1 to the Registration Statement on Form S-1, File No. 33-2998, filed with the
Securities and Exchange Commission on January 30, 1986 and incorporated by reference herein.
3.1(A) Certificate of Incorporation of UICI, as amended, filed as Exhibit 3.1 to the Form 10-Q dated June 30,
1996, filed on August 13, 1996, File No. 0-14320, and incorporated by reference herein.
3.2(A) Restated By-Laws, as amended, of the Company, filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, filed on March 29, 1996 and incorporated by reference herein.
4.1 Refer to Exhibits 3.1 and 3.2 to this Registration Statement
5.1 Opinion of Robert B. Vlach, Esquire
10.32 Agreement dated December 6, 1997 by and between UICI, UICI Acquisition Corp, ELA Corp., and Marcus A
Katz, Cary S. Katz, Ryan D. Katz, and RK Trust #2.
23 Consent of Ernst & Young LLP
23.1 Consent of Robert B. Vlach, Esquire (contained in his opinion filed as Exhibit 5.1 to this Registration
Statement).
24.1 Powers of Attorney (included on signature page of this Registration Statement).
27 Financial Data Schedule. Filed as Exhibit 27 to the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1996, filed on April 3, 1997 and incorporated herein by reference.
</TABLE>
II - 2
<PAGE> 16
UNDERTAKINGS
Item 17. Undertaking.
(a) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in this 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions set forth or described in Item 15
(except as set forth in paragraphs (c) and (d) therein) of this Registration
Statement, 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 Securities 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, or claims to the extent covered by contracts of
insurance) 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
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes:
(a) 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 1933;
(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;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement;
Provided, however, that paragraphs (a)(i) and
(a)(ii) do not apply if the registration
statement is on Form S-3 or Form S-8, and the
information required to be included in a
post-effective amendment by those paragraphs
is contained in periodic reports filed by the
registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the
Registration Statement.
II - 3
<PAGE> 17
(b) That, for the purpose of determining any liability
under the Securities Act, 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.
(c) 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.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on December 22, 1997.
UICI
By: /s/Vernon R. Woelke
-----------------------
Vernon R. Woelke
Vice President
<PAGE> 18
Each person whose signature appears below constitutes and appoints
Vernon R. Woelke and Robert B. Vlach, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to the Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and hereby grants to such attorneys-in-fact
and agents, and each of them full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully for all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 22, 1997.
<TABLE>
<CAPTION>
Signature Capacity in Which Signed Date
- --------- ------------------------ ----
<S> <C>
/s/ Ronald L. Jensen Chairman of the Board, President December 22, 1997
- --------------------- (Principal Executive Officer) and Director --------------------------------
Ronald L. Jensen
/s/ Richard J. Estell Director and Executive December 22, 1997
- ---------------------- Vice President --------------------------------
Richard J. Estell
/s/ J. Michael Jaynes Director December 22, 1997
- ---------------------- --------------------------------
J. Michael Jaynes
/s/ Gary L. Friedman Director December 22, 1997
- --------------------- --------------------------------
Gary L. Friedman
/s/ Vernon R. Woelke Vice President, Treasurer December 22, 1997
- --------------------- (Principal Financial Officer and --------------------------------
Vernon R. Woelke Principal Accounting Officer) and Director
/s/ Charles T. Prater Vice President and Director December 22, 1997
- ---------------------- --------------------------------
Charles T. Prater
</TABLE>
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
2.1 Plan of Reorganization of United Group Insurance Company, as subsidiary of United Group Companies, Inc.
and Plan and Agreement of Merger of United Group Companies, Inc. into United Insurance Companies, Inc.
filed as Exhibit 2-1 to the Registration Statement on Form S-1, File No. 33-2998, filed with the
Securities and Exchange Commission on January 30, 1986 and incorporated by reference herein.
3.1(A) Certificate of Incorporation of UICI, as amended, filed as Exhibit 3.1 to the Form 10-Q dated June 30,
1996, filed on August 13, 1996, File No. 0-14320, and incorporated by reference herein.
3.2(A) Restated By-Laws, as amended, of the Company, filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed on March 29, 1996 and
incorporated by reference herein.
4.1 Refer to Exhibits 3.1 and 3.2 to this Registration Statement
5.1 Opinion of Robert B. Vlach, Esquire
10.32 Agreement dated December 6, 1997 by and between UICI, UICI Acquisition Corp, ELA Corp., and Marcus A
Katz, Cary S. Katz, Ryan D. Katz, and RK Trust #2.
23 Consent of Ernst & Young LLP
23.1 Consent of Robert B. Vlach, Esquire (contained in his opinion filed as Exhibit 5.1 to this Registration
Statement).
24.1 Powers of Attorney (included on signature page of this Registration Statement).
27 Financial Data Schedule. Filed as Exhibit 27 to the Company's Annual Report on Form 10-K/A for the
year ended December 31, 1996, filed on April 3, 1997 and incorporated herein by reference.
</TABLE>
<PAGE> 1
ROBERT B. VLACH, ESQ.
GENERAL COUNSEL
UICI
4001 MCEWEN ROAD, SUITE 200
DALLAS, TEXAS 75244
Exhibit 5.1
December 22, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
SUBJECT: Common Stock, $0.01 par value
Ladies and Gentlemen:
I am the general counsel of UICI, a Delaware corporation (the "Company"). I
have reviewed the issuance of the 922,956 shares (the "Subject Shares") of the
Company's Common Stock, $0.01 par value per share (the "Common Stock"), to
certain persons (the "Selling Stockholders") in connection with the stock
exchange agreement between the Company and ELA Corp. The Subject Shares are
being registered with the Securities and Exchange Commission on the Form S-3
Registration Statement to which this letter is attached as Exhibit 5.1. I have
examined such corporate and other records, instruments, certificates and
documents as I considered necessary to enable me to express this opinion.
Based on the foregoing, I am of the opinion that the Subject Shares were duly
authorized for issuance and that the Seller Stockholders have obtained validly
issued, fully paid and non-assessable shares of Common Stock.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me under the caption "Legal Matters."
Very truly yours,
Robert B. Vlach, Esq.
<PAGE> 1
EXHIBIT 10.32
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter the "Agreement"), is
made and entered into as of the 6th day of December, 1997, by and among UICI, a
corporation organized under the laws of the State of Delaware ("UICI"), UICI
ACQUISITION CORP., a corporation organized under the laws of the State of
Georgia ("SUBSIDIARY"), ELA CORP., a corporation organized under the laws of the
State of Georgia ("ELA"), and MARCUS A. KATZ, CARY S. KATZ, AND RYAN D. KATZ,
individually and as shareholders of ELA, and RK TRUST #2, Cary S. Katz, Trustee
(collectively, "KATZ").
W I T N E S S E T H:
WHEREAS, SUBSIDIARY is a wholly-owned subsidiary of UICI;
WHEREAS, ELA desires to merge into SUBSIDIARY;
WHEREAS, the Board of Directors of ELA and KATZ, as sole shareholders
of ELA, have approved this Agreement and the merger;
WHEREAS, the Board of Directors of SUBSIDIARY and UICI, as the sole
shareholder of SUBSIDIARY, have approved this Agreement and the merger; and
WHEREAS, UICI, SUBSIDIARY, KATZ and ELA desire that the merger qualify
as a reorganization described in Sections 368(a)(1)(A) and (a)(2)(D) of the
Internal Revenue Code of 1986 (the "Code").
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto do hereby agree as follows:
SECTION I
THE MERGER
1.1 Constituent Corporations. The constituent corporations to the
merger of ELA into SUBSIDIARY ("Merger") are SUBSIDIARY and ELA.
1.2 Effective Date. This Agreement has been submitted to and approved
by the shareholders and Boards of Directors of SUBSIDIARY and ELA (and the Board
of Directors of UICI) as provided by the appropriate statutes of the State of
Georgia. If all of the conditions precedent to the Merger have either been
fulfilled or waived in writing, a Certificate of Merger shall be executed,
delivered, filed and recorded in accordance with the laws of the State of
Georgia as soon as practical thereafter, unless otherwise agreed by the parties
in writing. The Merger will become effective when the Certificate of Merger is
filed with the Secretary of the State of Georgia or as
<PAGE> 2
otherwise set forth in the Certificate of Merger. The date on which the Merger
shall become effective is referred to herein as the "Effective Date" or
"Closing."
1.3 Merger of ELA into SUBSIDIARY. Upon the Effective Date, ELA shall
merge into SUBSIDIARY in accordance with the applicable statutes of the State of
Georgia. The separate existence and corporate organization of ELA shall cease on
the Effective Date and SUBSIDIARY, as the surviving corporation ("Surviving
Corporation"), shall succeed to and possess all of the properties, rights,
privileges, powers, franchises, immunities and purposes and be subject to all
the debts, liabilities, obligations, restrictions, disabilities, penalties and
duties of ELA, all without further act or deed.
1.4 Additional Documents. At any time after the Effective Date, upon
request by the Surviving Corporation, the proper officers and directors of ELA
as of the Effective Date shall execute and deliver any and all deeds,
assignments and other instruments, and shall take or cause to be taken such
further or other action as the Surviving Corporation may reasonably deem
necessary or desirable in order to vest, perfect or confirm title to and
possession of all the properties, rights, privileges, powers, franchises,
immunities and purposes in the Surviving Corporation and otherwise to carry out
fully the provisions and purposes of this Agreement.
1.5 Amendment of Articles of Incorporation. From and after the
Effective Date and until thereafter amended as provided by law, the articles of
incorporation of SUBSIDIARY as in effect immediately prior to the Effective Date
shall be the articles of incorporation of the Surviving Corporation, except that
on the Effective Date, Article 1 of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows: The name of the
corporation is "UICI Acquisition Corp." and shall do business as the National
Education Loan Center.
1.6 Bylaws. From and after the Effective Date and until thereafter
amended as provided by law, the bylaws of SUBSIDIARY as in effect immediately
prior to the Effective Date, shall be the bylaws of the Surviving Corporation.
1.7 Directors and Officers. From and after the Effective Date, the
directors and officers of the Surviving Corporation shall be the directors and
officers of SUBSIDIARY. Such directors and officers shall hold office for the
time specified in and subject to the provisions contained in the bylaws of the
Surviving Corporation and applicable law.
1.8 Conversion of Shares of ELA.
(a) At the Effective Date, by virtue of the Merger and without further
action on the part of UICI, SUBSIDIARY, ELA, KATZ or the Surviving Corporation,
the outstanding shares of ELA ("ELA Shares"), shall be converted into and become
the right to receive an aggregate number of UICI shares of common stock, $0.01
par value having a value equal to $31,177,437.49 ("UICI Shares"). As of the
Effective Date, the number of UICI Shares into which the ELA Shares shall be
converted shall be 922,956 (such number of UICI Shares being based upon the
average of the daily
-2-
<PAGE> 3
closing prices of UICI Common Stock on the NASDAQ National Market as reported by
The Wall Street Journal for the number of consecutive full trading days
commencing on September 30, 1997 and ending on December 17, 1997). At Closing,
KATZ shall receive such 922,956 UICI Shares, which shares shall not be
registered under the Securities Act of 1933. Following Closing, UICI shall
expeditiously register such UICI Shares under the Securities Act of 1933 and
cause such registration to remain effective until such UICI Shares can be sold
without restrictions or limitations (including volume limitations), and such
registration shall be deemed initially completed at such time as the Securities
and Exchange Commission declares such registration effective. At such time as
KATZ receives such 922,956 UICI Shares which are registered under the Securities
Act of 1933 and declared effective, the final number of UICI Shares to be
received by KATZ shall be recomputed and based upon the average of the daily
closing prices of UICI Common Stock on the NASDAQ National Market as reported by
the Wall Street Journal for the number of consecutive full trading days
commencing on September 30, 1997 and ending on the business day prior to the day
that such 922,956 UICI Shares received by KATZ are registered under the
Securities Act of 1933. In the event KATZ is entitled (which entitlement shall
not be assignable) to additional UICI Shares as a result of such recomputation,
UICI shall register such additional UICI Shares under the Securities Act of
1933, pursuant to Section VI of this Agreement. If as a result of such
computation, KATZ has received UICI Shares in excess of the recomputed sum, KATZ
shall immediately return such excess shares to UICI. The aggregate number of
UICI Shares to be issued for all ELA Shares shall be distributed as follows: 25%
to Cary S. Katz, 8% to Ryan D. Katz, 16% to Ryan Trust 2, (Cary S. Katz,
Trustee) and 51% to Marcus A. Katz. Subject to the receipt by KATZ of UICI
Registered Securities, KATZ shall accept the UICI Shares as the sole
consideration and in full consideration for the ELA Shares converted into UICI
Shares pursuant to this Section 1.8. The number of shares shall also be adjusted
to reflect any stock split, stock dividend, dividend other than in cash and any
other similar transactions hereinafter effected.
(b) Upon the Merger, the transfer agent of UICI will be directed by
UICI to immediately issue and deliver to KATZ as of the Effective Date stock
certificate(s) representing UICI Shares.
(c) The ELA Shares and the UICI Shares shall be free and clear of all
liens, claims, pledges, options, encumbrances, restrictions on transfer (except
those under applicable securities laws) and voting, and rights of others of
every nature whatsoever.
1.9 Conversion of Shares of SUBSIDIARY. Each share of common stock of
SUBSIDIARY which shall be outstanding immediately prior to the Effective Date
shall remain outstanding.
1.10 Dissenter's Rights. SUBSIDIARY and ELA, each, shall have fully
complied with the requirements to provide the shareholders with notice of
dissenter's rights under applicable laws.
-3-
<PAGE> 4
1.11 Treasury Shares of ELA. On the Effective Date, all shares of common
stock of ELA then held in the treasury, if any, shall automatically cease to
exist and all certificates representing such shares shall be canceled.
1.12 Rights of Shareholders of ELA after Effective Date. After the
Effective Date and until the surrender of the outstanding share certificates of
ELA Shares, each such outstanding certificate, which prior to the Effective Date
represented shares of common stock of ELA, shall be deemed for all corporate
purposes to evidence the right to receive the UICI Shares into which such shares
shall have been converted.
1.13 Equal Value. ELA, KATZ, SUBSIDIARY and UICI agree that the fair market
value of the aggregate UICI Shares will be approximately equal to the fair
market value of the aggregate ELA Shares.
1.14 No Other Consideration. All parties hereto agree that no other
property, cash or rights to acquire other property or securities shall be
included in this Merger or constitute additional consideration for the Merger.
1.15 Closing. The Merger described herein shall be completed by December
31, 1997. The Closing will be held at such place and time as the parties may
mutually agree in writing. At the Closing the parties to this Agreement will
exchange instruments and documents as specified herein and as reasonably
requested as hereinafter provided in order to determine whether the terms and
conditions of this Agreement have been satisfied, including opinions of counsel
of the parties hereto. At least five (5) days prior to the Closing, each party
shall provide the other party with a list of such exchange instruments and
documents. Upon the determination of each party that its conditions to
consummate the Merger have been satisfied or waived, SUBSIDIARY and ELA shall
execute and file the Certificate of Merger. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The parties shall use their best efforts to cause the
Effective Date to be on or before December 31, 1997.
1.16 Pledge of ELA Shares. The parties acknowledge that the ELA Shares are
pledged by KATZ as additional security for the loans by BAC International Credit
Corporation ("BAC") to ELA and that KATZ have personally guaranteed said loans.
Unless waived by KATZ, UICI and ELA agree to jointly cooperate so that,
simultaneously with the Merger, they will obtain the release of the ELA Shares
from the pledge and the release of the guaranties and any other obligations of
KATZ to BAC (and any subsidiary or affiliate thereof) without any further
obligation or consideration on behalf of KATZ.
1.17 Regulatory Approvals. ELA and UICI, each, covenants and agrees that
it will take all reasonable steps necessary or desirable, and will use all
commercially reasonable efforts
-4-
<PAGE> 5
to cooperate with the other in obtaining, as promptly as possible, all necessary
approvals, authorizations and clearances of governmental and regulatory bodies
and officials required to consummate the transactions contemplated hereby.
1.18 HSR Filing. If applicable, the parties will promptly file the
pre-merger notification and report required under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976.
1.19 Pooling of Interests. The parties intend that the transaction will be
treated as a pooling of interests for accounting purposes and agree to abide by
the restrictions contained in Accounting Series Release 135. Notwithstanding the
foregoing, the parties agree that such accounting treatment is not a
pre-condition to the Merger. UICI agrees that it shall publicly issue financial
statements of UICI, SUBSIDIARY, and ELA within seventy-five (75) days following
Closing, which financial statements shall include at least thirty (30) days of
combined operations of UICI, SUBSIDIARY, and ELA.
1.20 Income Tax Treatment. The parties intend that the transaction will be
treated as a tax free reorganization under IRC Sections 368 (a) (1) (A) and 368
(a) (2)(D) and will take no actions which will violate applicable requirements.
SECTION II
REPRESENTATIONS OF KATZ AND ELA
2.1 Warranties and Representations of KATZ and ELA. KATZ and ELA warrant
and represent to SUBSIDIARY and UICI that:
(a) Organization and Corporate Power. ELA is duly incorporated and
validly existing under the laws of the State of Georgia and is qualified to do
business in every jurisdiction in which its ownership of property or conduct of
business requires it to qualify and where the failure to be so qualified could
have a material adverse effect on its business, operations, prospects, assets or
financial condition. ELA has all requisite corporate power and authority and all
material licenses, permits, and authorizations necessary to own and operate its
properties and to carry on its business as now conducted. The copies of ELA's
charter documents and Bylaws have been furnished to UICI's counsel and reflect
all amendments made thereto at any time prior to the date of this Agreement are
correct and complete.
(b) Authorization. The execution, delivery, and performance by ELA of
this Agreement and all other agreements contemplated hereby to which ELA is a
party have been duly and validly authorized by all necessary corporate action of
ELA, and this Agreement and each such other agreement, when executed and
delivered by the parties thereto, will constitute the legal, valid and binding
obligation of ELA enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, and similar
statutes affecting creditors' rights generally and judicial limits on equitable
remedies.
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(c) No Conflict with Other Instruments or Agreements. The execution,
delivery, and performance by ELA of this Agreement and all other agreements
contemplated hereby to which ELA is a party will not result in a breach or
violation of, or constitute a default under, its Articles of Incorporation or
Bylaws or any material agreement to which ELA is a party or by which ELA is
bound.
(d) Capital Stock and Related Matters. The authorized capital stock of
ELA consists of 10,000 shares of common stock, no par value, of which 2,422
shares are issued and outstanding.
(e) Fully-Paid, Non-Assessable Shares. All ELA Shares shall, upon
delivery, be duly and validly authorized and issued, fully-paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the exchange thereof. Neither KATZ nor ELA have violated or will violate any
applicable securities laws in connection with the exchange of the ELA Shares to
UICI hereunder.
(f) No Additional Securities or Rights. ELA is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its stock and shall not issue additional shares of stock
immediately before the Merger. ELA has no outstanding subscriptions, warrants,
options, "phantom" stock rights, convertible securities, or any other type of
right pursuant to which a person could acquire stock of ELA that, if exercised
or converted, would result in KATZ owning less than 100 percentage of issued and
outstanding capital stock of ELA set forth herein.
(g) Subsidiaries. ELA does not own or hold any rights to acquire any
shares of stock or any other equity security or interest in any other
corporation or entity.
(h) Required Approval. The Board of Directors of ELA and KATZ have
approved this Agreement as may be required by state law, and any and all
approvals required to be obtained by ELA of state regulatory agencies shall have
been obtained prior to Closing.
(i) Capable of Evaluating UICI Shares. KATZ has experience in
financial and business affairs and is capable of evaluating the merits and risks
of an investment in the UICI Shares.
(j) No Dissenters. There will be no shareholders of ELA dissenting or
objecting to the Merger contemplated by this Agreement.
(k) Litigation. Except as set forth in Section 2.1(k), of the
Disclosure Schedule, there are no material actions, suits, proceedings, orders,
investigations, or claims pending or, to the best of the knowledge of the
responsible officers of ELA, overtly threatened against ELA or any property of
ELA, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality; ELA is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise; or,
to the best of the knowledge of the responsible
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officers of ELA, any governmental investigations or inquiries; and, to the best
knowledge of KATZ, directors and responsible officers of ELA, there is no basis
for any material action, suit, proceeding, order, investigation or claim against
ELA.
(l) Employment Contracts. There are no written or oral employment or
consulting agreements, deferred compensation agreements, contracts or
commitments with any employee, officer or director of ELA, or agents or
consultants, other than agreements entered into in the ordinary course of
business and listed in Schedule 2.1(l) of the Disclosure Schedule.
(m) Absence of Changes. As of the date of this Agreement, there are no
material adverse changes in, or any event, condition or state of facts of any
character peculiar to ELA or its operations which in the aggregate materially
and adversely affects, or, to the knowledge of KATZ or the responsible officers
of ELA threatens to materially and adversely affect the business, prospects,
properties, assets, financial condition or results of operations of ELA as a
going concern or which could affect the validity and enforceability of this
Agreement.
(n) No Change in Business: Employees. Except as may be specifically
requested in writing by UICI, KATZ and ELA will use commercially reasonable
efforts to cause ELA to (i) continue to operate its business as such business is
presently operated; (ii) take no action other than in the ordinary course of its
business as such business is presently conducted, (iii) preserve intact its
present business organization, and (iv) keep available the services of its
present key officers, key employees and key agency personnel.
(o) Employee Benefits. The representatives, directors and officers of
ELA will not (i) make any change to, or amend in any way, the contracts or
salaries of employees of ELA, or (ii) enter into, or amend or alter materially,
any plan or any material employment, agency, brokerage or consulting agreement
except as required by law or directed at UICI's request.
(p) Indebtedness and Financial Statement. KATZ will not allow ELA to
create, incur, assume, guarantee or otherwise become liable with respect to any
indebtedness for borrowed money, except for amounts shown on the financial
statements described in Disclosure Schedule 2.1(p)(1) and the other disclosures
set forth in Section 2.1(p) of such Disclosure Schedule. Furthermore, ELA and
KATZ warrant that these financials present fairly, in all material respects, the
financial condition of ELA as of the dates set forth therein and that no
material adverse change has occurred since that date up to and including the
Closing.
(q) Tax Matters. (i) ELA has prepared in a substantially correct
manner and has filed all federal, state, local and foreign tax returns and
reports heretofore required to be filed by it and has paid all taxes shown as
due thereon; and (ii) no taxing authority has asserted any deficiency in the
payment of any tax or informed any responsible officer of ELA that it intends to
assert any such deficiency or to make any audit or other investigation of ELA
for the purpose of determining whether such a deficiency should be asserted
against ELA.
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<PAGE> 8
(r) Compliance with Laws. To the best of the knowledge of the
responsible officers of ELA and KATZ, ELA is, in the conduct of its business, in
substantial compliance with all laws, statutes, ordinances, regulations, orders,
judgments or decrees applicable to them, the enforcement of which, if ELA were
not in compliance therewith, would have a materially adverse effect on the
business of ELA, taken as a whole. ELA has not received any notice of any
asserted present or past failure by ELA to comply with such laws, statutes,
ordinances, regulations, orders, judgments or decrees.
(s) Certificates of Existence. Prior to Closing, ELA shall have
delivered to UICI certificates or letters of the appropriate regulatory
officials to the effect that it is an existing entity and where applicable, in
good standing, in all states in which it is registered to do business.
(t) Records. The minute books of ELA contain a general record of all
the official action of its board of directors, each committee of such board of
directors and its shareholders; and the books and records of ELA are complete
and correct in all material respects and have been maintained in accordance with
good business and bookkeeping practices and fairly reflect the business and
affairs of ELA.
(u) Information Provided. During the course of the negotiation of this
Agreement, ELA and KATZ have reviewed all information provided to them by UICI
and have had the opportunity to ask questions of and receive answers from
representatives of UICI concerning UICI, the securities being delivered to KATZ
pursuant to this Agreement upon the Merger, and to obtain certain additional
information requested by them.
(v) Additional Disclosure. From the date of this Agreement, to and
including the Closing, ELA and KATZ will, promptly upon the occurrence thereof,
advise UICI of each event subsequent to the date hereof which would have had to
be disclosed to UICI by ELA and KATZ under this Agreement had it occurred prior
to the date hereof or which causes any representation or warranty of ELA or KATZ
contained herein to no longer be true, correct or complete or causes any
covenant to be breached. Further, ELA and KATZ acknowledge that the Marketing
and Administrative Services Agreement and the Loan Purchase Agreement
(hereinafter referred to as "BAC Agreements") between ELA and BAC, set forth in
Section 2.1(v)(1) of the Disclosure Schedule, and the loans which ELA have the
right to acquire thereunder are an integral part of the consideration for UICI
entering into this Agreement. The BAC Agreements are valid, existing and
enforceable contracts according to their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, and similar statutes affecting
creditors' rights generally and judicial limits on equitable remedies. The
responsible officers of ELA and KATZ are not aware of any event that has
occurred which would be construed as a breach by ELA of the BAC Agreements and
further warrant that the execution of this Agreement will not cause a breach of
the BAC Agreements. Additionally, ELA and KATZ represent that the terms
expressed in the BAC Agreements accurately reflect their terms.
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<PAGE> 9
(w) Notification by ELA and KATZ of Misrepresentation. ELA and KATZ
agree to notify UICI promptly in writing of any material inaccuracy or
misrepresentation made by ELA or KATZ in this Agreement of which the responsible
officers of ELA or KATZ become aware prior to the Closing.
SECTION III
REPRESENTATIONS OF KATZ
3.1 Investment Representations by KATZ.
KATZ warrants and represents and covenants to SUBSIDIARY and UICI that:
(a) Each is acquiring the UICI Shares for his own account (and not for
others) and for investment purposes only and not with a view to distribution, as
such is defined by the Securities Act of 1933, as amended ("Act"), or any rule
or regulation thereunder, in violation of such act or any of said rules.
(b) Each has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and economic risks of this
particular investment.
(c) Each is an "accredited investor" as such term is defined in Rule
501 promulgated under the Act.
(d) Each acknowledges that KATZ must continue to bear the economic
risk of the investment in the UICI Shares for an indefinite period and
recognizes that the UICI Shares will be transfered at Closing without
registration under any state of Federal law relating to the registration of
securities for sale in reliance on exemptions therefrom;
(e) Each agrees that the UICI Shares will not, and may not, be offered
for sale, sold or transferred other than (i) pursuant to an effective
registration under applicable state securities laws or in a transaction which is
otherwise in compliance with such laws; (ii) pursuant to an effective
registration under the Act or in a transaction otherwise in compliance with the
Act; and (iii) upon evidence, satisfactory to UICI, of compliance with the
applicable securities laws of other jurisdictions. UICI shall be entitled to
rely upon an opinion of counsel satisfactory to it with respect to compliance
with the above laws;
(f) A legend indicating the UICI Shares have not been registered under
such laws and referring to the restrictions on transferability and sale of the
UICI Shares may be placed on the certificate or certificates delivered to KATZ
or any substitute therefor and any transfer agent of UICI may be instructed to
require compliance therewith.
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SECTION IV
REPRESENTATIONS OF UICI
4.1 Warranties and Representations of UICI. UICI warrants and represents to
KATZ that:
(a) Organization: Power. UICI is a corporation duly incorporated and
validly existing under the laws of the State of Delaware, and SUBSIDIARY is a
corporation duly incorporated and validly existing under the laws of Georgia.
UICI and SUBSIDIARY each has all requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
(b) Authorization. The execution, delivery, and performance by UICI
and SUBSIDIARY of this Agreement and all other agreements contemplated hereby to
which UICI or SUBSIDIARY is a party have been duly and validly authorized by all
necessary corporate action of UICI and SUBSIDIARY, and this Agreement and each
such other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid and binding obligation of UICI or SUBSIDIARY, as the
case may be, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and similar
statutes affecting creditors' rights generally and judicial limits on equitable
remedies.
(c) No Conflict with Other Instruments or Agreements. The execution,
delivery and performance by UICI or SUBSIDIARY of this Agreement and all other
agreements contemplated hereby to which UICI or SUBSIDIARY is a party will not
result in a breach or violation of, or constitute a default under, its Articles
of Incorporation or Bylaws or any material agreement to which UICI or SUBSIDIARY
is a party or by which UICI or SUBSIDIARY is bound.
(d) Litigation. There are no actions, suits, proceedings or
governmental investigations or inquiries pending or, to the knowledge of UICI,
threatened against UICI, SUBSIDIARY or their properties, assets, operations, or
businesses that might delay, prevent or hinder the consummation of the Merger.
(e) Investment Representations. UICI acquired the capital stock of
SUBSIDIARY for its own account, for purposes of investment and without
expectation, desire, or need for resale and not with the view toward
distribution, resale, subdivision or fractionalization of the shares of the
SUBSIDIARY.
(f) Fully-Paid, Non-Assessable Shares. The UICI Shares shall, upon
delivery to KATZ upon the Merger, be duly and validly authorized and issued,
fully-paid and non-assessable, and be free and clear of all liens, claims,
pledges, options, encumbrances, restrictions on transfer (except those under
applicable securities laws) and voting, preemptive rights of others, and rights
of others of every nature whatsoever.
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<PAGE> 11
(g) No Intent to Reacquire. UICI has no intention of reacquiring any of
the UICI Shares issued pursuant to this Agreement upon the Merger.
(h) Information Provided by ELA. During the course of the negotiation of
this Agreement, UICI has reviewed all information provided to it by ELA and has
had the opportunity to ask questions of and receive answers from representatives
of ELA concerning ELA and to obtain certain additional information requested by
UICI.
(i) Information Provided by UICI. UICI has provided KATZ and ELA with
correct and complete copies of its report on Form 10-K and Form 10-K/A for the
fiscal year ended December 31, 1996, its reports on Form 10-Q for the three
month periods ended March 31, 1997 and June 30, 1997, the proxy statement for
the 1997 annual meeting of the shareholders of UICI and UICI's 1996 Prospectus
with regard to the sale of shares of UICI Common Stock, in connection with a
secondary stock offering. The financial statements contained in such reports and
documents present fairly, in all material respects, the consolidated financial
position of UICI and its subsidiaries at the applicable dates and for the
applicable periods as set forth therein in conformity with generally accepted
accounting principles. The reports and documents do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to the make the statements therein not misleading.
Since June 30, 1997 to the Effective Date, there has not been and there will not
have been, any material adverse change in the financial condition or prospects
of UICI and its subsidiaries, taken as a whole.
(j) Reorganization Representations.
1. The Merger was negotiated through arm's length bargaining. Accordingly,
the fair market value of the UICI Shares and other consideration
received by each ELA shareholder will be approximately equal to the
fair market value of the ELA Shares surrendered in the exchange.
2. Prior to the transaction, UICI will be in control of SUBSIDIARY within
the meaning of section 368(c)(1) of the Code.
3. At Closing, neither the Surviving Corporation, nor UICI will have the
present intent to issue additional shares of its stock that would
result in UICI losing control of the Surviving Corporation within the
meaning of section 368(c)(1) of the Code.
4. UICI has no plan or intention to reacquire any of its stock issued in
the transaction.
5. UICI has no present plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation; or to cause the Surviving Corporation to sell or otherwise
dispose of any of the assets of ELA acquired in the transaction, except
for dispositions made in the ordinary course of business or transfers
described in section 368(a)(2)(C) of the Code.
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<PAGE> 12
6. Following the transaction, the Surviving Corporation will continue the
historic business of ELA or use a significant portion of ELA's business
assets in a business.
7. Neither UICI nor SUBSIDIARY is an investment company as defined in
section 368(a)(2)(f)(iii) and (iv) of the Code.
8. No stock of SUBSIDIARY will be issued in the transaction.
9. None of the compensation to be received by any ELA shareholder who is,
or will be, an employee of UICI, SUBSIDIARY or the Surviving
Corporation pursuant to any employment, consulting or similar
arrangement is or will be separate consideration for, or allocable to,
any of the ELA Shares. The compensation to be paid any ELA shareholder
who is, or will be, an employee of UICI or SUBSIDIARY pursuant to any
such employment, consulting or similar arrangement is or will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
SECTION V
Indemnification
5.1 Indemnification.
(a) KATZ agrees to indemnify in respect of, and hold UICI harmless from
and against, any and all damages, claims, deficiencies, losses, including taxes,
and all reasonable expenses, including interest, penalties, reasonable
attorneys' and accountants' fees and disbursements, but reduced by any offsets
to which any party shall be entitled directly or indirectly by reason thereof
(collectively "Damages"), resulting from the breach of any warranty or
representation or nonfulfillment or failure to perform any covenant or agreement
to be performed by ELA before the Merger or by KATZ contained in this Agreement,
including in the Disclosure Schedule, or in any certificate executed and
delivered pursuant to this Agreement.
(b) UICI agrees to indemnify in respect of, and hold KATZ harmless from
and against, any and all damages, claims, deficiencies, losses, including taxes,
and all reasonable expenses, including interest, penalties, reasonable
attorneys' and accountants' fees and disbursements, but reduced by any offsets
to which any party shall be entitled directly or indirectly by reason thereof
(collectively "Damages"), resulting from the breach of any warranty or
representation or nonfulfillment or failure to perform any covenant or agreement
on the part of UICI or SUBSIDIARY contained in this Agreement including in the
Disclosure Schedule, or in any certificate executed and delivered pursuant to
this Agreement.
(c) The party claiming indemnification hereunder is hereinafter
referred to as the "Indemnified Party" and the party against whom such claims
are asserted is hereinafter referred to as the "Indemnifying Party." Any claim
by KATZ or UICI for indemnification under this Section may only be made if and
to the extent that (i) Damages have been sustained by an Indemnified Party and
such Indemnified Party shall have given written notice of a claim for
indemnification for such Damages prior to the date of the completion of the
first audit of financial statements of ELA
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containing combined operations for those matters reasonably expected to be
encountered in the audit process, provided the audit is completed prior to the
first anniversary of the Closing, and prior to the first anniversary of the
Closing with respect to all other matters or all matters, as the case may be,
and (ii) the Indemnified Party shall have incurred Damages for which a claim of
indemnity is assertable hereunder against the other party in an aggregate amount
in excess of $50,000 (the "Indemnification Deductible") and, only for amounts
above such Indemnification Deductible. All indemnification by the parties shall
be made by the issuing of additional shares of UICI Common Stock by UICI, or
KATZ surrendering UICI Shares (which shall be valued at the market value on
September 30, 1997); provided however, that the number of additional UICI stock
issued or UICI Shares surrendered will not exceed 10% of the UICI Shares issued
as set forth in Section 1.8(a).
5.2 Notification of Claims. Indemnified Party agrees to notify Indemnifying
Party promptly in writing of any occurrence, event, transaction or circumstance
occurring subsequent to the date of this Agreement that could give rise to a
claim for indemnification against Indemnifying Party under this Section
("Indemnification Event"). Additionally, Indemnified Party, together with such
written notice and thereafter promptly after receipt or the obtaining thereof,
will deliver to Indemnifying Party all information and documents relating to
such Indemnification Event and will use all commercially reasonable efforts to
cooperate with Indemnifying Party in the defense of any litigation brought by
third parties or other efforts by Indemnifying Party to mitigate Damages
resulting from the Indemnification Event. Without limiting in any way UICI's
agreement to cooperate, UICI agrees to maintain and retain all books and records
delivered to it and to provide the Surviving Corporation and KATZ reasonable
access thereto, until the later of (i) expiration of the survival period for the
representations and warranties of ELA and KATZ, at which time ELA's and KATZ's
indemnification responsibilities with respect thereto under this Section 5 shall
terminate, or (ii) the final disposition of any lawsuit or other proceeding
involving an Indemnification Event.
SECTION VI
Registration of UICI Shares
6.1 Registration.
(a) Subject to the provisions of subparagraph (b) below, KATZ may
request UICI to file, from time to time, registration statements with the
Securities and Exchange Commission for public offerings covering such number of
UICI Shares owned by KATZ and acquired hereunder which are not registered under
the Securities Act of 1933 ("Registerable Shares"). The requests may be made at
any time commencing on the date financial results covering at least thirty (30)
days of post Merger, combined operations, has been published. In no event shall
the Registerable Shares requested to be registered have a market value at the
time the request is made of less than $1,000,000, unless all of the Registerable
Shares owed by KATZ are less then $1,000,000, in which case all of such shares
shall be registered by UICI. Upon receipt of such written request, UICI will use
its best efforts to file promptly and to have declared effective the
registration under the Act of all Registerable Shares requested to be registered
so as to permit fully such sale of the Registerable Shares without restrictions.
UICI agrees to file on a timely basis all reports required under the Act.
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<PAGE> 14
(b) UICI will also:
(i) Promptly prepare and file with the Commission a registration
statement on the applicable form with respect to the Registerable Shares and use
its best efforts to cause such registration statement to promptly become and
remain effective, including but not limited to, filing on a timely basis all
reports required under the Securities Act of 1933.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act of 1933 with
respect to the sale or other disposition of all shares covered by such
registration statement by KATZ, including amendments and supplements as may be
necessary to reflect the method of disposition by KATZ;
(iii) Furnish to KATZ such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act of 1933, and such other documents, as KATZ may reasonably request
in order to facilitate the public sale or other disposition of such Registerable
Shares; and
(iv) Use its best efforts to register or qualify the
Registerable Shares covered by such registration statement under such other
securities, Blue Sky or other applicable laws of such jurisdictions (not
exceeding ten) within the United States as KATZ may reasonably request.
(c) UICI will pay all registration and filing fees, printing and other
reproduction costs and fees and disbursements of counsel and accountants and
listing fees. KATZ shall pay all underwriting discounts and selling commissions
attributable to such Registerable Shares.
(d) At the time of the registration of such Registerable Shares, KATZ and
UICI shall enter into indemnity agreements and such other agreements as are
customary with respect to such offerings.
6.2 Incidental Registration Rights. If UICI at any time intends to file an
underwritten registration statement under the Act for an underwritten offering
of its common stock, UICI will notify KATZ prior to the filing of the
preliminary registration statement and grant KATZ the right to include some or
all of the Registerable Shares in such registration statement. At least thirty
(30) days prior to written notice of any such filing shall be given to KATZ.
KATZ shall advise UICI within fifteen (15) days of receipt of the notice as to
whether they wish to sell any or all of the Registerable Shares pursuant to such
registration statement.
6.3 Expiration of Registration Rights. As such time as KATZ is able to sell
without restrictions or limitations the Registerable Shares received by KATZ
from UICI, KATZ's right to demand registration of the Registerable Shares as set
forth in this Section VI shall expire.
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<PAGE> 15
SECTION VII
Termination
7.1 Termination. This Agreement may be terminated and abandoned at any time
without further obligation or liability on the part of any party in favor of any
other by mutual written consent of KATZ, ELA, SUBSIDIARY and UICI.
SECTION VIII
Miscellaneous Provisions
8.1 Delivery of Books and Records. On the Closing, ELA shall deliver to
UICI all books, records and files.
8.2 Entire Contract. This Agreement and the Disclosure Schedule contains
the entire contract and supersedes any and all other agreements, oral or
written, between the parties hereto with respect to the matter hereof and
contains all of the covenants and agreements between the parties with respect to
such matters. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by any
party, or any one acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. The term "responsible officers of ELA"
shall only include KATZ.
8.3 Amendments. This Agreement may not be modified, changed or amended in
any respect unless agreed upon in writing and signed by the duly authorized
representatives of the respective parties hereto.
8.4 Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor affect the interpretation of this Agreement.
8.5 Pronouns and Plurals. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or persons may require.
8.6 Agreement Binding. This Agreement shall be binding upon and inure to
the benefit of the heirs, executors, administrators, successors and assigns of
the parties hereto.
8.7 Severability. If any term, provision, covenant or condition of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
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8.9 Counterparts. This Agreement may be executed in several copies or
counterparts, each of which shall have the same force and effect of an original.
8.10 Survival of Representations. The representations and warranties of the
parties herein shall survive for a period of one (1) year following the Closing.
All other agreements and covenants of the parties herein shall survive the
Closing until such agreements and covenants are fully performed.
8.11 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be in writing and will be deemed to have
been duly given when delivered by hand, or upon receipt if delivered by
overnight courier, or five (5) business days after being mailed by certified or
registered mail, return receipt requested, with postage prepaid:
If to UICI, or to the Surviving Corporation, after the Closing, to:
Stephen J. Galvin, President
Education Funding Group
297 North Street
One Financial Place
Suite 2-2
Hyannis, Massachusetts 02601
Copy to:
Robert B. Vlach, Esq.
General Counsel
UICI
4001 McEwen Drive
Suite 200
Dallas, Texas 75255
or to such other person or address as UICI furnished to KATZ pursuant to the
below.
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<PAGE> 17
If to KATZ, or to ELA prior to the Closing:
Marcus A. Katz
ELA Corp.
9171 Towne Center Drive
Suite 375
San Diego, California 92122
Copy to:
Chester G. Rosenberg, Esq.
Glass, McCullough, Sherrill & Harrold
1409 Peachtree Street, N.E.
Atlanta, Georgia 30309
or to such other address as KATZ or ELA furnished to UICI or to the Surviving
Corporation pursuant to the above.
8.12 Attorney Fees. In the event an arbitration, suit or action is brought
by any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court or
appellate court.
8.13 Expenses. Subject to the other provisions of this Agreement, each
party shall bear its own costs and expenses, including attorneys' fees, incurred
in connection with this transaction. It is agreed that the fees and expenses of
ELA's and KATZ's attorney, prior to the Closing, shall be borne by ELA.
8.14 Arbitration. If at any time during the term of this Agreement any
dispute, difference or disagreement shall arise upon or in respect of this
Agreement or the meaning and construction hereof, every such dispute, difference
or disagreement shall be referred to a single arbiter agreed upon by the
parties, or if no single arbiter can be agreed upon, an arbiter or arbiters
shall be selected in accordance with the rules of the American Arbitration
Association, Atlanta, Georgia, and such dispute, difference or disagreement
shall be settled by binding and nonappealable arbitration in accordance with the
then prevailing commercial rules of the American Arbitration Association, and
judgment upon the award rendered by the arbiter may be entered in any court
having jurisdiction thereof.
8.15 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
8.16 Treatment of Transaction. Although the parties intend this transaction
to be a "reorganization" within the meaning of Sections 386(a)(1)(A) and
(a)(2)(D) of the Internal Revenue
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<PAGE> 18
Code of 1986, such treatment is not a condition to Closing and no Internal
Revenue Service Ruling or opinion of counsel is being obtained or requested for
such treatment. The parties will account and report such transaction for tax
purposes as such a reorganization unless advised by their respective accountants
or tax advisors that such treatment is not proper.
8.17 Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, such waiver shall be
in writing and shall be executed by KATZ and ELA's or by SUBSIDIARY's and UICI's
President or Vice President or authorized representative of such party. A waiver
of one occasion shall not be deemed to be a waiver of the same or any other
breach on a future occasion.
8.18 Assignment. The rights and obligations of the parties under this
Agreement may not be assigned in whole or in part without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
8.19 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed, or by their
respective duly authorized officers, have caused this Agreement to be executed,
under seal, as of the date first written above.
ELA CORPORATION UICI
By: /s/ Ryan D. Katz By: /s/ Vernon R. Woelke
------------------------------- --------------------------------
Ryan D. Katz, Vice President Vernon R. Woelke, Vice President
and Treasurer
[CORPORATE SEAL] [CORPORATE SEAL]
(SIGNATURES CONTINUED ON THE FOLLOWING PAGE)
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<PAGE> 19
(SIGNATURES CONTINUED FROM THE PREVIOUS PAGE)
Individually:
/s/ Marcus A. Katz
- -----------------------------(SEAL) CI ACQUISITION CORP.
Marcus A. Katz
/s/ Vernon R. Woelke
/s/ Cary S. Katz :--------------------------------
- -----------------------------(SEAL) Vernon R. Woelke, Vice President
Cary S. Katz and Treasurer
/s/ Ryan D. Katz
- -----------------------------(SEAL) [CORPORATE SEAL]
Ryan D. Katz
RK TRUST #2
/s/ Cary S. Katz
- -----------------------------(SEAL)
Cary S. Katz, not individually, but
solely as Trustee thereof
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<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of UICI for the
registration of 922,956 shares of its common stock and to the incorporation by
reference therein of our report dated March 14, 1997, with respect to the
consolidated financial statements and schedules of UICI included in its Annual
Report (Form 10-K/A) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
Dallas, Texas
December 22, 1997
