AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1999
REGISTRATION NO. 333-____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UICI
------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6331 75-2044750
- ------------------------------ --------------------------- -------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4001 MCEWEN, SUITE 200
DALLAS, TEXAS 75244
(972) 392-6700
-----------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------
Agent for service:
Glenn W. Reed, Esq.
Executive Vice President and General Counsel
UICI
4001 McEwen, Suite 200
Dallas, Texas 75244
(972) 392-6700
-------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy of all communications to:
Phillip S. Dingle, Esq.
Executive Vice President and Chief Financial Officer
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
(813) 289-1000
------------------------
Additional copies of all communications to:
Robert J. Joseph, Esq. David Shobe, Esq.
Gardner, Carton & Douglas Fowler, White, Gillen, Boggs,
321 North Clark Street Villareal and Banker, P.A.
Chicago, Illinois 60610 501 East Kennedy Blvd., Suite 1700
(312) 644-3000 Tampa, Florida 33602
(813) 228-7411
<PAGE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after the effective time of this Registration Statement and the
effective time of the merger of HealthPlan Services and UICI described in this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) 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. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) 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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------- ---------------- -------------- ------------------- -------------
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED(1) PER UNIT PRICE(3) FEE
- -------------------------------------- ---------------- -------------- ------------------- -------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value ........ 4,645,119 shares (2) $82,997,438 $23,074
- -------------------------------------- ---------------- -------------- ------------------- -------------
</TABLE>
(1) The estimated maximum number of shares of UICI issuable upon consummation
of the merger of UICI Acquisition Co. with and into HealthPlan Services
Corporation, based on the maximum number of shares of common stock of
HealthPlan Services that may be outstanding immediately prior to the
merger multiplied by an assumed conversion ratio of .3393.
(2) Not applicable.
(3) Estimated solely for the purposes of calculating the registration fee,
and calculated pursuant to Rule 457(f)(1) and 457(c) under the Securities
Act of 1933, as amended, based on the average of the high and low sale
prices, on the New York Stock Exchange Composite Transaction Tape on
October 21, 1999, of the common stock of HealthPlan Services Corporation
to be acquired by UICI in connection with the merger.
------------------------
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 WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
------------------------
<PAGE>
PROXY STATEMENT/PROSPECTUS (SUBJECT TO COMPLETION,
DATED OCTOBER 26, 1999)
HEALTHPLAN SERVICES LOGO OR LETTERHEAD
HealthPlan Services Corporation James K. Murray, Jr.
3501 Frontage Road Chairman and Chief Executive Officer
Tampa, Florida 33607
Dear Stockholder:
The Board of Directors of HealthPlan Services Corporation has unanimously
approved a merger with UICI.
We expect to accomplish this merger by merging a new subsidiary of UICI into
HealthPlan Services. HealthPlan Services will be the surviving corporate entity
in the merger and will be a wholly-owned subsidiary of UICI.
In the merger, each HealthPlan Services common share will be converted into the
right to receive a specified number of shares of common stock of UICI based on
an exchange ratio that will be determined based on the average of the volume
weighted averages of the trading prices of UICI stock over a period of 20
consecutive trading days prior to closing. The exchange ratio is described in
more detail inside the proxy statement. If such average price equals $23.625
(the closing stock price of UICI on October 22, 1999) you will receive .3393
shares of UICI common stock for each share of HealthPlan Services common stock
you own.
The merger cannot be completed unless holders of a majority of the outstanding
HealthPlan Services common shares vote to approve the merger. We have scheduled
a special meeting of HealthPlan Services stockholders to obtain this vote, and
stockholders who owned HealthPlan Services shares as of November 2, 1999 may
vote at this special meeting. If you vote your shares by proxy, you do not need
to attend the special meeting for your vote to be counted. The Board of
Directors of HealthPlan Services unanimously recommends that you vote "for"
approval of the merger at the special meeting.
Your Board of Directors believes that the merger will provide a strong platform
for growth in the healthcare administrative services industry. We also believe
that the merger will integrate two strong companies, creating more growth in
stockholder value than HealthPlan Services would realize as a stand-alone
company.
The attached proxy statement/prospectus gives you detailed information about the
meeting and the proposed merger. We encourage you to read this document
carefully. IN PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING
ON PAGE 19 FOR A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING
THE PROPOSED MERGER.
<PAGE>
The date, time and place of the special meeting are as follows:
December 8, 1999
10:00 a.m., local time
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Sincerely,
JAMES K. MURRAY, JR.
Chairman and
Chief Executive Officer
The proxy statement/prospectus is dated __________, 1999 and was first mailed to
the stockholders of HealthPlan Services Corporation on or about __________,
1999.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THE
PROXY STATEMENT/PROSPECTUS OR DETERMINED WHETHER THE PROXY STATEMENT/PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell the securities described in this proxy
statement/prospectus until the registration statement filed with the Securities
and Exchange Commission is effective. This proxy statement/prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
HEALTHPLAN SERVICES CORPORATION
(A DELAWARE CORPORATION)
3501 FRONTAGE ROAD
TAMPA, FLORIDA 33607
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Date: December 8, 1999
Time: 10:00 a.m., local time
Place: HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
PURPOSE OF THE MEETING:
o To consider and vote upon the Agreement and Plan of Merger, dated as
of October 5, 1999, among HealthPlan Services, UICI and UICI
Acquisition Co. and the merger of HealthPlan Services and UICI
Acquisition Co. contemplated thereby.
o To consider any other matters that may be properly brought before the
special meeting or any adjournment of the special meeting.
Only stockholders who owned stock at the close of business on November
2, 1999, are entitled to notice of, and to vote at, this special meeting or any
adjournment of the special meeting.
THE BOARD OF DIRECTORS OF HEALTHPLAN SERVICES HAS UNANIMOUSLY ADOPTED
AND APPROVED THE MERGER AGREEMENT AND THE MERGER AS IN THE BEST INTERESTS OF
HEALTHPLAN SERVICES AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
The merger is explained in the accompanying proxy
statement/prospectus, which you are urged to read carefully. A copy of the
Agreement and Plan of Merger is attached as Appendix A to the proxy
statement/prospectus.
<PAGE>
Stockholders are cordially invited to attend the special meeting. If
you do not expect to be present at the meeting but wish your shares to be voted
upon the matters to come before it, please fill in, date, and sign the
accompanying proxy card, and return it promptly in the envelope enclosed for
your convenience. No postage is necessary if mailed in the United States.
By order of the Board of Directors
__________________________________
Phillip S. Dingle, Secretary
Tampa, Florida
October ___, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.........................................................1
SUMMARY .......................................................................................6
The Companies ...........................................................................6
The HealthPlan Services Corporation Special Meeting......................................7
The Merger and the Merger Agreement......................................................8
The HealthPlan Services Option Agreement.................................................8
Our Reasons for the Merger...............................................................8
Our Recommendations to Stockholders......................................................9
Fairness Opinion ........................................................................9
Material Federal Income Tax Consequences.................................................9
Board of Directors and Management of HealthPlan Services After the Merger................9
Interests of Directors and Officers in the Merger.......................................10
Accounting Treatment....................................................................10
Regulatory Approvals....................................................................10
Completion of the Merger................................................................10
Termination and Termination Fees........................................................11
Appraisal Rights for Dissenting Stockholders............................................12
Comparative Per Share Market Price and Dividend Information.............................12
Selected Historical Financial Information...............................................13
Unaudited Selected Pro Forma Combined Condensed Financial Information...................16
Comparative Per Share Data..............................................................17
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................................18
RISK FACTORS .................................................................................19
THE COMPANIES ............................................................................... 21
HealthPlan Services Corporation.........................................................21
UICI....................................................................................21
THE SPECIAL MEETING ..........................................................................23
General .....................................................................23
Record Date and Voting..................................................................24
Voting and Revocation of Proxies........................................................24
THE MERGER ...................................................................................25
Background .............................................................................26
HealthPlan Services Corporation's Reasons for the Merger; Recommendation of the
HealthPlan Services Board......................................................31
Opinion of the Financial Advisor to the HealthPlan Services Board.......................34
Effective Time of the Merger............................................................44
Material Federal Income Tax Consequences................................................44
Accounting Treatment....................................................................46
Regulatory Approvals - Antitrust Clearance..............................................46
Listing of UICI Common Stock on Stock Exchanges.........................................46
Resale of Shares Issued in the Merger; Affiliates.......................................46
Board of Directors and Management of HealthPlan Services After the Merger...............47
-i-
<PAGE>
Interests of Certain Persons in the Merger..............................................47
THE MERGER AGREEMENT AND RELATED AGREEMENTS...................................................48
The Merger Agreement....................................................................48
Voting Agreements ......................................................................59
Option Agreement .......................................................................60
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION............................................60
SECURITY OWNERSHIP OF MANAGEMENT..............................................................66
HealthPlan Services Corporation.........................................................66
UICI ...................................................................................68
DESCRIPTION OF UICI COMMON SHARES.............................................................69
General.................................................................................69
Dividend Rights ........................................................................70
Voting Rights...........................................................................70
Liquidation Rights .....................................................................70
Preemptive and Subscription Rights......................................................70
COMPARATIVE RIGHTS OF HEALTHPLAN SERVICES CORPORATION
STOCKHOLDERS AND UICI STOCKHOLDERS................................................ 70
Business Combinations...................................................................71
State Takeover Legislation..............................................................71
Rights of Dissenting Stockholders.......................................................71
Amendments to Charters..................................................................72
Amendments to Bylaws....................................................................72
Stockholder Action......................................................................72
Special Meetings of Stockholders........................................................72
Cumulative Voting.......................................................................72
Number and Election of Directors........................................................73
Removal of Directors....................................................................73
Indemnification of Directors and Officers...............................................73
Limitation of Personal Liability of Directors...........................................73
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAWS
PROVISIONS.........................................................................74
General.................................................................................74
Preferred Stock.........................................................................75
Common Stock ...........................................................................75
Antitakeover Legislation................................................................76
LEGAL OPINIONS ...............................................................................76
EXPERTS .....................................................................76
STOCKHOLDER PROPOSALS FOR THE 2000 HEALTHPLAN SERVICES
ANNUAL MEETING.....................................................................77
WHERE YOU CAN FIND MORE INFORMATION...........................................................77
LIST OF DEFINED TERMS ........................................................................79
APPENDIX A - AGREEMENT AND PLAN OF MERGER....................................................A-1
APPENDIX B - OPTION AGREEMENT................................................................B-1
APPENDIX C - OPINION OF BEAR, STEARNS & CO. INC..............................................C-1
</TABLE>
-ii-
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A HealthPlan Services and UICI Acquisition Co. will combine in a merger.
HealthPlan Services will survive in the merger as a wholly-owned subsidiary
of UICI.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. You will be a holder of common stock of UICI after the merger. The number
of shares of UICI common stock you will receive in the merger will depend
upon the price of UICI common stock just prior to the closing of the
merger.
o If the average of the volume weighted averages of the trading prices
of UICI stock for a period of 20 consecutive trading days prior to the
closing of the merger is higher than $33.00 per share, then for each
share of HealthPlan Services common stock you own you will receive a
fraction of a share of UICI common stock equal to $9.50 divided by (x)
such average price of UICI stock minus (y) $3.00.
o If the average trading prices of UICI stock is less than or equal to
$33.00 per share, but greater than $30.00 per share, then for each
share of HealthPlan Services common stock you own you will receive
.3167 of a share of UICI common stock.
o If the average trading prices of UICI stock is greater than or equal
to $28.00 per share, but less than or equal to $30.00 per share, then
for each share of HealthPlan Services common stock you own you will
receive a fraction of a share of UICI common stock equal to $9.50
divided by such average price of UICI stock.
o If the average trading prices of UICI stock is less than $28.00 per
share, but greater than or equal to $23.00 per share, then for each
share of HealthPlan Services common stock you own you will receive
.3393 of a share of UICI common stock.
o If the average trading prices of UICI stock is less than $23.00 per
share, but greater than or equal to $21.00 per share, then for each
share of HealthPlan Services common stock you own you will receive a
fraction of a share of UICI common stock equal to $9.50 divided by the
sum of such average price plus $5.00.
o If the average trading prices of UICI stock is less than $21.00 per
share, then for each share of HealthPlan Services common stock you own
you will receive .3654 of a share of UICI common stock.
-1-
<PAGE>
Q. HOW WILL THE MERGER AFFECT MY STOCK DIVIDENDS?
A. The dividend payment level of UICI after the merger will be determined by
the board of directors of UICI. UICI does not currently pay a dividend and
we anticipate that UICI will continue its current policy of not paying
dividends following the merger.
Q. WHAT DO I NEED TO DO TO GET MY SHARES OF UICI?
A. After the merger is completed, UICI will send HealthPlan Services
stockholders written instructions for exchanging their shares for shares of
UICI. If you hold HealthPlan Services shares in certificate form, you
should not send in your share certificates now.
Q. CAN THE VALUE OF THE TRANSACTION CHANGE BETWEEN NOW AND THE TIME THE MERGER
IS COMPLETED?
A. Yes. As described above, the number and value of UICI shares that you will
receive in the merger is dependent on the market value for UICI stock prior
to the closing. Consequently, the value you receive will fluctuate based on
such market value of UICI stock right up to the time of closing.
Q. WHAT ARE MY TAX CONSEQUENCES AS A RESULT OF THE MERGER?
A. The merger is structured so that each of UICI and HealthPlan Services will
obtain an opinion of legal counsel that you will not recognize any gain or
loss in exchanging your HealthPlan Services shares for common shares of
UICI (except with respect to cash that you receive instead of any
fractional share interest in UICI's common shares). Your tax basis in the
common shares of UICI received in exchange for your HealthPlan Services
shares will be the same as your tax basis in your exchanged HealthPlan
Services shares, less an amount that you must allocate to cash that you
receive instead of any fractional share interest.
For more detail, see page 44 of this proxy statement/prospectus.
Q. WHO IS SOLICITING MY VOTE?
A. The Board of Directors of HealthPlan Services is soliciting your vote.
Q. HOW DO I VOTE?
A. You may vote by indicating on the enclosed proxy form how you want to vote,
and signing and mailing the proxy form in the enclosed prepaid return
envelope. Please vote as soon as possible to ensure that your shares are
represented at the special meeting.
-2-
<PAGE>
Q. WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A. The merger must be approved by a majority of the outstanding HealthPlan
Services common shares.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. Your broker will vote your shares only if you provide your broker
instructions on how to vote. You should follow the directions provided by
your broker regarding how to instruct your broker to vote your shares.
Without instructions, your shares will not be voted, which will have the
same effect as voting against the merger.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY?
A. Yes. You can change your vote at any time before we vote your proxy at the
special meeting in one of three ways. First, you can send a written notice
stating that you would like to revoke your proxy to the Secretary at the
address below. Second, you can complete a new proxy form and send it to the
Secretary, and the new proxy form will automatically replace any earlier
proxy form you returned. Third, you can attend, and vote in person at, the
special meeting.
You should send any written notice or new proxy to the Secretary of
HealthPlan Services at the following address: Phillip S. Dingle, Secretary,
HealthPlan Services Corporation, 3501 Frontage Road, Tampa, Florida 33607,
Tel.: (813) 289-1000.
Q. DO I HAVE THE RIGHT TO DISSENT?
A. You do not have a right to dissent under Delaware law in connection with
the proposed merger.
Q. WHEN DO YOU HOPE TO COMPLETE THE MERGER?
A. We hope to complete the merger shortly after the special meeting. Closing
of the merger is subject to stockholder approval at this meeting and
completion of federal antitrust clearance. We expect that we will have
completed our antitrust review by November 15, 1999.
Q. WILL MY RIGHTS AS A STOCKHOLDER CHANGE AS A RESULT OF THE MERGER?
A. Currently, the rights of HealthPlan Services stockholders are governed by
Delaware law and HealthPlan Services' certificate of incorporation and
bylaws. After the merger, Delaware law will continue to govern, but UICI's
certificate of incorporation and bylaws will govern your rights as a
stockholder of UICI. For a summary of material differences between the
rights of HealthPlan Services
-3-
<PAGE>
stockholders and the rights they will have as stockholders of UICI, see
page 70 of this proxy statement/prospectus.
Q. WHAT BENEFITS WILL I RECEIVE FROM BECOMING A UICI STOCKHOLDER?
A. The Board of Directors of HealthPlan Services believes that, as a UICI
stockholder, you will have the opportunity to realize potential benefits
associated with a larger company, including additional capital resources
and enhanced access to technology solutions.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT UICI AND HEALTHPLAN SERVICES?
A. You can find more information about UICI and HealthPlan Services from
various sources described under "WHERE YOU CAN FIND MORE INFORMATION" on
page 77 of this proxy statement/prospectus.
-4-
<PAGE>
WHO CAN ANSWER YOUR QUESTIONS?
If you would like additional copies of this proxy statement/prospectus or
if you have additional questions, you should contact:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Attention: Phillip S. Dingle, Chief Financial Officer
Telephone Number: (813) 289-1000
------------------------------
-5-
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS TO WHICH WE HAVE REFERRED
YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 77 OF THIS PROXY
STATEMENT/PROSPECTUS. EACH ITEM IN THIS SUMMARY INCLUDES A PAGE REFERENCE
DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF THAT ITEM.
THE COMPANIES
HEALTHPLAN SERVICES CORPORATION (SEE PAGE 21)
3501 Frontage Road
Tampa, Florida 33607
Tel: (813) 289-1000
HealthPlan Services is a managed health care services outsourcing company,
providing distribution, enrollment, billing and collection, and claims
administration services for health care payors and providers. HealthPlan
Services provides these services to approximately 140,000 groups covering over 3
million members in the United States. HealthPlan Services functions solely as a
service provider generating fee-based income and does not assume any
underwriting risk.
HealthPlan Services' wholly-owned subsidiaries include: HealthPlan
Services, Inc., American Benefit Plan Administrators, Inc., Centra HealthPlan
LLC, Employee Benefit Services, Inc., Group Benefit Administrators Insurance
Agency, Inc., HealthPlan Services Insurance Agency, Inc., HealthPlan Services
Insurance Agency of Illinois, Inc., Montgomery Management Corporation,
ProHealth, Inc., REH Agency of Missouri, Inc., Southern Nevada Administrators,
Inc., HealthCare Informatics Corporation, National Preferred Provider Network,
Inc., National Network Services, Inc. and Quality Medical Administrators.
Internet users can obtain additional information about HealthPlan Services and
its services at http://www.healthplan.com
UICI (SEE PAGE 21)
4001 McEwen, Suite 200
Dallas, Texas 75244
Tel: (972) 392-6700
UICI is a diversified financial services company that offers insurance and
financial services to niche consumer and institutional markets. UICI also
provides technology and outsourcing solutions to the insurance and health
services communities.
UICI 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, UICI
offers a range of
-6-
<PAGE>
health insurance products, including catastrophic hospital and basic
hospital-medical expense plans, choice-of-doctor plans and managed care options,
including a preferred provider organization plan and other coverage
modifications. For the student market, UICI offers tailored insurance programs
that generally provide single school year coverage to individual students,
primarily at universities, but also at public and private schools for students
in kindergarten through grade 12. UICI also issues life and annuity insurance
products to selected niche markets, and UICI acquires blocks of life insurance
and annuity policies from other insurers on an opportunistic basis.
UICI also provides underwriting, claims management and claims
administrative services to third party insurance carriers (primarily to Aegon
USA, Inc. related to products coinsured by UICI), third party administrators,
Blue Cross/Blue Shield organizations and self-administered employer health care
plans.
UICI assists individuals with no, or troubled, credit in obtaining a
nationally recognized credit card and supports various credit education
organizations. Through its Educational Finance Group, Inc. subsidiary, UICI
markets, originates, funds and services primarily Federally-guaranteed student
loans. UICI's Insurdata subsidiary develops comprehensive technology solutions
and provides related outsourcing services to the administration segment of the
healthcare industry. Through its National Motor Club unit, UICI also 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.
Internet users can obtain additional information about UICI and its
services at http://www.uici.net.
THE HEALTHPLAN SERVICES CORPORATION SPECIAL MEETING (SEE PAGE 23)
The special meeting of HealthPlan Services stockholders will be held at
the offices of HealthPlan Services, 3501 Frontage Road, Tampa, Florida 33607, on
December 8, 1999, at 10:00 a.m., local time.
At the special meeting, you will be asked to vote on a proposal to approve
the merger agreement among UICI, UICI Acquisition Co. and HealthPlan Services
and the merger of UICI Acquisition Co. and HealthPlan Services described in the
merger agreement. Approval of the merger agreement and the merger requires the
favorable vote of the holders of a majority of the outstanding HealthPlan
Services common shares.
You can vote at the special meeting of HealthPlan Services
stockholders if you owned HealthPlan Services common shares at the close of
business on the record date, November 2, 1999. As of __________, 1999, directors
and executive officers of HealthPlan Services and their affiliates beneficially
owned approximately _______% of the outstanding HealthPlan Services common
shares. Automatic Data Processing, Inc., Shinnston Enterprises Inc., Elm Grove
Associates and James K. Murray, Jr., William L. Bennett and Robert R. Parker
(officers and directors of HealthPlan Services) have entered
-7-
<PAGE>
into voting agreements with UICI. Under the terms of the voting agreements, the
parties agreed to vote their shares in favor of the merger. Approximately 17% of
HealthPlan Services' common shares are covered by these voting agreements.
IF YOU DO NOT VOTE YOUR SHARES, THE EFFECT WILL BE A VOTE AGAINST THE
MERGER AGREEMENT AND THE MERGER.
THE MERGER AND THE MERGER AGREEMENT (SEE PAGES 25 AND 48)
In the proposed merger, UICI Acquisition Co. will merge into HealthPlan
Services. As a result of the merger, HealthPlan Services will become a
wholly-owned subsidiary of UICI. The merger agreement is the legal document that
governs the merger. The merger agreement is attached as Appendix A to this proxy
statement/prospectus, and we encourage you to read it carefully.
THE HEALTHPLAN SERVICES OPTION AGREEMENT (SEE PAGE 60)
Concurrently with entering into the merger agreement, HealthPlan Services
granted a stock option to UICI. This stock option entitles UICI to purchase up
to 1,500,000 shares of HealthPlan Services common stock at a price of $7.375 per
share if specified conditions are met. These conditions are described in detail
in "THE MERGER AGREEMENT AND RELATED AGREEMENTS--OPTION AGREEMENT" on page 60
and "THE MERGER AGREEMENT ANd RELATED AGREEMENTS--TERMINATION AND TERMINATION
FEE" on page 57. We also have attached a copy of the option agreement to this
proxy statement/prospectus as Appendix B. This option agreement is intended to
increase the likelihood that the merger will be completed. It also may have the
effect of discouraging competing offers for HealthPlan Services.
OUR REASONS FOR THE MERGER (SEE PAGE 31)
The HealthPlan Services Board of Directors believes that the merger will
provide opportunities to achieve benefits for its stockholders and customers
that would not be available in the absence of a business combination with UICI.
The complementary combination of HealthPlan Services' technology and the
technology of UICI's Insurdata division should enable HealthPlan Services to
compete more effectively in the changing healthcare climate. The HealthPlan
Services Board has had growing concern regarding whether HealthPlan Services has
sufficient and predictable revenue to generate required efficiencies in its
business. The HealthPlan Services Board assessed HealthPlan Services' strategic
alternatives and concluded that the terms of the merger agreement provided the
best means for you to maximize the value of your holdings. The Board also
determined that it was unlikely that any other viable acquirors were interested
in negotiating and consummating an acquisition transaction within a reasonable
period of time. The HealthPlan Services Board believes that the merger will
result in a strong combined entity with complementary businesses, corporate
goals and management philosophies and the financial resources necessary to
complete and pursue growth opportunities.
-8-
<PAGE>
OUR RECOMMENDATIONS TO STOCKHOLDERS (SEE PAGE 33)
The Board of Directors of HealthPlan Services recommends that stockholders
vote "FOR" the proposal to approve the merger agreement and the merger.
FAIRNESS OPINION (SEE PAGE 34)
HealthPlan Services' financial advisor, Bear, Stearns & Co. Inc., has given
a written opinion to HealthPlan Services' Board of Directors that, as of October
5, 1999, the exchange ratio was fair from a financial point of view to holders
of HealthPlan Services common shares. This opinion is not intended to be a
recommendation to any HealthPlan Services stockholder as to how to vote. We have
attached a copy of Bear, Stearns & Co.'s opinion as Appendix C to this proxy
statement/prospectus. HealthPlan Services stockholders should read this opinion
in its entirety to fully understand it.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 44)
It is a condition to the merger that HealthPlan Services and UICI each
receive a tax opinion that the merger qualifies as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986. This means that,
for U.S. federal income tax purposes, HealthPlan Services stockholders who
exchange their HealthPlan Services common shares solely for common shares of
UICI in the merger generally will recognize no gain or loss (except with respect
to cash received instead of any fractional share interest in UICI's common
shares).
Because of the complexity of the tax laws and the individual nature of the
tax consequences of the merger, however, we recommend that you consult a tax
advisor concerning the applicable U.S. federal, state and local income tax
consequences of the merger.
BOARD OF DIRECTORS AND MANAGEMENT OF HEALTHPLAN SERVICES AFTER THE MERGER (SEE
PAGE 47)
When we complete the merger, James K. Murray, Jr., currently the Chairman
of the HealthPlan Services Board, will become a member of the UICI board. The
Board of Directors of HealthPlan Services, which will be a wholly-owned
subsidiary of UICI following the merger, will consist of Gregory T. Mutz
(President and Chief Executive Officer of UICI), Steven K. Arnold (Vice
President of UICI), Glenn W. Reed (Executive Vice President and General Counsel
of UICI), William L. Bennett (currently Vice Chairman of HealthPlan Services)
and Phillip S. Dingle (currently Executive Vice President and Chief Financial
Officer of HealthPlan Services). It is expected that Steven K. Arnold, currently
head of UICI's student health insurance division, will become President and
Chief Executive Officer at HealthPlan Services. Steven V. Huslander, George E.
Lucco, Jeffrey W. Bak and Jeffrey Markle, currently officers of HealthPlan
Services, are expected to enter into employment agreements with HealthPlan
-9-
<PAGE>
Services prior to the effective time of the merger, and it is expected that they
will all assume similar positions with HealthPlan Services following the merger.
Phillip S. Dingle is expected to enter into an employment agreement with UICI,
and it is expected that he will become the Chief Financial Officer of UICI
following the merger.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER (SEE PAGE 47)
Certain members of HealthPlan Services management and Board of Directors
have interests in the merger that may conflict with those of the other
stockholders. The HealthPlan Services Board of Directors was aware of these
interests and considered them when they approved the merger agreement and the
merger.
ACCOUNTING TREATMENT (SEE PAGE 46)
We expect the merger to qualify as a "purchase" for accounting purposes.
Purchase accounting requires UICI to determine the purchase price based on the
consideration paid in the acquisition. The fair value of the acquired net
tangible assets is recorded by UICI as of the date on which the acquisition is
consummated. The excess of the purchase price over net tangible assets acquired
is required to be assigned among identifiable intangible assets based on fair
value. The amounts recorded for intangible assets and goodwill are required to
be amortized by systematic charges to income over the estimated periods of
benefit and estimated useful lives.
REGULATORY APPROVALS (SEE PAGE 46)
In order to complete the merger, we must make a pre-merger notification
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and we
cannot complete the merger until the specified Hart-Scott-Rodino waiting period
requirements have been satisfied.
COMPLETION OF THE MERGER (SEE PAGE 55)
Before we can complete the merger, we must satisfy a number of
conditions. These include:
o HealthPlan Services stockholders approving the merger agreement and
the merger;
o obtaining the regulatory approval discussed above;
o obtaining all required governmental consents;
o obtaining authorization from the New York Stock Exchange to list the
shares of UICI common stock to be delivered in the merger;
-10-
<PAGE>
o each of HealthPlan Services and UICI obtaining an opinion from their
respective tax counsel that the merger will constitute a "tax-free"
reorganization for federal income tax purposes;
o the absence of any event, development or change of circumstance which
would be likely to have a material adverse effect on UICI or
HealthPlan Services.
The merger will occur as soon as practicable after all of the conditions in
the merger agreement are satisfied.
TERMINATION AND TERMINATION FEES (SEE PAGE 57)
The companies may agree in writing to terminate the merger agreement at any
time without completing the merger, even if stockholders of HealthPlan Services
have approved it.
In addition, the merger agreement may be terminated:
o by either company, if the merger is not completed by March 31, 2000;
o by either company, if the HealthPlan Services stockholders do not
approve the merger agreement and the merger;
o by either company, if the HealthPlan Services Board of Directors
determines to accept a transaction with another entity after having
reasonably concluded that the alternative transaction is more
favorable to HealthPlan Services stockholders than the merger and that
the entity proposing the transaction can adequately finance the
transaction, and after having determined that its fiduciary duties
require the board to reconsider its commitment to UICI;
o by UICI if the bank providing its financing commitment fails to fund
its loans because of a material adverse change in the financial
markets;
o by UICI, if the HealthPlan Services Board of Directors fails to
recommend approval, withdraws or adversely modifies its recommendation
of the merger to HealthPlan Services stockholders or approves or
recommends an alternative transaction.
The merger agreement provides for the payment of termination fees and
expenses in certain cases. For example, if the merger agreement is terminated
under specified circumstances involving an alternative transaction for
HealthPlan Services, HealthPlan Services must pay UICI a termination fee of $5
million. In addition, under the option agreement described above, UICI may
exercise the option to purchase 1,500,000 shares of HealthPlan Services common
stock if and when the merger agreement is terminated and a termination fee is
payable by HealthPlan Services.
-11-
<PAGE>
Whether or not the merger is completed, HealthPlan Services and UICI will
each pay their own fees and expenses, except that HealthPlan Services and UICI
will divide evenly the costs and expenses incurred in printing and mailing this
document, the fees that have been paid to the Securities and Exchange Commission
in connection with the merger and the fees that have been paid in connection
with the filings under the Hart-Scott-Rodino Antitrust Improvements Act.
APPRAISAL RIGHTS FOR DISSENTING STOCKHOLDERS
Under Delaware law, you will not have any appraisal or dissenters' rights
in connection with the merger.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
HealthPlan Services common shares are listed on the New York Stock Exchange
under the symbol "HPS." UICI common shares are listed on the New York Stock
Exchange under the symbol "UCI."
The following tables show the high and low sale prices and the dividends
declared for HealthPlan Services common shares and UICI common shares for the
periods indicated. All prices shown are as reported on the New York Stock
Exchange Composite Transaction Tape (or the Nasdaq National Market System with
respect to UICI's common shares for periods prior to April 30, 1999) based on
published financial sources.
-12-
<PAGE>
<TABLE>
<CAPTION>
HEALTHPLAN
SERVICES CORPORATION UICI
-------------------- ----
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
-------- ------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
1996
First Quarter $28.375 $22.625 NA $23.50 $19.00 NA
Second Quarter $29.25 $20.25 NA $22.75 $19.625 NA
Third Quarter $26.875 $18.00 NA $27.25 $20.625 NA
Fourth Quarter $24.50 $16.375 NA $33.625 $25.25 NA
1997
First Quarter $23.625 $15.375 NA $31.375 $22.875 NA
Second Quarter $19.250 $13.625 $0.125 $29.875 $24.00 NA
Third Quarter $22.125 $18.375 $0.125 $31.625 $27.625 NA
Fourth Quarter $22.1875 $18.9375 $0.125 $35.875 $29.5625 NA
1998
First Quarter $26.625 $26.125 $0.125 $36.1875 $30.75 NA
Second Quarter $17.6875 $17.375 $0.1375 $35.375 $25.625 NA
Third Quarter $10.875 $9.500 $0.1375 $27.875 $12.8125 NA
Fourth Quarter $11.500 $10.375 $0.1375 $24.50 $12.00 NA
1999
First Quarter $8.875 $7.00 0.1375 $23.8125 $20.00 NA
Second Quarter $9.50 $6.1875 0.1375 $27.6875 $22.8125 NA
Third Quarter $7.875 $6.1875 0.1375 $28.875 $25.5625 NA
Fourth Quarter
(through 10/21/99) $7.6875 $5.9375 NA $25.9375 $22.75 NA
</TABLE>
The following table presents trading information for HealthPlan Services
common shares and UICI common shares on October 5, 1999 and October 21, 1999.
October 5, 1999 was the last full trading day before our announcement of the
signing of the merger agreement. October 21, 1999 was the last practicable
trading day for which information was available before the date of this proxy
statement/prospectus.
<TABLE>
<CAPTION>
HEALTHPLAN SERVICES CORPORATION UICI
COMMON STOCK -----
------------ COMMON STOCK
------------
HIGH LOW LAST HIGH LOW LAST
------ ----- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
October 5, 1999 $7.50 $7.25 $7.375 $25.9375 $25.625 $25.9375
October 21, 1999 $6.125 $6.00 $6.125 $23.25 $23.00 $23.00
</TABLE>
The market prices of the HealthPlan Services common shares and the UICI
common shares fluctuate. These fluctuations will affect the number and price of
the common shares of UICI to be received on the date of the merger. You should
obtain current market quotations.
SELECTED HISTORICAL FINANCIAL INFORMATION
HEALTHPLAN SERVICES CORPORATION
In the table below, we provide you with selected historical consolidated
financial data of HealthPlan Services. HealthPlan Services derived the
consolidated income
-13-
<PAGE>
statement data below for the years ended December 31, 1998, 1997, 1996, 1995 and
the three months ended December 31, 1994, and the consolidated balance sheet
data at December 31, 1998, 1997, 1996, 1995 and 1994, from its audited
consolidated financial statements. It derived the consolidated income statement
data for the nine months ended September 30, 1994 and the consolidated balance
sheet data at September 30, 1994 from the audited financial statements of the
predecessor company to HealthPlan Services. HealthPlan Services derived the
unaudited consolidated income statement data for the six month periods ended
June 30, 1999 and 1998 and the unaudited consolidated balance sheet data at June
30, 1999 from unaudited consolidated financial statements.
When you read this selected historical consolidated financial information,
you should read along with it the historical consolidated financial statements
and accompanying notes that HealthPlan Services has included in its Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 and its Annual Report on
Form 10-K for the year ended December 31, 1998. You can obtain this report by
following the instructions we provide under "WHERE YOU CAN FIND MORE
INFORMATION" on page 77 of this proxy statement/prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
HEALTHPLAN SERVICES COMPANY (1)
---------------------------------------------------------- -----------
THREE NINE
MONTHS MONTHS
SIX MONTHS ENDED ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DEC.31, SEPT. 30,
----------------- -------------------------------------- ------ --------
1999 1998 1998 1997 1996 1995 1994 1994
---- ---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $145,407 $139,756 $289,247 $281,644 $191,493 $ 98,187 $25,132 $81,945
Income (loss) from operations 8,809 (4,392) 17,645 20,072 (8,076) 15,631 390 3,247
Net income (loss) 4,753 (2,943) $ 9,698 $ 10,796 $(6,716) $ 9,535 $ 231 $ 1,747
Per share data applicable to common
stock:
Basic Net Income (loss) per share 0.34 (0.20) $ 0.68 $ 0.72 $ (0.47) $ (0.82)
Diluted Net Income per share 0.34 n/a $ 0.67 $ 0.71 n/a $ 0.84
Dividends declared $ 0.54 $ 0.38 -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------- ---------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- ---------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Working Capital (deficit) $(40,074) $(36,813) $(29,842) $(26,929) $23,013 $(16,050)
Total assets 274,380 276,805 243,324 244,701 112,667 53,189
Total debt 97,323 43,694 62,298 1,282 1,300
Redeemable preferred stock (Series -- -- -- -- -- 19,285
A & B), including accrued dividends
Common stockholders' equity 97,072 91,652 116,566 108,783 80,966 1,007
</TABLE>
(1) Represents the historical results of operations of the predecessor company.
The predecessor company's historical financial statements reflect certain
expenses, including expenses attributable to employee benefit programs,
retirement and health plans, treasury, and insurance, which were incurred
by the predecessor company and allocated to HealthPlan Services on a pro
rata basis.
-14-
<PAGE>
UICI
In the table below, we provide you with selected historical consolidated
financial data of UICI. UICI derived the consolidated income statement data
below for each of the five years ended December 31, 1998, and the consolidated
balance sheet data at December 31, 1998, 1997, 1996, 1995 and 1994, from audited
consolidated financial statements. UICI derived the unaudited consolidated
income statement data for the six month periods ended June 30, 1999 and 1998 and
the unaudited consolidated balance sheet data at June 30, 1999 from unaudited
consolidated financial statements.
When you read this selected historical consolidated financial information,
you should read along with it the historical financial statements and
accompanying notes that UICI has included in its Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999 and its Annual Report on Form 10-K for the
year ended December 31, 1998. You can obtain this report by following the
instructions we provide under "WHERE YOU CAN FIND MORE INFORMATION" on page 77
of this proxy statement/prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues $ 622,120 $ 578,582 $1,179,903 $ 955,829 $ 730,593 $ 641,074 $ 522,946
Benefits and expenses 554,422 540,323 1,082,422 819,983 619,211 554,413 466,931
Income before federal income
taxes and minority
interests 67,698 38,259 97,481 135,846 111,382 86,661 56,015
Federal income taxes 22,001 12,537 30,235 43,396 36,190 29,040 18,399
Minority interests 969 3,107 8,477 5,946 5,945 4,293 1,438
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 44,728 $ 22,615 $ 58,769 $ 86,504 $ 69,247 $ 53,328 $ 36,178
Diluted earnings per common
share $ 0.94 $ 0.49 $ 1.26 $ 1.91 $ 1.66 $ 1.41 $ 0.96
OPERATING RATIOS:
Health Ratios:
Loss ratio (1) 71% 74% 75% 63% 58% 58% 57%
Expense ratio (2) 31% 30% 30% 30% 33% 33% 36%
Combined health ratio 102% 104% 105% 93% 91% 91% 93%
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING RATIOS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total investments and cash $1,172,066 $1,207,127 $1,076,876 $1,057,782 $ 888,299 $ 770,960
Total assets 2,837,598 2,475,055 1,579,383 1,320,988 1,130,859 1,031,263
Total policy liabilities 867,482 916,754 871,292 807,324 787,905 778,676
Total debt 85,427 51,543 50,270 30,943 50,381 56,155
Student loan credit facility 1,003,687 669,026 -- -- -- --
Stockholders' equity 606,226 594,791 536,290 432,918 248,819 170,923
</TABLE>
-15-
<PAGE>
(1) The health loss ratio represents benefits, claims and settlement expenses
related to health insurance policies stated as a percentage of health
premiums.
(2) The health expense ratio represents underwriting, acquisition and insurance
expenses related to health insurance policies stated as a percentage of
health premiums. Expenses relating to providing administrative services are
not included.
UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
In the table below, we provide you with unaudited selected pro forma
combined condensed financial information for UICI as if the merger had been
completed on January 1, 1998 for income statement purposes and on June 30, 1999
for balance sheet purposes. The information is based on adjustments to the
historical consolidated financial statements of UICI and HealthPlan Services to
give effect to the merger using the purchase method of accounting for business
combinations.
It is important that when you read this unaudited selected pro forma
combined financial information, you read along with it the separate historical
financial statements and accompanying notes of UICI and of HealthPlan Services,
which are incorporated by reference in this proxy statement/prospectus. See
"WHERE YOU CAN FIND MORE INFORMATION" on page 77 of this proxy
statement/prospectus. It is also important that you read the unaudited pro forma
combined financial information and accompanying discussion and notes that are
included in this proxy statement/prospectus under "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION" beginning on page 60. You should not rely on the
unaudited combined pro forma financial information as an indication of the
results of operations or financial position that would have been achieved if the
merger had taken place earlier or as an indication of the results of operations
or financial position of UICI that will be achieved after the completion of the
merger.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1999 DECEMBER 31, 1998
---------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA
Operating revenues $ 771,110 $1,502,390
Operating income 75,521 113,100
Net income 48,598 66,670
Earnings available for common stockholders
Per share data applicable to common stock:
Basic earnings per share $ 0.95 $ 1.31
Diluted earnings per share $ 0.93 $ 1.30
Dividends declared -0- -0-
</TABLE>
-16-
<PAGE>
JUNE 30, 1999
-----------------------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
BALANCE SHEET DATA
Total Assets $3,140,416
Common stockholders' equity 726,736
Long-term debt 848,443
Short-term debt including current maturities 336,755
Book value per common share $ 14.29
COMPARATIVE PER SHARE DATA
In the table below, we provide you with historical per share information
for UICI and HealthPlan Services as of June 30, 1999, for the six month period
ended June 30, 1999 and for the year ended December 31, 1998. We also provide
you with unaudited pro forma per share information for UICI and unaudited pro
forma equivalent per share information for HealthPlan Services, which we
calculated by multiplying UICI pro forma amounts by the exchange ratio of
0.3393, which is what the exchange ratio would be if the average stock price for
UICI stock for the 20 trading days prior to the merger was $23.00, the closing
stock price on October 19, 1999.
It is important that when you read this information, you read along with it
the financial statements and accompanying notes of UICI and HealthPlan Services
included in the documents that are described on page 77 of this proxy
statement/prospectus under "WHERE YOU CAN FIND MORE INFORMATION" and are
incorporated herein by reference. You should not rely on the unaudited pro forma
financial information as an indication of the results of operations or financial
position that would have been achieved if the merger had taken place earlier or
of the results of operations or financial position of UICI after the merger is
completed.
<TABLE>
<CAPTION>
HEALTHPLAN
HEALTHPLAN SERVICES
UICI SERVICES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL UICI EQUIVALENT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
June 30, 1999 $13.11 $6.74 $14.29 $4.85
December 31, 1998 $12.81 $6.59 $14.01 $4.75
Basic earnings per common share:
Six months ended June 30, 1999 $0.97 $0.34 $0.95 $0.32
Year ended December 31, 1998 $1.27 $0.68 $1.31 $0.44
Diluted earnings per common share:
Six months ended June 30, 1999 $0.94 $0.34 $0.93 $0.32
Year ended December 31, 1998 $1.26 $0.67 $1.30 $0.44
Dividends declared per common share:
Six months ended June 30, 1999 -- $0.28 -- --
Year ended December 31, 1998 -- $0.54 -- --
</TABLE>
-17-
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 with respect
to the financial condition, results of operations, cash flows, dividends,
financing plans, business strategies, operating efficiencies or synergies,
budgets, capital and other expenditures, competitive positions, growth
opportunities for existing products, benefits from new technology, plans and
objectives of management, markets for stock of UICI and HealthPlan Services and
other matters. Statements in this document that are not historical facts are
hereby identified as "forward-looking statements" for the purpose of the safe
harbor provided by Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. Such forward-looking statements,
including, without limitation, those relating to the future business prospects,
revenues, working capital, liquidity, capital needs, interest costs and income,
in each case relating to UICI or HealthPlan Services wherever they occur in this
proxy statement/prospectus, are necessarily estimates reflecting the best
judgment of the senior managements of UICI and HealthPlan Services and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. Such
forward-looking statements should, therefore, be considered in light of various
important factors, including those set forth in this proxy statement/prospectus.
Important factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking statements include
without limitation:
o changes in general economic conditions, including the performance of
financial markets and interest rates;
o competitive, regulatory or tax changes that affect the cost of or
demand for products;
o ability to attract and retain key management personnel;
o health care reform, ability to predict and effectively manage claims
related to health care costs;
o loss of contracts and inability to find new clients;
o reliance on key management and adequacy of claim liabilities and the
ability of the companies and third party vendors to modify computer
systems for the Year 2000 data conversion in a timely manner;
o the future results of UICI's credit card segment could be adversely
affected by the possibility of future economic downturns, which might
have the effect of causing an increase in credit losses or changes in
regulations for credit cards or credit card national banks;
-18-
<PAGE>
o changes in the Higher Education Act or other relevant federal or state
laws, rules and regulations and the programs implemented thereunder
may adversely impact UICI's education credit market;
o existing legislation and future measures by the federal government may
adversely affect the amount and nature of federal financial assistance
available with respect to loans made through the U.S. Department of
Education;
o 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; or
o unexpected costs, delays or difficulties related to the integration of
HealthPlan Services' and UICI's businesses.
The words "estimate," "project," "intend," "expect," "believe" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this proxy
statement/prospectus and the other documents incorporated herein by reference,
including, but not limited to, the March 31, 1999 and June 30, 1999 Quarterly
Reports on Form 10-Q and the December 31, 1998 Annual Report on Form 10-K of
UICI (including any amendments thereto), and the March 31, 1999 and June 30,
1999 Quarterly Reports on Form 10-Q and the December 31, 1998 Annual Report on
Form 10-K of HealthPlan Services (including any amendments thereto). Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date thereof and which are expectations which may not prove
to be correct due to reasons beyond the control of UICI or HealthPlan Services.
Neither UICI nor HealthPlan Services undertakes any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RISK FACTORS
In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, you should carefully read and consider the
following factors in evaluating the proposals to be voted on at the special
meeting.
WE CANNOT ASSURE YOU THAT OUR TWO COMPANIES WILL BE SUCCESSFULLY
INTEGRATED.
After the merger, UICI will need to integrate the operations, employees and
information systems of the two companies. Failure to successfully integrate our
operations may have a material adverse effect on our business, financial
condition or results of operations. Integrating two companies like UICI and
HealthPlan Services involves a number of risks, including:
o the diversion of management's attention away from ongoing operations;
-19-
<PAGE>
o difficulties in the combining of operations and systems;
o difficulties in the assimilation and retention of employees;
o challenges associated with combining and integrating differing
technology platforms;
o challenges in keeping customers; and
o potential adverse short-term effects on operating results.
UICI has estimated that it will be able to achieve annual cost savings of
approximately $6.0 million in 2001, increasing to approximately $9.0 million
annually by 2003, as a result of the combination of the operations of the two
companies. However, we may not be able to achieve these cost savings and other
size and scale-related benefits because of difficulties in integrating
operations.
THE MERGER MAY CAUSE US TO LOSE SOME OF OUR IMPORTANT THIRD-PARTY
ADMINISTRATION CONTRACTS.
A major part of HealthPlan Services' business is the provision of marketing
and administration services for insurance companies, managed care organizations,
and organizations with self-funded health care plans. Most of HealthPlan
Services' contracts with self-funded clients have one year renewable terms and
are terminable by the client by providing written notice either sixty or ninety
days prior to the renewal date. HealthPlan Services' insurance company and
managed care contracts generally have terms ranging in length from twelve to
forty-eight months, but many of these agreements are terminable without cause by
the customer upon advance notice of between six months and one year.
Furthermore, several of HealthPlan Services' agreements, including its
agreements with New England Life Insurance Company and Celtic Life Insurance
Company, are terminable upon a change in control of HealthPlan Services.
Accordingly, we cannot assure you that these contracts will remain in effect on
the same terms as currently exist. The loss of a substantial amount of this
business, or the renegotiation of such business on less favorable terms, may
have a material adverse effect on the combined company's business, financial
condition, or results of operations.
THE ABILITY TO REALIZE COST SAVINGS FOLLOWING THE MERGER WILL DEPEND IN
LARGE PART UPON THE SUCCESSFUL IMPLEMENTATION AND INTEGRATION OF UICI'S
TECHNOLOGY SOLUTIONS IN HEALTHPLAN SERVICES' BUSINESS.
Failure to fully realize the expected cost savings following the merger
could have an adverse effect on the business and results of HealthPlan Services.
Achieving cost savings will be a critical component of UICI's and HealthPlan
Services' strategy following the merger. The companies currently expect to
utilize proprietary Internet-based software solutions developed by UICI's
Insurdata business unit for HealthPlan
-20-
<PAGE>
Services' enrollment, billing and collection, and claims administration
services. If successfully applied to HealthPlan Services' operations in a timely
manner, UICI believes that this technology may serve to reduce HealthPlan
Services' cost of providing services, which will, in turn, make the services
provided by HealthPlan Services more attractive to potential customers and
clients. There can be no assurance, however, that UICI's proprietary technology
can be integrated into the business of HealthPlan Services in a timely or
cost-efficient manner.
HEALTHPLAN SERVICES' EARNINGS PER SHARE DURING THE THIRD QUARTER OF 1999 WILL BE
LOWER THAN ANALYSTS' ESTIMATES.
In a press release issued by HealthPlan Services on October 8, 1999,
HealthPlan Services announced that third quarter earnings per share will be
lower than analysts' estimates for such period. The management of HealthPlan
Services expects to establish a reserve for claims asserted during the third
quarter in the approximate amount of between $5.0 and $6.0 million. Although
management currently expects that this reserve will be sufficient to cover all
such outstanding claims, there can be no assurance that ultimate losses from
these claims will be less than or equal to the reserve. In addition, HealthPlan
Services' management expects to take a restructuring charge of up to $3 million
during the fourth quarter of 1999. The charge is aimed at reducing operating
expenses primarily in HealthPlan Services' large group business.
THE COMPANIES
FOR YOUR CONVENIENCE, WE HAVE INCLUDED ON PAGE 79 A LIST OF CERTAIN DEFINED
TERMS USED IN THIS PROXY STATEMENT/PROSPECTUS.
HEALTHPLAN SERVICES CORPORATION
HealthPlan Services is a leading managed health care services company,
providing distribution, enrollment, billing and collection, and claims
administration services for health care payors and providers. HealthPlan
Services' customers include insurance companies, health maintenance
organizations ("HMOs") and other managed care organizations, and organizations
with self-funded health care plans. HealthPlan Services provides these services
to approximately 140,000 groups covering over 3 million members in the United
States. HealthPlan Services functions solely as a service provider generating
fee-based income and does not assume any underwriting risk. In May 1998,
HealthPlan Services acquired National Preferred Provider Network, Inc. ("NPPN"),
a preferred provider organization network consisting of over 450,000 physician
offices, 4,000 hospitals and 50,000 ancillary care provider locations in all 50
states and the District of Columbia. Except for its NPPN subsidiary, the revenue
of which is not significant for reporting purposes, HealthPlan Services operates
in one business segment.
In December 1998, HealthPlan Services introduced an interactive electronic
Internet site through which certain plan transactions can be performed
electronically. The site, which is accessible through HealthPlan Services' home
page (www.healthplan.com), enhances HealthPlan Services' capabilities in all
aspects of its services.
HealthPlan Services was incorporated in 1994 under the laws of Delaware and
has its principal executive offices at 3501 Frontage Road, Tampa, Florida 33607
(telephone number 813-289-1000). Internet users can obtain information about
HealthPlan Services and its services at http://www.healthplan.com
UICI
UICI is a diversified financial services company that offers insurance and
financial services to niche consumer and institutional markets. UICI also
provides
-21-
<PAGE>
technology and outsourcing solutions to the insurance and healthcare services
communities.
UICI 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, UICI
offers a range of health insurance products. Catastrophic hospital and basic
hospital-medical expense plans are designed to accommodate individual needs and
include both choice-of-doctor plans and managed care options such as a preferred
provider organization ("PPO") plan as well as other coverage modifications. UICI
markets these higher deductible products through "dedicated" agency sales forces
that primarily sell UICI's products. For the student market, UICI offers
tailored insurance programs that generally provide single school year coverage
to individual students, primarily at universities, but also at public and
private schools for students in kindergarten through grade 12. In this market,
UICI sells its products primarily through in-house account executives that focus
on colleges and universities on a national basis. UICI also issues life and
annuity insurance products to selected niche markets, and UICI acquires blocks
of life insurance and annuity policies from other insurers on an opportunistic
basis. The life and annuity insurance policies issued by UICI are marketed
through a dedicated agency sales force. During 1998 and the first six months of
1999, health insurance premiums were approximately $747 million and $351
million, respectively, representing 63% and 56% of UICI's total revenues in such
periods.
UICI also provides underwriting, claims management and claims
administrative services to third party insurance carriers (primarily to Aegon
USA, Inc. related to products coinsured by UICI), third party administrators,
Blue Cross/Blue Shield organizations and self-administered employer health care
plans.
Through its wholly-owned subsidiary, United CreditServ, Inc., UICI assists
individuals with no, or troubled, credit in obtaining a nationally recognized
credit card. The credit cards are issued by United Credit National Bank, and
serviced by Specialized Card Services, Inc., each a wholly-owned subsidiary of
United CreditServ. United CreditServ also provides outsourcing and fulfillment
services to organizations that provide credit education materials to United
Credit National Bank's credit card applicants. During 1998 and the first six
months of 1999, revenues from United CreditServ were approximately $113.0
million and $100.0 million, respectively, representing 10% and 16% of UICI's
total revenues in such periods.
UICI markets, originates, funds and services primarily Federally-guaranteed
student loans.
UICI entered the student loan origination business in 1997, when it
acquired a controlling interest in Educational Finance Group, Inc. UICI seeks to
provide solutions for college and graduate school students, their parents and
the educational institutions they attend. UICI offers a package of student
loans, student loan servicing and student insurance, and, following its
acquisition in July 1999 of Academic Management Services, Inc., UICI became a
leading provider of student tuition installment plans. At June 30,
-22-
<PAGE>
1999, UICI had approximately $950.0 million aggregate principal amount of
student loans outstanding, of which approximately 90% were Federally guaranteed.
UICI's Insurdata subsidiary develops comprehensive technology solutions and
provides related outsourcing services to the administration segment of the
healthcare industry. Insurdata's services include proprietary workflow and
Internet-enabled business applications that enhance transaction processing and
promote the flow of information among constituent users, including healthcare
providers, payors, managed care and case management organizations, reinsurance
carriers, agents, preferred provider organizations, medical and dental claim
review staffs, employers and employees. In addition, Insurdata offers systems
integration, technology management and data capture services.
Through its National Motor Club unit, UICI also 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.
UICI was incorporated in 1984 under the laws of Delaware and has its
principal executive offices at 4001 McEwen, Suite 200, Dallas, Texas 75244
(telephone number 972-392-6700). Internet users can obtain information about
UICI and its services at http://www.uici.net.
THE SPECIAL MEETING
GENERAL
This proxy statement/prospectus is being furnished to HealthPlan Services
stockholders as part of the solicitation of proxies by the HealthPlan Services
Board of Directors for use at a special meeting of stockholders of HealthPlan
Services, to be held on December 8, 1999, at 10:oo a.m., local time, at
the offices of HealthPlan Services, 3501 Frontage Road, Tampa, Florida 33607.
This proxy statement/prospectus and an enclosed proxy form are first being
mailed to stockholders of HealthPlan Services on or about ___, 1999.
At the special meeting, you will be asked to consider and vote upon: (1) a
proposal to approve the Agreement and Plan of Merger, dated as of October 5,
1999, among UICI, HealthPlan Services and UICI Acquisition Co. and the merger of
HealthPlan Services and UICI Acquisition Co. contemplated thereby, and (2) any
other business that may properly come before the special meeting.
Each copy of this proxy statement/prospectus is accompanied by a proxy form
for use at the special meeting.
The Board of Directors has unanimously approved the merger agreement and
the merger, and recommends that you vote FOR the proposal to approve the merger
agreement and the merger. Approval of the merger agreement and the merger by our
stockholders is a condition to consummation of the merger.
-23-
<PAGE>
RECORD DATE AND VOTING
We have fixed the close of business on November 2, 1999 as the record date
for determining which stockholders are entitled to notice of and to vote at the
special meeting. Only holders of record on the record date are entitled to
notice of and to vote at the special meeting.
Approval of the merger agreement and the merger requires the favorable vote
of the holders of a majority of the outstanding shares of common stock of
HealthPlan Services at the special meeting ("HPS Common Shares").
Each holder on the record date is entitled to one vote per share, which
votes may be cast in person at the special meeting, or by a properly executed
proxy form. As of the record date, there were outstanding and entitled to vote
_____________ HPS Common Shares, which were held by approximately __________
holders of record. The presence, in person or by a valid proxy, of the holders
of a majority of the outstanding HPS Common Shares entitled to vote at the
special meeting is necessary to constitute a quorum at the special meeting.
Holders of HPS Common Shares represented in person or by proxy will be
counted for the purposes of determining whether a quorum is present at the
special meeting. Broker non-votes will be treated as HPS Common Shares that are
present and entitled to vote at the special meeting for purposes of determining
whether a quorum exists and will have the same effect as votes against approval
of the merger agreement and the merger.
VOTING AND REVOCATION OF PROXIES
All HPS Common Shares that are entitled to vote and are represented at the
special meeting by valid proxies received before or at the special meeting, and
not revoked, will be voted at the special meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated (other
than in the case of broker non-votes), such proxies will be voted in favor of
the proposal to approve the merger agreement and the merger. With respect to any
other business that may properly come before the special meeting and be
submitted to a vote of stockholders, proxies received by the Board of Directors
will be voted in accordance with the judgment of the designated proxy holders.
Under the rules of the New York Stock Exchange, HPS Common Shares held by a
broker or nominee may not be voted at the special meeting without instructions
to do so from the beneficial owner(s).
The Board does not know of any matters other than the merger proposal that
are to come before the special meeting. If any other matters are properly
presented at the special meeting for consideration, including, among other
things, consideration of a motion to adjourn the special meeting to another time
and/or place (including, without limitation, for the purposes of soliciting
additional proxies or allowing additional time for
-24-
<PAGE>
the satisfaction of conditions to the merger), the persons named in the enclosed
proxy form and acting thereunder generally will have discretion to vote on these
matters in accordance with their judgment if so authorized by instructions given
on such proxy. Notwithstanding the foregoing, proxies voting against a specific
proposal may not be used by the persons named in the proxies to vote for
adjournment of the special meeting for the purpose of providing HealthPlan
Services additional time to solicit votes to approve that proposal.
Any proxy given to HealthPlan Services pursuant to this solicitation may be
revoked by the person giving it at any time before it is voted. Proxies may be
revoked by (1) filing with the Secretary of HealthPlan Services, at or before
the taking of the vote at the special meeting, a written notice of revocation
bearing a later date than the proxy, (2) duly executing a later-dated proxy
relating to the same HPS Common Shares and delivering it to the Secretary of
HealthPlan Services before the taking of the vote at the special meeting, or (3)
attending the special meeting and voting in person (although attendance at the
special meeting will not in and of itself constitute a revocation of a proxy).
ANY WRITTEN NOTICE OF REVOCATION OR SUBSEQUENT PROXY SHOULD BE SENT TO
HEALTHPLAN SERVICES CORPORATION, 3501 FRONTAGE ROAD, TAMPA, FLORIDA 33607,
ATTENTION: CORPORATE SECRETARY, OR BE HAND DELIVERED TO THE SECRETARY OF
HEALTHPLAN SERVICES CORPORATION AT OR BEFORE THE TAKING OF THE VOTE AT THE
SPECIAL MEETING.
All expenses of our solicitation of proxies for the special meeting
will be borne by HealthPlan Services. In addition to solicitation by use of the
mails, proxies may be solicited from stockholders by directors, officers and
employees of HealthPlan Services in person or by telephone, telegram or other
means of communication. These directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with the solicitation. We have retained First Union
National Bank, a proxy solicitation firm, to assist us in the solicitation of
proxies for the special meeting at a cost of approximately $1,200 plus
reimbursement of reasonable out-of-pocket expenses. In addition, we will make
arrangements with brokerage houses, custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of HPS Common
Shares held of record by these brokerage houses, custodians, nominees and
fiduciaries, and we will reimburse these brokerage houses, custodians, nominees
and fiduciaries for their reasonable expenses.
THE MERGER
We are furnishing this proxy statement/prospectus to you in connection with
the proposed merger between HealthPlan Services and a wholly-owned subsidiary of
UICI because you are a stockholder of HealthPlan Services. If completed, the
merger will be carried out as provided in the merger agreement, a copy of which
is attached as Appendix A to this proxy statement/prospectus.
-25-
<PAGE>
The merger agreement provides that the merger will be accomplished by
merging a new UICI subsidiary (which we refer to as New UICI Sub) into
HealthPlan Services. Following the merger, the Common Stock of HealthPlan
Services will be 100% owned by UICI.
In the merger, each outstanding HPS Common Share will be converted into the
right to receive a fraction of a share of UICI common stock. The fraction will
be determined based on an exchange ratio that is, in turn, based on the average
of the volume weighted average trading prices of UICI stock for a period of 20
consecutive trading days ending on the third trading day immediately prior to
the effective date of the merger. The exchange ratio will be calculated as
follows:
<TABLE>
<CAPTION>
PRICE RANGE OF UICI STOCK (PER SHARE) EXCHANGE RATIO
------------------------------------- --------------
<S> <C> <C>
o Greater than $33.00 $9.50 /divided by/ (average price of UICI stock - $3.00)
o Less than or equal to $33.00 and greater
than $30.00 .3167
o Less than or equal to $30.00, but greater
than or equal to $28.00 $9.50 /divided by/ (average price of UICI stock)
o Less than $28.00, but greater than or equal
to $23.00 .3393
o Less than $23.00, but greater than or equal
to $21.00 $9.50 /divided by/ (average price of UICI stock + $5.00)
o Less than $21.00 .3654
</TABLE>
In no event, however, will you receive a fractional share of UICI common
stock. Instead, if you would otherwise be entitled to receive a fractional share
of UICI stock, you will be paid an amount in cash equal to such fraction
multiplied by the volume-weighted average closing price for UICI common stock on
the New York Stock Exchange for the five trading days immediately preceding the
effective date of the merger.
BACKGROUND
UICI, together with its subsidiaries, is a diversified financial services
company that offers insurance and financial services to niche consumer and
institutional markets. UICI also provides technology and outsourcing solutions
to the insurance and health services communities. UICI issues health insurance
policies to the self-employed and student markets; markets credit support
services to individuals with no, or troubled, credit experience and assists them
in obtaining a nationally recognized credit card; markets, originates, funds and
services primarily Federally guaranteed student loans; and provides motor club
services to motorists, including road and towing assistance, trip routing,
emergency travel assistance, and accident related indemnity benefits.
-26-
<PAGE>
Since its founding in 1984 primarily as a health insurer, UICI has
continuously sought ways to diversify and broaden its activities away from
traditional health insurance, or risk-based, product offerings. Since 1992 UICI
has furthered this objective by making the following acquisitions:
o In 1992, UICI formed its credit services division, which markets
credit support services to individuals with no, or troubled,
credit experience and assists such individuals in obtaining a
nationally recognized credit card. UICI established a credit card
service center in South Dakota in 1995, and, in February 1997,
UICI successfully chartered a special-purpose national bank for
the purpose of issuing the credit card accounts. In 1999, UICI
reorganized this business under the "United CreditServ" name.
o In April 1996 UICI acquired the underwriting, claims management
and administrative capabilities of AEGON USA, Inc. related to
health insurance products coinsured by UICI.
o In 1995 UICI purchased 51% of Insurdata Incorporated. Insurdata
develops comprehensive technology solutions and provides related
outsourcing services to the administration segment of the
healthcare industry. In addition, Insurdata offers systems
integration, technology management and data capture services. In
December 1996, UICI purchased the 49% of Insurdata that it did
not already own and completed the transfer to Insurdata of UICI's
insurance technology assets and technology-related personnel.
o UICI entered the student loan origination and servicing business
in May 1997 through the formation of Educational Finance Group,
and, in 1999 Educational Finance Group acquired Academic
Management Services, Inc., a leading provider of tuition
installment payment plans.
o In August 1997, UICI acquired National Motor Club of America,
Inc., a provider of motor club services.
Consistent with its diversification objectives, UICI was attracted to
HealthPlan Services' transaction-based business and the perceived opportunities
to apply technology solutions developed by UICI's Insurdata unit to the claims
administration and claims management businesses of HealthPlan Services. Because
UICI has itself been engaged in claims management and administration activities,
UICI believed that it was capable of evaluating the risks and opportunities
associated with HealthPlan Services' business.
-27-
<PAGE>
DISCUSSIONS BETWEEN HEALTHPLAN SERVICES AND UICI
In July 1999, Gregory T. Mutz (President and Chief Executive Officer of
UICI) called James K. Murray, Jr. (Chairman and Chief Executive Officer of
HealthPlan Services) to inquire on an introductory basis whether Mr. Murray
might entertain discussions that might lead to a possible business combination
of UICI and HealthPlan Services. Mr. Murray indicated that he would be willing
to conduct such discussions. Unknown to Mr. Mutz, at the direction of the
HealthPlan Services' Board, HealthPlan Services had previously retained Bear,
Stearns & Co., Inc. in January 1999 to investigate ways to enhance stockholder
value, including the possible entry into a strategic business combination in
order to complement HealthPlan Services' core capabilities.
On August 3, 1999, Mr. Mutz and Steven K. Arnold (UICI's Chief Executive
Officer, Student Insurance Division) met in Tampa with Mr. Murray and the
leaders of HealthPlan Services' small group, managed care and information
technology business units to discuss mutual business opportunities facing UICI
and HealthPlan Services. On August 26, 1999, Mr. Arnold met in Columbus, Ohio
with the head of HealthPlan Services' large group operations.
On August 11, 1999, UICI and HealthPlan Services executed a confidentiality
agreement in connection with their continuing discussions. Also on August 11,
Dennis Maloney (President of UICI's Insurdata subsidiary), Mr. Arnold and other
representatives of Insurdata visited HealthPlan Services' office in Tampa to
meet with the head of HealthPlan Services information technology business unit
and to review and assess HealthPlan Services' technology resources. On August
31, representatives of HealthPlan Services visited Insurdata in Dallas to review
Insurdata's information technology capabilities.
On September 2, 1999, Ronald L. Jensen (Chairman of UICI) and Mr. Murray
met in Tampa and discussed general business conditions in the healthcare
services industry. On September 3, 1999, Mr. Jensen, Mr. Mutz, Mr. Arnold and
Glenn W. Reed (Executive Vice President and General Counsel of UICI) met in
Tampa with Mr. Murray and other members of senior management of HealthPlan
Services. At this meeting, presentations were made by the business leaders of
HealthPlan Services' information technology, large group, small group and NPPN
managed care operations, and the perceived benefits associated with a possible
combination of UICI and HealthPlan Services were discussed. At the conclusion of
the meeting, Mr. Mutz informed Mr. Murray that UICI was prepared to proceed with
negotiations leading to a possible stock for stock acquisition by UICI of
HealthPlan Services in the range of $8.00 per HealthPlan Services share. Mr.
Murray requested that UICI management prepare a more detailed written proposal
with respect to a possible transaction for delivery to the HealthPlan Services
Board. In response to that request, on September 7, 1999, UICI delivered to
HealthPlan Services a preliminary written discussion draft of a summary of terms
outlining proposed terms of a tax-free, stock-for-stock merger transaction in
which HealthPlan Services stockholders would receive UICI stock in accordance
with an exchange ratio that is obtained by dividing $8.00 (the proposed
acquisition price of
-28-
<PAGE>
HealthPlan Services common stock) by the average closing sale price of UICI
common stock during the ten consecutive trading days immediately preceding the
date of the merger agreement.
Mr. Mutz, Mr. Arnold and Mr. Murray spoke periodically on the telephone
during the period September 7 to September 30 concerning the proposed
transaction.
On September 23, 1999, UICI formally engaged Donaldson Lufkin & Jenrette
Securities Corporation to serve as UICI's financial advisor in connection with
the transaction. Donaldson Lufkin assisted UICI in preparing a financial model
of a proposed transaction and in performing other financial analyses.
On September 15, 1999, Mr. Mutz spoke with a senior officer of Bank of
America, N.A., concerning UICI's need to secure additional bank or other
financing in order to complete the transaction. On September 17, 1999,
representatives of UICI met with representatives of Bank of America, N.A. to
discuss the possible transaction and to consider the possibility of increasing
UICI's existing $100 million credit facility to a $250 million facility, to
accommodate HealthPlan Services' existing debt and to provide additional growth
capital to UICI. Representatives of Bank of America expressed a willingness to
proceed with discussions.
On September 22, 1999, Mr. Mutz and other representatives of UICI, Mr.
Murray and other representatives of HealthPlan Services, representatives of
Donaldson Lufkin and representatives of Bear Stearns met in Tampa to further
discuss the terms of a possible business combination transaction. At that
meeting, Mr. Mutz advised HealthPlan Services that UICI would be willing to
increase its offer to acquire HealthPlan Services by proposing an exchange ratio
that would be in the range of .3065 to .38, depending upon the closing sale
price of UICI common stock during the twenty consecutive trading days
immediately preceding the completion of the merger. UICI confirmed its offer in
a written summary of preliminary discussion terms delivered to Mr. Murray on
September 23.
On September 23, 1999, the Board of HealthPlan Services met telephonically,
during which Mr. Murray advised the Board of the terms of UICI's offer and the
terms were discussed. The HealthPlan Services Board authorized management to
allow UICI to proceed with its more detailed due diligence inquiries, and UICI
and HealthPlan Services directed their respective legal counsel to prepare
drafts of definitive documentation with respect to a proposed stock-for-stock
merger transaction.
During the week of September 27, 1999, representatives of UICI and Bank of
America conducted additional due diligence inquiries in Tampa, during which
non-public information concerning HealthPlan Services was shared with UICI and
Bank of America. A draft merger agreement was circulated, and negotiations
ensued concerning its terms.
-29-
<PAGE>
On September 30, 1999, UICI received a draft form of commitment from Bank
of America contemplating a $250 million unsecured credit facility. Negotiations
ensued between UICI and Bank of America concerning the terms of the proposed
facility and the commitment letter. On October 3, 1999, Mr. Mutz and Mr. Arnold
met with members of HealthPlan Services management in Tampa to conclude several
additional due diligence inquiries, including management's assessment of
HealthPlan Services' projected financial results of operations for the third and
fourth quarters of 1999 and the full year 2000.
A special telephonic meeting of the UICI Board of Directors was held to
consider the proposed transaction on October 4, 1999. At the meeting, the terms
and conditions of the proposed transaction were reviewed in detail by UICI's
management and a representative of Gardner, Carton & Douglas (UICI's special
legal counsel). In addition, UICI's management described the potential benefits
and business rationale for the transaction. Representatives of Donaldson Lufkin
& Jenrette made a detailed financial presentation to the Board. Discussion and
questions from UICI Board members followed the presentations. Mr. Mutz advised
the Board that UICI had not completed its negotiations with Bank of America
concerning the terms of the financing commitment, and the Board directed Mr.
Mutz to complete those discussions and the negotiations of the proposed merger
agreement.
A continuation of the Special Meeting of the UICI Board of Directors was
held telephonically on October 5 to consider and approve the proposed
transaction. At that meeting, Mr. Mutz advised the Board that the discussions
with respect to the Bank of America financing commitment had concluded to
management's satisfaction, and the terms and conditions of Bank of America's
commitment were summarized. Following further discussion, the UICI Board of
Directors unanimously adopted the merger agreement and approved the merger.
A special telephonic meeting of the HealthPlan Services Board was held on
October 4, 1999 to discuss the merger agreement. In attendance at this meeting
were representatives of Bear Stearns and representatives of Fowler, White,
Gillen, Boggs, Villareal and Banker, P.A. (outside legal counsel to HealthPlan
Services). At this meeting, representatives of Bear Stearns reviewed the events
and discussions that led to the negotiations with UICI. In particular, Bear
Stearns recounted that, beginning in February 1999, Bear Stearns approached
certain parties on behalf of HealthPlan Services with regard to a potential
merger. Subject to non-disclosure agreements, these parties were given
non-public information about HealthPlan Services and an opportunity to meet with
the senior management of HealthPlan Services. From this process, seven parties
were identified by HealthPlan Services and Bear Stearns as "high probability"
candidates expressing an interest in a possible acquisition of HealthPlan
Services. They noted that the September 7, 1999 preliminary term sheet presented
by UICI was the culmination of this process. At the October 4 meeting, there was
also considerable discussion by the HealthPlan Services Board as to how the
exchange ratio should work, and the management noted that the pricing mechanism
was still being discussed. The Board
-30-
<PAGE>
asked management to continue negotiations and scheduled a continuation of the
meeting for the following day.
On October 5, 1999, the HealthPlan Services Board reconvened the meeting of
the previous day. At that meeting, management indicated that the exchange ratio
had been finalized and Bear Stearns had been given the updated information to
incorporate into their analysis. Management began the meeting by reviewing the
pricing terms, Bear Stearns then reviewed with the Board the material terms of
the merger and various information regarding UICI and HealthPlan Services,
including the basis of their fairness review and analysis. Representatives of
Fowler White commented upon the legal terms of the proposed agreement. Upon
conclusion of their report, Bear Stearns advised the Board of its opinion
concerning the fairness of the transaction to HealthPlan Services' stockholders.
See "HEALTHPLAN SERVICES CORPORATION'S REASONS FOR THE MERGER - OPINION OF BEAR
STEARNS." After deliberations about those and other aspects of the transaction,
including the potential advantages and disadvantages discussed below (see
"HEALTHPLAN SERVICES CORPORATION'S REASONS FOR THE MERGER; RECOMMENDATION OF THE
HEALTHPLAN SERVICES BOARD"), the HealthPlan Services Board members present at
the meeting voted unanimously to approve the merger agreement and merger
transaction and voted to recommend the same to the HealthPlan Services
stockholders.
On the evening of October 5, 1999, the parties executed the merger
agreement and issued a joint press release announcing the execution of the
merger agreement.
HEALTHPLAN SERVICES CORPORATION'S REASONS FOR THE MERGER; RECOMMENDATION OF THE
HEALTHPLAN SERVICES BOARD
In determining to approve the merger, the management of HealthPlan Services and
the HealthPlan Services' Board considered a number of factors, including the
following:
CHANGES IN THE HEALTH CARE INDUSTRY
The health care industry is undergoing dramatic changes that will require
companies such as HealthPlan Services to have state-of-the-art technology and a
large volume of healthcare transactions in order to be successful. After
consulting with the management of HealthPlan Services, the Board concluded that
HealthPlan Services' technology and the technology of UICI's Insurdata division
are complementary and will enable HealthPlan Services' business to compete more
effectively in the changing healthcare climate. In addition, the HealthPlan
Services Board believes that UICI's insurance subsidiaries will provide a
greater volume of transactions that will help the business develop better
economies of scale and efficiencies.
CONDITION OF HEALTHPLAN SERVICES
The HealthPlan Services Board considered the prospects, results of
operations, and objectives of HealthPlan Services (as well as the risks involved
in achieving these objectives given the current economic and market conditions).
For the period 1997
-31-
<PAGE>
through 1999, revenues for HealthPlan Services were essentially flat despite the
fact that HealthPlan Services made two acquisitions and continued to invest in
technological resources. While margins in 1999 were an improvement over 1998
margins, the HealthPlan Services Board and management has had growing concern
regarding whether HealthPlan Services has sufficient and predictable revenue to
generate required efficiencies in its business. It was also becoming apparent
that the technological changes created by the internet would require additional
resources to implement properly.
UICI'S BUSINESS AND PROSPECTS
The HealthPlan Services Board received and reviewed public and non-public
information regarding UICI and discussed UICI's prospects with Bear Stearns. The
HealthPlan Services Board believes that the merger will result in a strong
combined entity with (a) complementary businesses, corporate goals, and
management philosophies, (b) the financial resources necessary to complete and
pursue growth opportunities, and (c) access to technology solutions that have
the potential to lower the cost of providing services to customers and clients.
STRATEGIC ALTERNATIVES
The HealthPlan Services Board assessed HealthPlan Services' strategic
alternatives, including the alternative of remaining a publicly owned
independent company and the response by other companies to a possible business
combination with HealthPlan Services. They balanced the risks and benefits of
the merger against the risks and benefits of the other strategic alternatives
available to HealthPlan Services. Following extensive analysis and discussion
with its legal and financial advisors, the HealthPlan Services Board concluded
that the terms of the merger agreement provided the best means for the
HealthPlan Services stockholders to maximize the value of their holdings.
OTHER POTENTIAL ACQUIRORS
The HealthPlan Services Board considered, after consultation with
management, outside counsel, and Bear Stearns, the likelihood of the existence
of other viable acquirors on terms as favorable as those in the merger
agreement. Based on a review of the success of HealthPlan Services' and Bear
Stearns' efforts to seek and obtain bona fide acquisition offers during the
period prior to the commencement of negotiations with UICI, the HealthPlan
Services Board concluded that it was unlikely that any such other viable
acquirors were interested in negotiating and consummating an acquisition
transaction within a reasonable period of time.
ANALYSIS OF KEY PROVISIONS OF MERGER AGREEMENT
The HealthPlan Services Board analyzed the terms and conditions of the
merger agreement, including:
-32-
<PAGE>
(1) the provisions requiring that the number of UICI shares to be issued
to the HealthPlan Services stockholders in the merger be determined
with respect to the trading price of UICI stock during the twenty
consecutive trading days ending on the day which is three business
days before the date the merger is consummated; and
(2) the right of HealthPlan Services to negotiate with, and provide
information to, third parties and terminate the merger agreement in
the event of an unsolicited alternative proposal if such action is
required in the exercise of the fiduciary duties of the HealthPlan
Services Board. If the Board terminates the merger because its
fiduciary duties require it to do so or if the HealthPlan Services
stockholders fail to approve the merger and within 18 months
HealthPlan Services is acquired by another party, HealthPlan Services
would be obligated to pay UICI a $5,000,000 termination fee.
Additionally, the HealthPlan Services Board granted to UICI an option
to purchase 1,500,000 shares of HealthPlan Services common stock. This
option is exercisable if and only under the same circumstances that a
termination fee would be payable. The HealthPlan Services Board did
not believe that the existence of these termination fees and the
option will preclude any third party from proposing an alternative
transaction.
OPINION OF BEAR STEARNS
The HealthPlan Services Board considered the presentation of Bear Stearns
and its written opinion dated October 5, 1999, which provides that, based upon
and subject to the assumptions, limitations, and qualifications set forth in
such opinion, the exchange ratio is fair to the HealthPlan Services stockholders
from a financial point of view. The HealthPlan Services Board believes that the
analyses prepared and reviewed by Bear Stearns validate the fairness of the
exchange ratio from a financial point of view. For a summary of Bear Stearns'
opinion, including the assumptions made, matters considered, and limits of
review, see "THE MERGER-OPINION OF THE FINANCIAL ADVISOR TO THE HEALTHPLAN
SERVICES BOARD."
TAX TREATMENT
The HealthPlan Services board considered the fact that the merger is
designed to be tax free to the HealthPlan Services stockholders and that the
HealthPlan Services stockholders will retain the entire amount of their
investment in stock upon completion of the transaction without triggering any
tax liability (except to the extent that they receive cash for fractional
shares).
MANAGEMENT'S RECOMMENDATION
The HealthPlan Services Board received and reviewed presentations from, and
discussed the terms and conditions of the merger agreement with, executive
officers of HealthPlan Services and its financial and legal advisors. The
HealthPlan Services Board
-33-
<PAGE>
considered management's and its financial advisors' views of recent trends in
HealthPlan Services' industry. However, in connection with its deliberations,
the HealthPlan Services Board was also aware of the potential benefits to be
received in the merger by members of HealthPlan Services' senior management, as
described under "THE MERGER - INTERESTS OF CERTAIN PERSONS IN THE MERGER."
The above discussion of the information and factors considered by the
HealthPlan Services Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the merger,
the HealthPlan Services Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination.
THE HEALTHPLAN SERVICES BOARD UNANIMOUSLY RECOMMENDS THAT THE HEALTHPLAN
SERVICES STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
OPINION OF THE FINANCIAL ADVISOR TO THE HEALTHPLAN SERVICES BOARD
At the October 5, 1999 meeting of the HealthPlan Services Board, Bear
Stearns delivered its oral opinion (subsequently confirmed in writing) that the
exchange ratio to be provided for in the merger is fair, from a financial point
of view, to the stockholders of HealthPlan Services.
THE FULL TEXT OF THE BEAR STEARNS OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY BEAR STEARNS, IS ATTACHED AS APPENDIX C TO THIS PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE
BEAR STEARNS OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE BEAR STEARNS OPINION.
HEALTHPLAN SERVICES STOCKHOLDERS ARE URGED TO READ CAREFULLY THE BEAR STEARNS
OPINION IN ITS ENTIRETY.
The Bear Stearns opinion is intended for the benefit and use of the
HealthPlan Services Board, is directed only to the fairness to the stockholders
of HealthPlan Services, from a financial point of view, of the exchange ratio to
be provided for in the merger, does not address the merits of the underlying
decision by HealthPlan Services to engage in the merger and does not constitute
a recommendation to any holder of HealthPlan Services common stock or to the
HealthPlan Services Board as to how to vote on the merger or any related matter.
Although Bear Stearns evaluated the fairness to the stockholders of
HealthPlan Services, from a financial point of view, of the exchange ratio to be
provided for in the merger, such exchange ratio was determined by HealthPlan
Services and UICI, through
-34-
<PAGE>
arm's-length negotiations, which determination was not based on any
recommendation by Bear Stearns. Bear Stearns did provide certain advice to the
HealthPlan Services Board from time to time during the course of the
negotiations. The HealthPlan Services Board did not provide specific
instructions to, or place any limitations upon, Bear Stearns with respect to the
procedures to be followed or the factors to be considered by Bear Stearns in
performing its analyses or rendering the Bear Stearns opinion.
In connection with rendering the opinion, Bear Stearns, among other things:
o reviewed the merger agreement and the option agreement discussed on
pages 48 through 60 of this proxy statement;
o reviewed HealthPlan Services' Annual Reports to Stockholders and
Annual Reports on Form 10-K for the fiscal years ended December 31,
1997 and 1998, and its Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999;
o reviewed certain operating and financial information, including
projections, provided by the management of HealthPlan Services
relating to HealthPlan Services' business and prospects;
o met with certain members of HealthPlan Services' senior management to
discuss its operations, historical financial statements, recent
financial results and near-term estimated financial performance, and
future prospects;
o reviewed UICI's Annual Reports to Stockholders and Annual Reports on
Form 10-K for the fiscal years ended December 31, 1997 and 1998, and
its Quarterly Reports on Form 10-Q for the periods ended March 31,
1999 and June 30, 1999;
o reviewed certain operating and financial information, including
projections, provided by UICI management relating to UICI's business
and prospects;
o met with certain members of UICI's senior management to discuss its
operations, historical financial statements, recent financial results
and near-term estimated financial performance, and future prospects;
o reviewed the historical prices and trading volumes of the common stock
of HealthPlan Services and UICI;
o reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which Bear Stearns deemed
generally comparable to HealthPlan Services and UICI;
o reviewed the terms of recent acquisitions of companies which Bear
Stearns deemed generally comparable to HealthPlan Services;
o performed discounted cash flow analyses of the implied per share value
of HealthPlan Services' common stock and of UICI's common stock based
on the projections furnished to Bear Stearns by HealthPlan Services'
-35-
<PAGE>
management and UICI's management, respectively, as well as on a range
of more conservative projection scenarios; and
o conducted such other studies, analyses, inquiries and investigations,
as Bear Stearns deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the projections, provided to it
by HealthPlan Services and UICI. With respect to HealthPlan Services' and UICI's
projected financial results, Bear Stearns assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgements of the senior managements of HealthPlan Services and UICI as to the
expected future performance of HealthPlan Services and UICI, respectively. Bear
Stearns did not assume any responsibility for the independent verification of
any such information or of the projections provided to it, and Bear Stearns
further relied upon the assurances of the senior management of HealthPlan
Services and UICI that they were unaware of any facts that would make the
information or projections provided to it incomplete or misleading.
Notwithstanding Bear Stearns' reliance on the projections provided to it and on
the representations made to it by the managements of HealthPlan Services and
UICI with respect to such projections, in the course of Bear Stearns' analyses
for the purposes of rendering its opinion, Bear Stearns also considered the
valuation implications of more conservative projection scenarios for both
HealthPlan Services and UICI. In arriving at the opinion, Bear Stearns did not
perform or obtain any independent appraisal of the assets or liabilities of
HealthPlan Services and UICI, nor was Bear Stearns furnished with any such
appraisals. During the course of its engagement, Bear Stearns was asked by the
HealthPlan Services Board to solicit indications of interest from various third
parties regarding a transaction with HealthPlan Services, and Bear Stearns
considered the results of these solicitations in rendering its opinion. Bear
Stearns' opinion is necessarily based on economic, market and other conditions,
and the information made available to it, as of the date of the opinion. Bear
Stearns assumed that the merger will qualify as a tax-free "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. Bear Stearns did not express any opinion as to the price or range of
prices at which shares of common stock of UICI may trade subsequent to the
merger.
In connection with preparing and rendering the opinion, Bear Stearns
performed a variety of valuation, financial and comparative analyses. The
summary of the analyses, as set forth below, does not purport to be a complete
description of the analyses underlying the Bear Stearns opinion. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
summary description. Bear Stearns believes that its analyses must be considered
as a whole, and that selecting portions of its analyses and the factors
considered by it, without considering all the factors and analyses, could create
an incomplete view of the processes underlying the opinion. Moreover, the
estimates contained in the analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or necessarily reflect the prices at which
-36-
<PAGE>
businesses or securities actually may be sold. Accordingly, the estimates are
inherently subject to substantial uncertainties.
The following is a summary of the material valuation, financial and
comparative analyses performed by Bear Stearns in arriving at the Bear Stearns
opinion as of the date thereof.
HISTORICAL STOCK PRICE AND EXCHANGE RATIO ANALYSIS
Bear Stearns reviewed the historical closing stock prices of HealthPlan
Services common stock and UICI common stock, including, among others, the one
year and three year periods prior to October 4, 1999. Over the prior twelve
months, HealthPlan Services' common stock had traded between a high of $11.50 on
October 21, 1998 and a low of $5.69 on August 11, 1999 and UICI's common stock
traded between a high of $29.00 on August 20, 1999 and a low of $11.75 on
October 15, 1998. Bear Stearns observed that based on
- the stock price of HealthPlan Services of $7.56 on October 4, 1999;
- the stock price of HealthPlan Services of $6.25 one month prior to
October 4, 1999;
- the average stock price of HealthPlan Services of $6.72 for the twenty
trading days prior to October 4, 1999;
- the average stock price of HealthPlan Services of $7.04 for the three
months prior to October 4, 1999;
- the average stock price of HealthPlan Services of $7.58 for the six
months prior to October 4, 1999;
- the average stock price of HealthPlan Services of $8.20 for the year
prior to October 4, 1999; and
- an implied purchase price of $8.82 (based on a trading price for UICI's
common stock of $26.00 per share and an exchange ratio of 0.3393),
the implied purchase price represented implied premiums of 16.7%, 41.1%,
31.2%, 25.3%, 16.4% and 7.6%, respectively.
Bear Stearns also reviewed the historical closing stock prices of
HealthPlan Services and UICI common stock and the implied market exchange ratios
determined by dividing the price per share of HealthPlan Services by the price
per share of UICI (the "Market Exchange Ratio") over various periods of time
including, among others, October 4, 1999 and the periods one week, two weeks,
six months and one year prior to October 4, 1999. Bear Stearns calculated that
- the Market Exchange Ratio was 0.2923 on October 4, 1999;
- the Market Exchange Ratio averaged 0.2847 for the one week prior to
October 4, 1999;
-37-
<PAGE>
- the Market Exchange Ratio averaged 0.2639 for the two weeks prior to
October 4, 1999;
- the Market Exchange Ratio averaged 0.2758 for the six months prior to
October 4, 1999; and
- the Market Exchange Ratio averaged 0.3773 for the one year period prior
to October 4, 1999.
Bear Stearns compared these figures to an assumed exchange ratio for the
merger of 0.3393.
COMPARABLE PUBLIC COMPANY ANALYSIS
In the course of its analysis, Bear Stearns compared certain ratios and
multiples of HealthPlan Services to the corresponding ratios and multiples of
certain publicly-traded companies in the four industry sectors that Bear Stearns
believed were generally comparable to HealthPlan Services: Healthcare Payors
(Humana, Inc., Coventry Health Care, Inc., Mid-Atlantic Medical Services, Inc.,
American Medical Security Group, Inc. and The Ceres Group); Non-Risk Bearing
Managed Care (First Health Group, Inc. and United Payors and United Providers,
Inc.); Non-Risk Bearing Managed Workers' Compensation (Crawford & Co., Corvel
Corporation and Core, Inc.); and Transaction Processing / Health Care
Information Systems (National Data Corporation, The Bisys Group, Inc., Inspire
Insurance Solutions, Inc., Health Management Systems, Inc. and Health Risk
Management). The multiples and ratios were calculated based on publicly
available financial information and research reports, and were adjusted for
certain extraordinary and non-recurring items. Financial data reviewed included
(i) revenue; (ii) earnings before interest, taxes, depreciation and amortization
("EBITDA"); (iii) earnings before interest and taxes ("EBIT"); (iv) net income;
and (v) earnings per share ("EPS") for various time periods as well as certain
operating margins, valuation statistics, financial ratios and projected growth
rates. For purposes of its analysis, Bear Stearns also reviewed the harmonic
means of certain valuation multiples of the comparable companies.
Among other analyses, for each of the comparable companies, Bear Stearns
calculated the enterprise value multiples, which are the ratios of the sum of
their equity value as of October 4, 1999 plus debt less cash and cash
equivalents ("Enterprise Value") to their respective revenues, EBITDA and EBIT
during the most recently reported 12-month period ("LTM") and projected calendar
1999 and 2000 revenues, EBITDA and EBIT and the ratios of their stock prices as
of October 4, 1999 to their respective LTM earnings per share and projected
calendar year 1999 and 2000 earnings per share. Bear Stearns then compared the
calculated ratios and multiples of the comparable companies to the calculated
ratios and multiples for HealthPlan Services based on (i) the closing price for
HealthPlan Services on October 4, 1999 of $7.56 per share and (ii) the implied
purchase price for HealthPlan Services of $8.82 per share. These ratios are
summarized in the table below:
-38-
<PAGE>
<TABLE>
<CAPTION>
ENTERPRISE VALUE/LTM PRICE/EARNINGS PER SHARE
--------------------------------------- ---------------------------------------
REVENUE EBITDA EBIT LTM 1999E 2000E
------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
HEALTHPLAN SERVICES:
At October 4, 1999 ($7.56) 0.83 x 6.1 x 13.0 x 16.7 x 23.6 x 10.3 x
At Implied Price ($8.82) 0.90 6.6 14.2 19.5 27.5 12.0
HEALTHCARE PAYORS:
High 0.32 x 10.5 x 14.4 x 20.2 x 16.3 x 11.7 x
Low 0.10 3.2 5.7 6.7 10.9 9.4
Harmonic Mean 0.14 4.9 8.5 11.7 14.0 10.4
NON-RISK BEARING MANAGED
CARE:
High 3.38 x 8.6 x 10.5 x 16.7 x 16.6 x 14.1 x
Low 2.74 7.4 8.4 14.3 13.2 11.3
Harmonic Mean 3.03 8.0 9.3 15.4 14.7 12.5
NON-RISK BEARING MANAGED
WORKERS' COMPENSATION:
High 1.42 x 10.0 x 17.1 x 30.3 x 19.2 x 15.1 x
Low 0.99 7.2 9.8 16.8 15.6 13.6
Harmonic Mean 1.15 8.8 12.5 20.6 17.1 14.0
TRANSACTION
PROCESSING/HCIS:
High 2.80 x 11.5 x 14.2 x 22.9 x 21.2 x 18.3 x
Low 0.36 3.0 4.8 10.9 7.1 4.8
Harmonic Mean 0.70 4.6 7.4 14.1 11.4 9.0
OVERALL HARMONIC MEAN
(EXCLUDING HEALTHPLAN
SERVICES) 0.42 x 5.7 x 8.8 x 14.2 x 13.5 x 10.8 x
</TABLE>
Bear Stearns observed that, based on the implied purchase price for
HealthPlan Services of $8.82, the valuation multiples for HealthPlan
Services generally equaled or exceeded the harmonic means of the trading
multiples of the comparable companies.
Bear Stearns chose the comparable companies because they have general
business, operating and financial characteristics similar to those of
HealthPlan Services, and Bear Stearns received guidance from HealthPlan
Services management regarding the comparability of the selected companies.
However, Bear Stearns noted that no company used in the foregoing analysis
is identical to HealthPlan Services. Accordingly, Bear Stearns did not
rely solely on the mathematical results of the analysis, but also made
qualitative judgments concerning differences in financial and
-39-
<PAGE>
operating characteristics of HealthPlan Services and the comparable
companies and other factors that could affect the values of each.
COMPARABLE TRANSACTIONS ANALYSIS
Bear Stearns reviewed certain publicly-available financial information
related to eight merger and acquisition transactions completed in the health
care administrative services sector since January 1, 1996 that it deemed
generally comparable to the merger. For each of the comparable transactions,
Bear Stearns reviewed certain publicly-available financial information for the
acquired companies including, to the extent available, revenue, EBITDA, EBIT,
net income and certain valuation statistics, as adjusted for certain
extraordinary and non-recurring items. The ratios of the Enterprise Values of
the acquired companies to their respective LTM revenues, EBITDA and EBIT and the
ratios of the equity value of the acquired companies to their respective LTM net
income are summarized in the table below and are compared to the calculated
ratios for HealthPlan Services based on the implied purchase price of $8.82.
HARMONIC HEALTHPLAN
HIGH LOW MEAN SERVICES
---- ----- -------- ----------
EQUITY VALUE TO:
LTM Net Income 45.5x 23.9x 32.1x 19.5x
Forward Net Income 27.1 27.1 27.1 27.5
ENTERPRISE VALUE TO:
LTM Revenue 6.30x 0.48x 0.83x 0.90x
LTM EBITDA 18.4 4.0 6.3 6.6
LTM EBIT 24.5 9.7 14.2 14.2
Bear Stearns observed that the exchange ratio of 0.3393 and the implied
purchase price of $8.82 produced multiples for HealthPlan Services that were
generally favorable as compared to the harmonic means of (i) Enterprise Value to
LTM revenues; (ii) Enterprise Value to LTM EBITDA; and (iii) equity value to the
projected forward calendar year period net income and a multiple which was not
favorable as compared to the harmonic mean of equity value to LTM net income of
the comparable transactions. Bear Stearns indicated that the relatively low LTM
net income multiple for HealthPlan Services was attributable to the expectation
that HealthPlan Services' net income in the third and fourth quarters of 1999
would decline significantly. Bear Stearns noted that no transaction used in the
foregoing analysis is identical to the merger. Bear Stearns also noted that
there was limited data available for the selected transactions, owing to the
fact that only one of the acquired companies was publicly traded. Accordingly,
Bear Stearns indicated that it did not place significant weight on this
valuation method.
-40-
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS.
Bear Stearns calculated the relative ownership by HealthPlan Services and
UICI of UICI following the merger (the "Combined Company") based on equity
market capitalization and Enterprise Value at a range of exchange ratios
provided for in the merger agreement. Bear Stearns then compared HealthPlan
Services' relative ownership percentages based on equity market capitalization
to the LTM and projected 1999 and 2000 net income contribution by HealthPlan
Services to the Combined Company and HealthPlan Services relative ownership
percentages based on Enterprise Value to the LTM and projected 1999 and 2000
revenue, EBITDA and EBIT contributions to the Combined Company, which projected
results were provided to Bear Stearns by the managements of HealthPlan Services
and UICI, respectively. In this relative contribution analysis, Bear Stearns did
not take into account any of the cost savings or synergies assumed by either
company to result from the merger.
Bear Stearns calculated that using exchange ratios between the exchange
ratio of 0.3654 (the ratio that would apply assuming UICI average trading price
less than or equal to $21.00) and the maximum exchange ratio of 0.2969 (the
exchange ratio that would apply assuming UICI trading price of $35.00),
HealthPlan Services' stockholders would own between 8.1% and 9.7% of the
Combined Company based on equity market capitalization and between 8.0% and 8.7%
of the Combined Company based on Enterprise Value. Bear Stearns noted that the
ownership calculated using equity market capitalization compared to HealthPlan
Services' contribution of net income to the Combined Company of 7.2% for LTM and
projected 4.3% and 8.3% in 1999 and 2000, respectively. Bear Stearns also noted
that the ownership calculated using Enterprise Value compared to HealthPlan
Services' contribution to the Combined Company of (i) revenues of 15.8% for LTM
and projected 13.8% and 11.9% in 1999 and 2000, respectively; (ii) EBITDA of
12.7% for LTM and projected 12.4% in both 1999 and 2000; and (iii) EBIT of 8.0%
for LTM and projected 7.0% and 8.4% in 1999 and 2000, respectively.
DISCOUNTED CASH FLOW ANALYSIS
Bear Stearns performed a discounted cash flow analysis of HealthPlan
Services using stand-alone financial projections for HealthPlan Services
provided by HealthPlan Services' management for the years ending December 31,
2000 through December 31, 2004. Bear Stearns calculated a net present value of
the after-tax unlevered free cash flows for the years ending December 31, 2000
through December 31, 2004 as of December 31, 1999 using discount rates ranging
from 14.3% to 15.3%, based on the estimated weighted average cost of capital for
HealthPlan Services of 14.8%. Bear Stearns calculated a terminal value for
HealthPlan Services in the year 2004 using assumed perpetual growth rates of 2%
to 5%, applied to the projected 2005 free cash flow. These terminal values were
then discounted using discount rates ranging from 14.3% to 15.3%. Using this
analysis, the implied value per share of HealthPlan Services common stock (which
is the present value of the cash flows for the years December 31, 2000 through
December 31, 2004 plus the terminal value, less net debt, divided by the
-41-
<PAGE>
outstanding shares of HealthPlan Services common stock plus the shares issuable
upon conversion of existing in-the-money options, assuming the proceeds of such
options are used to repurchase common stock) ranged from a low of $7.48 (based
on a discount rate of 15.3% and a perpetuity growth rate of 2%) to a high of
$11.98 (based on a discount rate of 14.3% and a perpetuity growth rate of 5%).
Bear Stearns also analyzed the sensitivity of the implied discounted cash flow
value per share of HealthPlan Services using more conservative projections than
those provided to Bear Stearns by HealthPlan Services' management. Using this
analysis at a discount rate of 14.8%, the implied value of HealthPlan Services
common stock ranged from a low of $4.12 per share (based on a projection
scenario where HealthPlan Services only achieved 80% of management's plan and a
terminal value calculated using a perpetuity growth rate of 2%) to a high of
$11.01 per share (based on a projection scenario where HealthPlan Services
achieved 100% of management's plan and a terminal value calculated using a
perpetuity growth rate of 5%).
PRO FORMA MERGER ANALYSIS
Bear Stearns reviewed and analyzed certain pro forma financial impacts of
the merger on the holders of HealthPlan Services common stock and UICI common
stock based on:
- a price for UICI common stock of $26.00 per share, the mid-day trading
price on October 4, 1999;
- 46.267 million diluted shares of UICI outstanding and 13.662 million
diluted shares of HealthPlan Services common stock outstanding;
- an exchange ratio of 0.3393;
- EPS projections for HealthPlan Services and UICI which were based on the
projections provided to Bear Stearns by the managements of HealthPlan
Services and UICI, respectively;
- accounting for the merger as a "purchase" with an assumed amortization
period for goodwill incurred in the acquisition of 20 years; and
- no assumed cost savings or synergies.
The results of the analysis indicated that, without cost savings or
synergies, the acquisition of HealthPlan Services by UICI would result in
dilution of the projected EPS of UICI common stock of $0.05 or 2.2% for
calendar year 2000 and dilution of $0.02 or 0.9% for calendar year 2001, as
compared to the projected EPS of UICI common stock on a stand-alone,
pre-acquisition basis. Bear Stearns calculated that pre-tax synergies of
approximately $4.2 million in 2000 and $2.1 million in 2001 would be
required in order for UICI to achieve break-even (non-dilutive) EPS. These
required synergies compared favorably to HealthPlan Services management's
estimates for combination synergies.
-42-
<PAGE>
OTHER ANALYSES
Bear Stearns conducted such other analyses as it deemed necessary,
including the following:
- reviewing historical and projected financial and operating data for both
HealthPlan Services and UICI;
- analyzing selected investment research reports on, and earnings and
other estimates for, each of HealthPlan Services and UICI;
- analyzing the historic stock performance and trading volume for
HealthPlan Services and UICI;
- reviewing available information regarding the institutional holdings of
HealthPlan Services common stock and UICI common stock.
The HealthPlan Services Board engaged Bear Stearns as its financial advisor
based on Bear Stearns' experience and expertise. Bear Stearns is an
internationally recognized investment banking firm that has substantial
experience in the health care industry and expertise in transactions similar to
the merger. As part of its investment banking business, Bear Stearns is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Pursuant to the terms
of its engagement letter, dated February 15, 1999, HealthPlan Services has
agreed to pay Bear Stearns the following compensation:
- a fee of $600,000 in connection with the delivery of the Bear Stearns
opinion;
- a transaction fee, contingent upon and payable at closing of the merger,
of 1% of the total consideration to be paid by UICI in the merger
against which the opinion fee is to be credited, which transaction fee
is estimated at approximately $2.1 million; and
- to reimburse Bear Stearns for all reasonable out-of-pocket expenses,
including fees and disbursements of counsel, and of other consultants
and advisors retained by Bear Stearns.
HealthPlan Services has also agreed to indemnify Bear Stearns and certain
related persons against certain liabilities in connection with its engagement,
including certain liabilities under the federal securities laws. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to Bear Stearns pursuant to the foregoing provisions,
Bear Stearns and HealthPlan Services have been informed that in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the ordinary course of
business, Bear Stearns may actively trade the equity securities of HealthPlan
Services and UICI for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in the securities.
-43-
<PAGE>
EFFECTIVE TIME OF THE MERGER
Unless the parties to the merger agree to a later time and date, the merger
will become effective when we file a certificate of merger with the Secretary of
State of Delaware. Unless we agree otherwise, we will complete the merger on the
second business day after all of the conditions to the merger are satisfied or
waived. We expect to complete the merger by January 31, although we can give no
assurance when, or if, all the conditions to completion of the merger will be
satisfied or waived. See "-- REGULATORY APPROVALS" and "THE MERGER AGREEMENT AND
RELATED AGREEMENTS-- CONDITIONS TO EACH COMPANY'S OBLIGATIONS TO COMPLETE THE
MERGER."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended to be only a summary of the material
U.S. federal income tax consequences of the merger and not a complete analysis
or listing of all potential tax effects relative to a decision whether to vote
for the approval of the merger agreement and the merger. The discussion does not
address all aspects of U.S. federal income taxation that may apply to HealthPlan
Services stockholders who are subject to special U.S. federal income tax
treatment, including non-U.S. persons, insurance companies, tax-exempt entities,
retirement plans and persons who acquired their HPS Common Shares upon the
exercise of employee stock options or otherwise as compensation. For example,
the discussion does not address the effect, if any, of the Foreign Investment In
Real Property Tax Act on non-U.S. persons holding HPS Common Shares. The
discussion below applies to HealthPlan Services stockholders who hold their HPS
Common Shares as a capital asset within the meaning of Section 1221 of the
Internal Revenue Code. The discussion addresses neither the effect of applicable
state, local or non-U.S. tax laws, nor the effect of any U.S. federal tax laws
other than those pertaining to U.S. federal income tax.
OPINIONS
It is a condition of the merger that HealthPlan Services receive an opinion
of counsel to the effect that:
o the merger will be treated as a reorganization described in Section
368(a) of the Internal Revenue Code; and
o stockholders of HealthPlan Services who are United States persons and
who exchange HPS Common Shares solely for shares of common stock of
UICI in the merger will not recognize any gain or loss as a result of
such exchange (except with respect to cash received instead of
fractional shares).
It is a condition of the merger that UICI receive an opinion of counsel to
the effect that:
-44-
<PAGE>
o the merger will be treated as a reorganization described in Section
368(a) of the Internal Revenue Code.
Opinions of counsel are not equivalent to rulings from the Internal Revenue
Service, and such opinions are not binding on the Internal Revenue Service. The
Internal Revenue Service and ultimately the courts could disagree with the
opinions. The opinions will be based on the Internal Revenue Code, the
regulations under the Internal Revenue Code, administrative rulings of the IRS
and court decisions, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences discussed below.
The opinions will also be based on customary assumptions and representations
made by HealthPlan Services, its principal stockholders, and UICI. The
discussion below assumes that the merger will be treated as a reorganization
described in Section 368(a) of the Internal Revenue Code.
Except with respect to cash received in lieu of fractional shares, you will
not recognize any gain or loss on the exchange of HPS Common Shares for common
stock of UICI. The tax basis of the shares of common stock of UICI you receive
in the merger will be equal to the tax basis of the HPS Common Shares you
exchange for those shares, reduced by any amount of basis allocable to
fractional share interests for which you receive cash. For determining whether
gain or loss on the subsequent disposition of shares of common stock of UICI
received in the merger is long-term or short-term, the holding period of the
shares of common stock of UICI you receive will include the holding period of
the HPS Common Shares you exchanged for those shares.
The receipt of cash in lieu of a fractional share of common stock of UICI
by you in the merger will result in taxable gain or loss to you for U.S. federal
income tax purposes based on the difference between the amount of cash you
receive and your basis in the fractional share as described above. That gain or
loss will be a capital gain or loss and will be a long-term or short-term
capital gain or loss, depending on your holding period in the HPS Common Shares.
Backup withholding at a rate of 31% will apply to any cash payments to you
unless either (1) you provide or have provided your taxpayer identification
number (social security or employer identification number) and certify that the
number is correct or (2) an exemption from backup withholding applies under the
applicable law and regulations.
THE FOREGOING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. BECAUSE OF THE
COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR
STOCKHOLDER MAY BE AFFECTED BY MATTERS NOT DISCUSSED IN THIS PROXY
STATEMENT/PROSPECTUS, YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO
YOUR OWN PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL AND NON-U.S. TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN
APPLICABLE TAX LAWS. NON-U.S. PERSONS, IF ANY, WHO HOLD OR HAVE HELD (DIRECTLY,
CONSTRUCTIVELY OR BY ATTRIBUTION)
-45-
<PAGE>
MORE THAN 5% OF THE OUTSTANDING HPS COMMON SHARES SHOULD CONSULT THEIR TAX
ADVISORS REGARDING THE CONSEQUENCES TO THEM OF THE MERGER UNDER THE FOREIGN
INVESTMENT IN REAL PROPERTY TAX ACT, INCLUDING ANY TAX FILING REQUIREMENTS THAT
MAY APPLY.
ACCOUNTING TREATMENT
We expect that the merger will be treated as a "purchase" for accounting
purposes. Under this method of accounting, UICI must determine the purchase
price based on the consideration paid in the acquisition. The fair value of the
acquired net tangible assets is recorded by UICI as of the date on which the
acquisition is consummated. The excess of purchase price over net tangible
assets acquired is required to be assigned among identifiable intangible assets
based on fair value. These identifiable intangible assets may include, among
other things, incomplete technology, complete technology, brands and trademarks,
customer lists, employment contracts and copyrights. Any excess purchase price
over the acquired net tangible assets that is not assigned to identifiable
intangible assets is classified as goodwill. The amounts recorded for intangible
assets and goodwill are required to be amortized by systematic charges to income
over the estimated periods of benefit and estimated useful life.
REGULATORY APPROVALS - ANTITRUST CLEARANCE
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the related
rules and regulations prohibit us from completing the merger until we submit
required information to the Antitrust Division of the Department of Justice and
the Federal Trade Commission ("FTC") and specified Hart-Scott-Rodino Antitrust
Improvement Act waiting period requirements have been satisfied. Even after the
Hart-Scott-Rodino Antitrust Improvement Act waiting period expires or
terminates, the Antitrust Division or the FTC may later challenge the merger on
antitrust grounds. We do not believe that the merger will violate federal
antitrust laws.
LISTING OF UICI COMMON STOCK ON STOCK EXCHANGES
We have agreed to take all reasonably required actions to obtain approvals
to list the shares of common stock of UICI to be issued in the merger on the New
York Stock Exchange, subject to official notice of issuance. Approval for
listing on the New York Stock Exchange is a condition to the merger.
RESALE OF SHARES ISSUED IN THE MERGER; AFFILIATES
The common stock of UICI issued to HealthPlan Services stockholders in the
merger will be freely transferable under the Securities Act, except for shares
issued to an affiliate of HealthPlan Services for purposes of Rule 145 under the
Securities Act. These persons may not sell UICI common stock that they acquired
in the merger except under an effective registration statement under the
Securities Act, or in compliance with Rule 145 under the Securities Act or
another applicable exemption from the registration
-46-
<PAGE>
requirements of the Securities Act. The merger agreement requires HealthPlan
Services to use its reasonable best efforts to cause each of its affiliates to
execute a written agreement to comply with the foregoing requirements.
BOARD OF DIRECTORS AND MANAGEMENT OF HEALTHPLAN SERVICES AFTER THE MERGER
When we complete the merger, James K. Murray, Jr., currently the Chairman
of the HealthPlan Services Board, will become a member of the UICI board. The
Board of Directors of HealthPlan Services which will be a wholly-owned
subsidiary of UICI following the merger will consist of Gregory T. Mutz
(President and Chief Executive Officer of UICI), Steven K. Arnold (Vice
President of UICI), Glenn W. Reed (Executive Vice President and General Counsel
of UICI), William L. Bennett (currently Vice Chairman of HealthPlan Services)
and Phillip S. Dingle (currently Executive Vice President and Chief Financial
Officer of HealthPlan Services). It is expected that Steven K. Arnold, currently
head of UICI's student health insurance division, will become President and
Chief Executive Officer at HealthPlan Services. Steven V. Huslander, George E.
Lucco, Jeffrey W. Bak and Jeffrey Markle, currently officers of HealthPlan
Services, are expected to assume similar positions with HealthPlan Services
following the merger. Phillip S. Dingle is expected to become the Chief
Financial Officer of UICI following the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board that stockholders vote for
approval of the merger agreement and the merger, you should be aware that
certain members of HealthPlan Services management and of the HealthPlan Services
Board have interests in the merger that may be considered different from, or in
addition to, the interests of the stockholders of HealthPlan Services generally.
The HealthPlan Services Board was aware of these interests and considered them
when it approved the merger agreement and the merger. See also "THE MERGER
AGREEMENT AND RELATED AGREEMENTS - INDEMNIFICATION AND INSURANCE," "THE MERGER
AGREEMENT AND RELATED AGREEMENTS - HEALTHPLAN SERVICES STOCK OPTIONS" and "THE
MERGER AGREEMENT AND RELATED AGREEMENTS - EMPLOYMENT AGREEMENTS" for a
description of additional interests of these individuals.
BONUS
Under the terms of the 1999 Annual Incentive Plan adopted by the HealthPlan
Services Board Compensation Committee in February 1999, upon completion of the
merger, James K. Murray, Jr., the Chairman and Chief Executive Officer of
HealthPlan Services, will be entitled to a bonus in the amount of $250,000.
EMPLOYMENT AGREEMENTS
We expect that prior to the time we complete the merger, Steven V.
Huslander, George E. Lucco, Jeffrey W. Bak and Jeffrey Markle, currently
officers of HealthPlan
-47-
<PAGE>
Services, will enter into employment agreements with HealthPlan Services and
assume similar positions with HealthPlan Services following the merger. Phillip
S. Dingle is expected to enter into an employment agreement with UICI and become
the Chief Financial Officer of UICI following the merger.
Under the employment agreements with HealthPlan Services (and, with respect
to Mr. Dingle, with UICI), which are expected to have a two-year base term and a
two-year extension option, these individuals are expected to receive the
following compensation and benefits:
o base annual salaries of $200,000;
o annual performance bonuses;
o one-time restricted stock grants, at levels commensurate with current
employees of UICI at corresponding salary levels, subject to five-year
vesting restrictions;
o one-time stock option grants at levels commensurate with current
employees at corresponding salary levels, subject to five-year vesting
restrictions;
o participation in UICI's Senior Officer Share Purchase and Loan
Program; and
o upon termination of employment, employees will be subject to usual and
customary non-compete and non-solicitation restrictions.
SEVERANCE POLICIES
Alan M. Ross, Senior Vice President-Human Resources of HealthPlan Services,
has an employment agreement providing for payment of severance upon a
change-in-control prior to December 31, 1999 in which the successor company does
not offer Mr. Ross the position of chief human resources officer. The severance
is a lump sum amount equal to one and one-half times salary and bonus. Mr. Ross'
current salary and target bonus is $218,400.
THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a description of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this proxy
statement/prospectus and incorporated herein by reference. This description may
not include all of the information that interests you. We urge you to read the
entire merger agreement.
THE MERGER AGREEMENT
The merger agreement provides that New UICI Sub will merge into HealthPlan
Services with HealthPlan Services being the surviving corporate entity.
Following the merger, HealthPlan Services will be a wholly-owned subsidiary of
UICI. The merger will occur after the approval of the merger by HealthPlan
Services stockholders and the
-48-
<PAGE>
satisfaction or waiver of the other conditions to the merger described in the
merger agreement.
The merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of Delaware as required by Delaware law.
EXCHANGE RATIO
Pursuant to the merger agreement, in the merger, each outstanding HPS
Common Share will be converted into the right to receive a fraction of a share
of UICI common stock. The fraction will be determined based on an exchange ratio
that is, in turn, based on the average of the volume weighted average of the
trading prices of UICI stock for a period of 20 consecutive trading days ending
on the third trading day immediately prior to the effective date of the merger.
The exchange ratio will be calculated as follows:
<TABLE>
<CAPTION>
PRICE RANGE OF UICI STOCK (PER SHARE) EXCHANGE RATIO
------------------------------------- --------------
<S> <C>
o Greater than $33.00 $9.50 / (average price of UICI stock - $3.00)
o Less than or equal to $33.00 and greater
than $30.00 .3167
o Less than or equal to $30.00, but greater
than or equal to $28.00 $9.50 / (average price of UICI stock)
o Less than $28.00, but greater than or equal
to $23.00 .3393
o Less than $23.00, but greater than or equal
to $21.00 $9.50 / (average price of UICI stock + $5.00)
o Less than $21.00 .3654
</TABLE>
In no event, however, will you receive a fractional share of UICI common
stock. Instead, if you would otherwise be entitled to receive a fractional share
of UICI stock, you will be paid an amount in cash equal to such fraction
multiplied by the average of the closing price for UICI common stock on the New
York Stock Exchange for the five trading days immediately preceding the
effective date of the merger.
CONVERSION OF HPS COMMON SHARES
IT IS VERY IMPORTANT THAT YOU NOT SEND IN YOUR HPS COMMON SHARE
CERTIFICATES UNTIL YOU RECEIVE TRANSMITTAL INSTRUCTIONS FROM THE EXCHANGE AGENT.
EXCHANGE AGENT
UICI will deposit shares of UICI common stock to be issued in the merger
with an exchange agent selected by UICI and HealthPlan Services.
-49-
<PAGE>
EXCHANGE PROCEDURES
As soon as practical after we complete the merger, the exchange agent will
mail a transmittal letter and instructions to each holder of HPS Common Shares
of record at the close of business the day before the effective time of the
merger. The instructions will explain exactly what you need to do to convert
your HPS Common Shares into shares of UICI common stock.
After the effective time of the merger, each holder of HPS Common Shares
will have the right to receive shares of common stock of UICI, but you will not
receive your shares until you have complied with the exchange agent's
instructions and submitted the required documents, including share certificates.
The exchange agent will not issue any fractional shares that result from the
conversion of HPS Common Shares, but will instead issue a check for the value of
any fractional share determined as described below under "EXCHANGE RATIO."
TRANSFER OF OWNERSHIP
Any certificates representing HPS Common Shares will be delivered, AND RISK
OF LOSS AND TITLE WILL PASS TO THE EXCHANGE AGENT, ONLY when the exchange agent
receives such certificates. We URGE you to mail your certificates by certified
mail or some other secure method when you receive instructions to do so from the
exchange agent.
PAYMENTS FOLLOWING SURRENDER
If you have not exchanged your HPS Common Shares for shares of UICI common
stock as described above, you will not receive any dividends or other
distributions declared or made after the effective time of the merger. Once you
have exchanged your HPS Common Shares, you will be entitled to receive, without
interest:
o any cash payable instead of a fractional share of UICI common stock to
which you are entitled; and
o any dividends or other distributions paid after the effective time of
the merger on whole shares of UICI common stock, but before your HPS
Common Shares were exchanged.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of UICI and HealthPlan Services relating to, among other things:
o organization and similar corporate matters;
o capital structure;
-50-
<PAGE>
o authorization, execution, delivery, performance and enforceability of
the merger agreement and related matters;
o conflicts under certificates of incorporation or bylaws, required
consents or approvals and violations of instruments or law;
o documents filed with the SEC and the accuracy of the information
contained therein;
o absence of specified material changes, material undisclosed
liabilities or material defaults;
o environmental matters;
o Year 2000 readiness;
o the accuracy of information supplied by each of UICI and HealthPlan
Services in connection with the preparation of the Registration
Statement and this proxy statement/prospectus; and
o absence of material litigation.
HealthPlan Services also represented and warranted as to:
o tax, employee and employee benefit matters;
o intellectual property matters;
o the receipt of a fairness opinion from its financial advisor;
o compliance with applicable law; and
o that it has not proposed, adopted, approved or implemented any
stockholder rights plan.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
HealthPlan Services has agreed that until the merger is complete or the
merger agreement is terminated, it will conduct its business in the ordinary and
usual course consistent with past practice, and will use its reasonable efforts
to preserve intact its present business organization, will keep available the
services of its present officers and key employees, will preserve the goodwill
of those having business relationships with it and will not hire any person as
an employee or consultant where such person's annual compensation would exceed
$100,000.
-51-
<PAGE>
In addition, HealthPlan Services has agreed to certain customary
restrictions on the conduct of its business as to:
o organizational documents;
o dividends and distributions;
o changes in capital structure;
o acquisition or disposition of stock and related securities;
o acquisitions and other uses of funds;
o disposition of assets;
o incurrence or guarantee of indebtedness;
o capital expenditures;
o employee benefit plans and similar arrangements;
o compensation for directors, officers and employees;
o accounting matters; and
o tax matters.
UICI has agreed that until the merger is completed or the merger agreement
is terminated (and except as specifically stated in the merger agreement), it
will conduct its business in the ordinary and usual course consistent with past
practice, and will use its reasonable efforts to preserve intact its present
business organization, keep available the services of its present officers and
key employees, and preserve the goodwill of those having business relationships
with it.
In addition UICI has agreed to certain customary restrictions for the
conduct of its business as to:
o dividends and distributions;
o changes in capital structure; and
o accounting policies.
-52-
<PAGE>
Each company has also agreed that it and each of its subsidiaries will:
o provide copies of filings and access to books and records; and
o use commercially reasonable efforts to obtain all necessary waivers,
consents and approvals.
NO SOLICITATION OF COMPETING TRANSACTIONS
The merger agreement requires that HealthPlan Services not, directly or
indirectly, through any officer, director, agent or otherwise:
o initiate, solicit or knowingly encourage, or take any other action
knowingly to facilitate the making of an Alternative Acquisition (as
defined below); or
o engage in negotiations with any person relating to an Alternative
Acquisition, or agree to or endorse any Alternative Acquisition, or
authorize any of the officers, directors or employees of HealthPlan
Services or any investment banker, financial advisor, attorney,
accountant or other agent or representative of HealthPlan Services to
take any such action.
An "Alternative Acquisition" means any of the following transactions (other
than the transactions contemplated by the merger agreement) that would result in
a third party (or its stockholders) acquiring more than 35% of the voting power
of the shares of the common stock of HealthPlan Services then outstanding or
more than 35% of the assets of HealthPlan Services and its subsidiaries, taken
as a whole:
o merger, consolidation, share exchange, business combination, issuance
or purchase of securities or other similar transaction;
o sale, lease, exchange, mortgage, pledge, transfer or other disposition
of the assets of HealthPlan Services in a single transaction or series
of related transactions;
o tender offer or exchange offer for HealthPlan Services securities or
the filing of a registration statement under the Securities Act in
connection with any such exchange offer transaction; or
o public announcement of an agreement, proposal, plan or intention to do
any of the foregoing, either during the effectiveness of the merger
agreement or at any time thereafter.
HealthPlan Services will notify UICI within 24 hours of all inquiries and
proposals which HealthPlan Services may receive relating to any of such matters.
However, these restrictions will not prevent the HealthPlan Services Board
from taking any of the following actions:
-53-
<PAGE>
o furnishing information to, or entering into and engaging in
discussions or negotiations with, any person that makes a bona fide
unsolicited written proposal that the HealthPlan Services Board
determines in good faith, after consultation with its financial
advisors and independent legal counsel, can be reasonably expected to
result in a Superior Proposal (as defined below). However, prior to
furnishing any information to, or entering into discussions or
negotiations with, any person, HealthPlan Services must, (1) notify
UICI and keep UICI informed of the status and material terms of any
such proposal and the status of any such discussions and negotiations,
and (2) receive from such person a confidentiality agreement;
o complying with Rule 14e-2 under the Exchange Act with regard to a
tender or exchange offer or making any disclosure required under
applicable law; or
o failing to make or withdrawing or modifying its recommendation of the
merger following the making of a Superior Proposal if the Board of
Directors of HealthPlan Services, after consultation with and based
upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of HealthPlan
Services to comply with its fiduciary duties under applicable law.
A "Superior Proposal" means any proposal which would result in a party
acquiring, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, share exchange, business combination,
share purchase, asset purchase, recapitalization, liquidation, dissolution,
joint venture or similar transaction, more than 50% of the voting power of the
shares of the common stock of HealthPlan Services then outstanding or all or
substantially all the assets of HealthPlan Services and its subsidiaries, taken
as a whole, for consideration which the Board of Directors of HealthPlan
Services determines in its good faith judgment to be financially more favorable
to HealthPlan Services stockholders than the merger and with respect to which
the Board of Directors of HealthPlan Services determines, in its good faith
judgment, that financing, to the extent required, is then committed or is
reasonably available.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that all rights to indemnification,
advancement of litigation expenses and limitation of personal liability existing
in favor of the directors and officers of HealthPlan Services under the
provisions existing as of the date of the merger agreement in HealthPlan
Services' certificate of incorporation or bylaws will, with respect to any
matter existing or occurring at or prior to the effective time of the merger
(including the transactions contemplated by the merger agreement), survive the
merger, and, as of the effective time of the merger, the surviving company in
the merger will assume all such obligations of HealthPlan Services and no change
will be made with respect to such rights after the merger.
UICI also agreed that for six years after the merger, it will maintain in
effect the policies of directors' and officers' liability insurance maintained
by HealthPlan Services or policies containing substantially similar coverage for
matters occurring at or prior to
-54-
<PAGE>
the effective time. UICI will not be required, however, to pay more than 200% of
the current annual premiums for the policies currently maintained by HealthPlan
Services for its directors' and officers' liability insurance. If insurance
cannot be maintained or obtained at such cost, UICI will maintain or obtain as
much of such insurance as can be so maintained or obtained at a cost equal to
200% of the current annual premiums of HealthPlan Services for its directors'
and officers' liability insurance.
HEALTHPLAN SERVICES STOCK OPTIONS
HealthPlan Services has granted stock options pursuant to the HealthPlan
Services Corporation 1995 Incentive Equity Plan, the HealthPlan Services
Corporation 1995 Director's Stock Option Plan, the 1995 HealthPlan Services
Corporation Consultants Stock Option Plan, the Amended and Restated HealthPlan
Services Corporation 1996 Employee Stock Option Plan and the HealthPlan Services
Corporation 1996 Employee Stock Purchase Plan. Under these plans (other than the
1996 Employee Stock Purchase Plan), options vest 20% on the date of grant and
20% on each of the first through fourth anniversaries of the date of grant of
such option.
Under the terms of the merger agreement, each HealthPlan Services stock
option that is outstanding immediately prior to the effective time will be
converted into a new option to purchase the number of shares of UICI Common
Stock equal to the product of (i) the number of HPS Common Shares subject to
such stock option and (ii) the exchange ratio. The exercise price for such new
option will equal (x) the per share exercise price of such HealthPlan Services
stock option, divided by (y) the exchange ratio. After the merger, each new
option will be exercisable and will vest upon the same terms and conditions as
were applicable to the related HealthPlan Services stock option immediately
prior to the merger.
CONDITIONS TO EACH COMPANY'S OBLIGATIONS TO COMPLETE THE MERGER
The merger will occur only if the merger agreement is approved by the
requisite vote of holders of HPS Common Shares. In addition, consummation of the
merger is subject to the satisfaction or waiver (to the extent such waiver is
permitted by law) of certain other conditions, including:
o any waiting period applicable to the merger under the
Hart-Scott-Rodino Act having expired or been terminated and no action
can be pending by the FTC or the Antitrust Division of the Department
of Justice challenging or seeking to enjoin the merger;
o no statute, rule, regulation, executive order, decree, injunction or
other order being in effect that materially restricts, prevents or
prohibits completion of the merger or any transaction contemplated by
the merger agreement;
-55-
<PAGE>
o all filings, approvals and consents of any governmental entity, the
failure of which to obtain would have a material adverse effect on
either UICI or HealthPlan Services, having been made or obtained;
o the Registration Statement of which this proxy statement/prospectus is
a part having become effective under the Securities Act and not being
subject to a stop order or proceeding of the SEC seeking a stop order,
and UICI having received all state securities or "blue sky" permits
and other authorizations necessary to issue the UICI common stock in
the merger; and
o the UICI common stock in the merger having been approved for listing
on the New York Stock Exchange, upon official notice of issuance.
CONDITIONS TO OBLIGATIONS OF UICI
The obligation of UICI to complete the merger is subject to the following
additional conditions:
o each of the representations and warranties of HealthPlan Services
being true and correct (without regard to any materiality qualifiers)
as of the date of the merger agreement and, except to the extent the
representations and warranties speak as of an earlier date, being true
and correct as of the effective time of the merger as though made at
the effective time, except where the failure to be true and correct
would not, individually or in the aggregate, have a material adverse
effect on HealthPlan Services;
o HealthPlan Services having performed in all material respects all
obligations required to be performed by it under the merger agreement;
o UICI having received a certificate of the Chief Executive Officer or
the Chief Financial Officer of HealthPlan Services that specified
conditions in the merger agreement have been fulfilled;
o UICI having received from each "affiliate" of HealthPlan Services a
written agreement that such affiliate will not sell any shares of UICI
common stock received in the merger, except in compliance with the
requirements of the Securities Act;
o UICI having received an opinion of Gardner, Carton & Douglas, counsel
to UICI, that the merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code; and
o UICI having received the resignations of each board member of
HealthPlan Services, other than William L. Bennett.
-56-
<PAGE>
CONDITIONS TO OBLIGATIONS OF HEALTHPLAN SERVICES
The obligation of HealthPlan Services to complete the merger is subject to
the following additional conditions:
o the representations and warranties of UICI being true and correct
(without regard to any materiality qualifiers) as of the date of the
merger agreement and, except to the extent the representations and
warranties speak as of an earlier date, being true and correct as of
the effective time of the merger as though made at the effective time,
except where the failure to be true and correct would not,
individually or in the aggregate, have a material adverse effect on
UICI;
o UICI having performed in all material respects all obligations
required to be performed by it under the merger agreement;
o HealthPlan Services having received a certificate of the Chief
Executive Officer or the Chief Operating Officer of UICI that the
conditions specified in the merger agreement have been fulfilled; and
o HealthPlan Services having received an opinion of Fowler, White,
Gillen, Boggs, Villareal and Banker P.A., counsel to HealthPlan
Services, that the merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code.
TERMINATION AND TERMINATION FEE
The merger agreement may be terminated at any time before the merger
becomes effective:
o by mutual consent of UICI and HealthPlan Services;
o by either UICI or HealthPlan Services if the merger has not become
effective before March 31, 2000;
o by either UICI or HealthPlan Services if the HealthPlan Services
stockholders do not approve the merger agreement and the merger;
o by either UICI or HealthPlan Services if any permanent injunction or
action by any governmental entity preventing the completion of the
merger has become final and non-appealable;
o by either UICI or HealthPlan Services if there has been a breach of
any representation or warranty of the other party which, individually
or in the aggregate, would have a material adverse affect on that
other party or if there has been a breach in any material respect of
any agreement or
-57-
<PAGE>
covenant to be performed and complied with by that other party under
the merger agreement and the breach is not curable, or if curable, is
not cured within 30 days after written notice of such breach is given
to that other party by the party not in breach;
o by UICI if the bank or financial institution under any financing
commitment fails to fund the loan to UICI because of a material
adverse change in the financial markets;
o by UICI if the HealthPlan Services Board (x) fails to recommend
approval of the merger agreement by the stockholders of HealthPlan
Services or withdraws or amends or modifies in a manner adverse to
UICI and New UICI Sub its recommendation or approval of the merger
agreement, (y) makes any recommendation with respect to an Alternative
Acquisition other than a recommendation to reject such Alternative
Acquisition or (z) takes any action regarding an Alternative
Acquisition that would be prohibited by the "no solicitation"
provisions of the merger agreement; or
o by HealthPlan Services if such termination is necessary to allow
HealthPlan Services to enter into an agreement with respect to a
Superior Proposal (subject to prior payment of the termination fee as
described below).
If the merger agreement is terminated, the merger will be deemed abandoned
and such termination will be without liability of any party under the merger
agreement except for liability for breach of the merger agreement and except as
set forth below in the following paragraph regarding termination fees.
If the merger agreement is terminated by UICI because the HealthPlan
Services Board fails to recommend approval of the merger (or withdraws or
modifies its recommendation), makes any recommendation with respect to an
Alternative Acquisition other than a recommendation to reject such Alternative
Acquisition, or takes any action regarding an Alternative Acquisition that would
be prohibited by the "no solicitation" provisions of the merger agreement as
described above, then HealthPlan Services must pay to UICI within two business
days after such termination a fee of $5 million. Similarly, if HealthPlan
Services terminates the merger agreement in order to accept a Superior Proposal,
then HealthPlan Services must pay UICI within two business days of such
termination a fee of $5 million. If the merger agreement is terminated due to
the failure of HealthPlan Services' stockholders to approve the merger
agreement, and at or prior to the time of the failure to approve the merger
agreement an Alternative Acquisition has been made public, and within eighteen
months of such termination an Alternative Acquisition with any third party is
completed or an agreement relating to an Alternative Acquisition is entered into
by HealthPlan Services, then HealthPlan Services must pay UICI a termination fee
of $5 million.
Whether or not the merger is completed, all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated thereby
will be
-58-
<PAGE>
paid by the party incurring such expense, except that the following expenses
will be borne equally by UICI and HealthPlan Services:
o the filing fee in connection with the filings under the
Hart-Scott-Rodino Antitrust Improvements Act;
o the expenses incurred in connection with printing and mailing this
proxy statement/prospectus; and
o the filing fee with the SEC relating to the registration statement or
proxy statement.
EXTENSION, WAIVER AND AMENDMENT
At any time prior to the effective time of the merger, UICI or HealthPlan
Services may extend the time for performance of any obligations or other acts of
the other under the merger agreement, waive any inaccuracies in the
representations and warranties of the other contained in the merger agreement or
waive compliance by the other with any agreements contained in the merger
agreement or with any conditions that may legally be waived.
The merger agreement may not be amended except in writing. The merger
agreement may be amended without the approval of the HealthPlan Services
stockholders except that no amendment will be made following approval and
adoption of the merger agreement by HealthPlan Services stockholders if the
amendment would require further stockholder approval under applicable law,
unless the further approval has already been obtained.
VOTING AGREEMENTS
On October 5, 1999, concurrently with entering into the merger agreement,
UICI entered into voting agreements with Automatic Data Processing, Inc., James
K. Murray, Jr., William L. Bennett, Robert R. Parker, Shinnston Enterprises,
Ltd. and Elm Grove Associates Inc. The voting agreements were entered into by
each of these stockholders as an inducement to UICI to enter into the merger
agreement.
Pursuant to the voting agreements, the stockholders agreed, among other
things, subject to specified conditions set forth in the voting agreements,
during the term of the voting agreements, to vote an aggregate of 2,441,499 HPS
Common Shares (constituting 17.87% of the HPS Common Shares issued and
outstanding on October 5, 1999) (a) in favor of the approval and adoption of the
merger agreement and the merger at every meeting of the stockholders of
HealthPlan Services at which such matters are considered and at every
adjournment of such meeting, and (b) against any other acquisition or proposed
acquisition of HealthPlan Services (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise). The stockholders agreed to
deliver to UICI upon request immediately prior to any such vote a proxy
substantially in the form attached to the voting agreements. This stockholder
proxy is irrevocable during the term
-59-
<PAGE>
of the voting agreements to the extent permitted under Delaware law and is
subject to the conditions set forth in the voting agreements.
Pursuant to the voting agreements, during the term of the voting
agreements, the stockholders also agreed not to sell, assign, pledge, transfer
or otherwise dispose of, or grant any proxies with respect to any of the voting
agreement shares.
In addition, the stockholders agreed that they will not deposit any of the
voting agreement shares in a voting trust or subject any of these shares to any
arrangement inconsistent with the voting agreement.
The voting agreements terminate upon the earliest to occur of the effective
time of the merger or the date on which the merger agreement is terminated in
accordance with its terms.
This summary of the voting agreements is qualified in its entirety by the
text of the voting agreements, the form of which is Exhibit A to the Agreement
and Plan of Merger attached as Appendix A to this proxy statement and
incorporated herein by reference.
OPTION AGREEMENT
In connection with the merger agreement, UICI and HealthPlan Services
entered into an option agreement granting UICI an irrevocable option to purchase
up to 1,500,000 shares of HealthPlan Services common stock at an exercise price
of $7.375 per share. The option is exercisable if and when the merger agreement
is terminated and a termination fee is payable by HealthPlan Services as
described above under "TERMINATION AND TERMINATION FEES."
The option agreement also grants UICI the right to have any shares of
HealthPlan Services acquired upon exercise of the option registered under the
Securities Act of 1933 for sale in a public offering.
This summary of the option agreement is qualified in its entirety by the
text of the option agreement, which is attached as Appendix B to this proxy
statement and incorporated by reference.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give effect
to the merger using the purchase method of accounting. Under the purchase
method, the fair value of the acquired net tangible assets is recorded by UICI
as of the date on which the acquisition is consummated. These unaudited pro
forma combined financial statements should be read in conjunction with the
historical financial statements and related notes of UICI and HealthPlan
Services which are incorporated by reference in this
-60-
<PAGE>
proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on page
77.
The unaudited pro forma combined balance sheet at June 30, 1999 assumes the
merger had been completed on June 30, 1999. The unaudited pro forma combined
statements of income for the six month period ended June 30, 1999 and for the
year ended December 31, 1998 assume the merger had been completed on January 1,
1998, the beginning of the earliest period presented.
The unaudited pro forma combined financial statements do not
necessarily indicate what UICI's financial position or operating results would
have been if the merger had been completed on the assumed completion dates and
they do not necessarily indicate future operating results of UICI.
-61-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
REFLECTING COMPLETION OF THE MERGER
SIX MONTHS ENDED JUNE 30, 1999
(In thousands, except per share amounts)
UICI HEALTHPLAN SERVICES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS UICI
---------- ------------------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Premiums
Health.................................................... $350,786 $350,786
Life premiums and other considerations.................... 23,807 23,807
-------- --------
374,593 -- 374,593
Investment income............................................ 41,902 41,902
Other interest income........................................ 46,555 46,555
Credit card fees............................................. 100,192 100,192
Other fee income............................................. 55,501 55,501
Other income................................................. 1,982 $145,407 147,389
Gains (losses) on sale of investments........................ 1,395 3,583 4,978
-------- -------- --------
Total Revenues........................................... 622,120 148,990 771,110
BENEFITS AND EXPENSES
Benefits, claims, and settlement expenses.................... 265,632 265,632
Underwriting, acquisition & insurance expenses............... 119,368 119,368
Other expenses............................................... 93,465 128,697 222,162
Provision for doubtful accounts.............................. 41,586 41,586
-------- -------- ------- -------
Total Benefits and Expenses.............................. 520,051 128,697 648,748
-------- -------- ------- -------
INCOME BEFORE FEDERAL INCOME TAXES,
AND INTEREST, DEPRECIATION,
AMORTIZATION AND MINORITY INTEREST............................. 102,069 20,293 122,362
Amortization................................................. 2,785 4,539 $ 720(a) 8,044
Depreciation................................................. 5,503 3,670 9,173
Interest expense............................................. 2,215 3,275 266(b) 5,756
Interest expense-student loan borrowings..................... 23,868 23,868
-------- ------- ------- -------
34,371 11,484 986 46,841
-------- ------- ------- -------
INCOME BEFORE FEDERAL INCOME TAXES
AND MINORITY INTEREST.......................................... 67,698 8,809 (986) 75,521
Federal income taxes......................................... 22,001 3,811 (103)(c) 25,709
-------- ------- ------- -------
INCOME BEFORE MINORITY INTEREST.................................. 45,697 4,998 (883) 49,812
Minority interest............................................ 969 245 -- 1,214
-------- ------- ------- -------
NET INCOME....................................................... $ 44,728 $ 4,753 $ (883) $48,598
======== ======= ======= =======
PRIMARY NET INCOME PER SHARE..................................... $ 0.97 $ 0.95
======== =======
FULLY DILUTED NET INCOME PER SHARE............................... $ 0.94 $ 0.93
======== =======
Shares outstanding-basic......................................... 46,292 4,635 50,927
Shares outstanding-diluted....................................... 47,616 4,635 52,251
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
-62-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
REFLECTING COMPLETION OF THE MERGER
YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share amounts)
UICI HEALTHPLAN SERVICES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS UICI
---------- ------------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE
Premiums
Health............................................... 747,275 $ 747,275
Life premiums and other considerations............... 49,347 49,347
---------- ------- ----------
796,622 -- 796,622
Investment income........................................ 74,892 74,892
Other interest income.................................... 41,927 41,927
Credit card fees......................................... 112,867 112,867
Other fee income......................................... 111,138 111,138
Other income............................................. 37,545 $289,247 326,792
Gains (losses) on sale of investments.................... 4,912 33,240 38,152
---------- -------- ------- ----------
Total Revenues....................................... 1,179,903 322,487 -- 1,502,390
BENEFITS AND EXPENSES
Benefits claims, and settlement expenses................. 586,035 586,035
Underwriting, acquisition & insurance expenses........... 258,753 258,753
Other expenses........................................... 123,284 283,399 406,683
Provision for doubtful accounts.......................... 74,984 74,984
---------- -------- ------- ----------
Total Benefits and Expenses.......................... 1,043,056 283,399 1,326,455
---------- -------- ------- ----------
INCOME BEFORE FEDERAL INCOME TAXES,
AND INTEREST, DEPRECIATION,
AMORTIZATION AND MINORITY INTEREST......................... 136,847 39,088 175,935
Amortization............................................. 5,723 8,193 $ 1,440(a) 15,356
Depreciation............................................. 11,360 7,607 18,967
Interest expense......................................... 3,059 5,643 586(b) 9,288
Interest expense-student loan borrowings................. 19,224 19,224
---------- -------- ------- ----------
39,366 21,443 2,026 62,835
---------- -------- ------- ----------
INCOME BEFORE FEDERAL INCOME TAXES
AND MINORITY INTEREST...................................... 97,481 17,645 (2,026) 113,100
Federal income taxes..................................... 30,235 8,683 (229)(c) 38,689
---------- ------- ------- ----------
INCOME BEFORE MINORITY INTEREST.............................. 67,246 8,962 (1,797) 74,411
Minority interest........................................ 8,477 (736) 7,741
---------- -------- ------- ---------
NET INCOME................................................... $ 58,769 $ 9,698 $(1,797) $ 66,670
========== ======== ======= =========
PRIMARY NET INCOME PER SHARE................................. $ 1.27 $ 1.31
========== =========
FULLY DILUTED NET INCOME PER SHARE........................... $ 1.26 $ 1.30
========== ==========
Shares outstanding-basic..................................... 46,244 4,635 50,879
Shares outstanding-diluted................................... 46,468 4,635 51,103
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
-63-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
REFLECTING COMPLETION OF THE MERGER
JUNE 30, 1999
(In thousands)
UICI HEALTHPLAN SERVICES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS UICI
---------- ------------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Available for Sale:
Fixed maturities.................................... $ 859,997 $ 859,997
Equity securities................................... 25,090 $ 6,096 31,186
Mortgage and collateral loans........................... 8,532 8,532
Policy loans............................................ 20,528 20,528
Investment in unconsolidated subsidiary................. 45,310 45,310
Short-term investments.................................. 200,643 200,643
---------- -------- ---------
Total investments................................... 1,160,100 6,096 1,166,196
Student loans............................................... 966,180 966,180
Credit card loans........................................... 208,247 208,247
Cash and cash equivalents................................... 11,966 $(10,750)(d) 1,216
Restricted Cash............................................. -- 8,906 8,906
Agents' receivables......................................... 15,255 15,255
Reinsurance receivables..................................... 80,910 80,910
Due premiums and other receivables, net..................... 32,702 29,456 62,158
Investment income due and accrued........................... 61,518 61,518
Deferred acquisition costs.................................. 83,781 83,781
Intangible assets, net...................................... 141,505 195,604 35,950(e) 373,059
Property and equipment, net................................. 58,088 26,551 84,639
Other assets................................................ 17,346 7,767 3,238(f) 28,351
---------- -------- ------- ----------
Total Assets................................................ $2,837,598 $274,380 $28,438 $3,140,416
========== ======== ======= ==========
LIABILITIES
Policy liabilities:
Future policy benefits.................................. $461,939 $461,939
Claims.................................................. 297,669 297,669
Unearned premiums....................................... 87,198 87,198
Other policy liabilities................................ 20,676 20,676
Other liabilities........................................... 89,864 $ 83,390 173,254
Time deposits............................................... 157,059 157,059
Short-term debt............................................. 5,075 505 5,580
Long-term debt.............................................. 80,196 95,579 175,775
Notes payable to related party.............................. 156 156
Student loan credit facility................................ 1,003,687 1,003,687
Federal income taxes payable................................ 14,007 2,834 16,841
---------- -------- -------- ----------
Total liabilities........................................... 2,217,526 182,308 2,399,834
---------- -------- ------- ----------
MINORITY INTERESTS.............................................. 13,846 13,846
STOCKHOLDERS' EQUITY
Common Stock................................................ 464 152 (106)(g) 510
Preferred Stock............................................. -- --
Additional paid-in capital.................................. 163,523 109,918 10,546(g) 283,987
Treasury stock.............................................. (4,575) (30,006) 30,006(g) (4,575)
Accumulated other comprehensive income......................
Net unrealized investment gains (losses)................ (12,340) 1,297 (1,297)(g) (12,340)
Retained earnings........................................... 459,154 10,711 (10,711)(g) 459,154
---------- -------- ------- ----------
Total stockholders' equity ................................. 606,226 92,072 28,438 726,736
-- ------- -------- ------- ----------
Total liabilities and stockholders' equity.................. $2,837,598 $274,380 $28,438 $3,140,416
========== ======== ======= ==========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
-64-
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Adjustment reflects additional goodwill amortization expense ($720,000
and $1,440,000 for the six and twelve month periods ending June 30,
1999 and December 31, 1998, respectively) associated with additional
goodwill recorded in connection with the merger. Approximately $36
million of additional goodwill would have been recorded, which
represents the amount of the excess of the HealthPlan Services' equity
purchase price ($127.5 million) over the estimated fair value of the
net assets acquired ($91.5 million). For purposes of the pro forma
financial statements, the equity purchase price of $127.5 million has
been estimated assuming (i) the issuance of 4,635,000 shares of UICI
common stock in the merger at an assumed issuance price of $26.00 per
share, and (ii) the capitalization of approximately $7.0 million of
acquisition-related expenses. The goodwill recorded in connection with
the merger will be amortized over 25 years.
(b) Adjustment reflects (i) the elimination of the amortization of
HealthPlan Services' capitalized debt issuance costs ($ 109,000 and
$164,000 for the six and twelve month periods ended June 30, 1999 and
December 31, 1998, respectively) and (ii) amortization ($375,000 and
$750,000 for the six and twelve month periods ended June 30, 1999 and
December 31, 1998 respectively), of capitalized debt issuance costs
($3.7 million) related to the refinancing of existing bank
indebtedness.
(c) Adjustment reflects the tax effects of pro forma adjustments at a 39%
effective tax rate.
(d) Adjustment reflects (i) payments of acquisition-related expenses
(estimated to be $7.0 million) and (ii) payment of expenses related to
refinancing of existing indebtedness (estimated to be approximately
$3.7 million).
(e) Reflects additional goodwill recorded in connection with the merger in
the amount of $36 million in the aggregate, represented by (i) the
amount of the excess of the HealthPlan Services equity purchase price
($127.5 million) over the estimated fair value of net assets acquired
($ 91.5 million) assuming the transaction had closed at June 30, 1999.
For purposes of the pro forma financial statements, the equity purchase
price of $127.5 million has been estimated assuming (i) the issuance of
4,635,000 shares of UICI common stock in the merger at an assumed
issuance price of $26.00 per share, and (ii) the capitalization of
approximately $7.0 million of acquisition-related expenses. The
goodwill recorded in connection with the merger will be amortized over
25 years.
(f) Reflects adjustment for (i) the write-off of the unamortized portion of
capitalized debt issuance costs in the amount of $840,000, net of taxes
of $328,000, and (ii) capitalization of debt issuance costs related to
the refinancing of existing bank indebtedness in the amount of $3.7
million, assuming the transaction had occurred at June 30, 1999.
(g) Reflects adjustment for (i) cancellation of HealthPlan Services' equity
accounts and (ii) estimated issuance of 4,635,000 shares of UICI common
stock in the merger.
-65-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
HEALTHPLAN SERVICES CORPORATION
To the best knowledge of HealthPlan Services, based on information filed
with the Securities and Exchange Commission and information provided directly to
HealthPlan Services by the persons and entities named below, the following table
contains information on the beneficial ownership of HPS Common Shares, as of
October 20, 1999, by (1) each director and those executive officers named in the
Summary Compensation Table included in HealthPlan Services' annual meeting proxy
statement dated April 5, 1999, and (2) all current directors and executive
officers as a group. Unless otherwise indicated, all HPS Common Shares are owned
of record by the individuals named and the beneficial ownership consists of sole
voting power and sole investment power. The number of HPS Common Shares
beneficially owned by each of the persons listed below includes HPS Common
Shares subject to options that are now or become exercisable within 60 days from
December 1, 1999.
<TABLE>
<CAPTION>
AMOUNT % OF
BENEFICIALLY CLASS
NAME OF BENEFICIAL OWNER OWNED
------------------------ ------------ -----
<S> <C> <C>
James K. Murray, Jr. 928,371 (1) 6.7%
William L. Bennett 407,465 (2) 2.9%
Joseph A. Califano, Jr. 25,932 (3) *
Joseph S. DiMartino 80,566 (3) *
Vincent D. Farrell, Jr. 435,411 (4) 3.2%
John R. Gunn 25,932 (3) *
Nancy M. Kane, D.B.A. 25,482 (5) *
David Nierenberg 58,417 (6) *
James G. Niven 30,462 (3) *
Robert R. Parker 364,297 (7) 2.6%
Marc I. Perkins 7,320 (8) *
Arthur F. Weinbach 7,482 (9) *
Steven V. Hulslander 101,071 (10) *
George E. Lucco 96,500 (11) *
Gary L. Raeckers 105,454 (12) *
Automatic Data Processing, Inc. 1,320,000 (9) 9.7%
DePrince, Race & Zollo, Inc. 2,927,000 (13) 21.4%
All Directors and Executive Officers as a group (includes 16 persons) 2,592,545 (14) 18.1%
</TABLE>
- -------------------------
* Less than one percent.
(1) Does not include 160,000 shares held by a private entity in which Mr.
Murray owns securities; Mr. Murray is not a controlling stockholder of
such entity and he does not have or share investment control over the
entity's portfolio. Includes 13,156 shares held by a private company
with respect to which Mr. Murray shares investment and voting power; Mr.
Murray disclaims beneficial ownership in such shares except to the
extent of his interest in such private company. Also includes: 150,000
shares held by Mr. Murray's wife, as to which shares Mr. Murray
disclaims beneficial ownership; 593,803 shares held by a family limited
partnership with respect to which Mr. Murray shares
-66-
<PAGE>
investment and voting power; and 165,000 shares issuable upon exercise
of options that are exercisable within 60 days of December 1, 1999.
(2) Includes 165,000 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Also includes 3,609
shares held by Mr. Bennett's children, as to which Mr. Bennett disclaims
beneficial ownership.
(3) Includes 14,400 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
(4) Includes 7,200 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Also includes 426,512
shares beneficially owned by Spears, Benzak, Salomon & Farrell, Inc., a
division of Key Asset Management, Inc., with respect to which shares Mr.
Farrell disclaims beneficial ownership. Mr. Farrell is Managing Director
and Chief Investment Officer of Spears Benzak.
(5) Includes 14,400 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Also includes 450 shares
held by Dr. Kane as custodian for her minor child.
(6) Includes 14,400 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Also includes 43,735
shares held by the Nierenberg Family 1993 Living Trust, with respect to
which Mr. Nierenberg has investment and voting power as trustee.
(7) Includes 95,000 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
(8) Includes 7,200 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
(9) Includes 7,200 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Does not include the
proportionate share ownership of the Company represented by 371,820
shares of Automatic Data Processing, Inc. common stock that are
beneficially owned by Mr. Weinbach or 736,000 shares of Automatic Data
Processing common stock issuable to Mr. Weinbach upon exercise of
options that are exercisable within 60 days of December 1, 1999. Also
does not include 1,320,000 shares held by Automatic Data Processing,
Mr. Weinbach is the Chairman and Chief Executive Officer of Automatic
Data Processing, and therefore may be deemed to share investment and
voting power with respect to the shares owned by Automatic Data
Processing.
(10) Includes 59,000 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
(11) Includes 59,000 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
-67-
<PAGE>
(12) Includes 75,000 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999.
(13) The information set forth in the table and this footnote regarding
shares beneficially owned by DePrince, Race & Zollo, Inc. as of December
1, 1999 is based on information provided to the Company by DePrince
Race.
(14) Includes 685,200 shares issuable upon exercise of options that are
exercisable within 60 days of December 1, 1999. Does not include the
holdings of persons named in the table above who are not executive
officers of HealthPlan Services as of the date of this filing, but
includes holdings of persons not otherwise named above who have become
executive officers of HealthPlan Services since December 31, 1999.
UICI
The following table contains information on the beneficial ownership of
UICI common shares, as of October 5, 1999, by (1) each director and those
current executive officers named in the Summary Compensation Table included in
UICI's annual meeting proxy statement dated April 12, 1999, and (2) all
directors and executive officers as a group. Unless otherwise indicated, all
UICI common shares are owned of record by the individuals named and the
beneficial ownership consists of sole voting power and sole investment power.
The number of UICI common shares beneficially owned by each of the persons
listed below includes UICI common shares subject to options that are now or
become exercisable within 60 days from October 5, 1999.
<TABLE>
<CAPTION>
AMOUNT % OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------ ------------------ -----
<S> <C> <C>
Ronald L. Jensen 8,258,986 (1) 17.9%
President and Fellows of Harvard College c/o Harvard 6,005,000 12.9%
Management Co.
FMR Corp 3,611,500 7.8%
Onward and Upward, Inc. 3,069,217 6.6%
Richard J. Estell 111,477 (4)(3)
Richard T. Mockler 12,663 (4)
Gregory T. Mutz 935,372 (5)
Patrick J. McLaughlin 6,509 (4)
Stuart D. Bilton 2,823 (4)
George H. Lane 2,823 (4)
Charles T. Prater 111,212 (4)(2)
William P. Benac 10,000 (4)
William P. Gedwed 10,028 (4)
All officers and directors as a group 9,618,805 (1)(2)(5)(6) 20.6%
</TABLE>
- -------------------------
(1) Includes 4,100,000 shares owned by Mr. Jensen's spouse. Does not include
shares owned directly or indirectly by Mr. Jensen's five adult children,
or shares owned by the R.L. Jensen Foundation Charitable Trust as to
which Mr. Jensen disclaims beneficial
-68-
<PAGE>
ownership. Mr. Jensen's adult children directly own in the aggregate
approximately 5.8% of the outstanding common stock. Mr. Jensen's adult
children are also the stockholders of Onward and Upward, Inc., which
owns approximately 6.6% of the outstanding common stock.
(2) Includes shares of common stock held as of September 30, 1999 by the
Trustees under the Company's Employee Stock Ownership and Savings Plan.
(The shares held under the Plan purchased with contributions made by the
Company are subject to the vesting requirements of the Plan.)
(3) Includes 2,178 options under the Company's 1998 Employee Stock Option
Plan.
(4) Owns less than 1% of the outstanding common stock.
(5) Includes 41,995 shares owned by a partnership in which Mr. Mutz has a
33.3% ownership interest; 7,637 shares owned as custodian for his minor
children, 164 shares held in IRAs for two of his minor children, and
131,220 shares owned by several family trusts in which Mr. Mutz serves
either as the Trustee or the Investment Advisor, and in which Mr. Mutz
is a beneficiary. Also includes 20,937 options granted under UICI's 1996
Special Stock Option Plan, and 40,000 options granted under UICI's 1987
Amended and Restated Stock Option Plan.
(6) Includes 6,624 options granted under UICI's 1998 Employee Stock Option
Plan.
DESCRIPTION OF UICI COMMON SHARES
GENERAL
UICI's charter provides for two classes of capital stock: UICI common
shares (100,000,000 shares authorized, of which 46,396,276 shares were
outstanding as of October 5, 1999); and UICI preferred shares (10,000,000 shares
authorized, none of which were outstanding as of October 5, 1999). The preferred
stock may be issued from time to time in such series and with such designations,
dividend rates and times of payment, redemption prices, and liquidation prices
or preferences as to assets in voluntary liquidation as the UICI Board of
Directors deems appropriate. Cumulative dividends, redemption provisions and
sinking fund requirements, to the extent that some or all of these features are
or may be present when the preferred stock is issued, could have an adverse
effect on the availability of earnings for distribution to the holders of UICI
common stock or for other corporate purposes.
The statements below are summaries of certain provisions of the
charter of UICI. These summaries are not complete. UICI has filed its charter
with its SEC filings. See "WHERE YOU CAN FIND MORE INFORMATION" on page 77. The
rights of holders of common stock of UICI could also be impacted by UICI's
bylaws and the Delaware General Corporation Law. For summaries of relevant
provisions of the bylaws and Delaware law, see "COMPARATIVE RIGHTS OF HEALTHPLAN
SERVICES CORPORATION STOCKHOLDERS AND UICI STOCKHOLDERS" and "CERTAIN
ANTITAKEOVER EFFECTS OF CERTAIN UICI CHARTER AND BYLAWS PROVISIONS."
-69-
<PAGE>
DIVIDEND RIGHTS
Before any dividends are paid on the UICI common stock, the holders of any
preferred stock that may be issued will be entitled to receive their dividends
at the rates provided for the shares of their series. Any dividends that may be
declared on the common stock will be paid in an equal amount for each share of
common stock. UICI has not paid cash dividends on the common stock to date. UICI
currently intends to retain all future earnings to finance continued expansion
and operation of its business and subsidiaries. UICI's credit facility restricts
the payment of cash dividends unless specified earnings tests are satisfied.
Additional restrictions on the payment of cash dividends may be imposed in
connection with future issuances of preferred stock and indebtedness by UICI.
Any decisions as to the payment of cash dividends will be made by the UICI Board
in light of then current conditions, including earnings, operations, capital
requirements, liquidity, financial condition, restrictions in financing
arrangements and any other relevant factors as determined by the Board.
VOTING RIGHTS
Each outstanding share of common stock is entitled to one vote per share on
each matter submitted to a vote of the stockholders. The affirmative vote of a
majority of the common stock present in person or by proxy and entitled to vote
is required to approve any act or action requiring a vote of the common
stockholders. Holders of common stock do not have cumulative voting rights. As a
result, the holders of a majority of the shares of common stock can elect all
the directors, and the holders of the remaining shares will not be able to elect
any directors.
LIQUIDATION RIGHTS
Upon the liquidation, dissolution or winding up of UICI, after payment of
creditors and any liquidation preference of preferred stock that may be issued,
the remaining net assets of UICI will be distributed pro rata to the holders of
the common stock.
PREEMPTIVE AND SUBSCRIPTION RIGHTS
No stockholder has the preemptive right to purchase or subscribe for any
additional capital stock. There are no conversion rights or redemption or
sinking fund provisions for the common stock. There is no liability to further
calls or assessments by UICI.
COMPARATIVE RIGHTS OF HEALTHPLAN SERVICES CORPORATION
STOCKHOLDERS AND UICI STOCKHOLDERS
When we complete the merger, HealthPlan Services stockholders will become
stockholders of UICI and their rights will be governed by the UICI certificate
of incorporation and the UICI bylaws, which differ in certain material respects
from the HealthPlan Services certificate of incorporation and the HealthPlan
Services bylaws. As stockholders of UICI, the rights of former HealthPlan
Services stockholders will continue to be governed by the Delaware Business
Corporation Law (the "DELAWARE LAW").
-70-
<PAGE>
The following comparison of the UICI charter and bylaws, on the one hand,
and the HealthPlan Services' charter and bylaws, on the other hand, summarizes
the material differences but is not intended to list all differences.
BUSINESS COMBINATIONS
The Delaware Law provides that a merger or consolidation may be approved by
a majority vote of the shares entitled to vote thereon, unless a greater
percentage is required by the corporation's certificate of incorporation. Under
both UICI's and HealthPlan Services' charters, the vote of a majority of the
stockholders is sufficient to approve a merger or consolidation.
STATE TAKEOVER LEGISLATION
Section 203 of the Delaware Law, in general, prohibits a stockholder who
acquires more than 15% of the outstanding voting shares of a corporation subject
to the statute, but less than 85% of such shares, from engaging in specified
"business combinations" with the corporation for three years after the date that
the stockholder became an interested stockholder. Section 203 does not apply if
(1) before the acquisition date the corporation's board of directors has
approved either the business combination or the transaction in which the
stockholder became an interested stockholder or (2) the corporation's board of
directors approves the business combination and at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder vote to authorize the business combination. The term "business
combination" encompasses a wide variety of transactions with or caused by an
interested stockholder in which the interested stockholder receives or could
receive a benefit on other than a pro rata basis with other stockholders,
including mergers, specified asset sales, specified issuances of additional
shares to the interested stockholder, transactions with the corporation that
increase the proportionate interest of the interested stockholder or
transactions in which the interested stockholder receives certain other
benefits. Neither UICI nor HealthPlan Services has "opted out" of Section 203,
as is permitted under the Delaware Law.
RIGHTS OF DISSENTING STOCKHOLDERS
Under the Delaware Law, dissenting stockholders have rights of
appraisal in connection with certain mergers or consolidations. Unless a
corporation's certificate of incorporation otherwise provides, the Delaware Law
does not provide appraisal rights (1) for shares listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 stockholders (as long as the stockholders receive
in the merger shares of the surviving corporation or of any other corporation
the shares of which are listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders) or (2) if the corporation is the surviving corporation and
no vote of its stockholders is required for the merger. Neither UICI's nor
HealthPlan Services' certificate of incorporation provides otherwise. The
Delaware Law does not provide appraisal rights to stockholders who dissent from
the sale of all or substantially all of a corporation's assets or an amendment
to the corporation's certificate of incorporation, unless the corporation's
-71-
<PAGE>
certificate of incorporation provides for dissenters' rights in those cases.
Neither UICI's nor HealthPlan Services' charter so provides.
AMENDMENTS TO CHARTERS
The Delaware Law provides that the certificate of incorporation of a
corporation may be amended upon the affirmative vote of a majority of the
outstanding shares of each class entitled to vote thereon, unless the
corporation's charter requires a larger percentage. UICI's and HealthPlan
Services' charters allow for amendments to the charters as prescribed by
Delaware Law.
AMENDMENTS TO BYLAWS
Under the Delaware Law, holders of a majority of the voting power of a
corporation and, when provided in the certificate of incorporation, the
directors of the corporation, have the power to adopt, amend and repeal the
bylaws of a corporation. HealthPlan Services' charter grants the HealthPlan
Services Board this power. UICI's charter grants the UICI board this power, but
provides that any adoption, amendment, or repeal of the bylaws by the UICI board
may be repealed or changed by a majority of the voting power of UICI.
STOCKHOLDER ACTION
The Delaware Law permits actions which could be taken at a stockholders'
meeting to be taken by written action of the stockholders unless the
corporation's charter or bylaws require that a meeting be held. Neither UICI's
nor HealthPlan Services' charter requires stockholders to act at a meeting.
SPECIAL MEETINGS OF STOCKHOLDERS
The Delaware Law provides that special meetings of stockholders may be
called by a corporation's board of directors and other persons authorized by the
corporation's certificate of incorporation or bylaws. HealthPlan Services'
bylaws provide that special meetings of stockholders may be called only by the
chairman of the board, chief executive officer, the Board or by a majority of
the shares entitled to vote at the meeting. UICI's charter and bylaws authorize
only the Chairman of the Board, the President, the Board of Directors or the
holders of not less than one-tenth of all shares entitled to vote at the meeting
to call a special meeting.
CUMULATIVE VOTING
The Delaware Law permits a corporation's certificate of incorporation to
provide for cumulative voting in the election of directors. HealthPlan Services'
charter does not provide for cumulative voting. UICI's charter expressly
prohibits cumulative voting.
-72-
<PAGE>
NUMBER AND ELECTION OF DIRECTORS
UICI's charter and bylaws provide that the board of directors will include
initially five directors, with a change in the number to be made by a resolution
of the board, but never less than one director.
HealthPlan Services' bylaws provide for an initial board of two directors,
with changes in the number of directors to be made by resolution of the board or
stockholders.
REMOVAL OF DIRECTORS
The Delaware Law provides that unless a corporation's certificate of
incorporation otherwise provides, directors may be removed with or without cause
and requires that the removal of directors be approved by a majority vote of the
shares then entitled to vote at an election of directors. HealthPlan Services'
charter provides that a member of the HealthPlan Services Board may be removed
with or without cause only at a special meeting of stockholders called for that
purpose. UICI's charter does not otherwise discuss the removal of directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Law permits indemnification of officers and directors against
liabilities and expenses incurred in proceedings if the person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action,
had no reasonable cause to believe such person's conduct was unlawful. In the
case of derivative actions, indemnification is limited to expenses and no
indemnification may be made in respect of any claim, issue or matter as to which
such person has been adjudged to be liable to the corporation unless
indemnification is otherwise authorized by a court. UICI's and HealthPlan
Services' bylaws require the companies to indemnify officers and directors to
the full extent permitted by law.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The Delaware Law allows a Delaware corporation to include in its
certificate of incorporation, and HealthPlan Services' and UICI's charters
contain, a provision eliminating the liability of a director for monetary
damages for a breach of such director's fiduciary duties as a director, except
liability for any breach of the director's duty of loyalty to the corporation's
stockholders, for acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law, under Section 174 of the
Delaware Law (which deals generally with unlawful payments of dividends, stock
repurchases and redemptions), and for any transaction from which the director
derived an improper personal benefit.
-73-
<PAGE>
CERTAIN ANTITAKEOVER EFFECTS OF
CERTAIN CHARTER AND BYLAWS PROVISIONS
GENERAL
UICI's charter contains provisions that will make more difficult the
acquisition of control of the company by means of a tender offer, open market
purchases, a proxy fight or otherwise that are not approved by the company's
board of directors. UICI's bylaws also contain provisions that could have an
antitakeover effect.
The purposes of such charter and bylaw provisions are to discourage certain
types of transactions, described below, which may involve an actual or
threatened change of control and to encourage persons seeking to acquire control
to negotiate the terms of any proposed business combination or offer with the
board of directors. The provisions are designed to reduce vulnerability to an
unsolicited proposal for a takeover that does not contemplate the acquisition of
all outstanding shares or is otherwise unfair to stockholders, or an unsolicited
proposal for the restructuring or sale of all or part of the company. UICI
believes that, as a general rule, such proposals would not be in the best
interests of stockholders. These provisions will help ensure that the UICI board
of directors, if confronted by a surprise proposal from a third party which has
acquired a block of stock, will have sufficient time to review the proposal and
appropriate alternatives to the proposal and to act in what it believes to be
the best interests of stockholders.
UICI believes that the provisions discussed below may provide some measure
of protection for stockholders against certain potentially coercive takeover
tactics. Such takeover tactics include the accumulation of substantial stock
positions in public companies by third parties as a prelude to proposing a
takeover, a restructuring or a sale of all or part of the company or another
similar extraordinary corporate action. Such actions are often undertaken by a
third party without advance notice to, or consultation with, the management or
board of directors of a company. In many cases, the purchaser seeks
representation on a company's board of directors in order to increase the
likelihood that its proposal will be implemented by a company. If a company
resists the efforts of the purchaser to obtain representation on the company's
board, a purchaser may commence a proxy contest to have its nominees elected to
the board of directors in place of certain directors or in place of the entire
board of directors.
UICI believes that the imminent threat of removal of management or the
board of directors in such situations would severely curtail the ability of
management or the board of directors to negotiate effectively with such
purchasers. Management or the board of directors would be deprived of the time
and information necessary to evaluate the takeover proposal, to study
alternative proposals and to help ensure that the best price is obtained in any
transaction involving the company which may ultimately be undertaken.
These provisions, individually and collectively, will make difficult and
may discourage a merger, tender offer or proxy fight, even if such transaction
or occurrence may be favorable to the interests of stockholders, and may delay
or frustrate the assumption of control by a holder of a large block of common
stock and the removal of incumbent management, even if such removal might be
beneficial to stockholders. Furthermore, these provisions may deter or could be
used to
-74-
<PAGE>
frustrate a future takeover attempt which is not approved by the incumbent board
of directors, but which the holders of a majority of the shares may deem to be
in their best interests or in which stockholders may receive a substantial
premium for their stock over prevailing market prices of such stock. By
discouraging takeover attempts, these provisions might have the incidental
effect of inhibiting certain changes in management (some or all of the members
of which might be replaced in the course of a change of control) and also the
temporary fluctuations in the market price of the stock which often result from
actual or rumored takeover attempts.
Set forth below is a description of the possible antitakeover effects of
such provisions.
PREFERRED STOCK
UICI's bylaws authorize the board to establish series of preferred stock.
The UICI Board has the authority to fix the rights and preferences of each such
series with respect to, among other things, the dividend rate, redemption
provisions, liquidation preferences, conversion rights and voting rights. The
number of authorized shares of preferred stock is 10,000,000. As of the date of
this proxy statement/prospectus, no UICI Preferred Shares are outstanding.
We believe that the availability of such preferred stock will provide
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. Having
such authorized shares available for issuance will allow the company to issue
shares of preferred stock in certain cases without the expense and delay of a
special meeting of stockholders. Subject to the possible rights of holders of
any outstanding shares of preferred stock to vote on such issuances, the
authorized shares of preferred stock, as well as shares of common stock, will be
available for issuance without further action by stockholders, unless such
action is required by applicable law or the rules of any stock exchange on which
the securities may be listed. Although there is no intention at the present time
of doing so, the board could authorize a series of preferred stock that could
impede a business combination through adoption of a stockholder rights plan. The
board will make any determination to issue such shares based on its judgment as
to the best interests of the company and its then existing stockholders. The
board, in so acting and upon obtaining any required regulatory approvals, could
issue preferred stock having terms which could discourage an acquisition attempt
or other transaction that some, or a majority, of the stockholders might believe
to be in their best interests or in which stockholders might receive a premium
for their stock over the then market price of such stock.
COMMON STOCK
UICI's charter presently authorizes the issuance of 100 million UICI common
shares, approximately 51 million of which would have been outstanding after the
merger if it had occurred on October 5, 1999.
The board would have the ability, in the event of a proposed merger, tender
offer or other attempt to gain control of the company that was not approved by
the board, to issue additional common stock that would dilute the stock
ownership of the acquiror.
-75-
<PAGE>
ANTITAKEOVER LEGISLATION
We have described certain antitakeover provisions of the Delaware Law under
"COMPARATIVE RIGHTS OF HEALTHPLAN SERVICES STOCKHOLDERS AND UICI STOCKHOLDERS -
STATE TAKEOVER LEGISLATION."
The Delaware Law provisions should encourage persons interested in
acquiring control to negotiate in advance with the board, since the restrictions
contained in the provisions regarding business combinations with interested
stockholders do not apply if the acquiror first obtains disinterested director
approval. As stated above, in the event of a proposed acquisition of control, we
believe that the interests of stockholders will best be served by a transaction
that results from negotiations based upon careful consideration of the proposed
terms, such as the price to be paid to minority stockholders, the form of
consideration paid and tax effects of the transaction. The antitakeover
provisions of the Delaware Law should also tend to discourage the accumulation
of large blocks of stock by third parties, which we believe can be disruptive to
the stability of important relationships with employees, customers and major
lenders.
The antitakeover provisions of the Delaware Law will not prevent a hostile
takeover. They may, however, make more difficult or discourage a takeover or the
acquisition of control by a principal stockholder and thus the removal of
incumbent management. Some stockholders may find this disadvantageous in that
they may not be afforded the opportunity to participate in takeovers which are
not approved by the board, but in which they might receive, for at least some of
their shares, a substantial premium above the market price at the time of a
tender offer or other acquisition transaction. The Delaware antitakeover
provisions should not prevent or discourage transactions in which an acquiring
person is willing to negotiate in good faith with the board.
LEGAL OPINIONS
The legality of the shares of the common stock of UICI to be issued in
connection with the merger is being passed upon for UICI by Glenn W. Reed,
Executive Vice President and General Counsel of UICI. At October 5, 1999, Mr.
Reed was the beneficial owner of 20,000 shares of UICI common stock.
Certain of the tax consequences of the merger will be passed upon at the
effective time of the merger, as a condition to the merger, by Gardner, Carton &
Douglas on behalf of UICI, and by Fowler, White, Gillen, Boggs, Villareal and
Banker, P.A. on behalf of HealthPlan Services. See "THE MERGER -- MATERIAL
FEDERAL INCOME TAX CONSEQUENCES."
EXPERTS
The consolidated financial statements of UICI incorporated by reference
from UICI's Annual Report on Form 10-K for the year ended December 31, 1998,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated herein
-76-
<PAGE>
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements incorporated in this proxy
statement/prospectus by reference to the Annual Report on Form 10-K of
HealthPlan Services for the year ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
STOCKHOLDER PROPOSALS FOR THE 2000 HEALTHPLAN SERVICES ANNUAL MEETING
HealthPlan Services will hold a 2000 annual meeting of stockholders only if
the merger is not completed before the time of such meeting. In the event that
such a meeting is held, any proposals of stockholders intended to be presented
at the 2000 annual meeting of stockholders must have been received by the
Secretary of HealthPlan Services on or before December 7, 1999 in order to be
considered for inclusion in HealthPlan Services' 2000 proxy materials.
For any stockholder proposal that is not submitted for inclusion in the
2000 proxy statement, but is instead sought to be presented directly at the 2000
annual meeting, management will be able to vote proxies in its discretion if
HealthPlan Services: (i) does not receive notice of the proposal prior to the
close of business on February 21, 2000; or (ii) receives notice of the proposal
before the close of business on February 21, 2000 and advises stockholders in
the 2000 proxy statement about the nature of the matter and how management
intends to vote on such matter.
Stockholder proposals should be sent certified mail, return receipt
requested, to the attention of the Corporate Secretary at the Company's
principal executive offices of HealthPlan Services at 3501 Frontage Road, Tampa,
Florida 33607.
WHERE YOU CAN FIND MORE INFORMATION
UICI and HealthPlan Services file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the Public Reference Room. Our SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at HTTP://WWW.SEC.GOV
UICI filed a Registration Statement on Form S-4 (the "REGISTRATION
STATEMENT") to register with the SEC the shares to be issued to HealthPlan
Services stockholders in the merger. This proxy statement/prospectus is a part
of that Registration Statement and constitutes a prospectus of UICI, as well as
being a proxy statement of HealthPlan Services for its special meeting.
-77-
<PAGE>
As allowed by SEC rules, this proxy statement/prospectus does not contain
all the information you can find in the Registration Statement or the exhibits
to that Registration Statement.
The SEC allows us to "incorporate by reference" business and financial
information into this proxy statement/prospectus, which means that we can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this proxy statement/prospectus. This proxy statement/ prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
companies and their financial condition.
<TABLE>
<CAPTION>
UICI SEC Filings (File No. 0-14320)
PERIOD
- ---------------------------------------------------------------------- ------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.................................... For the Year Ended December 31, 1998
Quarterly Reports on Form 10-Q................................ For the Quarters Ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K................................... Filed on September 13, 1999 and October 7, 1999
Proxy Statement............................................... Filed on April 12, 1999
HealthPlan Services Corporation SEC Filings
(File No. 1-13772)
PERIOD
- ---------------------------------------------------------------------- -------------------------------------------------------------
Annual Report on Form 10-K.................................... For the Year Ended December 31, 1998
Quarterly Reports on Form 10-Q................................ For the Quarters Ended March 31, 1999 and June 30, 1999
Current Report on 8-K......................................... Filed on October 7, 1999
Proxy Statement............................................... Filed on April 5, 1999
</TABLE>
UICI and HealthPlan Services also incorporate by reference into this proxy
statement/prospectus additional documents that may be filed with the SEC from
the date of this proxy statement/prospectus to the date of the special meeting.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K, as well as proxy
statements.
UICI has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to UICI and HealthPlan Services has
supplied all such information relating to HealthPlan Services.
-78-
<PAGE>
If you are a stockholder, UICI or HealthPlan Services may have sent
you some of the documents incorporated by reference, but you can obtain any of
them through UICI or HealthPlan Services, the SEC or the SEC's Internet world
wide web site as described above. Documents incorporated by reference are
available from the appropriate company without charge, excluding all exhibits
unless we have specifically incorporated by reference an exhibit in this proxy
statement/prospectus. Stockholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
UICI HealthPlan Services Corporation
4001 McEwen, Suite 200 3501 Frontage Road
Dallas, Texas 75244 Tampa, FL 33607
Tel: (972) 392-6700 Tel: (813) 289-1000
Attn: Corporate Secretary's Department Attn: Corporate Secretary's Department
If you would like to request documents from us, please do so by _________,
1999 to receive them before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. NEITHER UICI NOR HEALTHPLAN
SERVICES HAVE AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED _______________, 1999. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN THAT DATE. NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO HEALTHPLAN SERVICES STOCKHOLDERS NOR THE ISSUANCE OF
UICI COMMON STOCK IN THE MERGER CREATES ANY IMPLICATION TO THE CONTRARY.
LIST OF DEFINED TERMS
TERM PAGE TERM PAGE
- ---- ---- ---- ----
Alternative Acquisition........53 NPPN..........................21
Delaware Law...................70 PPO...........................22
FTC............................46 Registration Statement........77
HMOs...........................21 Superior Proposal.............54
HPS Common Shares..............24
-79-
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UICI,
UICI ACQUISITION CO.
AND
HEALTHPLAN SERVICES CORPORATION
DATED AS OF OCTOBER 5, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C>
ARTICLE I. THE MERGER............................................................A-1
Section 1.1. The Merger........................................................A-1
Section 1.2. Effective Time of the Merger......................................A-1
Section 1.3. Closing...........................................................A-2
ARTICLE II. THE SURVIVING CORPORATION.............................................A-2
Section 2.1. Certificate of Incorporation......................................A-2
Section 2.2. By-Laws...........................................................A-2
Section 2.3. Directors and Officers of Surviving Corporation...................A-2
ARTICLE III. CONVERSION OF SHARES..................................................A-2
Section 3.1. Exchange Ratio....................................................A-2
Section 3.2. Exchange of Company Common Stock; Procedures......................A-3
Section 3.3. Dividends; Escheat................................................A-4
Section 3.4. No Fractional Securities..........................................A-4
Section 3.5. Closing of Company Transfer Books.................................A-5
Section 3.6. Further Assurances................................................A-5
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................A-5
Section 4.1. Corporate Organization; Related Entities..........................A-5
Section 4.2. Capitalization....................................................A-6
Section 4.3. Authority Relative to this Agreement..............................A-7
Section 4.4. Consents and Approvals; No Violations.............................A-7
Section 4.5. Reports and Financial Statements..................................A-8
Section 4.6. Absence of Certain Changes or Events..............................A-8
Section 4.7. Litigation........................................................A-8
Section 4.8. Absence of Undisclosed Liabilities................................A-9
Section 4.9. No Default........................................................A-9
Section 4.10. Taxes.............................................................A-9
Section 4.11. Intellectual Property............................................A-12
Section 4.12. Stockholder Rights Plan..........................................A-13
Section 4.13. Information in Disclosure Documents and Registration Statement...A-13
Section 4.14. Employees........................................................A-13
Section 4.15. Employee Benefit Plans; ERISA....................................A-14
Section 4.16. Environmental Matters............................................A-15
Section 4.17. Vote Required....................................................A-16
Section 4.18. Opinion of Financial Advisor.....................................A-16
Section 4.19. Insurance........................................................A-16
Section 4.20. Affiliate Transactions...........................................A-17
Section 4.21. Brokers..........................................................A-17
Section 4.22. Year 2000........................................................A-17
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT.............................A-18
Section 5.1. Organization.....................................................A-18
Section 5.2. Capitalization...................................................A-18
i
<PAGE>
A-Section 5.3. Authority Relative to this Agreement.............................A-19
Section 5.4. Consents and Approvals; No Violations............................A-19
Section 5.5. Reports and Financial Statements.................................A-20
Section 5.6. Absence of Certain Changes or Events; Material Agreements........A-20
Section 5.7. Litigation.......................................................A-20
Section 5.8. Absence of Undisclosed Liabilities...............................A-21
Section 5.9. No Default.......................................................A-21
Section 5.10. Information in Disclosure Documents and Registration Statement...A-21
Section 5.11. Environmental Protection.........................................A-22
Section 5.12. Vote Required....................................................A-23
Section 5.13. Insurance........................................................A-23
Section 5.14. Year 2000........................................................A-23
Section 5.15. Affiliate Transactions...........................................A-24
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER...............................A-24
Section 6.1. Conduct of Business by the Company Pending the Merger............A-24
Section 6.2. Conduct of Business by Parent Pending the Merger.................A-25
Section 6.3. Conduct of Business of Sub.......................................A-26
ARTICLE VII. ADDITIONAL AGREEMENTS................................................A-26
Section 7.1. Access and Information...........................................A-26
Section 7.2. Solicitation of Competing Transactions...........................A-26
Section 7.3. Registration Statement...........................................A-28
Section 7.4. Proxy Statement-Prospectus; Stockholder Approvals................A-28
Section 7.5. Compliance with the Securities Act...............................A-29
Section 7.6. Commercially Reasonable Efforts..................................A-29
Section 7.7. Voting Agreement.................................................A-30
Section 7.8. Company Stock Options............................................A-30
Section 7.9. Public Announcements.............................................A-30
Section 7.10. Directors' and Officers' Indemnification and Insurance...........A-31
Section 7.11. Election to Parent Board of Directors............................A-31
Section 7.12. Company Stock Option Agreement...................................A-31
Section 7.13. Expenses.........................................................A-31
Section 7.14. Listing Application..............................................A-32
Section 7.15. Supplemental Disclosure..........................................A-32
Section 7.16. Letters of Accountants...........................................A-32
Section 7.17. Conveyance Taxes.................................................A-32
Section 7.18. Non-solicitation of Employees....................................A-32
Section 7.19. Exchange Act Filings.............................................A-33
Section 7.20. Litigation Reserve...............................................A-33
ARTICLE VIII. CONDITIONS TO CONSUMMATION OF THE MERGER.............................A-33
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger.......A-33
Section 8.2. Conditions to Obligations of Parent and Sub to Effect the Merger.A-34
Section 8.3. Conditions to Obligation of the Company to Effect the Merger.....A-35
ARTICLE IX. TERMINATION..........................................................A-36
Section 9.1. Termination......................................................A-36
ii
<PAGE>
Section 9.2. Effect of Termination............................................A-37
ARTICLE X. GENERAL PROVISIONS...................................................A-37
Section 10.1. Amendment and Modification.......................................A-37
Section 10.2. Waiver...........................................................A-38
Section 10.3. Survivability; Investigations....................................A-38
Section 10.4. Notices..........................................................A-38
Section 10.5. Descriptive Headings; Interpretation.............................A-39
Section 10.6. Entire Agreement; Assignment.....................................A-39
Section 10.7. Governing Law....................................................A-39
Section 10.8. Severability.....................................................A-39
Section 10.9. Counterparts.....................................................A-40
</TABLE>
EXHIBITS
- --------
Exhibit A Voting Agreement
Exhibit B Affiliation Agreement
Exhibit C Option Agreement
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 5, 1999 (this
"Agreement"), by and among UICI, a Delaware corporation ("Parent"), UICI
ACQUISITION CO., a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and HEALTHPLAN SERVICES CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent and Sub and the Company deem it
advisable and in the best interests of their respective stockholders that Parent
acquire the Company pursuant to the terms and conditions of this Agreement, and,
in furtherance of such acquisition, such Boards of Directors (and Parent as the
sole stockholder of Sub) have approved this Agreement and the merger of Sub with
and into the Company in accordance with the terms of this Agreement and the
General Corporation Law of the State of Delaware (the "DGCL"); and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, certain holders of shares of the Common Stock, par value $.01 per
share (the "Company Common Stock"), of the Company, are entering into an
agreement with Parent in the form attached hereto as Exhibit A (the "Voting
Agreement") to vote certain shares of Company Common Stock according to the
terms set forth in the Voting Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. In accordance with the provisions of this
Agreement and the DGCL, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "Merger"), the separate existence
of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (sometimes hereinafter called the "Surviving Corporation") and
shall continue its corporate existence under the laws of the State of Delaware.
The Merger shall have the effects set forth in Section 259(a) of the DGCL.
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at the time of filing of a properly executed Certificate of Merger in
the form required by and executed in accordance with the provisions of Section
251 of the DGCL. The parties hereto shall cause such filing to be made as soon
as practicable after the Closing (as defined in Section 1.3). When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Merger shall become effective.
A-1
<PAGE>
SECTION 1.3. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at Fowler, White, Gillen, Boggs,
Villareal and Banker P.A., Suite 1700, 501 East Kennedy Blvd, Tampa, Florida
33601, at 10:00 a.m., local time, on the day on which all of the conditions set
forth in Article VIII are satisfied or waived or on such other date and at such
other time and place as Parent and the Company shall agree; PROVIDED, HOWEVER,
that the closing of the transactions contemplated hereby shall not occur between
the period from December 10, 1999 through January 10, 2000 (such date, the
"Closing Date").
ARTICLE II.
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Sub in effect at the Effective Time shall be the Certificate of Incorporation
of the Surviving Corporation until amended in accordance with applicable law,
except that, at the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended to provide that the name of the Surviving
Corporation shall be "HealthPlan Services Corporation."
SECTION 2.2. BY-LAWS. The By-Laws of Sub as in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation until amended in accordance
with applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation or as otherwise provided by law.
(b) The officers of the Company at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation or as otherwise provided by law.
ARTICLE III.
CONVERSION OF SHARES
SECTION 3.1. EXCHANGE RATIO. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in accordance with
Section 3.1(b)), shall be converted into the right to receive a number of shares
of Common Stock, par value $.01 per share (the "Parent Common Stock"), of
Parent, equal to the Exchange Ratio (as hereinafter defined) and payable upon
the surrender of the certificate formerly representing such share of Company
Common Stock in accordance with Section 3.2 hereof. The "Exchange Ratio" shall
be equal to the result (rounded to the nearest 1/10,000, with .0005 rounded up)
obtained by dividing $9.50 by: (i) $28.00, if the Parent Average Price (as
hereinafter defined) is less than $28.00 and greater than or equal to $23.00;
(ii) the Parent Average Price plus $5.00, if the
A-2
<PAGE>
Parent Average Price is less than $23.00 and greater than or equal to $21.00;
(iii) the Parent Average Price, if the Parent Average Price is greater than or
equal to $28.00 and less than or equal to $30.00; (iv) $30.00, if the Parent
Average Price is greater than $30.00 and less than or equal to $33.00; and (v)
the Parent Average Price less $3.00, if the Parent Average Price is greater than
$33.00; PROVIDED, HOWEVER, that if the Parent Average Price is less than $21.00,
the Exchange Ratio shall be .3654. "Parent Average Price" means the average
(rounded to the nearest 1/10,000th) of the volume weighted averages (rounded to
the nearest 1/10,000th) of the trading prices of the Parent Common Stock on the
New York Stock Exchange (the "NYSE"), as reported by Bloomberg Financial Markets
(or such other source Parent and the Company shall agree in writing), for the 20
consecutive trading days ending on the third trading day immediately preceding
the Effective Time.
(b) All shares of Company Common Stock that, in either case, are (i) held
by the Company as treasury shares or (ii) owned by Parent or any wholly-owned
Subsidiary of Parent, shall be canceled and retired and cease to exist, and no
securities of Parent or other consideration shall be delivered in exchange
therefor. As used in this Agreement, the term "Subsidiary" means, with respect
to any party, any corporation or other organization, whether incorporated or
unincorporated, of which (x) such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (y) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party and/or one or more of its
Subsidiaries.
(c) All shares of Common Stock, $.01 par value per share ("Sub Common
Stock"), of Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable share of
Common Stock, par value $.01 per share, of the Surviving Corporation.
(d) Each outstanding option to purchase Company Common Stock (each, a
"Company Stock Option") shall be assumed by Parent as more specifically provided
in Section 7.8.
SECTION 3.2. EXCHANGE OF COMPANY COMMON STOCK; PROCEDURES.
(a) Prior to the Closing Date, Parent shall designate a bank or trust
company reasonably acceptable to the Company to act as Exchange Agent hereunder
(the "Exchange Agent"). As soon as practicable after the Effective Time, Parent
shall deposit with or for the account of the Exchange Agent stock certificates
representing the aggregate number of shares of Parent Common Stock issuable
pursuant to Section 3.1 in exchange for outstanding shares of Company Common
Stock, which shares of Parent Common Stock shall be deemed to have been issued
at the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") that were converted pursuant to
Section 3.1 into the right to receive shares of
A-3
<PAGE>
Parent Common Stock (i) a form of letter of transmittal specifying that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and (ii)
instructions for use in surrendering such Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article III, (y) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.4, after giving effect to any required tax withholdings,
and the Certificate so surrendered shall forthwith be canceled and (z) any
dividends or distributions to which such holder may be entitled pursuant to
Section 3.3. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer, and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
3.2(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock and any dividends or distributions, which may be
payable pursuant to Section 3.3 hereof.
SECTION 3.3. DIVIDENDS; ESCHEAT. No dividends or distributions that are
declared on shares of Parent Common Stock will be paid to persons entitled to
receive certificates representing shares of Parent Common Stock until such
persons surrender their Certificates. Upon such surrender, there shall be paid
to the person in whose name the certificates representing such shares of Parent
Common Stock shall be issued, any dividends or distributions with respect to
such shares of Parent Common Stock which have a record date on or after the
Effective Time and shall have become payable between the Effective Time and the
time of such surrender. In no event shall the person entitled to receive such
dividends or distributions be entitled to receive interest thereon. Promptly
following the date which is six months after the Effective Time, the Exchange
Agent shall deliver to the Surviving Corporation all cash, certificates and
other documents in its possession relating to the transactions described in this
Agreement, and any holders of Company Common Stock who have not theretofore
complied with this Article III shall look thereafter only to the Surviving
Corporation for the shares of Parent Common Stock, any dividends or
distributions thereon, and any cash in lieu of fractional shares thereof to
which they are entitled pursuant to this Article III. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Company Common Stock for any shares of Parent Common Stock, any
dividends or distributions thereon or any cash in lieu of fractional shares
thereof delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
SECTION 3.4. NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional securities, each holder of Company Common
A-4
<PAGE>
Stock who would otherwise have been entitled to a fraction of a share of Parent
Common Stock upon surrender of such holder's Certificates will be entitled to
receive a cash payment (without interest) determined by multiplying (i) the
fractional interest to which such holder would otherwise be entitled (after
taking into account all shares of Company Common Stock then held of record by
such holder) and (ii) the average of the per share closing prices for Parent
Common Stock on the NYSE for the five trading days immediately preceding the
Effective Time.
SECTION 3.5. CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged as provided in this Article III.
SECTION 3.6. FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of Sub or the Company acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names and on such
behalves or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.1. CORPORATE ORGANIZATION; RELATED ENTITIES.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own or lease its properties and to carry on its business
as it is presently being conducted. Schedule 4.1(a) lists, and the Company is
duly qualified as a foreign corporation to do business and is in good standing
in, every jurisdiction where the character of the Company's properties (owned or
leased) or the nature of its activities makes such qualification necessary,
except for failures, if any, to be so qualified which would not in the aggregate
have a Company Material Adverse Effect (as hereinafter defined).
(b) Schedule 4.1(b) lists all of the Subsidiaries of the Company which
would be required to be set forth as an exhibit to the Company's Annual Report
on Form 10-K pursuant to the rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (the "Company Subsidiaries"). Each
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization or
incorporation and has the corporate power and authority to own or lease its
properties and to
A-5
<PAGE>
carry on its business as it is presently being conducted, except for failures,
if any, to be so organized, validly existing or in good standing or to have such
corporate power and authority which would not in the aggregate have a Company
Material Adverse Effect.
(c) The copies of the Certificate of Incorporation and By-Laws of the
Company heretofore delivered to Parent are complete and correct copies of such
instruments as presently in effect.
(d) As used in this Agreement, any reference to any event, change,
circumstance or effect having a "Company Material Adverse Effect" shall mean
that such event, change, circumstance or effect is, individually or in the
aggregate, materially adverse to the business, operations, properties, assets
(including intangible assets), liabilities (including contingent liabilities),
condition (financial or other) or results of operations of the Company and any
of its Subsidiaries taken as a whole or to the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement,
other than any event, change, circumstance or effect relating to or resulting
from: (i) general changes in the industries in which the Company operates its
business; (ii) changes in general economic conditions or securities markets in
general; and (iii) the termination of any contract listed in Schedule 4.4
resulting from a termination right triggered by this Agreement, the transactions
contemplated hereby or the announcement thereof.
SECTION 4.2. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock, 13,665,139 of
which are issued and outstanding. As of the date of this Agreement, options to
acquire 2,008,275 shares of Company Common Stock ("Company Stock Options") are
outstanding under all of the Company Option Plans (as defined below) and
2,711,261 shares of Company Common Stock are reserved for issuance pursuant to
the Company Option Plans. The "Company Option Plans" means the Amended and
Restated HealthPlan Services Corporation 1996 Employee Stock Option Plan, the
HealthPlan Services Corporation 1995 Incentive Equity Plan, the HealthPlan
Services Corporation 1995 Consultants Stock Option Plan, the HealthPlan Services
Corporation 1996 Employee Stock Purchase Plan, the HealthPlan Services
Corporation 1995 Directors Stock Option Plan and the Amended and Restated
HealthPlan Services Corporation Directors Equity Plan. All of the issued and
outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable.
(b) Except as disclosed in this Section 4.2 or on Schedule 4.2(b) or as
contemplated by the Option Agreement (defined herein), (i) there is no
outstanding right, subscription, warrant, call, unsatisfied preemptive right,
option or other agreement or arrangement of any kind to purchase or otherwise to
receive from the Company any of the outstanding authorized but unissued or
treasury shares of the capital stock or any other security of the Company, (ii)
there is no outstanding security of any kind convertible into or exchangeable
for such capital stock, and (iii) there is no voting trust or other agreement or
understanding to which the Company is a party or is bound with respect to the
voting of the capital stock of the Company.
A-6
<PAGE>
(c) Except as set forth on Schedule 4.2(c), none of the awards, grants or
other agreements pursuant to which Company Stock Options were issued have
provisions which accelerate the vesting or right to exercise such options upon
the execution of this Agreement (including the documents attached as Exhibits
hereto), the consummation of the transactions contemplated hereby (or thereby)
or any other "change of control" or similar events.
(d) Except as set forth on Schedule 4.2(d) and for qualifying shares
required by certain foreign jurisdictions, all of the issued and outstanding
capital stock of each of the Company Subsidiaries has been validly issued, is
fully paid and nonassessable and is owned of record and beneficially, directly
or indirectly, by the Company or another Subsidiary of the Company, free of any
Liens, preemptive rights or other restrictions with respect thereto.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated on its part hereby have been duly authorized by
the Company's Board of Directors and, except for the approval of its
stockholders to be sought at the stockholders meeting contemplated by Section
7.4(a) with respect to this Agreement, no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or for the Company
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution,
delivery and performance of this Agreement by the Company, nor the consummation
by the Company of the transactions contemplated hereby, will (i) conflict with
or result in any breach of any provisions of the charter, By-laws or other
organizational documents of the Company or the organizational documents of any
of its Subsidiaries, (ii) require a filing with, or a permit, authorization,
consent or approval of, any federal, state, local or foreign court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or administrative agency or commission (a "Governmental
Entity"), except in connection with or in order to comply with the applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), for the filing of a registration statement on Form S-4
under the Securities Act of 1933, as amended (the "Securities Act") with respect
to Parent Common Stock to be offered to the Company stockholders, the filing of
the Proxy Statement-Prospectus under the Exchange Act, filings or approvals
required under state securities or "blue sky" laws, the By-Laws of the National
Association of Securities Dealers (the "NASD") and the filing and recordation of
a Certificate of Merger as required by the DGCL, (iii) except as set forth on
Schedule 4.4 hereto, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any mortgage, pledge, security interest, encumbrance, lien, claim or
charge of any kind or right of others of whatever nature ("Liens"), on any
property or asset of the Company or any of its Subsidiaries pursuant to, any of
the terms,
A-7
<PAGE>
conditions or provisions of any material note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation (each, a
"Contract") to which the Company or any of its Subsidiaries is a party or by
which it or any of its properties or assets may be bound or (iv) violate any
law, order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to the Company or any of its Subsidiaries or any
of their properties or assets, except, in the case of clauses (ii), (iii) and
(iv), where failures to make such filing or obtain such authorization, consent
or approval would not have, or where such violations, breaches or defaults or
Liens would not have, in the aggregate, a Company Material Adverse Effect.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS. Except as set forth on
Schedule 4.5, the Company has timely filed all reports required to be filed by
the Company with the Securities and Exchange Commission (the "SEC") pursuant to
the Exchange Act or the Securities Act since December 31, 1997 (collectively,
the "Company SEC Reports"), and has previously made available to Parent true and
complete copies of all such Company SEC Reports. Such Company SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such Company SEC Reports, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Reports have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") consistently applied throughout the periods indicated (except as
otherwise noted therein or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present (subject, in the case of unaudited
statements, to normal recurring year-end adjustments and any other adjustments
described therein) the financial position of the Company as at the dates thereof
and the results of operations and cash flows of the Company for the periods then
ended. Since December 31, 1998, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of the Company.
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 4.6 or in the Company SEC Reports filed as of the date of this
Agreement, since December 31, 1998, (i) neither the Company nor any of its
Subsidiaries has conducted its business and operations other than in the
ordinary course of business and consistent with past practices or taken any
actions that, if it had been in effect, would have violated or been inconsistent
with the provisions of Section 6.1 and (ii) there has not been any fact, event,
circumstance or change affecting or relating to the Company or any of its
Subsidiaries which has had or is reasonably likely to have a Company Material
Adverse Effect. Except as set forth on Schedule 4.6 or as would not represent a
Company Material Adverse Effect, the transactions contemplated by this Agreement
will not constitute a change of control under or require the consent from or the
giving of notice to a third party pursuant to the terms, conditions or
provisions of any Contract to which the Company or any of its Subsidiaries is a
party.
SECTION 4.7. LITIGATION. Except as disclosed on Schedule 4.7 and except for
litigation disclosed in the notes to the financial statements included in the
Company's Annual Report to Stockholders for the fiscal year ended December 31,
1998 or in the Company SEC Reports filed subsequent thereto, as of the date
hereof, there is no suit, action, proceeding or investigation
A-8
<PAGE>
pending or, to the best knowledge of the Company, threatened against, the
Company or any of its Subsidiaries or with respect to which the Company or any
of its Subsidiaries could be required to provide indemnification or to otherwise
contribute to liabilities or damages relating thereto, the outcome of which
could reasonably be expected to have a Company Material Adverse Effect; nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Company or any of its Subsidiaries having, or which,
insofar as can reasonably be foreseen, in the future may have a Company Material
Adverse Effect. For purposes of this Agreement, wherever the term "Company
knowledge" or "best knowledge of the Company" or any phrase of similar import is
used it shall mean the actual knowledge of the directors and the executive
officers of the Company, or knowledge which such persons could reasonably be
expected to possess in view of their respective positions with the Company, and,
except as provided above, shall not include imputed, constructive or implied
knowledge of any such persons.
SECTION 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company SEC
Reports or which were incurred after June 30, 1999 in the ordinary course of
business and consistent with past practice, or except as set forth on Schedule
4.8, none of the Company or any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a balance sheet (or reflected in the notes
thereto) and which could reasonably be expected to have a Company Material
Adverse Effect.
SECTION 4.9. NO DEFAULT. Except as set forth in Schedule 4.9, neither the
Company nor any of its Subsidiaries is in breach or violation of, or in default
under (and no event has occurred which with notice or lapse of time or both
would constitute such a breach, violation or default), any term, condition or
provision of (i) the Company's or the respective Subsidiary's Certificate or
Articles of Incorporation or By-Laws, or (ii) (x) any order, writ, decree,
statute, rule or regulation of any Governmental Entity applicable to the Company
or any of its Subsidiaries or any of their properties or assets or (y) any
Contract to which the Company or any of its Subsidiaries is a party or by which
the Company, or any of its Subsidiaries or any of their properties or assets may
be bound, except in the case of this clause (ii), which breaches, violations or
defaults, individually or in the aggregate, would not have a Company Material
Adverse Effect. The Company and each of its Subsidiaries have, and are in
compliance with, all licenses, permits, variances, exemptions, orders, approvals
and other authorizations of all Governmental Entities as are necessary in order
to enable them to own their businesses and conduct their businesses as currently
conducted and as currently proposed to be conducted and to enter into the
transactions contemplated hereby, the lack of which, under applicable law, rule
or regulation, (x) would render legally impermissible the transactions
contemplated hereby or (y) could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 4.10. TAXES.
(a) The Company has heretofore delivered or will make available to Parent
true, correct and complete copies of the federal, state, local and foreign
income, franchise sales and other Tax Returns (as hereinafter defined) filed by
the Company and each of its Subsidiaries for each of the Company's years ended
1996, 1997 and 1998, inclusive.
A-9
<PAGE>
(b) Except where the failure to be in compliance with any of the following
representations would not have a Company Material Adverse Effect or as disclosed
in Schedule 4.10(b):
(i) All returns, declarations, reports, estimates, statements,
schedules or other information or document with respect to Taxes
(as hereinafter defined) (collectively, "Tax Returns") required
to be filed by the Company and each of its Subsidiaries have been
timely filed (giving effect to extensions granted with respect
thereto), and all such Tax Returns are true, correct and
complete. The Company and each of its Subsidiaries is not
required to file any state Tax Returns other than in the states
reflected on Schedule 4.10(b), identifying for the Company and
for each Subsidiary each such state. No authority in a
jurisdiction where any of the Company or its Subsidiaries does
not file Tax Returns has claimed that the Company or any of its
Subsidiaries is subject to tax in such jurisdiction.
(ii) The Company and each of its Subsidiaries has timely paid all
Taxes owed (whether or not shown on any Tax Return) or claimed to
be due from it by any federal, state, local, foreign or other
taxing authority.
(iii) There are no liens for Taxes upon the assets of the Company or
any of its Subsidiaries except Liens for Taxes not yet due and
payable.
(iv) No Tax Returns of the Company or any of its Subsidiaries have
been examined by the Internal Revenue Service (the "Service")
since 1995. No deficiency for any Taxes has been proposed,
asserted or assessed against the Company or any of its
Subsidiaries which has not been resolved and paid in full. There
are no outstanding waivers, extensions or comparable consents
regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns that have been given by the
Company or any of its Subsidiaries (including the time for filing
of Tax Returns or paying Taxes).
(v) Neither the Company nor any of its Subsidiaries has made any
change in accounting methods, received a ruling from any taxing
authority or signed an agreement with any taxing authority.
(vi) The Company and each of its Subsidiaries has complied with all
applicable laws, rules and regulations relating to the payment
and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the
Code or similar provisions under any foreign laws) and has,
within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over
under applicable laws.
A-10
<PAGE>
(vii) Other than as set forth in Schedule 4.10(b)(vii), no audit or
other proceeding by any federal, state, local or foreign court,
governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of the
Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries has received a written notice of any
pending audits or proceedings. Schedule 4.10(b)(vii) shall set
forth the nature of any such audit or proceeding, the type of Tax
Return, any deficiencies proposed, asserted or assessed and the
amount thereof and the tax year in question.
(viii) Neither the Company nor any its Subsidiaries is a party to, is
bound by or has any obligation under, any Tax sharing, allocation
or indemnity agreement or similar contract or arrangement.
(ix) The Company and each of its Subsidiaries has been and continues
to be an includible corporation which is a member of the
affiliated group (within the meaning of Section 1504 of the Code)
for which the Company files a consolidated return as the common
parent.
(x) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable
to the assessment of any Taxes or deficiencies against the
Company or any of its Subsidiaries.
(xi) No power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(xii) Neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held, acquired or to be acquired by any
of them, filed a consent to the application of Section 341(f) of
the Code, or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries.
(xiii) The Company has identified for Parent all agreements, contracts
and arrangements with the Company and each of its Subsidiaries,
and has provided to Parent all such information as of the date
hereof concerning the Company and each of its Subsidiaries and
their employees as may be necessary to enable Parent to determine
the amount, if any, of any "excess parachute payment" within the
meaning of Section 28OG of the Code that could result solely from
the transactions contemplated by this Agreement.
(xiv) Neither the Company nor any of its Subsidiaries is or has been
during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code a "United States real property
holding company" (as defined in Section 897(c)(2) of the Code).
A-11
<PAGE>
(xv) Neither the Company nor any of its Subsidiaries has participated
in, or cooperated with, an "international boycott" within the
meaning of Section 999 of the Code.
(xvi) The charges, accruals and reserves for Taxes reflected on the
books of the Company and each of its Subsidiaries are adequate
under GAAP to cover the Tax liabilities accruing or payable by
the Company and each of its Subsidiaries in respect of periods
prior to the date hereof.
(xvii) Neither the Company nor any of its Subsidiaries is subject to
any joint venture, partnership or other arrangement or contract
that is treated as a partnership for U.S. federal income tax
purposes.
(xviii) Neither the Company nor any of its Subsidiaries is subject to
liability for Taxes of any other person (other than with respect
to the Company), including, without limitation, liability arising
from the application of U.S. Treasury Regulation ss.1.1502-6 or
any analogous provision of Tax law.
(xix) The shares of Company Common Stock are of "a class of stock that
is regularly traded on an established securities market" within
the meaning of Section 1445(b)(6) of the Code.
(c) For purposes of this Agreement, "Taxes" (including, with correlative
meaning, the term "Tax") shall include all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, service, service use, ad valorem, transfer, franchise,
profits, license, withholding, social security, payroll, employment, excise,
estimated, severance, stamp, recording, occupation, property or other taxes,
customs duties, fees, assessments or charges of any kind whatsoever, whether
computed on a separate consolidated, unitary, combined or other basis, together
with any interest, fines, penalties, additions to tax or other additional
amounts imposed thereon or with respect thereto imposed by any taxing authority
(domestic or foreign).
SECTION 4.11. INTELLECTUAL PROPERTY. Except as would not have a Company
Material Adverse Effect, the Company and each of its Subsidiaries owns, or
possesses valid license rights to use, all Intellectual Property (as hereinafter
defined) used in the conduct of the business. Except as would not have a Company
Material Adverse Effect, neither the execution, delivery and performance of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will adversely affect the right of the Company
or any of its Subsidiaries, without obtaining the consent of any person, paying
any money or taking any other action, to continue to use all Intellectual
Property of the Company or any of its Subsidiaries as such Intellectual Property
is currently used in the conduct of the business of the Company or such
Subsidiary. Neither the Company nor any of its Subsidiaries has received any
notice, nor, except as would not have a Company Material Adverse Effect, has any
basis to believe, that any Intellectual Property owned or licensed by the
Company or any of its Subsidiaries conflicts with, violates or infringes any
asserted rights of any other person. To the Company's knowledge, there is no
infringement of any proprietary right owned by or licensed by or to the Company
or any of its Subsidiaries which could, individually or in the
A-12
<PAGE>
aggregate, reasonably be expected to have a Company Material Adverse Effect. As
used in this Agreement, the phrase "Intellectual Property" means all
intellectual property or other proprietary rights of every kind, including,
without limitation, all domestic or foreign patents, patent applications,
inventions (whether or not patentable), processes, products, technologies,
discoveries, works protected by copyright, computer software, apparatus, trade
secrets, trademarks (registered and unregistered) and trademark applications and
registrations, brand names, certification marks, service marks and service mark
applications and registrations, trade names, trade dress, copyright
registrations, design rights, customer lists, marketing and customer
information, mask work rights, know-how, licenses, technical information
(whether confidential or otherwise), and all documentation relating to the
foregoing.
SECTION 4.12. STOCKHOLDER RIGHTS PLAN. The Company has not proposed,
adopted, approved or implemented any stockholder rights plan, or authorized the
issuance of any similar dividend or the distribution of any securities to its
stockholders, or entered into any agreement with respect to the foregoing (any
such plan, authorization, dividend, distribution or agreement being referred to
herein as a "Stockholder Rights Plan"), which could have the effect of
restricting, prohibiting, impeding or otherwise affecting the consummation of
the transactions contemplated by this Agreement or the Voting Agreement, in each
case by the respective parties thereto.
SECTION 4.13. INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by the Company for inclusion
in (i) the Registration Statement to be filed with the SEC by Parent on Form S-4
under the Securities Act for the purpose of registering the shares of Parent
Common Stock to be issued in connection with the Merger (the "Registration
Statement") or (ii) the joint proxy statement-prospectus to be distributed in
connection with the Company's meetings of stockholders to vote upon this
Agreement (the "Proxy Statement-Prospectus") will, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, or, in the case of the Proxy Statement-Prospectus or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement-Prospectus and any amendments or supplements thereto, and at the time
of the meeting of stockholders of the Company to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement-Prospectus will comply as to form in all
material respects with the applicable provisions of the Exchange Act, and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to statements made therein based on information
supplied by Parent or its representatives for inclusion in the Proxy
Statement-Prospectus or with respect to information concerning Parent or any of
its Subsidiaries incorporated by reference in the Proxy Statement-Prospectus.
SECTION 4.14. EMPLOYEES. Except as set forth on SCHEDULE 4.14 or SCHEDULE
4.15, there are no employment or severance or termination agreements, policies,
plans, commitments or other Contracts, whether written or oral, accruing to the
benefit of any employee, director or independent contractor of the Company or
any of its Subsidiaries. To the knowledge of the Company, no executive, key
employee or group of employees has any plans to terminate his, her or their
employment with the Company or any of its Subsidiaries, whether as a result of
the Merger or otherwise, except as contemplated by this Agreement. Except as
A-13
<PAGE>
disclosed on Schedule 4.14, the Company has complied in all material respects
with governmental requirements and laws relating in any way whatsoever to the
employment of labor, except where the failure to do so would not have a Company
Material Adverse Effect. Except as disclosed on Schedule 4.14 or 4.7, there are
no actions, charges or complaints currently pending, or to the knowledge of the
Company, threatened (and to the knowledge of the Company, there is no basis
therefor), against the Company or any of its Subsidiaries, relating to alleged
employment discrimination, failure to pay appropriate wages or overtime pay or
other compensation, unfair labor practices, equal pay discrimination,
affirmative action noncompliance, occupational safety and health, breach of
employment contract, employee benefit matters, wrongful discharge or other
employment-related matters which can reasonably be expected if adversely
determined to have a Company Material Adverse Effect. Except as disclosed on
Schedule 4.14, all levies, assessments and penalties made against the Company
pursuant to any applicable workers' compensation legislation in any jurisdiction
in which the Company conducts business have been paid by the Company where the
failure to so pay could have a Company Material Adverse Effect. Except for
contracts shown on Schedule 4.14, neither the Company nor any of its
Subsidiaries is a party to any Contracts with any labor union or employee
association nor has the Company or any of its Subsidiaries made commitments to
or conducted negotiations with any labor union or employee association with
respect to any future contracts. The Company is not aware of any current
attempts to organize or establish any labor union or employee association with
respect to any employees of the Company or any of its Subsidiaries, and there is
no existing or pending certification of any such union with regard to a
bargaining unit.
SECTION 4.15. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 4.15 hereto sets forth a true and complete list of each
retirement, pension, bonus, stock purchase, profit sharing, stock option,
deferred compensation, severance or termination pay, insurance, medical,
hospital, dental, vision care, drug, sick leave, disability, salary
continuation, retiree health, legal benefits, unemployment benefits, vacation,
incentive or other compensation plan, agreement or arrangement or other employee
benefit, whether written or unwritten, insured or uninsured, whether single
employer, multiple employer or multiemployer plan, that is maintained or
otherwise contributed to or required to be contributed to at any time during the
three (3) calendar years preceding the date of this Agreement (the "Company
Plans"), by the Company and each of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), which together
with the Company or any of its Subsidiaries would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Neither the Company, any of its Subsidiaries
nor any ERISA Affiliate has any formal plan or commitment to create any
additional plan or modify any existing Company Plan.
(b) Except as set forth on Schedule 4.15(b), each of the Company Plans that
is subject to ERISA is in compliance with ERISA in all material respects; each
of the Company Plans intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified, no event has occurred which may affect such
qualification and the trusts maintained thereunder are exempt from taxation
under Section 501(a) of the Code; no Company Plan has an accumulated or waived
funding deficiency within the meaning of Section 412 of the Code; neither the
Company nor an ERISA Affiliate has incurred, directly or indirectly, any
material liability
A-14
<PAGE>
(including any material contingent liability) to or on account of a Company Plan
pursuant to Title IV of ERISA; no proceedings have been instituted to terminate
any Company Plan that is subject to Title IV of ERISA; no "reportable event," as
such term is defined in Section 4043(b) of ERISA, has occurred with respect to
any Company Plan; and no condition exists that presents a material risk to the
Company or an ERISA Affiliate of incurring a liability to or on account of a
Company Plan pursuant to Title IV of ERISA. Except as set forth on Schedule
4.15(b), neither the Company nor any ERISA Affiliate has any unfunded liability
for (i) post-retirement welfare benefits including retiree life and medical
benefits; or (ii) pension benefits under a Company Plan subject to Title IV of
ERISA.
(c) Except as set forth on Schedule 4.15(c), the current value of the
assets of each of the Company Plans that are subject to Title IV of ERISA, based
upon the actuarial assumptions (to the extent reasonable) presently used by the
Company Plans, exceeds the present value of the accrued benefits under each such
Company Plan; no Company Plan is a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) and no Company Plan is a multiple employer plan as
defined in Section 413 of the Code; and all contributions or other amounts
payable by the Company as of the Effective Time with respect to each Company
Plan in respect of current or prior plan years have been either paid or accrued
on the balance sheet of the Company. There are no pending, threatened or
anticipated investigations, suits/proceedings or claims (other than routine
claims for benefits) by, on behalf of or against any of the Company Plans or any
trusts related thereto or to the knowledge of the Company are there any facts
that could rise to any liability in the event of such investigation, suit,
proceeding or claim.
(d) Except as set forth on Schedule 4.15(d), neither the Company nor any
ERISA Affiliate, nor any Company Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection with
which the Company or any ERISA Affiliate, any Company Plan, any such trust, or
any trustee or administrator thereof, or any party dealing with any Company Plan
or any such trust could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975, 4976 or 4980B of the Code. Except as set forth on Schedule
4.15(d), no amounts payable under the Company Plans will, individually or in the
aggregate, fail to be deductible for federal income tax purposes by virtue of
Section 28OG of the Code. Except as set forth on Schedule 4.15(d), no Company
Plan provides death or medical benefits (whether or not insured), with respect
to current or former employees of the Company or any ERISA Affiliate beyond
their retirement or other termination of service other than (i) coverage
mandated by applicable law or (ii) death benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee, director or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided or disclosed in the Schedules to this Agreement or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
SECTION 4.16. ENVIRONMENTAL MATTERS. Except as could not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or as disclosed on Schedule 4.16:
A-15
<PAGE>
(a) There are not any past or present conditions or circumstances that
could reasonably be expected to interfere with or prevent the conduct of the
business of the Company or any of its Subsidiaries in compliance with: (i) any
order of any court or arbitration board or tribunal or Governmental Entity, or
any law, ordinance, governmental rule or regulation related to human health or
the environment ("Environmental Law"); or (ii) the terms or conditions of any
permits, approvals, licenses or consents required to be issued by any
Governmental Entity pursuant to any applicable Environmental Law.
(b) There are not any past or present conditions or circumstances at,
arising out of, or related to, any current or former businesses, assets or
properties of the Company or any of its Subsidiaries, including but not limited
to on-site or off-site storage, treatment, disposal or the release or threatened
release of any chemical substance, product or waste, which could, individually
or in the aggregate, reasonably be expected to give rise to: (i) liabilities or
obligations for any cleanup, remediation, disposal or corrective action or any
long-term monitoring requirements under any Environmental Law or (ii) claims
arising for personal injury, property damage, or damage to natural resources.
(c) Neither the Company nor any of its Subsidiaries has (i) received any
notice of noncompliance with, violation of, or liability or potential liability,
or request for information under any Environmental Law or (ii) entered into any
consent decree, settlement or order or is subject to any order of any court or
Governmental Entity or tribunal under any Environmental Law or relating to the
cleanup of any hazardous or toxic materials, wastes, substances or any
pollutants or contamination.
(d) There are no persons or entities whose liability, for any environmental
matters or under any applicable Environmental Law, the Company or any of its
Subsidiaries has retained or assumed contractually.
(e) Neither the Company nor any of its Subsidiaries has handled or directed
the management of or participated in any decisions with respect to or exercised
any influence or control over the use, generation, storage, treatment or
disposal of any hazardous or toxic materials, wastes or substances at or related
to any of their business, assets or properties.
SECTION 4.17. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger. The Board of Directors of the Company (at a meeting duly
called and held) has unanimously (i) approved this Agreement, (ii) determined
that the transactions contemplated hereby are in the best interests of the
holders of Company Common Stock and (iii) determined to recommend this
Agreement, the Merger and the other transactions contemplated hereby to such
holders for approval and adoption, subject to their rights to withdraw such
recommendation as granted in Section 7.2.
SECTION 4.18. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Bear Stearns & Co. Inc. ("Bear Stearns"), dated October 5, 1999,
substantially to the effect that the Exchange Ratio provided for in the Merger
Agreement is fair from a financial point of view to the holders of the Company
Common Stock. A copy of this opinion will be delivered to Parent on or promptly
after the date of this Agreement.
A-16
<PAGE>
SECTION 4.19. INSURANCE. The Company and each of its Subsidiaries is, and
has been continuously since January 1, 1995, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by the Company and its Subsidiaries during such time
period. Neither the Company nor any of its Subsidiaries, has received any
written notice of cancellation or termination with respect to any material
insurance policy. To the knowledge of the Company, all material insurance
policies of the Company and its Subsidiaries are valid and enforceable policies
in all material respects.
SECTION 4.20. AFFILIATE TRANSACTIONS. Except as disclosed in the Company
SEC Reports or as otherwise disclosed in the Schedules to this Agreement, there
are no material Contracts or other transactions between the Company, on the one
hand, and any (i) officer or director of the Company, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company or (iii)
affiliate (as such term is defined in Regulation 12b-2 promulgated under the
Exchange Act) of any such officer, director or beneficial owner, on the other
hand.
SECTION 4.21. BROKERS. Except for Bear Stearns, no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
SECTION 4.22. YEAR 2000. The Company and each of its Subsidiaries has
implemented a program (the "Year 2000 Program") to: (i) inventory, assess,
remediate, replace or upgrade, and test for "Year 2000 Functionality" (as
hereinafter defined) all computer hardware, software, systems, networks,
interfaces (including interfaces with third parties), devices and building
infrastructure elements that may contain software, firmware or embedded devices
that could be date sensitive (collectively, "Date-sensitive Devices") that are
used by the Company or any of its Subsidiaries and are material to the conduct
of the business of the Company or such Subsidiary (collectively, "Remediation
Efforts"), (ii) evaluate the efforts of all third parties providing goods or
services material to the conduct of the business of the Company or any of its
Subsidiaries (including, without limitation, third party service providers and
providers of public infrastructure services) to assure Year 2000 Functionality
within their organizations and to assure the continued availability of the goods
or services they provide that are material to the business of the Company or any
of its Subsidiaries prior to, during and after the year-end change from 1999 to
2000 (collectively "Supply Chain Evaluation"), and (iii) develop contingency
plans to avert and, if necessary, promptly recover from, any failure of the
Company, any of its Subsidiaries or any third party material to their respective
businesses to be able to continue to conduct business as usual prior to, during
and after the year-end change from 1999 to 2000 as a result of loss of Year 2000
Functionality by such entity or other entities in their respective supply chains
(collectively, "Contingency Plans"). The Company and each of its Subsidiaries
has completed its Remediation Efforts and Supply Chain Evaluation, and as of the
date hereof the Company is not aware of any condition or circumstance that will
impede the ability of the Company or any Subsidiary to conduct business as usual
prior to, during and after the year-end change from 1999 to 2000. The Company
and each of its Subsidiaries has substantially completed its Contingency Plans.
As used in this Agreement, the phrase "Year 2000 Functionality" means that,
except as would not cause a Company Material Adverse Effect, all date-sensitive
devices material to the conduct of the entity's business will provide
A-17
<PAGE>
uninterrupted functionality to record, store, process and present calendar dates
on or after January 1, 2000 (including without limitation properly treating 2000
as a leap year) in substantially the same manner and with the same functionality
as such date-sensitive devices have heretofore recorded, stored, processed and
presented calendar dates falling on or before December 31, 1999. The Company
reasonably believes as of the date hereof that the remaining costs of fully
implementing its Year 2000 Program will not exceed the amounts reflected in its
Report on Form 10-Q for the quarter ended June 30, 1999.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 5.1. ORGANIZATION.
(a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to carry on its business as it is now being, conducted or presently
proposed to be conducted. Parent is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities make
such qualification necessary, except where the failure to be so qualified will
not have a Parent Material Adverse Effect (as hereinafter defined). Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Sub has not engaged in any business (other than in
connection with this Agreement and the transactions contemplated hereby) since
the date of its incorporation.
(b) Schedule 5.1(b) lists all of the Subsidiaries of Parent which would be
required to be set forth as an exhibit to Parent's Annual Report on Form 10-K
pursuant to the rules and regulations under the Exchange Act (the "Parent
Subsidiaries"). Each Subsidiary of Parent is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization or incorporation and has the corporate power and authority to own
or lease its properties and to carry on its business as it is presently being
conducted, except for failures, if any, to be so organized, validly existing or
in good standing or to have such corporate power and authority which would not
in the aggregate have a Parent Material Adverse Effect.
(c) The copies of the Certificate of Incorporation and By-Laws of Parent
and Sub heretofore delivered to the Company are complete and correct copies of
such instruments as presently in effect.
(d) As used in this Agreement, any reference to any event, change or effect
having a "Parent Material Adverse Effect" shall mean that such event, change or
effect is, individually or in the aggregate, materially adverse to the business,
operations, properties, assets (including intangible assets), liabilities
(including contingent liabilities), condition (financial or other) or results of
operations of the Parent and its Subsidiaries taken as a whole or to the ability
of Parent to consummate the Merger and the other transactions contemplated by
this Agreement, other than any change, effect or circumstance relating to or
resulting from: (i) general changes in the
A-18
<PAGE>
industries in which Parent operates its business; and (ii) changes in general
economic conditions or securities markets in general.
SECTION 5.2. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
Parent consists of 100,000,000 shares of Parent Common Stock, of which, at
October 1, 1999, 46,390,202 shares were issued and outstanding, and 10,000,000
shares of Parent Preferred Stock, of which, at October 1, 1999, none were
outstanding. As of the date of this Agreement, options to acquire 5,007,571
shares of Parent Common Stock (the "Parent Stock Options") are outstanding under
all stock option plans of Parent. All of the shares of Parent Common Stock
issuable in exchange for shares of Company Common Stock at the Effective Time in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of one thousand shares of
Sub Common Stock, one hundred of which shares, as of the date hereof are issued
and outstanding, owned by Parent and are validly issued, fully paid and
nonassessable.
(c) Except as disclosed in this Section 5.2 or in the Parent SEC Reports
(as hereinafter defined), (i) there is no outstanding right, subscription,
warrant, call, unsatisfied preemptive right, option or other agreement or
arrangement of any kind to purchase or otherwise to receive from Parent or Sub
any of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of Parent or Sub, (ii) there is no outstanding
security of any kind convertible into or exchangeable for such capital stock,
and (iii) there is no voting trust or other agreement or understanding to which
Parent or Sub is a party or is bound with respect to the voting of the capital
stock of Parent or Sub.
(d) Except for qualifying shares required by certain foreign jurisdictions,
all of the issued and outstanding capital stock of each of the Parent
Subsidiaries has been validly issued, is fully paid and nonassessable and,
except as disclosed on Schedule 5.2(d), is owned of record and beneficially,
directly or indirectly, by Parent or another Subsidiary of Parent, free of any
Liens, preemptive rights or other restrictions with respect thereto.
SECTION 5.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Sub
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated on their part hereby have been
duly authorized by their respective Boards of Directors, and by Parent as the
sole stockholder of Sub, and, no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement or for Parent and Sub to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Sub and constitutes a
valid and binding agreement of each of Parent and Sub, enforceable against
Parent and Sub in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
A-19
<PAGE>
SECTION 5.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
Schedule 5.4, neither the execution, delivery and performance of this Agreement
by Parent or Sub, nor the consummation by Parent or Sub of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provisions of (x) the Certificate of Incorporation or By-Laws of Parent or of
Sub or (y) the organizational documents of the Parent Subsidiaries, (ii) require
a filing with, or a permit, authorization, consent or approval of, any
Governmental Entity except in connection with or in order to comply with the
applicable provisions of the HSR Act, the filing of the Proxy
Statement-Prospectus under the Exchange Act, filings or approvals required under
state or foreign laws relating to takeovers, if applicable, state securities or
"blue sky" laws, the By-Laws of the NASD, and the filing and recordation of a
Certificate of Merger as required by the DGCL, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of a Lien on any property or asset of Parent or
any of its Subsidiaries pursuant to, any of the terms, conditions or provisions
of any material Contract to which Parent or Sub or any other Subsidiary of
Parent is a party or by which any of them or any of their properties or assets
may be bound or (iv) violate any law, order, writ, injunction, decree, statute,
rule or regulation of any Governmental Entity applicable to Parent, Sub or any
other Subsidiary of Parent or any of their properties or assets, except, in the
case of clauses (ii), (iii) and (iv), where the failure to make such filing or
obtain such authorization, consent or approval would not have, or where such
violations, breaches or defaults or Liens would not have, in any such case, a
Parent Material Adverse Effect.
SECTION 5.5. REPORTS AND FINANCIAL STATEMENTS. Parent has timely filed all
reports required to be filed by Parent with the SEC pursuant to the Exchange Act
or the Securities Act since December 31, 1997 (collectively, the "Parent SEC
Reports"), and has previously made available to the Company true and complete
copies of all such Parent SEC Reports. Such Parent SEC Reports, as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent included in the Parent
SEC Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments and any other adjustments described therein) the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
of Parent and its consolidated Subsidiaries for the periods then ended. Since
December 31, 1998, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Parent or
any of its consolidated Subsidiaries.
SECTION 5.6. ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL AGREEMENTS.
Except as set forth on Schedule 5.6 or in the Parent SEC Reports filed as of the
date of this Agreement, since December 31, 1998, (i) neither Parent nor any of
its Subsidiaries has conducted its business and operations other than in the
ordinary course of business and consistent with past practices or taken any
action that, if it had been in effect, would have violated or been inconsistent
with the provisions of Section 6.2; and (ii) there has not been any fact, event,
circumstance or change
A-20
<PAGE>
affecting or relating to Parent or any of its Subsidiaries which has had or is
reasonably likely to have a Parent Material Adverse Effect. Except as described
in Section 5.4, the transactions contemplated by this Agreement will not require
a consent from or the giving of notice to a third party pursuant to the terms,
conditions or provisions of any contract to which the Parent or any of its
Subsidiaries is a party.
SECTION 5.7. LITIGATION. Except as disclosed on Schedule 5.7 and except for
litigation disclosed in the notes to the financial statements included in the
Parent's Annual Report to Stockholders for the fiscal year ended December 31,
1998 or in the Parent SEC Reports filed subsequent thereto, as of the date
hereof, there is no suit, action, proceeding or investigation pending or, to the
best knowledge of the Parent, threatened against, the Parent or any of its
Subsidiaries or with respect to which the Parent or any of its Subsidiaries
could be required to provide indemnification or to otherwise contribute to
liabilities or damages relating thereto, the outcome of which could reasonably
be expected to have a Parent Material Adverse Effect; nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity outstanding against
the Parent or any of its Subsidiaries having, or which, insofar as can
reasonably be foreseen, in the future may have a Parent Material Adverse Effect.
For purposes of this Agreement, wherever the term "Parent knowledge" or "best
knowledge of the Parent" or any phrase of similar import is used it shall mean
the actual knowledge of the directors and the executive officers of Parent, or
knowledge which such persons could reasonably be expected to possess in view of
their respective positions with the Company, and, except as provided above,
shall not include imputed, constructive or implied knowledge of any such persons
SECTION 5.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in Parent's financial
statements (or reflected in the notes thereto) included in the Parent SEC
Reports filed as of the date of this Agreement or which were incurred after June
30, 1999 in the ordinary course of business and consistent with past practices,
none of Parent or any of its Subsidiaries has any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a consolidated balance sheet (or reflected in the notes
thereto) and which could reasonably be expected to have a Parent Material
Adverse Effect.
SECTION 5.9. NO DEFAULT. Neither Parent nor any of its Subsidiaries is in
breach or violation, or in default under (and no event has occurred which with
notice or the lapse of time or both would constitute such a breach, default or
violation of) any term, condition or provision of (i) the Parent's or the
respective Subsidiary's Certificate of Incorporation or By-Laws, or (ii) (x) any
order, writ, decree, statute, rule or regulation of any Governmental Entity
applicable to Parent or any of its Subsidiaries or any of their properties or
assets or (y) any Contract to which the Parent or any of its Subsidiaries is a
party or by which Parent or any of its Subsidiaries or any of their properties
or assets may be bound except in the case of this clause (ii), which breaches,
violations or defaults, individually or in the aggregate, would not have a
Parent Material Adverse Effect. The Parent and each of its Subsidiaries have,
and are in compliance with, all licenses, permits, variances, exemptions,
orders, approvals and other authorizations of all Governmental Entities as are
necessary in order to enable them to own their businesses and conduct their
businesses as currently conducted and as currently proposed to be conducted and
to enter into the transactions contemplated hereby, the lack of which, under
applicable law, rule or
A-21
<PAGE>
regulation, (x) would render legally impermissible the transactions contemplated
hereby or (y) could reasonably be expected to have a Parent Material Adverse
Effect.
SECTION 5.10. INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by Parent or Sub for inclusion
in (i) the Registration Statement or (ii) the Proxy Statement-Prospectus will in
the case of the Registration Statement, at the time it becomes effective and at
the Effective Time, or, in the case of the Proxy Statement-Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement-Prospectus and any amendments or supplements thereto, and at the
time of the meeting of stockholders of the Company to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy Statement-Prospectus will
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act, and the rules and regulations promulgated
thereunder, except that no representation is made by Parent with respect to
statements made therein based on information supplied by the Company or its
representatives for inclusion in the Registration Statement or the Proxy
Statement-Prospectus or with respect to information concerning the Company
incorporated by reference in the Registration Statement or the Proxy
Statement-Prospectus.
SECTION 5.11. ENVIRONMENTAL PROTECTION. Except as could not, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect:
(a) There are not any past or present conditions or circumstances that
could reasonably be expected to interfere with or prevent the conduct of the
business of Parent or any of its Subsidiaries in compliance with: (i) any order
of any court or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation related to human health or the environment
("Environmental Law"); or (ii) the terms or conditions of any permits,
approvals, licenses or consents required to be issued by any Governmental Entity
pursuant to any applicable Environmental Law.
(b) There are not any past or present conditions or circumstances at,
arising out of, or related to, any current or former business, assets or
properties of Parent or any of its Subsidiaries, including but not limited to
on-site or off-site storage, treatment, disposal or the release or threatened
release of any chemical substance, product or waste, which could, individually
or in the aggregate, reasonably be expected to give rise to: (i) liabilities or
obligations for any cleanup, remediation, disposal or corrective action or any
long-term monitoring requirements under any Environmental Law or (ii) claims
arising for personal injury, property damage, or damage to natural resources.
(c) Neither Parent nor any of its Subsidiaries has (i) received any notice
of noncompliance with, violation of, or liability or potential liability under
any Environmental Law or (ii) entered into any consent decree, settlement or
order or is subject to any order of any court or Governmental Entity or tribunal
under any Environmental Law or relating to the cleanup of any hazardous or toxic
materials, wastes, substances or any pollutants or contamination.
A-22
<PAGE>
(d) There are no persons or entities whose liability, for any environmental
matters or under any applicable Environmental Law, Parent or any of its
Subsidiaries has retained or assumed contractually.
(e) Neither Parent nor any of its Subsidiaries has handled or directed the
management of or participated in any decisions with respect to or exercised any
influence or control over the use, generation, storage, treatment or disposal of
any hazardous or toxic materials, wastes or substances at or related to any of
their business, assets or properties.
SECTION 5.12. VOTE REQUIRED. The affirmative vote of Parent, as the sole
stockholder of all outstanding shares of Sub Common Stock, is the only vote of
the holders of any class or series of Sub capital stock necessary to approve the
Merger. The Board of Directors of Parent (at a meeting duly called and held) has
unanimously (i) approved this Agreement, (ii) determined that the transactions
contemplated hereby are fair to and in the best interests of Parent and the
holders of Parent Common Stock, and (iii) determined to cause Parent, as the
sole stockholder of Sub, to approve and adopt this Agreement. The Board of
Directors of Sub (by unanimous written consent) has approved this Agreement.
SECTION 5.13. INSURANCE. Parent and each of its Subsidiaries is, and has
been continuously since January 1, 1995, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by Parent and its Subsidiaries during such time period.
Neither Parent nor any of its Subsidiaries has received any written notice of
cancellation or termination with respect to any material insurance policy. To
the knowledge of the Parent, all material insurance policies of Parent and its
Subsidiaries are valid and enforceable policies in all material respects.
SECTION 5.14. YEAR 2000. Parent and each of its Subsidiaries has
implemented a program (the "Year 2000 Program") to: (i) inventory, assess,
remediate, replace or upgrade, and test for "Year 2000 Functionality" (as
hereinafter defined) all computer hardware, software, systems, networks,
interfaces (including interfaces with third parties), devices and building
infrastructure elements that may contain software, firmware or embedded devices
that could be date sensitive (collectively, "Date-sensitive Devices") that are
used by Parent or any of its Subsidiaries and are material to the conduct of the
business of Parent or such Subsidiary (collectively, "Remediation Efforts"),
(ii) evaluate the efforts of all third parties providing goods or services
material to the conduct of the business of Parent or any of its Subsidiaries
(including, without limitation, third party service providers and providers of
public infrastructure services) to assure Year 2000 Functionality within their
organizations and to assure the continued availability of the goods or services
they provide that are material to the business of Parent or any of its
Subsidiaries prior to, during and after the year-end change from 1999 to 2000
(collectively "Supply Chain Evaluation"), and (iii) develop contingency plans to
avert and, if necessary, promptly recover from, any failure of Parent, any of
its Subsidiaries or any third party material to their respective businesses to
be able to continue to conduct business as
A-23
<PAGE>
usual prior to, during and after the year-end change from 1999 to 2000 as a
result of loss of Year 2000 Functionality by such entity or other entities in
their respective supply chains (collectively, "Contingency Plans"). Parent and
each of its Subsidiaries has completed its Remediation Efforts and Supply Chain
Evaluation, and as of the date hereof Parent is not aware of any condition or
circumstance that will impede the ability of Parent or any Subsidiary to conduct
business as usual prior to, during and after the year-end change from 1999 to
2000. Parent and each of its Subsidiaries has substantially completed its
Contingency Plans. As used in this Agreement, the phrase "Year 2000
Functionality" means that, except as would not cause a Parent Material Adverse
Effect, all date-sensitive devices material to the conduct of the entity's
business will provide uninterrupted functionality to record, store, process and
present calendar dates on or after January 1, 2000 (including without limitation
properly treating 2000 as a leap year) in substantially the same manner and with
the same functionality as such date-sensitive devices have heretofore recorded,
stored, processed and presented calendar dates falling on or before December 31,
1999. Parent reasonably believes as of the date hereof that the remaining costs
of fully implementing its Year 2000 Program will not exceed the amounts
reflected in its Report on Form 10-Q for the quarter ended June 30, 1999.
SECTION 5.15. AFFILIATE TRANSACTIONS. Except as disclosed in the Parent SEC
Reports, there are no material Contracts or other transactions between the
Parent, on the one hand, and any (i) officer or director of the Parent, (ii)
record or beneficial owner of five percent or more of the voting securities of
the Parent or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior
to the Effective Time, unless Parent shall otherwise agree in writing, or as set
forth on Schedule 6.1 or as otherwise expressly contemplated by this Agreement:
(a) the Company shall, and shall cause its Subsidiaries to, conduct their
respective businesses only in the ordinary and usual course consistent with past
practice, and use their reasonable efforts to preserve intact their present
business organization, keep available the services of their present officers and
key employees, and preserve the goodwill of those having business relationships
with them; the Company shall not, and shall not permit any Subsidiary to, hire
any person to any position as an employee or as a consultant to the Company or a
Subsidiary of the Company where the total annual compensation payable to such
person, whether in cash or otherwise, would exceed $100,000;
(b) the Company shall not, and shall not permit any Subsidiary to, (i)
amend their respective charters, By-laws or other organizational documents, (ii)
split, combine or reclassify any shares of their outstanding capital stock,
(iii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property, or (iv) directly or indirectly redeem or otherwise
acquire any shares of their capital stock;
(c) the Company shall not, and shall not permit any Subsidiary to, (i)
authorize for issuance, issue or sell or agree to issue or sell any shares of,
or rights or securities of any kind to acquire, rights or securities convertible
into any shares of, their respective capital stock (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise), except for the issuance of shares of Company Common Stock upon
the exercise of Company Stock Options outstanding on the date of this Agreement,
(ii) merge or
A-24
<PAGE>
consolidate with another entity, (iii) acquire or purchase an equity interest in
or a substantial portion of the assets of another corporation, partnership or
other business organization or otherwise acquire any material assets outside the
ordinary and usual course of business and consistent with past practice or
otherwise enter into any material contract, commitment or transaction outside
the ordinary and usual course of business consistent with past practice, (iv)
except as noted on Schedule 6.1(c)(iv), sell, lease, license, waive, release,
transfer, encumber or otherwise dispose of any of its material assets outside
the ordinary and usual course of business and consistent with past practice,
including any shares the Company holds of HealthAxis.com, Inc., (v) incur,
assume or prepay any material indebtedness or any other material liabilities
other than in the ordinary course of business and consistent with past practice,
(vi) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of a material
nature any other person other than in the ordinary course of business and
consistent with past practice, (vii) make any loans, advances or capital
contributions to, or investments in, any other person, (viii) authorize or make
capital expenditures in excess of the amounts currently budgeted therefor, (ix)
permit any insurance policy naming the Company as a beneficiary or a loss payee
to be cancelled or terminated other than in the ordinary course of business, or
(x) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(d) the Company shall not, and shall not permit any Subsidiary to, (i)
adopt, enter into, terminate or amend (except as may be required by applicable
law) any Company Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, (ii) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases in base compensation
in the ordinary course of business consistent with past practice), or (iii) take
any action to fund or in any other way secure, or to accelerate or otherwise
remove restrictions with respect to, the payment of compensation or benefits
under any employee plan, agreement, contract, arrangement or other Company Plan
(including the Company Stock Options);
(e) the Company shall not, and shall not permit any Subsidiary to, take any
action with respect to, or make any material change in, their respective
accounting policies or procedures;
(f) the Company shall not knowingly take any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code;
(g) the Company shall not, and shall not permit any Subsidiary to, make any
Tax election or settle or compromise any income Tax liability or file any income
tax return prior to the last day (including extensions) prescribed by law, in
the case of any of the foregoing, material to the business, financial condition
or results of operations of the Company;
(h) the Company shall not, and shall not permit any Subsidiary to, propose,
adopt, approve or implement any Stockholder Rights Plan which could have the
effect of restricting, prohibiting, impeding or otherwise affecting the
consummation of the transactions contemplated by this Agreement or the Voting
Agreement, in each case by the respective parties thereto.
A-25
<PAGE>
SECTION 6.2. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. Except as
set forth on Schedule 6.2, prior to the Effective Time, unless the Company
shall otherwise agree in writing, or as otherwise expressly contemplated by this
Agreement.
(a) the business of Parent and its Subsidiaries shall be conducted only in
the ordinary and usual course consistent with past practice, and Parent shall
use its reasonable efforts to preserve intact the present business organization,
to keep available the services of its present officers and key employees, and
preserve the goodwill of those having business relationships with it;
(b) Parent shall not declare, set aside or pay any dividend or other
distribution payable in cash, stock or property;
(c) Parent shall not split, combine or reclassify the outstanding Parent
Common Stock;
(d) neither Parent nor Sub shall take any action with respect to, or make
any material change in, its accounting policies or procedures;
(e) neither Parent nor Sub shall knowingly take any action which would
jeopardize qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
SECTION 6.3. CONDUCT OF BUSINESS OF SUB. During the period from the date of
this Agreement to the Effective Time, Sub shall not engage in any activities of
any nature except as provided in or contemplated by this Agreement.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS AND INFORMATION. Each of the Company and Parent shall
(and shall cause their respective Subsidiaries and their Subsidiaries'
respective officers, directors, employees, auditors and agents to) afford to the
other and to the other's officers, employees, financial advisors, legal counsel,
accountants, consultants and other representatives reasonable access during
normal business hours throughout the period prior to the Effective Time to all
of its books and records (other than privileged documents and subject to any
confidentiality provisions applicable to communications between any party and
its counsel) and its properties, plants and personnel and, during such period,
each shall furnish promptly to the other a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
securities laws, provided that no investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger. Unless
otherwise required by law, each party agrees that it (and its Subsidiaries and
its and their respective representatives) shall hold in confidence all nonpublic
information so acquired in accordance with the terms of the confidentiality
agreement, dated August 11, 1999 between Parent and the Company (the
"Confidentiality Agreement").
A-26
<PAGE>
SECTION 7.2. SOLICITATION OF COMPETING TRANSACTIONS.
(a) The Company shall not, directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information), or take any other
action knowingly to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Alternative
Acquisition (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Alternative Acquisition, or agree to or endorse any
Alternative Acquisition, or authorize any of the officers, directors or
employees of the Company or any investment banker, financial advisor, attorney,
accountant or other agent or representative of the Company to take any such
action, and the Company shall notify Parent as promptly as practicable of all of
the relevant material details relating to all inquiries and proposals which the
Company or any such officer, director, employee, investment banker, financial
advisor, attorney, accountant or other agent or representative may receive
relating to any of such matters; provided, however, that prior to the approval
of this Agreement by the stockholders of the Company, nothing contained in this
Section 7.2 shall prohibit the Board of Directors of the Company from (i)
furnishing information to, or entering into and engaging in discussions or
negotiations with, any person that makes a bona fide unsolicited written
proposal that the Board of Directors of the Company determines in good faith,
after consultation with the Company's financial advisors and independent legal
counsel, can be reasonably expected to result in a Superior Proposal; provided,
that prior to furnishing such information to, or entering into discussions or
negotiations with, such person, the Company, (1) provides notice to Parent to
the effect that it is furnishing information to, or entering into discussions or
negotiations with, such person and provides in any such notice to Parent in
reasonable detail the identity of the person making such proposal and the
material terms and conditions of such proposal, (2) provides Parent with all
information regarding the Company provided or to be provided to such person
which Parent has not previously been provided, and provided further that the
Company shall keep Parent informed, on a prompt basis, of the status and
material terms of any such proposal and the status of any such discussions and
negotiations, and (3) receives from such person or entity an executed
confidentiality agreement containing customary terms (which need not contain
"standstill" or similar provisions); (ii) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or making any
disclosure required under applicable law; or (iii) failing to make or
withdrawing or modifying its recommendation referred to in Sections 4.17 and 7.4
following the making of a Superior Proposal if, solely in the case of this
clause (iii), the Board of Directors of the Company, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties under applicable law.
(b) For purposes of this Agreement, "Alternative Acquisition" shall mean
any of the following involving the Company: (i) any merger, consolidation, share
exchange, business combination, issuance or purchase of securities or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of the assets of the Company in a single transaction or
series of related transactions; (iii) any tender offer or exchange offer for the
Company securities or the filing of a registration statement under the
Securities Act in connection with any such exchange offer; in the case of
clauses (i), (ii) or (iii) above, which transaction would result in a third
party (or its stockholders) acquiring more than 35% of the
A-27
<PAGE>
voting power of the shares of the Common Stock of the Company then outstanding
or more than 35% of the assets of the Company and its Subsidiaries, taken as a
whole; or (iv) any public announcement of an agreement, proposal, plan or
intention to do any of the foregoing, either during the effectiveness of this
Agreement or at any time thereafter, other than in each of (i), (ii), (iii) and
(iv) the transactions contemplated by this Agreement.
(c) For purposes of this Agreement, a "Superior Proposal" means any
proposal made by a third party which would result in such party (or in the case
of a parent-to-parent merger, its stockholders) acquiring, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution, joint venture or similar
transaction, more than 50% of the voting power of the shares of the Common Stock
of the Company then outstanding or all or substantially all the assets of the
Company and its Subsidiaries, taken as a whole, for consideration which the
Board of Directors of the Company determines in its good faith judgment to be
financially more favorable to the Company stockholders than the Merger and with
respect to which the Board of Directors of the Company determines, in its good
faith judgment, that financing, to the extent required, is then committed or is
reasonably available.
(d) If the Company receives any unsolicited offer or proposal to enter into
discussions or negotiations relating to an Alternative Acquisition, the Company
shall notify Parent thereof within twenty-four hours of the Company's receipt
thereof, including information as to the identity of the party making any such
offer or proposal and the specific terms of such offer or proposal, as the case
may be.
The Company shall be entitled to provide copies of this Section 7.2 to
third parties who on an entirely unsolicited basis after the date hereof,
contact the Company concerning an Alternative Acquisition, provided that Parent
shall concurrently be notified of such contact and the delivery of such copy.
SECTION 7.3. REGISTRATION STATEMENT. As promptly as practicable, Parent and
the Company shall in consultation with each other prepare and file with the SEC
the Proxy Statement-Prospectus and Parent, in consultation with the Company,
shall prepare and file with the SEC the Registration Statement. Each of Parent
and the Company shall use its reasonable best efforts to have the Registration
Statement declared effective as soon as practicable. Parent shall also use its
reasonable best efforts to take any action required to be taken under state
securities or blue sky laws in connection with the issuance of the shares of
Parent Common Stock pursuant to this Agreement in the Merger. The Company shall
furnish Parent with all information concerning the Company and the holders of
its capital stock and shall take such other action as Parent may reasonably
request in connection with the Registration Statement and the issuance of shares
of Parent Common Stock. If at any time prior to the Effective Time any event or
circumstance relating to Parent, any Subsidiary of Parent, the Company, any
Subsidiary of the Company or their respective officers or directors, should be
discovered by such party which should be set forth in an amendment or a
supplement to the Registration Statement or the Proxy Statement-Prospectus, such
party shall promptly inform the other thereof and take appropriate action in
respect thereof.
A-28
<PAGE>
SECTION 7.4. PROXY STATEMENT-PROSPECTUS; STOCKHOLDER APPROVALS.
(a) The Company, acting through its Board of Directors, shall, subject to
and in accordance with applicable law and its Certificate of Incorporation and
By-Laws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Registration Statement becomes
effective a meeting of the holders of Company Common Stock for the purpose of
voting to approve and adopt this Agreement and the transactions contemplated
hereby, and, subject to the fiduciary duties of the Board of Directors of the
Company under applicable law as advised by outside legal counsel, (i) recommend
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company and include in the Proxy Statement-Prospectus
such recommendation, and (ii) take all reasonable and lawful action to solicit
and obtain such approval. Parent and the Company, as promptly as practicable (or
with such other timing as Parent and the Company mutually agree), shall cause
the definitive Proxy Statement-Prospectus to be mailed to the Company's
stockholders. Notwithstanding anything to the contrary in the foregoing, unless
this Agreement has been validly terminated in accordance with Article IX hereof,
the Company shall hold its stockholders meeting in accordance with the time
period specified in the first sentence of this Section 7.4.
(b) At or prior to the Closing, the Company shall deliver to Parent a
certificate of the Company's Secretary setting forth the voting results from its
stockholder meeting.
SECTION 7.5. COMPLIANCE WITH THE SECURITIES ACT.
(a) At least 30 days prior to the Effective Time, the Company shall cause
to be delivered to Parent a list identifying all persons who were, in its
reasonable judgment, at the record date for the Company's stockholders' meeting
convened in accordance with Section 7.4(a) hereof, "affiliates" of the Company
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Affiliates").
(b) The Company shall use its reasonable best efforts to cause each person
who is identified as one of its Affiliates in its list referred to in Section
7.5(a) above to deliver to Parent (with a copy to the Company), at or prior to
the Effective Time, a written agreement, in the form attached hereto as Exhibit
B, (the "Affiliate Letters ").
(c) If any Affiliate of the Company refuses to provide an Affiliate Letter,
Parent may place appropriate legends on the certificates evidencing the shares
of Parent Common Stock to be received by such Affiliate pursuant to the terms of
this Agreement and to issue appropriate stop transfer instructions to the
transfer agent for shares of Parent Common Stock to the effect that the shares
of Parent Common Stock received by such Affiliate pursuant to this Agreement
only may be sold, transferred or otherwise conveyed (i) pursuant to an effective
registration statement under the Securities Act, (ii) in compliance with Rule
145 promulgated under the Securities Act, or (iii) pursuant to another exemption
under the Securities Act.
SECTION 7.6. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or
A-29
<PAGE>
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
the obtaining of all necessary waivers, consents and approvals and the effecting
of all necessary registrations and filings. Without limiting the generality of
the foregoing, as promptly as practicable, the Company, Parent and Sub shall
make all filings and submissions under the HSR Act as may be reasonably required
to be made in connection with this Agreement and the transactions contemplated
hereby. Subject to the Confidentiality Agreement, the Company will furnish to
Parent and Sub, and Parent and Sub will furnish to the Company, such information
and assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to the Confidentiality
Agreement, the Company will provide Parent and Sub, and Parent and Sub will
provide the Company, with copies of all material written correspondence, filings
and communications (or memoranda setting forth the substance thereof) between
such party or any of its representatives and any Governmental Entity, with
respect to the obtaining of any waivers, consent or approvals and the making of
any registrations or filings, in each case that is necessary to consummate the
Merger and the other transactions contemplated hereby. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers or directors of Parent and the
Surviving Corporation shall take all such necessary action. Each of the parties
will use its reasonable efforts to ensure that the tax opinion to be delivered
by its counsel pursuant to Section 8.2(d) or 8.3(c), as the case may be, be
delivered and not withdrawn or modified in any material respect.
SECTION 7.7. VOTING AGREEMENT. Concurrently herewith, and as an essential
inducement for Parent's entering into this Agreement, Parent is entering into a
Voting Agreement with Automatic Data Processing, Inc. and each of Jack Murray,
William Bennett and Robert Parker (and, in each case, any stockholder whose
shares may be deemed to be beneficially owned by any such person) (collectively,
the "Stockholders") with respect to shares of Company Common Stock owned
(beneficially or of record) by the Stockholders, such shares to constitute in
the aggregate not less than 17% of the issued and outstanding shares of Common
Stock of the Company; provided that shares owned by the minor children or the
spouse of a stockholder shall be deemed not to be beneficially owned by a
stockholder for purposes of this Section 7.7.
SECTION 7.8. COMPANY STOCK OPTIONS. At the Effective Time, each of the
Company Stock Options which is outstanding immediately prior to the Effective
Time shall be assumed by Parent and converted automatically into an option to
purchase shares of Parent Common Stock (a "New Option") in an amount and at an
exercise price determined as provided below:
(a) The number of shares of Parent Common Stock to be subject to the New
Option shall be equal to the product of the number of shares of Company Common
Stock remaining subject (as of immediately prior to the Effective Time) to the
original option and the Exchange Ratio, provided that any fractional shares of
Parent Common Stock resulting from such multiplication shall be rounded down to
the nearest share; and
(b) The exercise price per share of Parent Common Stock under the New
Option shall be equal to the exercise price per share of Company Common Stock
under the original option
A-30
<PAGE>
divided by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. After the Effective Time, each New Option shall be exercisable and
shall vest upon the same terms and conditions as were applicable to the related
Company Stock Option immediately prior to the Effective Time, except that all
references to the Company shall be deemed to be references to Parent.
SECTION 7.9. PUBLIC ANNOUNCEMENTS. Each of Parent, Sub, and the Company
agrees that it will not issue any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits hereto) or the
transactions contemplated hereby or thereby without the prior consent of the
other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with the NYSE and (ii) the party making such
disclosure has first used its best efforts to consult with the other party about
the form and substance of such disclosure.
SECTION 7.10. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. All
rights to indemnification, advancement of litigation expenses and limitation of
personal liability existing in favor of the directors and officers of the
Company under the provisions existing on the date hereof in the Company's
Certificate of Incorporation or By-Laws shall, with respect to any claims
arising out of any event or matter existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement),
survive the Effective Time, and, as of the Effective Time, the Surviving
Corporation shall assume all obligations of the Company in respect thereof and
no change shall be made with respect to such rights after the Effective Time.
Parent further agrees that for a period of six (6) years after the Effective
Time, Parent shall cause to be maintained in effect the policies of directors'
and officers' liability insurance maintained by the Company or policies of at
least the same coverage containing terms that are no less advantageous with
respect to matters occurring at or prior to the Effective Time to the extent
such liability insurance can be maintained annually at a cost to Parent not
greater than 200% of the current annual premiums for the policies currently
maintained by the Company for its directors' and officers' liability insurance;
provided however, that if such insurance cannot be so maintained or obtained at
such cost, Parent shall maintain or obtain as much of such insurance as can be
so maintained or obtained at a cost equal to 200% of the current annual premiums
of the Company for its directors' and officers' liability insurance.
SECTION 7.11. ELECTION TO PARENT BOARD OF DIRECTORS. Parent shall take all
steps reasonably necessary to elect James K. Murray, Jr. to the Board of
Directors of Parent. As a director, Mr. Murray will be entitled to such
compensation arrangements as are currently in place for outside directors of
Parent.
SECTION 7.12. COMPANY STOCK OPTION AGREEMENT. Upon execution of this
Agreement, the Company shall execute and deliver to Parent an Option Agreement
(the "Option Agreement"), granting Parent the option to purchase 1,500,000
shares of Company Common
A-31
<PAGE>
Stock, on the terms and subject to the conditions set forth in the form of
Option Agreement attached herein as Exhibit C.
SECTION 7.13. EXPENSES. Except as otherwise set forth in Section 9.2(b),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement (including the Exhibits hereto) and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except that (i) the filing fee in connection with filings under the
HSR Act, (ii) the expenses incurred in connection with printing and mailing the
Registration Statement and the Proxy Statement and (iii) the filing fee with the
SEC relating to the Registration Statement or the Proxy Statement shall be borne
equally by Parent and the Company.
SECTION 7.14. LISTING APPLICATION. Parent will use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued pursuant to this
Agreement in the Merger to be listed for quotation on the NYSE.
SECTION 7.15. SUPPLEMENTAL DISCLOSURE. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.15 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VIII of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
SECTION 7.16. LETTERS OF ACCOUNTANTS.
(a) Parent shall use all reasonable efforts to cause to be delivered to the
Company a letter of Ernst & Young LLP, Parent's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement, which letter
shall be brought down to the Effective Time.
(b) The Company shall use all reasonable best efforts to cause to be
delivered to Parent a letter of PricewaterhouseCoopers LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time.
A-32
<PAGE>
SECTION 7.17. CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding (i) any real property transfer gains,
sales, use, transfer, value-added, stock transfer, and stamp taxes, (ii) any
recording, registration and other fees, and (iii) any similar taxes or fees that
become payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
SECTION 7.18. NON-SOLICITATION OF EMPLOYEES. Each of Parent and the Company
agree, for a period of one year from the date hereof, not to directly or
indirectly solicit any employee of the other or to induce or encourage any
employee of the other to terminate such employee's employment.
SECTION 7.19. EXCHANGE ACT FILINGS. For so long as Parent may be required
to do so, Parent shall timely file with the SEC all reports required to be filed
with the SEC pursuant to the Exchange Act.
SECTION 7.20. LITIGATION RESERVE. Company has advised Parent that it will
record a reserve during the quarter ended September 30, 1999 in the approximate
amount of $5,800,000 in connection with loss contingencies associated with
certain disputes and/or litigation. The Company also agrees to use its best
commercially reasonable efforts to settle the claims currently identified on its
open litigation summary on or before December 10, 1999.
ARTICLE VIII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) HSR APPROVAL. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) STOCKHOLDER APPROVAL. This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote (as described
in Section 4.17) of the stockholders of the Company in accordance with
applicable law.
(c) NYSE LISTING FOR QUOTATION. The shares of Parent Common Stock issuable
to the holders of Company Common Stock pursuant to this Agreement in the Merger
shall have been authorized for listing on the NYSE, upon official notice of
issuance.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceeding by the SEC seeking a stop order.
A-33
<PAGE>
(e) NO ORDER. No Governmental Entity (including a federal or state court)
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the Merger or
any transaction contemplated by this Agreement; provided, however, that the
parties shall use their reasonable best efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted.
(f) APPROVALS. Other than the filing of Merger documents in accordance with
the DGCL, all authorizations, consents, waivers, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity that are listed on Schedule 8.1(f) on Parent or the
Surviving Corporation shall have been obtained, been filed or have occurred.
Parent shall have received all state securities or "blue sky" permits and other
authorizations necessary to issue the shares of Parent Common Stock pursuant to
this Agreement in the Merger.
SECTION 8.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in this Agreement shall be true and correct
(without regard to any materiality qualifiers) as of the date hereof and, except
to the extent such representations and warranties speak as of an earlier date,
will be true and correct as of the Effective Time as though made at the
Effective Time, except, in each case, where the failure to be true and correct
would not, individually or in the aggregate, have a Company Material Adverse
Effect, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect.
(c) AFFILIATE LETTERS. Parent shall have received the Affiliate Letters
from each of the Affiliates of the Company, as contemplated in Section 7.5.
(d) TAX OPINION OF COUNSEL. Parent shall have received an opinion of
Gardner, Carton & Douglas ("Gardner, Carton") dated on or about the date that is
two business days prior to the date the Proxy Statement-Prospectus is first
mailed to stockholders of the Company to the effect that the Merger will
constitute a reorganization for federal income tax purposes within the meaning
of Section 368(a) of the Code, which opinion shall not have been withdrawn or
modified in any material respect.
In rendering such opinion, Gardner, Carton may require and rely upon
representations contained in certificates of officers of Parent, Sub and the
Company, certain stockholders and
A-34
<PAGE>
others dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect; provided, however, that the
condition set forth in this Section 8.2(d) shall be deemed to be satisfied if
Gardner, Carton is unable to render such opinion solely by reason of any of the
holders of Company Common Stock refusing or failing to provide Gardner, Carton
with requested representations. The specific provisions of each such certificate
and representation shall be in form and substance satisfactory to Gardner,
Carton.
(e) FINANCING COMMITMENT. Parent shall have received on or before October
18, 1999 a financing commitment in customary commercial form from a bank or
other financial institution for a senior unsecured debt facility in the
aggregate amount of $250 million (a "Financing Commitment"). Parent shall use
its commercially reasonable efforts to obtain a Financing Commitment. The
Company agrees to cooperate with the Parent and the Parent's prospective
financing sources in connection with due diligence inquiries of prospective
financing sources. If such commitment is not obtained by the close of business
on October 18, 1999 and Parent fails to terminate this Agreement by delivering
to the Company written notice of such termination by the close of business on
such date pursuant to the termination right granted in Section 9.1(g), this
condition shall be deemed to be irrevocably waived by the Parent.
(f) RESIGNATIONS. Parent shall have received the resignations of each
member of the Company's Board of Directors (other than William Bennett, who
shall remain as a director of the Company).
SECTION 8.3. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent set forth in this Agreement shall be true and correct
(without regard to any materiality qualifiers) as of the date hereof and, except
to the extent such representations and warranties speak as of an earlier date,
will be true and correct as of the Effective Time as though made at the
Effective Time, except, in each case, where the failure to be true and correct
would not, individually or in the aggregate, have a Parent Material Adverse
Effect, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief operating officer of Parent
to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Each of Parent and Sub
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief operating officer of Parent to such effect.
(c) TAX OPINION OF COUNSEL. The Company shall have received an opinion of
Fowler, White, Gillen, Boggs, Villareal and Banker P.A. ("Fowler White") dated
on or about the date that is two business days prior to the date the Proxy
Statement-Prospectus is first mailed to stockholders of the Company to the
effect that the Merger will constitute a reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code, which opinion shall
not have been withdrawn or modified in any material respect.
A-35
<PAGE>
In rendering such opinion, Fowler White may require and rely upon
representations contained in certificates of officers of Parent, Sub and the
Company, certain stockholders and others dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect;
provided, however, that the condition set forth in this Section 8.3(c) shall be
deemed to be satisfied if Fowler White is unable to render such opinion solely
by reason of any of the holders of Company Common Stock refusing or failing to
provide Fowler White with requested representations. The specific provisions of
each such certificate and representation shall be in form and substance
satisfactory to Fowler White.
ARTICLE IX.
TERMINATION
SECTION 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) By mutual consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have been
consummated before March 31, 2000 (unless the failure to so consummate the
Merger by such date shall be due to the action or failure to act of the party
(or its Subsidiaries, if any) seeking to terminate this Agreement, which action
or failure to act constitutes a breach of this Agreement);
(c) By the Company or Parent, if, upon a vote at the meeting of
stockholders of the Company called pursuant to Section 7.4 hereof (including any
adjournment or postponement thereof), the requisite vote of the stockholders of
the Company for approval of this Agreement and the Merger has not been obtained;
(d) By either Parent or the Company, if any permanent injunction or action
by any Governmental Entity of competent jurisdiction preventing the consummation
of the Merger shall have become final and nonappealable;
(e) By Parent, if (i) there has been a breach of any representations or
warranties of the Company set forth herein such that the conditions set forth in
Section 8.2(a) are not satisfied; (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement on the
part of the Company, which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by Parent to the
Company; (iii), the bank (or banks) or any other financial institution
(collectively, the "Lender") under any Financing Commitment shall have failed to
fund or disburse any loan or loans to be made to Parent under such Financing
Commitment due to the occurrence and continuation of a material adverse change
in, or material disruption of, conditions in the financial, banking or capital
markets which such Lender, in its sole discretion, shall have deemed material in
connection with the syndication of the loan or loans to be made pursuant to such
Financing Commitment; or (iv) the Board of Directors of the Company (x) fails to
recommend approval and adoption of this Agreement and the Merger by the
stockholders of the Company or withdraws or amends or modifies in a manner
adverse to Parent and Sub its recommendation or approval in respect of this
Agreement or the Merger, (y) makes any recommendation with respect to an
Alternative
A-36
<PAGE>
Acquisition other than a recommendation to reject such Alternative Acquisition,
or (z) takes any action prohibited by Section 7.2;
(f) By the Company, if (i) there has been a breach of any representations
or warranties of Parent set forth herein such that the conditions set forth in
Section 8.3(a) are not satisfied; (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement on the
part of Parent, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by the Company to Parent;
or (iii) such termination is necessary to allow the Company to enter into an
agreement with respect to a Superior Proposal (provided that the termination
described in this clause (iii) shall not be effective unless and until the
Company shall have paid to Parent in full the fee described in Section 9.2(b));
(g) By Parent, provided that written notice of such termination is given on
or before October 18, 1999 if the condition set forth in Section 8.2(e) is not
satisfied or waived by that date and Parent has paid to the Company the fee
called for by Section 9.2(b)(iii).
SECTION 9.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this Article
IX, the Merger shall be deemed abandoned and this Agreement shall forthwith
become void, without liability on the part of any party hereto, except as
provided in this Section 9.2, Section 7.1 and Section 7.13, and except that
nothing herein shall relieve any party from liability for any breach of this
Agreement; provided, however, the parties agree that any liability for a breach
of this Agreement that is not a willful breach shall be limited to the recovery
of all documented out of pocket expenses of the other party incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, all investment banking, legal, accounting and
other similar expenses).
(b) (i) If (x) Parent shall have terminated this Agreement pursuant to
Section 9.1(e)(iv) or (y) the Company shall have terminated this Agreement
pursuant to Section 9.1(f)(iii), then in any such case the Company shall
promptly, but in no event later than two business days after the date of such
termination, pay Parent a termination fee of Five Million Dollars ($5,000,000).
(ii) If (x) Parent or the Company shall terminate this Agreement
pursuant to Section 9.1(c) due to the failure of the Company's
stockholders to approve the Agreement, (y) at or prior to the time of
such failure to so approve this Agreement an Alternative Acquisition
shall have been made public and (z) within eighteen months of such
termination (I) an Alternative Acquisition with any third party is
consummated or (II) an agreement to effect an Alternative Acquisition
is entered into by the Company, then in any such case the Company shall
promptly, but in no event later than two days after the conditions set
forth in clauses (x), (y) and (z) of this Section 9.2(b)(ii) are
satisfied, pay Parent a termination fee of Five Million Dollars
($5,000,000).
A-37
<PAGE>
(iii) If Parent shall have terminated this Agreement pursuant to
Section 9.1(g), then Parent shall promptly pay Company, but in no event
later than two business days after the date of such termination, a fee
of Four Million Dollars ($4,000,000).
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1. AMENDMENT AND MODIFICATION. At any time prior to the
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein; provided,
however, that after any approval and adoption of this Agreement by the
stockholders of the Company, no such amendment, modification or supplementation
shall be made which under applicable law requires the approval of such
stockholders, without the further approval of such stockholders.
SECTION 10.2. WAIVER. At any time prior to the Effective Time, Parent and
Sub, on the one hand, and the Company, on the other hand, may (i) extend the
time for the performance of any of the obligations or other acts of the other,
(ii) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
SECTION 10.3. SURVIVABILITY; INVESTIGATIONS. The respective representations
and warranties of Parent and the Company contained herein or in any certificates
or other documents delivered prior to or as of the Effective Time (i) shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and (ii) shall not survive beyond the Effective Time
SECTION 10.4. NOTICES. All notices and other communications hereunder shall
be in writing, and shall be deemed given if delivered personally or by next-day
courier or telecopied with confirmation of receipt, to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, or one day after delivery to a
courier for next-day delivery.
(a) If to Parent or Sub, to:
UICI
4001 McEwen Boulevard, Suite 200
Dallas, Texas 75244
Attention: Glenn W. Reed, Esq.
Telecopier No.: (972) 392-6717
A-38
<PAGE>
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
and
(b) If to the Company, to:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Attention: Phillip S. Dingle
Telecopier No.: (813) 282-0490
with a copy to:
Fowler, White, Gillen, Boggs, Villareal & Banker, P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Attention: David C. Shobe, Esq.
Telecopier No.: (813) 228-9401
SECTION 10.5. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. References to
this Agreement shall be deemed to include the Exhibits and Schedules hereto,
unless the context otherwise requires. The term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, an association, a
trust, a Governmental Entity or an unincorporated organization or other entity.
SECTION 10.6. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Schedules and other documents and instruments referred to herein), together with
the Confidentiality Agreement, constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof. Except for
Sections 7.10 and 7.11, this Agreement is not intended to confer upon any person
not a party hereto any rights or remedies hereunder. This Agreement shall not be
assigned by operation of law or otherwise; provided that Parent or Sub may
assign its rights and obligations hereunder to a direct or indirect subsidiary
of Parent, but no such assignment shall relieve Parent or Sub, as the case may
be, of its obligations hereunder.
SECTION 10.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
A-39
<PAGE>
SECTION 10.8. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
SECTION 10.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
A-40
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company has caused this
Agreement to be executed under seal on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
PARENT:
UICI
By: /s/ GREGORY T. MUTZ
-------------------------------------
Name: Gregory T. Mutz
Title: President and Chief Executive Officer
SUB:
UICI ACQUISITION CO.
By: /s/ GREGORY T. MUTZ
-------------------------------------
Name: Gregory T. Mutz
Title: President and Chief Executive Officer
THE COMPANY:
HEALTHPLAN SERVICES CORPORATION
By: /s/ JAMES K. MURRAY, JR.
------------------------------------
Name: James K. Murray, Jr.
Title: Chairman and Chief Executive Officer
A-41
<PAGE>
EXHIBIT A
FORM OF
VOTING AGREEMENT
VOTING AGREEMENT (the "Agreement"), dated as of October __, 1999, between
HealthPlan Services Corporation, a Delaware corporation (the "Company"),
________________ (the "Stockholder") and UICI, a Delaware corporation
("Parent").
WHEREAS, concurrently with the execution of this Agreement, the Company,
Parent and UICI Acquisition Co., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), have entered into an Agreement and Plan of Merger
(as the same may be amended from time to time, the "Merger Agreement"),
providing for the merger (the "Merger") of Sub with and into the Company
pursuant to the terms and conditions of the Merger Agreement; and
WHEREAS, upon consummation the Merger, the stockholders of the Company will
receive a number of shares of common stock, par value $.01 per share, of Parent
("Parent Common Stock") equal to the Exchange Ratio (as defined in the Merger
Agreement) for each share of common stock, par value $.01 per share (the
"Company Common Stock") of the Company owned by them;
WHEREAS, the Stockholder owns of record and beneficially __________ shares
of Company Common Stock and wish to enter into this Agreement with respect to
__________ of such shares (such __________ shares of Company Common Stock being
referred to as the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Merger Agreement, the
Stockholder has agreed, upon the terms and subject to the conditions set forth
herein, to vote the Shares and to deliver an irrevocable proxy to Parent to vote
the Shares at a meeting of the Company's stockholders, in favor of approval and
adoption of the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO VOTE SHARES. The Stockholder agrees during the term of this
Agreement to vote the Stockholder's Shares, in person or by proxy, (a) in favor
of approval and adoption of the Merger Agreement and the Merger at every meeting
of the stockholders of the Company at which such matters are considered and at
every adjournment thereof, and (b) against an Alternative Acquisition (as such
term is defined in the Merger Agreement). The Stockholder agrees to deliver to
Parent upon request immediately prior to any vote contemplated by clause (a) or
(b) above a proxy substantially in the form attached hereto as Annex A (a
"Proxy"), which Proxy shall be irrevocable during the term of this Agreement to
the extent permitted under Delaware law, and Parent agrees to vote the Shares
subject to each such Proxy in favor of approval and adoption of the Merger
Agreement and the Merger.
A-42
<PAGE>
2. NO VOTING TRUSTS. The Stockholder agrees that the Stockholder will not,
nor will the Stockholder permit any entity under the Stockholder's control to,
deposit any of the Stockholder's Shares in a voting trust or subject any of its
Shares to any arrangement with respect to the voting of the Shares inconsistent
with this Agreement.
3. LIMITATION ON DISPOSITIONS AND PROXIES. During the term of this
Agreement, the Stockholder agrees not to sell, assign, pledge, transfer or
otherwise dispose of, or grant any proxies with respect to (except for a Proxy
or a proxy which is not inconsistent with the terms of this Agreement) any of
the Stockholder's Shares.
4. SPECIFIC PERFORMANCE. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with the obligations imposed by this Agreement, that, in the
event of any such failure, the other party will not have an adequate remedy at
law or in damages. Accordingly, each party hereto agrees that injunctive relief
or other equitable remedy, addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto agrees that it will not seek, and agrees to waive any requirement
for, the securing or posting of a bond in connection with any other party's
seeking or obtaining such equitable relief.
5. TERM OF AGREEMENT; TERMINATION. Subject to Section 9(e), the term of
this Agreement shall commence on the date hereof and such term and this
Agreement shall terminate upon the earliest to occur of (i) the Effective Time,
and (ii) the date on which the Merger Agreement is terminated in accordance with
its terms. Upon such termination, no party shall have any further obligations or
liabilities hereunder; provided, that such termination shall not relieve any
party from liability for any breach of this Agreement prior to such termination.
6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to Parent that, as of the date hereof, (a) such
Stockholder has full legal power and authority to execute and deliver this
Agreement and the Proxy, and (b) such Stockholder's Shares are free and clear of
all proxies (except for a proxy which is not inconsistent with the terms of this
Agreement).
7. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
8. NOTICES. All notices, requests, claims, demands or other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, upon receipt of a transmission confirmation if sent by telecopy or
like transmission (with confirmation) and on the next business day when sent by
Federal Express, Express Mail or other reputable
A-43
<PAGE>
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Parent:
UICI
4001 McEwen Boulevard, Suite 200
Dallas, Texas 75244
Attention: Glenn W. Reed, Esq.
Telecopier No.: (972) 392-6717
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
(b) If to Stockholder:
-------------------------
-------------------------
-------------------------
Attention: --------------------
Telecopier No.: (___) ___-____
9. MISCELLANEOUS.
(a) This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such provision
to any person or circumstances shall be held invalid or unenforceable by a court
of competent jurisdiction, such provision or application shall be unenforceable
only to the extent of such invalidity or unenforceability, and the remainder of
the provision held invalid or unenforceable and the application of such
provision to persons or circumstances, other than the party as to which it is
held invalid, and the remainder of this Agreement, shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
A-44
<PAGE>
(d) All Section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or reference shall be
derived therefrom.
(e) The obligations of the Stockholder set forth in this Agreement shall
not be effective or binding upon the Stockholder until after such time as the
Merger Agreement is executed and delivered by the Company, Parent and Sub, and
the parties agree that there is not and has not been any other agreement,
arrangement or understanding between the parties hereto with respect to the
matters set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
STOCKHOLDER
By:
------------------------------
Name:
Title:
HEALTHPLAN SERVICES CORPORATION
By:
------------------------------
Name:
Title:
UICI
By:
-------------------------------
Name:
Title:
A-45
<PAGE>
(ANNEX A)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints UICI, a
Delaware corporation ("Parent"), its proxy to vote __________ shares of Common
Stock, par value $.01 per share, of HealthPlan Services Corporation, a Delaware
corporation (the "Company"), owned by the undersigned and described in the
Voting Agreement referred to below and which the undersigned is entitled to vote
at any meeting of stockholders of the Company, and at any adjournment thereof,
to be held for the purpose of considering and voting upon a proposal to approve
and adopt the Agreement and Plan of Merger, dated as of October __, 1999 (the
"Merger Agreement"), by and among the Company, Parent, and UICI Acquisition Co.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
providing for the merger (the "Merger") of Sub with and into the Company, FOR
such proposal and AGAINST any Alternative Acquisition (as such term is defined
in the Merger Agreement). This proxy is subject to the terms of the Voting
Agreement, is coupled with an interest and revokes all prior proxies granted by
the undersigned with respect to such __________ shares, is irrevocable and shall
terminate and be of no further force or effect automatically at such time as the
Voting Agreement, dated as of October )__, 1999 between the undersigned and
Parent, a copy of such Agreement being attached hereto, terminates in accordance
with its terms.
Dated: ____________________, 1999
[NAME OF STOCKHOLDER]
By:
-------------------------
Name:
Title:
A-46
<PAGE>
EXHIBIT B
FORM OF AFFILIATE LETTER
_______________, 1999
- ------------------------
- ------------------------
- ------------------------
Attention:
------------------------
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of _________________________, a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of _______________, 1999 (the
"Agreement"), by and among _________________________, a Delaware corporation
("Parent"), _________________________, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and the Company, Parent will acquire all of the
issued and outstanding shares of common stock, par value $.01 per share, of the
Company ("Company Common Stock") and Sub will merge with and into the Company
(the "Merger").
As a result of the Merger, I may receive shares of Common Stock, par value
$.01 per share of Parent ("Parent Common Stock"). I would receive the Parent
Common Stock in exchange for shares (or options for shares) owned by me of
Company Common Stock.
I represent, warrant and covenant to Parent that in the event I receive
Parent Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the Parent
Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Parent Common Stock to the extent I
felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement Form S-4. However, I have also been advised that,
because at the time the Merger is submitted
A-47
<PAGE>
for a vote of the stockholders of the Company, (a) I may be deemed to be an
affiliate of the Company and (b) the distribution by me of the Parent Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of Parent Common Stock issued to me in the Merger unless (i)
such sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been registered under the Act
or (iii) in the opinion of counsel reasonably acceptable to Parent, such sale,
transfer or other disposition is otherwise exempt from registration under the
Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Common Stock by me or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available solely as a result of the
Merger.
E. I also understand that there will be placed on the certificates for the
Parent Common Stock issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
_______________, 1999 BETWEEN THE REGISTERED HOLDER HEREOF AND
_________________________, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF _________________________."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement, Parent
reserves the right to put the following legend on the certificates issued to any
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend after one year unless the provisions of Rule 145(d)(2) have been amended
to require a longer period than one year.
A-48
<PAGE>
[WE UNDERSTAND, AND YOU AGREE, THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, WE MAY DISTRIBUTE THE PARENT COMMON STOCK RECEIVED BY US IN THE MERGER
TO OUR PARTNERS IN ACCORDANCE WITH THE TERMS OF OUR PARTNERSHIP AGREEMENT SO
LONG AS EACH PARTNER RECEIVING A DISTRIBUTION OF PARENT COMMON STOCK FROM US
AGREES TO EXECUTE A LETTER AGREEMENT ADDRESSED TO YOU CONTAINING SUBSTANTIALLY
THE SAME TERMS AS THIS LETTER AGREEMENT.]
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, as or a waiver of any rights I may have to object to any claim that
I am such an affiliate or on after the date of this letter.
Very truly yours,
-----------------------------------
Name:
Accepted this _____ day of __________, 1999 by:
- -------------------------
By:
----------------------
Name:
Title:
A-49
<PAGE>
EXHIBIT C
OPTION AGREEMENT
See APPENDIX B
A-50
<PAGE>
APPENDIX B
OPTION AGREEMENT
OPTION AGREEMENT, dated as of October 5, 1999 by and between HealthPlan
Services Corporation, a Delaware corporation ("Grantor"), and UICI, a Delaware
corporation ("Acquiror").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Grantor and Acquiror are entering into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), which provides, among other things,
upon the terms and subject to the conditions thereof, for the merger of Grantor
with and into a wholly-owned subsidiary of Acquiror (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the Merger
Agreement, Acquiror has requested that Grantor agree, and Grantor has so agreed,
to grant to Acquiror an option with respect to certain shares of Grantor's
common stock, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce Acquiror to enter into the Merger Agreement, and
in consideration of the mutual covenants and agreements set forth herein and in
the Merger Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION. Grantor hereby grants Acquiror an irrevocable option
(the "Grantor Option") to purchase up to 1,500,000 shares, subject to adjustment
as provided in Section 6 hereof (such shares being referred to herein as the
"Grantor Shares") of common stock, $.01 par value, of Grantor (the "Grantor
Common Stock") in the manner set forth below at a price (the "Exercise Price")
per Grantor share of $7.375 payable in cash.
2. EXERCISE OF OPTION. The Grantor option may be exercised by Acquiror, in
whole or in part, at any time or from time to time after the Merger Agreement is
terminated and a termination fee is payable under circumstances which would
entitle Acquiror to the termination fee under Section 9.2(b)(i) or 9.2(b)(ii) of
the Merger Agreement.
In the event Acquiror wishes to exercise the Grantor Option, Acquiror shall
deliver to Grantor a written notice (an "Exercise Notice") specifying the total
number of Grantor Shares it wishes to purchase. Each closing of a purchase of
Grantor Shares (a "Closing") shall occur at a place, on a date and at a time
designated by Acquiror in an Exercise Notice delivered at least two business
days prior to the date of the Closing. The Grantor Option shall terminate upon
the earlier of: (i) the Effective Time; or (ii) two years following the first
event that triggers the obligation of Grantor to pay the termination fee under
Section 9.2(b)(i) or 9.2(b)(ii) of the Merger Agreement (or if, at the
expiration of such two year period the Grantor Option cannot be exercised by
reason of any applicable judgment, decree, order, law or regulation, 10 business
days after such impediment to exercise shall have been removed or shall have
become final and not subject to appeal). Notwithstanding the foregoing, the
Grantor Option may not be exercised if Acquiror is in material breach of any of
its representations or warranties, or in material breach of any of its covenants
or agreements, contained in this Agreement or in the Merger Agreement. Upon the
giving by Acquiror to Grantor of the Exercise Notice and the tender of the
applicable aggregate Exercise Price, Acquiror shall be deemed to be the holder
of record of the Grantor Shares issuable upon such exercise, notwithstanding
that the stock transfer books of Grantor shall then be closed or that
certificates representing such Grantor Shares shall not then be actually
delivered to Acquiror.
B-1
<PAGE>
3. CLOSING. At any Closing, (a) Grantor will deliver to Acquiror or its
designee a single certificate in definitive form representing the number of
Grantor Shares designated by Acquiror in its Exercise Notice, such certificate
to be registered in the name of Acquiror and to bear the legend set forth in
Section 7 and (b) Acquiror will deliver to Grantor the aggregate Exercise Price
for the Grantor Shares so designated and being purchased by wire transfer of
immediately available funds or certified check or bank check. Grantor shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of its stock certificates under this Agreement.
4. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF GRANTOR. Grantor
represents and warrants to Acquiror that (a) Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Grantor and the consummation by Grantor of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantor and no other corporate proceedings on the part of Grantor
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Grantor, constitutes a valid and binding obligation of Grantor and, assuming
this Agreement constitutes a valid and binding obligation of Acquiror, is
enforceable against Grantor in accordance with its terms, (e) Grantor has taken
all necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Grantor Option in accordance with its
terms, and at all times from the date hereof through the expiration of the
Grantor Option will have reserved, 1,500,000 authorized and unissued Grantor
Shares, such amount being subject to adjustment as provided in Section 6, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, (f) upon
delivery of the Grantor Shares to Acquiror upon the exercise of the Grantor
Option in accordance with its terms, Acquiror will acquire the Grantor Shares
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever, (g) the execution and delivery of this
Agreement by Grantor does not, and the consummation by Grantor of the
transactions contemplated hereby will not, violate, conflict with, or result in
a breach of any provision of, or constitute a default (with or without notice or
lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") of Grantor pursuant to, (A) any
provision of the Certificate of Incorporation or bylaws of Grantor, (B) any
provisions of any material loan or credit agreement, note, mortgage, indenture,
lease, Grantor benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license or (C) any material judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Grantor or its
properties or assets, (h) the execution and delivery of this Agreement by
Grantor does not, and the performance of this Agreement by Grantor will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, and (i) none of Grantor, any of its
affiliates or anyone acting on its or their behalf has issued, sold or offered
any security of Grantor to any person under circumstances that would cause the
issuance and sale of the Grantor Shares, as contemplated by this Agreement, to
be subject to the registration requirements of the Securities Act as in effect
on the date hereof and the issuance, sale and delivery of the Grantor Shares
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and Grantor
shall not take any action which would cause the issuance, sale and delivery of
the Grantor Shares hereunder not to be exempt from such requirements). Grantor
agrees that any Grantor Shares issued to Acquiror upon the exercise of the
Grantor Option will be approved for listing on the New York Stock Exchange.
B-2
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror represents and
warrants to Grantor that (a) Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Acquiror and no other corporate proceedings on the part of Acquiror are
necessary to authorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered by Acquiror and
constitutes a valid and binding obligation of Acquiror, and, assuming this
Agreement constitutes a valid and binding obligation of Grantor, is enforceable
against Acquiror in accordance with its terms, and (d) Acquiror is an Accredited
Investor and any Grantor Shares acquired upon exercise of the Grantor Option
will be acquired for Acquiror's own account, for investment purposes only and
will not be, and the Grantor Option is not being, acquired by Acquiror with a
view to the public distribution thereof in violation of any applicable provision
of the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without limitation to any
restriction on Grantor contained in this Agreement or in the Merger Agreement,
in the event of any change in Grantor Common Stock by reason of stock dividends,
splitups, mergers, (other than the Merger), recapitalizations, combinations,
exchange of shares or the like, the type and number of shares or securities
subject to the Grantor Option, and the purchase price per share provided in
Section 1, shall be adjusted appropriately to restore to Acquiror its rights
hereunder.
7. RESTRICTIVE LEGENDS. Each certificate representing shares of Grantor
Common Stock issued to Acquiror hereunder, at a Closing, shall include a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE OPTION AGREEMENT, DATED AS OF OCTOBER 5, 1999,
A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Acquiror shall
have delivered to the other party a copy of a letter from the staff of the
Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to the other party, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and in
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
8. REGISTRATION STATEMENT.
(a) If at any time or times after the Option has become exercisable Grantor
determines to file with the Securities and Exchange Commission a registration
statement covering any Grantor Common Stock (other than Grantor Common Stock
issuable to officers and employees pursuant to an employee benefit plan
registered on Form S-8), Grantor shall notify Acquiror, at least 15 days prior
to the filing of such proposed registration statement. If Acquiror requests
Grantor in writing, within
B-3
<PAGE>
10 days of the receipt of notification from Grantor, to include in such
registration statement any Grantor Shares then held by Acquiror, then, Grantor
shall use its best efforts to include those Grantor Shares in the registration
statement, to have the registration declared effective and to keep such
registration current for a period of not less than 180 days. If Acquiror decides
not to (or is precluded from including) all of its Grantor Shares in any
registration statement thereafter filed by Grantor, Acquiror will nevertheless
continue to have the right under this Section 8(a) to include its Grantor Shares
in a future registration of Grantor.
(b) At any time, Acquiror may demand registration under the Securities Act
of all or part of the Grantor Shares then held by Acquiror. Acquiror shall be
limited to one demand under this Section 8(b) and such demand shall be made by
written notice to Grantor, which notice shall specify the number of Grantor
Shares requested to be registered. Upon receipt of a written demand for
registration under this Section 8(b), the Company shall use its best efforts to
register such Grantor Shares, to have the registration statement declared
effective and to keep such registration current for a period of not less than
180 days.
(c) A registration effected under this Section 8 shall be effected at
Grantor's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to Acquiror, and Grantor shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters, if any, in the customary manner, (ii) if applicable,
to enter into an underwriting agreement in form and substance customary for
transactions of such type with the underwriters participating in such offering
and (iii) to take all further actions which shall be reasonably necessary to
effect such registration and sale (including, if the underwriters, if any, deem
it necessary, participating in road-show presentations).
9. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or the
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party. Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
10. SPECIFIC PERFORMANCE. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
11. ENTIRE AGREEMENT. This Agreement and the Merger Agreement (including
the exhibits and schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof and thereof.
B-4
<PAGE>
12. FURTHER ASSURANCES. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
13. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regulatory agency
determines that Acquiror is not permitted to acquire, the full number of shares
of Grantor Common Stock provided in Section 1 hereof (as the same may be
adjusted), it is the express intention of Grantor to allow Acquiror to acquire
or to require Grantor to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if (i) delivered personally, or (ii) sent by
reputable overnight courier service, or (iii) telecopied (which is confirmed),
or (iv) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
A. If to Grantor, to:
HealthPlan Services Corporation
3501 Frontage Road
Tampa, Florida 33607
Attention: Phillip S. Dingle, Esq.
Telecopier No.: (813) 282-0490
and a copy to:
Fowler, White, Gillen, Boggs, Villareal & Banker, P.A.
501 East Kennedy Boulevard, Suite 1700
Tampa, Florida 33602
Attention: David C. Shobe, Esq.
Telecopier No.: (813) 228-9401
B. If to Acquirer, to:
UICI
4001 McEwen Boulevard, Suite 200
Dallas, Texas 75244
Attention: Glenn W. Reed, Esq.
Telecopier No.: (972) 392-6717
B-5
<PAGE>
with a copy to:
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Suite 3300
Chicago, Illinois 60610-4795
Attention: Charles R. Manzoni, Jr., Esq.
Telecopier No.: (312) 644-3381
15. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State and without
regard to its choice of law principles. Each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any federal court located in
the State of Delaware or any Delaware state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court.
16. INTERPRETATION. When a reference is made in this Agreement to a Section
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but both of which, taken together,
shall constitute one and the same instrument.
18. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
19. AMENDMENTS; WAIVER. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
20. REPLACEMENT OF GRANTOR OPTION. Upon receipt by Grantor of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Grantor will execute and deliver a new Agreement of
like tenor and date.
B-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
HEALTHPLAN SERVICES CORPORATION
By: /s/ PHILLIP S. DINGLE
-------------------------------------------
Name: Phillip S. Dingle
Title: Executive Vice President and
Chief Financial Officer
UICI
By: /s/ GREGORY T. MUTZ
--------------------------------------------
Name: Gregory T. Mutz
Title: President and Chief Executive Officer
B-7
<PAGE>
APPENDIX C
October 5, 1999
HealthPlan Services Corporation
3501 Frontage Road
Tampa, FL 33607
Attention: Board of Directors
Gentlemen:
We understand that HealthPlan Services Corporation ("HPS") and UICI are
considering a transaction pursuant to which a newly-formed wholly-owned
subsidiary of UICI would be merged with and into HPS in a stock-for-stock
exchange (the "Merger"). Pursuant to the Merger, each outstanding share of
common stock of HPS would be converted into the right to receive 0.3393 shares
(the "Exchange Ratio") of UICI of common stock. The Exchange Ratio shall be
subject to adjustment as follows: (i) if the UICI Average Stock Price (as
defined below) is less than $28.00 per share and greater than or equal to $23.00
per share, the Exchange Ratio shall be fixed at 0.3393; (ii) if the UICI Average
Stock Price is greater than or equal to $28.00 per share and less than or equal
to $30.00 per share, the Exchange Ratio will be determined by dividing $9.50 by
the UICI Average Stock Price; (iii) if the UICI Average Stock Price is greater
than $30.00 and less than or equal to $33.00, the Exchange Ratio shall be fixed
at 0.3167; (iv) if the UICI Average Stock Price is greater than $33.00 per
share, the Exchange Ratio will be determined by dividing $9.50 by an amount
equal to the UICI Average Stock Price less $3.00; (v) if the UICI Average Stock
Price is less than $23.00 per share and greater than or equal to $21.00 per
share, the Exchange Ratio will be determined by dividing $9.50 by the sum of the
UICI Average Stock Price and $5.00; and (vi) if the UICI Average Stock Price is
less than $21.00 per share, the Exchange Ratio will be fixed at 0.3654. The UICI
Average Stock Price shall be defined as the average of the volume weighted
averages of the trading prices of UICI's common stock for the 20 consecutive
trading days ending on the third trading day immediately preceding the
consummation of the Merger. If HPS terminates the Merger for certain reasons,
UICI will be entitled to (i) receive a termination fee of $5 million from HPS,
and (ii) exercise an option to purchase up to 1,500,000 newly-issued shares of
HPS common stock at a price of $7.38 per share in accordance with the terms of
an Option Agreement (the "Option Agreement") to be entered into by HPS and UICI.
If UICI terminates the Merger for certain reasons, HPS shall be entitled to
receive a termination fee of $4 million from UICI.
You have provided us with copies of the proposed Agreement and Plan of Merger
(the "Agreement") and the Option Agreement both dated October 5, 1999.
C-1
<PAGE>
You have asked us to render our opinion as to whether the Exchange Ratio to be
provided for in the Merger is fair, from a financial point of view, to the
shareholders of HPS.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Agreement and the Option Agreement;
2. reviewed HPS' Annual Reports to Shareholders and Annual Reports on Form
10-K for the fiscal years ended December 31, 1997 and 1998, and its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1999 and
June 30, 1999;
3. reviewed certain operating and financial information, including
projections, provided to us by HPS' management relating to HPS'
business and prospects;
4. met with certain members of HPS' senior management to discuss its
operations, historical financial statements, recent financial results
and near-term estimated financial performance, and future prospects;
5. reviewed UICI's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended December 31, 1997 and 1998, and
its Quarterly Reports on Form 10-Q for the periods ended March 31, 1999
and June 30, 1999;
6. reviewed certain operating and financial information, including
projections, provided to us by UICI management relating to UICI's
business and prospects;
7. met with certain members of UICI's senior management to discuss its
operations, historical financial statements, recent financial results
and near-term estimated financial performance, and future prospects;
8. reviewed the historical prices and trading volumes of the common stock
of HPS and UICI;
9. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which we deemed generally
comparable to HPS and UICI;
10. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to HPS;
11. performed discounted cash flow analyses of the implied per share value
of HPS' common stock and of UICI's common stock based on the
projections furnished to us by HPS' management and UICI's management,
respectively, as well as on a range of more conservative projection
scenarios; and
12. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
C-2
<PAGE>
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the projections, provided to us
by HPS and UICI. With respect to HPS' and UICI's projected financial results, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior managements of
HPS and UICI as to the expected future performance of HPS and UICI,
respectively. We have not assumed any responsibility for the independent
verification of any such information or of the projections provided to us and we
have further relied upon the assurances of the senior managements of HPS and
UICI that they are unaware of any facts that would make the information or
projections provided to us incomplete or misleading. Notwithstanding our
reliance on the projections provided to us and on the representations made to us
by the managements of HPS and UICI with respect to such projections, in the
course of our analyses for the purposes of rendering this opinion, we have
considered the valuation implications of more conservative projection scenarios
for both HPS and UICI. In arriving at our opinion, we have not performed or
obtained any independent appraisal of the assets or liabilities of HPS and UICI,
nor have we been furnished with any such appraisals. During the course of our
engagement, we were asked by the Board of Directors of HPS to solicit
indications of interest from various third parties regarding a transaction with
HPS, and we have considered the results of such solicitation in rendering our
opinion. Our opinion is necessarily based on economic, market and other
conditions, and the information made available to us, as of the date hereof. We
have assumed that the Merger will qualify as a tax-free "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
We do not express any opinion as to the price or range of prices at which the
shares of common stock of HPS and UICI may trade subsequent to the announcement
of the proposed Merger or as to the price or range of prices at which the shares
of common stock of UICI may trade subsequent to the consummation of the Merger.
We have acted as a financial advisor to HPS in connection with the Merger and
will receive a fee for such services. In the ordinary course of business, Bear
Stearns may actively trade the equity and debt securities of HPS and/or UICI for
our own account and for the account of our customers and, accordingly, may at
any time hold a long or short position in such securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of HPS and does not constitute a recommendation to the Board
of Directors of HPS or any holders of HPS' common stock as to how to vote in
connection with the Merger. This opinion does not address HPS' underlying
business decision to pursue the Merger. This letter is not to be used for any
other purpose, or reproduced, disseminated, quoted or referred to at any time,
in whole or in part, without our prior written consent; provided, however, that
this letter may be included in its entirety in any proxy statement / prospectus
to be distributed to holders of HPS common stock in connection with the Merger.
Based on and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio to be provided for in the Merger is fair, from a
financial point of view, to the Shareholders of HPS.
C-3
<PAGE>
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ KEVIN P. CLARKE
------------------------
Senior Managing Director
C-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware authorizes
indemnification of directors, officers and employees of Delaware corporations.
Article VIII of the Registrant's by-laws (i) authorizes the indemnification of
directors and officers (the "Indemnitees") under specified circumstances to the
fullest extent authorized by the General Corporation Law of Delaware, (ii)
provides for the advancement of expenses to the Indemnitees for defending any
proceedings related to the specified circumstances, (iii) gives the Indemnitees
the right to bring suit against the Registrant to enforce the foregoing rights
to indemnification and advancement of expenses, and (iv) authorizes the
Registrant to maintain certain policies of insurance to protect itself and any
of its directors, officers or employees. The Registrant has an insurance policy
covering its directors and officers against certain personal liability, which
may include liabilities under the Securities Act of 1933 as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated herein by
reference:
EXHIBIT DESCRIPTIONS
2.1 Agreement and Plan of Merger by and among the Registrant, UICI
Acquisition Co. and HealthPlan Services Corporation, dated as of
October 5, 1999 (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K (File No. 0-14320), dated
October 5, 1999). The Registrant agrees to furnish supplementally a
copy of any omitted schedule to the Securities and Exchange Commission
upon request.
3.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 4(1)(A) to the Registrant's Form S-8 (File No.
333-85113), filed August 13, 1999).
3.2 Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q (File No.
0-14320), filed May 14, 1998).
4.1 Description of Common Stock of the Registrant (incorporated by
reference to the Registrant's Form 8-A12B (File No. 0-14320), filed
April 22, 1999).
5.1 Form of Opinion of Glenn W. Reed, Esq., Executive Vice President and
General Counsel of UICI, as to the legality of the securities being
registered.
II-1
<PAGE>
8.1 Opinion of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A. as
to certain U.S. federal income tax matters.*
8.2 Opinion of Gardner, Carton & Douglas as to certain U.S. federal income
tax matters. *
9.1 Voting Agreement between the Registrant and Automatic Data Processing,
Inc., dated as of October 5, 1999 (incorporated by reference to
Exhibit 99.2 to the Registrant's Current Report on Form 8-K (File No.
0-14320), dated October 5, 1999).
9.2 Voting Agreement between the Registrant and James K. Murray, Jr., dated
as of October 5, 1999 (incorporated by reference to Exhibit 99.3 to
the Registrant's Current Report on Form 8-K (File No. 0-14320), dated
October 5, 1999).
9.3 Voting Agreement between the Registrant and Shinnston Enterprises,
Ltd., dated as of October 5, 1999 (incorporated by reference to
Exhibit 99.4 to the Registrant's Current Report on Form 8-K (File No.
0-14320), dated October 5, 1999).
9.4 Voting Agreement between the Registrant and Elm Grove Associates, Inc.,
dated as of October 5, 1999 (incorporated by reference to Exhibit 99.5
to the Registrant's Current Report on Form 8-K (File No. 0-14320),
dated October 5, 1999).
9.5 Voting Agreement between the Registrant and William L. Bennett, dated
as of October 5, 1999 (incorporated by reference to Exhibit 99.6 to
the Registrant's Current Report on Form 8-K (File No. 0-14320), dated
October 5, 1999).
9.6 Voting Agreement between the Registrant and Robert R. Parker, dated as
of October 5, 1999 (incorporated by reference to Exhibit 99.7 to the
Registrant's Current Report on Form 8-K (File No. 0-14320), dated
October 5, 1999).
10.1 Option Agreement between the Registrant and HealthPlan Services, dated
as of October 5, 1999 (incorporated by reference to Exhibit 9 to
HealthPlan Services' Schedule 13-D (File No. 1-13772), filed October
14, 1999).
23.1 Consent of Glenn W. Reed, Esq., Executive Vice President and General
Counsel of UICI (included in Exhibit 5.1). *
23.2 Consent of Ernst & Young LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Bear, Stearns & Co. Inc. (included in their opinion attached
as Appendix C)
23.5 Consent of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
(included in Exhibit 8.1). *
23.6 Consent of Gardner, Carton & Douglas (included in Exhibit 8.2). *
II-2
<PAGE>
24.1 Power of Attorney.
99.1 Form of Proxy of HealthPlan Services.
- -------------------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS
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 Securities and Exchange Act of 1934, as amended (the "Exchange
Act") (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to 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.
That, prior to any public reoffering of the securities registered hereunder
through use of a prospectus that is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
That every prospectus: (i) that is filed pursuant to the paragraph immediately
preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of
the Securities Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to this
Registration Statement and will not be used until such amendment is effective,
and that, for purposes 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 the time shall be deemed to be the initial bona fide offering
thereof.
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 foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the 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) 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.
II-3
<PAGE>
To respond to requests for information that is incorporated by reference into
the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request.
To supply, by means of a post-effective amendment, all information concerning a
transaction and the company being acquired involved therein that was not the
subject of and included in this Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on October 26, 1999.
UICI
By /s/ GREGORY T. MUTZ
- -------------------------------------
Gregory T. Mutz,
President and Chief Executive Officer
Date October 26, 1999
Pursuant to the requirements of Securities Exchange Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
<S> <C>
RONALD L. JENSEN* October 26, 1999
- -------------------------------------------------------
Ronald L. Jensen
Chairman of the Board and Director
GREGORY T. MUTZ* October 26, 1999
- -------------------------------------------------------
Gregory T. Mutz,
President, Chief Executive Officer and Director
RICHARD J. ESTELL* October 26, 1999
- -------------------------------------------------------
Richard J. Estell
Director and Executive Vice President
/s/ WILLIAM P. BENAC October 26, 1999
- -------------------------------------------------------
William P. Benac,
Executive Vice President (Chief Financial Officer)
/s/ VERNON R. WOELKE October 26, 1999
- -------------------------------------------------------
Vernon R. Woelke,
Treasurer (Chief Accounting Officer)
RICHARD T. MOCKLER* October 26, 1999
- -------------------------------------------------------
Richard T. Mockler,
Director
II-5
<PAGE>
GEORGE H. LANE, III* October 26, 1999
- -------------------------------------------------------
George H. Lane, III
Director
STUART D. BILTON* October 26, 1999
- -------------------------------------------------------
Stuart D. Bilton
Director
PATRICK J. MCLAUGHLIN* October 26, 1999
- -------------------------------------------------------
Patrick J. McLaughlin
Director
*By: /s/ GLENN W. REED October 26, 1999
- -------------------------------------------------------
Glenn W. Reed
(Attorney-in-Fact)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
5.1 Form of Opinion of Glenn W. Reed, Esq., Executive Vice President and
General Counsel of UICI, as to the legality of the securities being
registered.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Bear, Stearns & Co. Inc. (included in their opinion attached
as Appendix C).
24.1 Power of Attorney.
99.1 Form of Proxy of HealthPlan Services.
Exhibit 5.01
Form of Legal Opinion
October __, 1999
UICI
4001 McEwen, Suite 200
Dallas, Texas 75244
Ladies and Gentlemen:
I am Executive Vice President and General Counsel of UICI, a Delaware
corporation (the "Company"), and am issuing this opinion in connection with the
registration of ___________ shares of Common Stock, $0.01 par value per share,
of the Company (the "Shares"), to be issued by the Company pursuant to a
Registration Statement on Form S-4 (File No. 333-______) (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") to which this opinion appears as Exhibit 5.01.
I have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company and public
officials and such other documents as I have deemed relevant or necessary as the
basis of the opinion set forth below in this letter. In such examination, I have
assumed the genuineness of all signatures, the conformity to original documents
submitted as certified or photostatic copies, and the authenticity of originals
of such latter documents. Based on the foregoing, I am of the following opinion:
The Shares have been duly authorized and, when issued by the
Company in the manner contemplated in the Registration
Statement, will be validly issued, fully paid and
nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.01 to the
Registration Statement and the reference to me under the heading "Legal
Opinions" in the Proxy Statement/Prospectus constituting part of the
Registration Statement. In giving such consent, I do not thereby admit that I am
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission promulgated thereunder.
Sincerely,
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Proxy
Statement of HealthPlan Services Corporation that is made a part of the
Registration Statement (Form S-4) of UICI and to the incorporation by reference
therein of our report dated March 12, 1999, with respect to the consolidated
financial statements and schedules of UICI included in its Annual Report (Form
10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
- ----------------------------
ERNST & YOUNG LLP
Dallas, Texas
October 25, 1999
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of UICI of our report of HealthPlan Services Corporation
dated March 19, 1999 relating to the financial statements which appear in
HealthPlan Services Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the references to us under the headings
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- -----------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
October 25, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, UICI, a Delaware corporation (herein referred to as the
"Company"), intends to file with the Securities and Exchange Commission, under
the Securities Act of 1933, as amended, a Registration Statement on Form S-4
relating to the issuance and sale of additional shares of its Common Stock, par
value $0.01 per share, to be issued in connection with the acquisition of
HealthPlan Services Corporation; and
WHEREAS, each of the undersigned holds the office or offices in the
Company herein below set opposite his or her name, respectively.
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
Gregory T. Mutz and Glenn W. Reed, and each of them individually, his attorney
with full power to act for him and in his name, place and stead, to sign his
name in the capacity or capacities set forth below to the Company's Registration
Statement on form S-4 relating to the issuance and sale of additional shares of
the Company's Common Stock, par value $0.01 per share, to be issued in
connection with the acquisition of HealthPlan Services Corporation and to any
and all amendments (including post-effective amendments) to such Registration
Statement, and hereby ratifies and confirms all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
2nd day of October 1999.
Ronald L. Jensen, Chairman and Director /s/ RONALD L. JENSEN
-------------------------
Gregory T. Mutz, Director and President /s/ GREGORY T. MUTZ
and Chief Executive Officer -------------------------
Richard J. Estell, Director /s/ RICHARD J. ESTELL
-------------------------
Richard T. Mockler, Director /s/ RICHARD T. MOCKLER
-------------------------
Patrick J. McLaughlin, Director /s/ PATRICK J. MCLAUGHLIN
-------------------------
Stuart D. Bilton, Director /s/ STUART D. BILTON
-------------------------
George H. Lane, III, Director /s/ GEORGE H. LANE
-------------------------
EXHIBIT 99.1
FORM OF PROXY
HEALTHPLAN SERVICES
CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
HEALTHPLAN SERVICES CORPORATION
3501 FRONTAGE ROAD
TAMPA, FLORIDA 33607
DECEMBER 8, 1999
10:00 A.M.
- FOLD AND DETACH HERE -
HEALTHPLAN SERVICES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HEALTHPLAN SERVICES CORPORATION (THE "COMPANY").
The undersigned hereby constitutes and appoints James K. Murray, Jr. and
William L. Bennett, or either of them (each a "Designee"), attorneys, agents,
and proxies with power of substitution to vote all of the shares of the Company
that the undersigned is entitled to vote at the Special Meeting of Stockholders
to be held at the offices of HealthPlan Services Corporation, 3501 Frontage
Road, Tampa, Florida 33607, on December 8, 1999 at 10:00 a.m. local time, and
any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSAL SET
FORTH BELOW. IN THEIR DISCRETION THE DESIGNEES ARE ALSO AUTHORIZED TO VOTE UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, ANY MATTER WITH
RESPECT TO WHICH THE COMPANY HAS NOT RECEIVED NOTICE, AND MATTERS INCIDENT TO
THE CONDUCT OF THE MEETING.
Please mark your votes as indicated in this example. [X]
PROPOSAL 1
To consider and vote upon the Agreement and Plan of Merger, dated as of
October 5, 1999, among HealthPlan Services, UICI and UICI Acquisition Co.
and the merger of HealthPlan Services and UICI Acquisition Co.
contemplated thereby.
[ ] For [ ] AGAINST [ ] ABSTAIN
(SEE REVERSE SIDE)
- FOLD AND DETACH HERE -
<PAGE>
The undersigned acknowledges receipt of the Notice of the Special Meeting of
Stockholders and the Proxy Statement dated_____, 1999 and ratifies all actions
that the proxies or either of them or their substitutes may lawfully take or
cause to be taken by virtue hereof and revokes all former proxies.
Dated:__________________________, 1999
Signature:____________________________
Signature:____________________________
NOTE: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney or for an estate, trust, or
corporation, please give full title. Please return the signed card in
the enclosed envelope.
