<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
UICI
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
UICI
4001 MCEWEN DRIVE, SUITE 200
DALLAS, TEXAS 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1999
The Annual Meeting of the Stockholders of UICI (the "Company"), a
Delaware corporation, will be held at The Renaissance Dallas North Hotel, 4099
Valley View Lane, LBJ @ Midway, Dallas, Texas, on Wednesday, May 5, 1999 at
11:00 o'clock a.m., Central Daylight Time, for the following purposes:
1. To elect seven (7) directors of the Company to hold office
until the next annual meeting of stockholders and until their
respective successors are chosen and qualified.
2. To ratify the appointment of Ernst & Young LLP as independent
public accountants to audit the accounts of the Company for
the fiscal year ending December 31, 1999.
3. To approve an amendment to the Certificate of Incorporation to
increase the authorized shares of Common Stock.
4. To approve an amendment to the UICI 1987 Amended and Restated
Stock Option Plan.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed March 12, 1999 as the record date for
the meeting. Holders of the Company's Common Stock of record at the close of
business on such date will be entitled to notice of and to vote at such meeting
or any adjournment thereof. The stock transfer books will not be closed.
The Company will supply, upon written request and without charge, a
copy of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Requests for the report should be directed to Investor
Relations, UICI, 4001 McEwen Drive, Suite 200, Dallas, Texas 75244.
By order of the Board of Directors
Robert B. Vlach
Secretary
Date: March 31, 1999
--------------------
IMPORTANT
UNLESS YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN
AND MAIL THE ENCLOSED PROXY WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOUR PROMPT RESPONSE WILL ASSURE A QUORUM AT THE MEETING, SAVING YOUR
COMPANY THE EXPENSE OF FURTHER SOLICITATION OF PROXIES.
<PAGE> 3
UICI
4001 MCEWEN DRIVE, SUITE 200
DALLAS, TEXAS 75244
--------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
--------------------
This statement is furnished to the stockholders of UICI (the "Company")
in connection with the Board of Directors' solicitation of proxies to be used at
the Annual Meeting of Stockholders on May 5, 1999 at The Renaissance Dallas
North Hotel, 4099 Valley View Lane, LBJ @ Midway, Dallas, Texas, and at any
adjournment thereof. All proxies delivered pursuant to this solicitation are
revocable at the option of the person executing the same at any time before the
proxy is voted. Proxies in the form enclosed, unless previously revoked, will be
voted at the meeting. Where a choice or instruction is specified by the
stockholder thereon, the proxy will be voted in accordance with such
specification. Where a choice or instruction is not specified by such
stockholder, the proxy will be voted as recommended by the Board of Directors.
The Company's Common Stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol: UICI. The Company has applied for
listing on the New York Stock Exchange and expects to be listed and trading on
such Exchange by the date of the annual meeting under the symbol: UCI. This
proxy statement is being mailed on or about April 12, 1999 to stockholders of
record at the close of business on March 12, 1999, who are the only stockholders
entitled to receive notice of and to vote at the meeting. At March 12, 1999 the
Company had outstanding 46,230,941 shares of common stock. Each share of the
outstanding common stock is entitled to one vote. A simple majority of the total
shares outstanding is required to elect directors and ratify or approve the
other items being voted on at this time.
1. ELECTION OF DIRECTORS
The Board of Directors (the "Board") has fixed the number of directors
for the ensuing year at seven (7). At the meeting, it is intended that such
number of directors will be elected to hold office until the next Annual Meeting
of Stockholders and until their respective successors are chosen and qualified.
It is intended that the proxies will be voted to elect as directors the nominees
listed below. Although the Board does not anticipate that any of such nominees
will be unable to serve as a director, in the event of such occurrence, the
proxy holders shall have the right to vote for such substitute, if any, as the
present Board of Directors may designate.
NOMINEES
The following table sets forth the name and age of each nominee for
director, his principal occupation for the past five years, the year he became a
director of the Company, the number of shares of common stock of the Company
which he beneficially owned as of March 12, 1999 and the percentage of the
outstanding shares of common stock which that number of shares represents.
1
<PAGE> 4
<TABLE>
<CAPTION>
============================================================================================================
YEAR FIRST SHARES OF COMMON
NOMINEE, PRINCIPAL OCCUPATION, AGE AND ELECTED STOCK BENEFICIALLY PERCENT
DIRECTORSHIPS DIRECTOR OWNED 3/12/99 OF CLASS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RONALD L. JENSEN has served as Chairman of the Board of 1983 8,258,986(1) 17.9%
Directors and its predecessor Company since December
1983. Mr. Jensen served as President and Chief Executive
Officer ("CEO") of the Company from September 1997 to
January 1999, and in 1993 and 1994. Mr. Jensen is a
member of the Executive Committee of the Board of
Directors. Mr. Jensen has served as a Director and
President of Special Investment Risks, Inc. ("SIR") and
its predecessor company United Group Association, Inc.
("UGA") since 1984. Mr. Jensen has been a Director of
Excell Global Services, Inc. ("Excell") since January
1998 and owns a controlling interest. Mr. Jensen and
his five adult children own an interest in Avtel
Communications, Inc. ("AVTEL"). The AVTEL stock owned
by Mr. Jensen and three of his adult children is in an
irrevocable voting trust. Age: 68
RICHARD J. ESTELL has served as Executive Vice President 1989 110,188(2)(3) (4)
and Director of the Company since 1989. He is a member
of the Executive, Investment and Audit Committees of the
Board of Directors. Mr. Estell has served as Chairman of
the Board for Mid-West National Life Insurance Company of
Tennessee ("Mid-West") and The MEGA Life and Health
Insurance Company ("MEGA") and as President of MEGA since
1989. He has served as Chairman of the Board of The
Chesapeake Life Insurance Company ("Chesapeake") since
1991. He has also served as a Director and President of
National Managers Life Insurance Company, Inc. ("National
Managers") since 1992. He has served as a Director of
Fidelity First Insurance Company ("Fidelity") since
1997. Mr. Estell has served as a Director of Insurdata
Incorporated since July 1998.
Age: 53
RICHARD T. MOCKLER has served as a Director of the 1991 9,840 (4)
Company since 1991. Mr. Mockler is a member of the Audit
and Stock Option Committees of the Board of Directors.
Mr. Mockler retired as a partner with Ernst & Young, LLP,
CPAs, in 1989, after 27 years of service. He has served
as a member of the Board of Directors of Georgetown Rail
Equipment Company since 1994 and as Treasurer since
October 1996. Mr. Mockler served as a Director of Snead
Research Labs from 1995 until January 1998 and as
Treasurer from October 1996 until January 1998.
Age: 61
============================================================================================================
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
============================================================================================================
YEAR FIRST SHARES OF COMMON
NOMINEE, PRINCIPAL OCCUPATION, AGE AND ELECTED STOCK BENEFICIALLY PERCENT
DIRECTORSHIPS DIRECTOR OWNED 3/12/99 OF CLASS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GREGORY T. MUTZ has served as a Director, President and 1999 1,084,972(5) 2.3%
CEO of the Company since January 1999 and is a member of
the Executive Committee of the Board of Directors of the
Company. He has served as Chairman of the Board of Amli
Realty Co. since 1980, as Chairman of the Board of
Trustees of Amli Residential Properties Trust since 1994,
and as Chairman of Amli Commercial Properties Trust since
1997. Mr. Mutz also has served as Chairman of the Board
of Excell since 1997. He has been a Director of the
National Multifamily Housing Council since 1995 and a
Director of Alleghany/Chicago Trust since 1996. Mr. Mutz
also served as a Director of Baldwin & Lyons from 1978
until 1997 and as a Director of AVTEL from 1997 until
1998.
Age: 53
PATRICK J. MCLAUGHLIN has been Managing Director of -- 4,000 (4)
Emerald Capital Group, Ltd. since April 1993. He has
served as a Director of Universal American since January
1995.
Age: 41
STUART BILTON has been President and CEO of Chicago Trust -- -- --
Company since 1994. He also has served as President of
Alleghany Asset Management since January 1997 and as a
Director since 1994. Mr. Bilton has served as a
Director of Baldwin & Lyons, Inc. since 1987 and as
Chairman of Alleghany Funds since 1993.
Age: 52
GEORGE H. LANE, III has served as CEO of Lane Co. since -- -- --
June 1988. Mr. Lane also serves as a Trustee of
Westminster Schools, Atlanta, Georgia.
Age: 50
============================================================================================================
</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 ownership. Mr.
Jensen's adult children directly own in the aggregate approximately
5.7% 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 March 12, 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 10,890 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; 7,427 shares owned as custodian for his minor
children, 164 shares held in IRAs for two of his minor children, 200
shares owned as custodian for his minor stepchildren, 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 under the Company's 1996
Special Stock Option Plan, 12,000 options under the Company's 1998
Employee Stock Option Plan, and 200,000 options under the Company's
1987 Amended and Restated Stock Option Plan.
(6) Includes 23,826 options under the Company's 1998 Employee Stock Option
Plan.
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the name and address of each person known by
management to own beneficially five percent or more of the Company's common
stock as of March 12, 1999, the number of shares beneficially owned by such
person and the percent of the class so owned and the amount of common stock
beneficially owned by all directors and officers as a group and the percent of
the class so owned.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
TITLE OF CLASS NAME & ADDRESS OWNED OF CLASS
- -------------- -------------- ------------ --------
<S> <C> <C> <C>
Common Stock Ronald L. Jensen 8,258,986(1) 17.9%
4001 McEwen Dr., Suite 200
Dallas, TX 75244
Common Stock President and Fellows of 6,005,000 13.0%
Harvard College
c/o Harvard Management Co.
600 Atlantic Avenue
Boston, MA 02210
Common Stock FMR Corp. 3,611,500 7.8%
100 East Pratt Street
Baltimore, MD 21202
Common Stock Onward and Upward, Inc. 3,069,217 6.6%
2121 Precinct Line Road
Hurst, TX 76054
Common Stock All officers and directors 9,944,000(1)(2)(3)(5)(6) 21.5%
as a group (10 individuals)
</TABLE>
Notes refer to notes on prior page.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive and certain officers, and any persons holding more than ten percent of
the Company's common stock are required to report their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission (the "Commission") and, in the Company's case, the National
Association of Securities Dealers, Inc. Specific due dates for these reports
have been established and the Company is required to report in this proxy
statement any failure to file by these dates during 1998. All of these filing
requirements were satisfied by the Company's directors, officers and ten percent
holders. In making this statement, the Company has relied on the written
representations of its incumbent directors, officers and ten percent holders and
copies of the reports filed with the Commission.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors
of the Company met eight times and took action on other occasions by unanimous
consent of its members.
4
<PAGE> 7
The Audit Committee consists of three directors: namely, Richard J.
Estell, J. Michael Jaynes and Richard T. Mockler. The Committee held two
meetings during 1998. The Audit Committee recommends engagement of the
independent auditors, considers the fee arrangement and scope of the audit,
reviews the financial statements and the independent auditors' report, reviews
the activities and recommendations of the Company's internal financial and
accounting staff, considers comments made by the independent auditors with
respect to the Company's internal control structure, and reviews internal
accounting procedures and controls with the Company's financial and accounting
staff.
The Executive Committee consists of four directors: namely, Ronald L.
Jensen, Gregory T. Mutz, Richard J. Estell and Vernon R. Woelke. The Committee
met one time during 1998 and took action on numerous occasions by unanimous
consent of its members. The Executive Committee has all of the authority of the
full Board of Directors in the management of the business and affairs of the
Company.
The Investment Committee consists of three directors: namely, Richard
J. Estell, Vernon R. Woelke and Charles T. Prater, and two non-director members,
Mark D. Hauptman and Warren B. Idsal. The Committee met four times during 1998.
The Investment Committee oversees the Company's investments.
The Stock Option Plan Committee met twice during 1998 and took action
on other occasions by unanimous written consent of its members. Gary L. Friedman
has been a committee member since the last annual meeting and Richard T. Mockler
has been a committee member since January 1999. The Committee administers the
various Stock Option Plans of the Company.
The Company does not have a Nominating Committee. Board of Director
nominees are proposed by existing Board members and Company management.
COMPENSATION OF DIRECTORS
The directors of the Company are entitled to receive compensation for
each Board meeting and each Committee meeting attended. During 1998, Richard T.
Mockler received $1,500 for each Board meeting attended and $750 for each
Committee meeting attended as compensation for his services.
Beginning May 5, 1999, the outside directors of the Company will
receive an annual retainer of $3,000, plus $3,000 for each Board meeting
attended. The outside directors may elect to receive UICI stock, in whole or in
part, in lieu of cash, at a 15% discount to the market price. Each outside
director must elect either the stock or the cash option at the Board meeting
following the annual meeting of the shareholders. Any shares received by the
director under this stock purchase incentive program must be held for a period
of two years.
Also beginning May 5, 1999, each outside director is entitled to
participate in an incentive compensation program and may select one of two
programs. Each participating outside director may purchase up to $50,000 worth
of UICI stock at a 15% discount and receive an option to purchase a like
number of UICI shares at market value. Alternatively, each outside director may
purchase up to $50,000 worth of UICI stock at full market price by paying $3.00
per share in cash and executing a five-year note in favor of the Company for the
balance of the purchase price, with interest thereon equal to the greater of the
Applicable Federal Rate or 5% per annum, payable quarterly. In addition, each
outside director will receive an option to purchase a like number of UICI shares
at market value. Any options granted under this program will be governed by the
UICI 1987 Amended and Restated Stock Option Plan.
5
<PAGE> 8
EXECUTIVE COMPENSATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors is not directly involved in the executive
compensation policies of the Company. Mr. Jensen performs the duties of the
compensation committee and informs the Board of Directors of the proposed
compensation for the executive officers of the Company. The factors considered
by Mr. Jensen include the individual's contribution to the long-term financial
goals of the Company, his perception of the individual's potential to contribute
to the future of the Company, planned or actual changes in functional
responsibility, and other factors which he considers important.
Submitted by the Company's Board of Directors:
Ronald L. Jensen Gary L. Friedman
Richard J. Estell J. Michael Jaynes
Richard T. Mockler Vernon R. Woelke
Gregory T. Mutz Charles T. Prater
The table below discloses compensation information for the CEO and the
four other most highly compensated executive officers for services rendered in
all capacities during the fiscal years ended December 31, 1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards All Other
Annual Compensation ----------------------------------- Compen-
Name and Principal --------------------- Restricted Stock Securities sation
Position Year Salary($) Bonus($) Awards(a)($) Underlying Options (b)(d)($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Jensen, 1998 1 -- -- -- --
President & CEO and 1997 1 -- -- -- --
Director(c) 1996 1 -- -- -- --
Richard J. Estell, 1998 300,962 161,533 -- 10,890 11,600
Executive Vice 1997 223,078 273,001 -- -- 12,012
President and Director 1996 200,000 516,838 -- -- 9,000
Charles T. Prater, 1998 148,385 105,594 -- 6,000 11,600
Vice President and 1997 119,995 199,323 -- -- 8,788
Director 1996 119,995 109,971 -- -- 8,111
Warren B. Idsal, 1998 138,923 -- -- 4,592 6,126
Vice President and 1997 -- -- -- -- --
Chief Financial
Officer(e) 1996 -- -- -- -- --
Robert B. Vlach, Vice 1998 132,923 20,594 -- 5,034 10,837
President, Secretary 1997 120,769 10,443 -- -- 9,873
and General Counsel 1996 115,000 24,970 -- -- 8,309
</TABLE>
6
<PAGE> 9
Footnotes
(a) This column shows the market value of restricted stock issued on date
of grant less amount paid, if any, by the individuals listed in the
table. Dividends are paid, if any, to holders with respect to
restricted stock at the same rate paid to all stockholders. The
aggregate holdings/value of restricted stock, less amount paid, if any,
on December 31, 1998 by the individuals listed in this table, are:
Charles T. Prater, 6,400 shares/$220,800.
(b) Includes Company contributions to its Employee Stock Ownership and
Savings Plan.
(c) Ronald L. Jensen resigned his positions as President and CEO effective
January 28, 1999. Mr. Mutz was elected to these positions effective
January 28, 1999 to fill the vacancies created by Mr. Jensen's
resignation.
(d) Includes funds contributed by the Company into its Medical Savings
Account Health Insurance Plan.
(e) Warren B. Idsal joined the Company effective March 1, 1998 and the
salary shown in the compensation table is for the period he was
employed.
Notes refer to prior table.
1998 STOCK OPTIONS
The following table summarizes options granted to the named executive
officers during 1998, along with the present value of such options on the date
they were granted, calculated as described in the footnote to the table.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Exercise
Underlying Options Granted of Base Grant Date
Options To Employees Price Expiration Present
Name Granted(#) In Fiscal Year ($/Sh) Date Value(1,2)($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gregory T. Mutz 12,000 0.1% 15.00 08/15/2002 70,440
200,000 2.4% 19.50 12/03/2003 1,748,000
Richard J. Estell 10,890 0.1% 15.00 08/15/2002 63,924
Charles T. Prater 6,000 0.1% 15.00 08/15/2002 35,220
Warren B. Idsal 4,592 0.1% 15.00 08/15/2002 26,955
Robert B. Vlach 5,034 0.1% 15.00 08/15/2002 29,550
</TABLE>
(1) Based on the Black-Scholes option valuation model with the $15.00 option
price. The key input variables used in valuing the options were: risk free
interest rate, 5.19%; dividend yield, 0.00%; stock price volatility, 0.377;
option term, four years. The volatility variable reflected weekly stock
price trading data from August 19, 1994 through August 14, 1998. An
adjustment was made for the risk of forfeiture during the vesting period.
The actual value, if any, that a grantee may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so there is no assurance the value realized will be at or near
the value estimated by the Black-Scholes model.
(2) Based on the Black-Scholes option valuation model with the $19.50 option
price. The key input variables used in valuing the options were: risk free
interest rate, 5.19%; dividend yield, 0.00%; stock price volatility, 0.427;
option term, five years. The volatility variable reflected weekly stock
price trading data from December 2, 1994 through December 4, 1998. An
adjustment was made for the risk of forfeiture during the vesting period.
The actual value, if any, that a grantee may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so there is no assurance the value realized will be at or near
the value estimated by the Black-Scholes model.
7
<PAGE> 10
The following table summarizes for each of the named executive officers
the total number of unexercised stock options held at December 31,1998, and the
aggregate dollar value of in-the-money, unexercised stock options held at
December 31,1998.
AGGREGATED STOCK OPTION EXERCISES
IN 1998 AND YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Stock
Shares Stock Options at Year End(#) Options at Year End($)(a)
Acquired on Value ---------------------------------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gregory T. Mutz -- -- 20,937 212,000 252,710 2,014,000
Richard J. Estell -- -- 10,890 -- 103,455
Charles T. Prater -- -- 6,000 -- 57,000
Warren B. Idsal -- -- 4,592 -- 43,624
Robert B. Vlach -- -- 5,034 -- 47,823
</TABLE>
(a) The closing stock price at December 31, 1998 was $ 24.50.
8
<PAGE> 11
[FIVE-YEAR PERFORMANCE COMPARISON GRAPH]
THE GRAPH BELOW DEMONSTRATES A COMPARISON OF CUMULATIVE TOTAL RETURNS FOR THE
COMPANY AS COMPARED WITH THE NASDAQ STOCK MARKET INDEX AND THE NASDAQ INSURANCE
STOCK INDEX.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
UICI 100 133 296 510 547 384
NASDAQ STOCK MARKET INDEX 100 98 138 170 209 293
NASDAQ INSURANCE STOCKS INDEX 100 94 134 152 224 199
</TABLE>
ASSUMES $100 INVESTED ON DECEMBER 31, 1993 IN UICI COMMON STOCK, THE NASDAQ
STOCK MARKET INDEX, AND THE NASDAQ INSURANCE STOCK INDEX.
9
<PAGE> 12
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
The Company has an Employee Stock Ownership and Savings Plan which
permits the Company to make contributions on behalf of eligible employees either
in the form of Shares of the Company or in cash which is invested in such
Shares, thereby increasing the employees' ownership in the Company. Shares
contributed to the Plan or purchased with the Company's contributions are
allocated to the participant's account on a monthly basis and forfeitures are
allocated to employees who are participants on the last day of the Plan Year
based upon the ratio of each participant's annual credited compensation (up to
$40,000) to the total annual credited compensation of all participants entitled
to share in such contributions for such Plan Year. Each participant's vested
interest in the Plan is at all times nonforfeitable and is distributable only
upon hardship withdrawal, death, or termination of employment.
EMPLOYEE STOCK OPTION PLAN
UICI has a stock option plan which provides options on 1,600,000 shares
of Common Stock for granting to officers, key employees and certain eligible
non-employees at fair market value at the date of grant. Under this plan, in
December 1998, the Company issued 200,000 options at an option price of $19.50
to Mr. Mutz.
In connection with the acquisition of Amli Realty Co. ("ARC") in
November 1996, the Company established the 1996 Special Stock Option Plan. At
December 31, 1998, the total number of options outstanding under the plan was
60,591.
In August 1998, the Company granted agents and employees of the Company
8.1 million stock options at an exercise price of $15. The options vest 20% each
year beginning August 15, 1999 through August 15, 2001, and 40% on August 15,
2002. All options that are not vested when an agent or employee leaves the
Company will be forfeited. At December 31, 1998 the total number of options
outstanding under the plan was 5.9 million.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The primary purpose for establishing the Company was to provide a
vehicle for agents and employees to accumulate wealth through ownership of the
Company they help build. The first step to accomplish this goal was the
establishment of a coinsurance agreement between AEGON and the Company to
coinsure business written by United Group Association, Inc. ("UGA"), which is
owned by Ronald L. Jensen, the founder and Chairman of the Board of the Company.
UGA had previously entered into a general agency contract with AEGON under which
it received commissions from AEGON and under which it had the right to coinsure
a portion of the insurance policies it sold. The Company has had numerous other
transactions with Mr. Jensen, UGA, and other companies owned or partially owned
by Mr. Jensen, hereinafter collectively referred to as "RJ".
The Company has also had transactions with the five adult children of
Mr. Jensen and companies they own, primarily Onward and Upward, Inc.,
hereinafter collectively referred to as "Onward".
From the Company's inception through 1996, RJ sold health insurance
policies that were issued by AEGON and coinsured by the Company or issued
directly by the Company. The commissions paid to RJ on the policies issued by
AEGON were based on commission rates negotiated and agreed to by AEGON and RJ.
The Company expenses its proportionate share of these commissions. The
commission rates on the policies issued directly by the Company are similar to
the rates on the coinsured policies. RJ received insurance commissions of $20.9
million on the coinsured policies and $4.7 million on the direct policies in
1998.
During 1995, the Company and RJ entered into an agreement whereby the
Company receives a 20% interest in the profits or losses relating to certain
lead activities of RJ. The Company had profits of $600,000 in 1998 on these
activities.
During 1993, the Company entered into an agreement with RJ to
participate in an interest in a company which has developed a paperless claims
system. The Company has written off its investment of $6.1 million over the
past four years. In 1998, the Company did not participate in any additional
investments in the paperless claims system.
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During 1998, the Company sold its interest in two subsidiaries to RJ
for a price equal to the net book value of the tangible assets totaling $5.4
million. During 1998, while it was still owned by the Company, RJ loaned one of
the subsidiaries $100,000 which was used for operations.
In November 1994, the Company extended a $10.0 million line of credit
to RJ. The terms of the line of credit were renegotiated in 1997 so that
additional collateral was added and the interest rate decreased to prime from
prime plus four percent (4%), maturing December 31, 1998 instead of September
30, 1998. The line of credit was collateralized by certain common stock. RJ
repaid $2.5 million in 1997 and the remaining balance of $7.5 million in May of
1998.
The Company acquired a 15.9% interest in its subsidiary, The Chesapeake
Life Insurance Company, from Onward for a price of $4.5 million. The purchase
price was based on a predetermined formula which approximated GAAP book value.
Onward is a minority interest owner in one other subsidiary of the Company in
which Onward has granted the Company a right of first refusal to purchase the
interest at a predetermined formula price. Onward also has the right to require
the Company to purchase its ownership interest at the same formula price.
In 1998, the Company acquired a 90% interest in an entity owned by
Onward for a total price of $236,000, which approximated the net book value of
the assets as of the purchase date.
Prior to July 1, 1998, Onward generated sales leads for the agents of
the Company. Prior to January 1, 1997 these leads were provided by RJ. The
Company paid $7.5 million for the leads in 1998. In 1998, the Company purchased
the assets of the company that generated the sales leads for a purchase price of
$2.8 million.
RJ and Onward own an interest in AVTEL, a telephone company. The
Company paid $2.4 million to AVTEL for long distance telephone services rendered
in 1998 and received a reimbursement payment of $114,000 in connection with such
services.
In 1995, RJ acquired a bank in South Dakota ("Richland") which was
utilized by the Credit Services Division of the Company to issue credit cards
prior to the formation of United Credit National Bank, a credit card bank wholly
owned by the Company. During 1998, the Credit Services Division paid $176,000
and received $585,000 from Richland for services performed in connection with
processing credit cards and also borrowed $666,000 from Richland at interest
rates ranging from 9.0% to 9.25%, of which $497,000 was outstanding at December
31, 1998. The proceeds were used for equipment purchases.
During 1998, Richland also originated student loans for Educational
Finance Group, Inc. ("EFG") and received an origination fee as lender. Richland
originated $21.6 million in student loans in 1998 and received $66,960 in
origination fees. During 1998, Richland sold $20.7 million of loans to EFG at no
gain.
Onward owns interests in various entities that provide printing, audio
visual, or processing services. The Company paid $875,000 in 1998 and received
$716,000 reimbursement for certain expenses from such entities.
The Company provides data processing services and certain
administrative services to a company owned by RJ that administers claims. The
Company received fees of $9.2 million in 1998 and paid $68,700 for certain
processing services performed by this claims administrator. During 1998, the
Company loaned $ 910,000 to this company and was repaid in 1998 with interest
at prime plus two.
In January 1999, Gregory T. Mutz was elected President and Chief
Executive Officer of the Company. Mr. Mutz will continue to serve as Chairman of
the Board of AMLI Residential Properties Trust, a REIT traded on the NYSE
("AML"). The Company has a 12% interest in AML. As Chairman of the Board of AML,
Mr. Mutz received certain compensation and has various options and deferred
compensation programs in which he is a participant, all of which are set out in
the AML proxy statement. In addition, as of December 31, 1998, AML had loaned
Mr. Mutz $2.1 million on a recourse and secured basis, to purchase 85,345
shares of AML. Mr. Mutz is also Chairman of the Board of AMLI Commercial
Properties Trust ("ACPT"), a private REIT in which the Company has a 20%
interest. Mr. Mutz owns stock, directly and indirectly in ("ACPT"), and owes
ACPT $200,000 which was used to purchase stock in ACPT. At December 31, 1998,
Mr. Mutz owed the Company and a subsidiary $3.7 million. The highest amount owed
during 1998 was $4.0 million. The funds were used to purchase shares in the
Company and a subsidiary. The amount outstanding at March 12, 1999 was $ 3.3
million, bears interest at the rate of 5% per annum, payable quarterly, has a 6
year term, and is full recourse and secured by 200,000 shares of UICI stock.
The Company receives investment management services from external
professionals. Patrick J. McLaughlin, managing director of Emerald Capital
Group, Ltd., and Stuart Bilton, President and CEO
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<PAGE> 14
of Chicago Trust Company, are being nominated as directors for the Company.
Emerald Capital Group, Ltd. and Chicago Trust Company received fees of $373,400
and $127,100, respectively, in 1998 for such services.
In 1996, the Company invested $4 million in exchange for a 100% Class A
and a 40% Class B membership interest in Cash Delivery Systems, LLC ("CDS"),
formerly known as Sun Network Technologies ("SNT"). The remaining 60% Class B
membership interest was owned by Sun Communications, Inc. ("Sun"). At the time
of the Company's investment, CDS was in the business of owning and placing
automated teller machines ("ATMs") and processing ATM transactions. In
connection with the Company's investment in CDS, RJ executed an agreement in
which RJ agreed to indemnify the Company for any loss or reduction in value of
the Company's Class A membership contribution and granted an option to the
Company to put the Class A membership interest to RJ for $4 million. CDS and RJ
then invested $80,000 and $20,000 in Sun Tech Processing Systems, LLC ("STP") in
exchange for an 80% and 20% membership interest, respectively. In addition, RJ
agreed to enter into an agreement to loan up to $6 million to STP, secured by
all property acquired with the funds loaned.
Effective December 31, 1996, the Company contemporaneously completed
several transactions involving the Company, RJ, Sun, CDS and STP. First, CDS and
RJ withdrew their membership contributions from STP and the debt agreement was
canceled. Second, the Company and Sun were issued new Class B membership
interests in STP of 80% and 20%, respectively. Third, the Company invested an
additional $2 million in STP in exchange for a 100% Class A membership interest.
Fourth, CDS transferred its ATM transaction processing business to STP as agreed
to by all parties to the agreement. Fifth, the Company sold its entire Class A
and Class B membership interests in CDS to RJ for $854,000 as agreed to by all
parties to the agreement, which represented the net book value of CDS before the
transfer of the ATM transaction processing business to STP. In addition, RJ
agreed to return to the Company any return on investment of the Class A
membership interest in CDS in excess of $854,000 that he would receive, after
repayment of his loans to CDS.
The transactions described above are governed by an agreement by and
among the Company, RJ, Sun, CDS and STP dated in March 1997 (the "March 1997
Agreement"), which provides that (i) there will be no distributions to Class B
members of STP or CDS until all Class A preferred interests in both STP and CDS
have been paid or redeemed in full and (ii) should funds be available to any
parties from either STP or CDS, such funds will be loaned to the other company
until the preferred interests are retired. The Regulations of both STP and CDS
further require the payment of all outstanding debt before any members receive a
distribution upon liquidation. In connection with the above transactions, RJ
made secured and unsecured loans of approximately $12 million to CDS. After the
sale of CDS's ATMs and use of the proceeds to repay these loans in part,
approximately $6.2 million of RJ's loans to CDS remained outstanding as of
December 31, 1998. These loans bear interest at an annual rate of 2.5% plus the
prime rate, payable monthly, and have a maturity date of July 1, 2001.
In February 1998, the assets of STP were sold to an unrelated party for
$17.5 million and the Company has recognized, in 1998, a gain in the total
amount of $9.7 million. Consistent with its understanding of the March 1997
Agreement, the Company recorded a gain of $2.3 million in the first quarter of
1998, representing the distribution due to its Class A and Class B interests in
STP after funds were advanced to CDS to retire RJ's debt and redeem his Class A
interest in CDS. In April 1998, Sun filed certain claims in District Court in
Dallas County, Texas concerning the distribution of the proceeds from the sale
of the assets. The core issue was whether the provisions of the March 1997
Agreement would require that STP make a loan or advance to CDS out of the
proceeds of the sale so that CDS could repay the loans made by RJ to CDS and
could redeem RJ's Class A preferred membership interest in CDS. A liquidator was
appointed to rule on the proper distribution based upon the interpretation of
the March 1997 Agreement among the Company, RJ and the minority shareholder. The
liquidator ruled that the proceeds should be distributed differently than had
previously been determined by the Company in the first quarter of 1998.
The net effect of any loan or advance to CDS would be to reduce the
funds available for STP to distribute to the Company and Sun. In order to
eliminate any possible conflict between the Company and RJ, the Company and RJ
reached an agreement effective June 30, 1998 in which RJ agreed to decrease the
amount of his proceeds from the sale of the assets of STP, and increase the
amount of the Company's proceeds, by an amount equal to the shortfall, if any,
between the amount that would be awarded to the Company based on Sun's reading
of the March 1997 Agreement and the amount awarded to the Company in the final
outcome of the litigation.
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<PAGE> 15
The District Court ruled in December 1998 that, as a matter of law, the
March 1997 Agreement should be read in the manner urged by Sun and consistent
with the liquidator's previous ruling and entered the judgment directing
distribution of the proceeds in the manner urged by Sun which included an
additional $1.7 million in attorney's fees which could be increased to $2.1
million under certain circumstances. RJ has filed a notice of appeal in his
personal capacity as a party to the agreement but has not determined whether or
how he will proceed with that appeal. The Company has filed a notice of appeal
and is considering whether to raise as issues the amount of attorney's fees to
be paid to Sun and other issues ruled on by the court. However, the Company does
not intend to directly appeal the District Court's ruling with regard to the
distribution of the proceeds. The Company believes it is probable that the
outcome of the appeal and or potential settlement, if any, will not materially
affect the distribution of the proceeds to the Company as contained in the
final judgment of the District Court.
2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors reappointed the firm of Ernst & Young LLP as the
Company's independent auditors to audit the financial statements of the Company
for the fiscal year ending December 31, 1999. In recommending ratification by
the stockholders of the appointment of Ernst & Young LLP, the Board of Directors
has satisfied itself as to that firm's professional competence and standing.
Representatives of Ernst & Young LLP are not expected to be present at the
Annual Meeting.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THE
STOCKHOLDERS VOTE "FOR" THIS RATIFICATION.
3. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of 50,000,000 shares of Common Stock, $0.01 par value and 10,000,000
shares of Preferred Stock, $0.01 par value. As of March 12, 1999, 46,230,941
shares of Common Stock were issued and outstanding. As of December 31, 1998,
the Company had outstanding options of 6,187,550. There are no shares of
Preferred Stock outstanding.
Because of the limited number of shares of Common Stock remaining to be
issued, on February 10, 1999, the Board of Directors declared it advisable that
the Certificate of Incorporation of the Company be amended, subject to approval
by the stockholders, to increase the authorized shares of Common Stock from
50,000,000 shares to 100,000,000 shares. If a majority of the Stockholders vote
in favor of the increase in the authorized shares of Common Stock, the first
paragraph of Article Four of the Certificate of Incorporation will be amended to
read as follows:
"ARTICLE IV
"The Company is authorized to issue two classes of stock to be
designated, respectively, 'Common Stock' and 'Preferred Stock'. The
total number of shares which the Company is authorized to issue is One
Hundred Ten Million (110,000,000), consisting of One Hundred Million
(100,000,000) shares of Common Stock with a par value of One Cent
($0.01) per share and Ten Million (10,000,000) shares of Preferred
Stock with a par value of One Cent ($0.01) per share."
The Board of Directors' resolutions proposing the amendment to Article
Four of the Certificate of Incorporation authorize the Board of Directors to
abandon the proposed amendment at any time prior to filing of the Certificate of
Amendment with the State of Delaware, notwithstanding the adoption of the
proposed amendment by the stockholders. The Board of Directors does not
presently foresee any circumstances that would cause the Board to abandon the
proposed amendment to Article Four of the Certificate of Incorporation.
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<PAGE> 16
The Board of Directors believes it is desirable to have the additional
shares of Common Stock that would be authorized by the proposed amendment
available for issuance in connection with possible future financing
transactions, acquisitions of other companies or business properties, stock
dividends or stock splits, employee benefit plans and proper corporate purposes.
Having such additional authorized shares available will give the Company greater
flexibility by permitting such shares to be issued without the expense and delay
of a special meeting of stockholders. Such a delay might deprive the Company of
the flexibility the Board views as important in facilitating the effective use
of the Company's shares. The Board does not have any current plans to issue any
of the additional shares for the purpose of a merger, consolidation, acquisition
or for any similar matters.
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. The holders
of the Common Stock do not presently have pre-emptive rights to subscribe for
any of the Company's securities and will not have any such rights to subscribe
for the additional Common Stock proposed to be authorized.
The affirmative vote of a majority of the outstanding shares of Common
Stock is needed to approve the proposed amendment to the Company's Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE "FOR" ADOPTION
OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
COMPANY'S AUTHORIZED COMMON STOCK AS DESCRIBED ABOVE, AND YOUR PROXY WILL BE SO
VOTED UNLESS YOU SPECIFY OTHERWISE.
4. PROPOSAL TO AMEND STOCK OPTION PLAN
On March 16, 1999, the Board of Directors, upon recommendation of the
Stock Option Committee, voted to amend the Company's 1987 Amended and Restated
Stock Option Plan (the Plan) to set a maximum number of options which may be
granted to an optionee; to provide for accelerated exercisability in the event
of any change in control; and to extend the time for exercise of options in the
event of permanent disability or death from the earlier of the expiration date
of the options or 90 days after the event to within 365 days after the event.
The amendment also decreased the number of members of the Stock Option Committee
from three or more to two or more, specifically requiring that such Committee
members be "outside directors" as that term is defined in Treasury Regulation
Section 1.162-27, and "disinterested persons" as defined in SEC Rule 16b-3(c)
(2)(i), whichever is more stringent.
The amendment to the Plan by its terms is subject to approval by the
Company's stockholders. A copy of the Plan as amended is attached hereto, and
incorporated into, this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL.
5. OTHER MATTERS
As of the date of this proxy statement, the Board of Directors is not
informed of any matters, other than those stated above, that may be brought
before the meeting. However, if any matter not known is presented at the
meeting, it is the intention of the persons named in the accompanying form of
proxy to vote with respect to any such matters in accordance with their best
judgment.
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<PAGE> 17
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders to be held in 2000 must be received by the Company no
later than January 5, 2000 for inclusion in the Company's Proxy Statement and
form of proxy relating to that Annual Meeting.
EXPENSES OF SOLICITATION
The Company will bear the cost of solicitation of proxies. The
solicitation of proxies by mail may be followed by telephoning or other personal
solicitation of certain stockholders and brokers by some officers or other
employees of the Company. The Company will request banks and brokers or other
similar agents or fiduciaries to transmit the proxy material to the beneficial
owners for their voting instructions and will reimburse them for their
reasonable expenses in so doing.
By Order of the Board of Directors
Robert B. Vlach, Secretary
Date: April 12, 1999
----------
IT IS URGED THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY.
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<PAGE> 18
UICI
RESTATED AND AMENDED
1987 STOCK OPTION PLAN
(NON-QUALIFIED)
1. PURPOSE OF PLAN
The purpose of the UICI 1987 Stock Option Plan originally
established the 3rd day of December, 1987, as amended and restated the
28th day of January, 1989, as further amended and restated the 28th day
of February, 1991, and as further amended and restated the 16th day of
March, 1999 (the "Plan"), is (a) to aid UICI (the "Company") in
securing and retaining individuals of outstanding ability, including
key personnel who are or may be employed by the Company or its
subsidiaries, non-employee Directors of the Company or its
subsidiaries, and non-employee individuals who contribute to the
success and growth of the Company by the performance of past, present
or future services to the Company and/or its subsidiaries; and (b) to
provide additional motivation to such persons to exert their best
efforts on behalf of the Company. The Company expects that it will
benefit from the added interest which such persons will have in the
welfare of the Company as a result of their ownership or increased
ownership of the Company's Common Stock.
2. STOCK SUBJECT TO THE PLAN
The total number of shares of Common Stock of the Company as
of March 16, 1999 for which options are to be granted under the Plan is
four million (4,000,000) shares, which may consist, in whole or in
part, of unissued shares or treasury shares. Any option granted
hereunder, or portion thereof, shall be forfeited to the extent that it
fails by its terms to become exercisable or is not otherwise exercised
before its expiration. If a participant forfeits options under the
terms of the Plan, then the shares reserved for such forfeited options
shall revert to the Plan and be available to be issued again.
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<PAGE> 19
3. ADMINISTRATION
The Stock Option Committee appointed by the Board of Directors
of the Company (the "Committee") shall have two or more members
selected from time to time by the Board of Directors, all of whom shall
be "outside directors" as that term is defined in Treasury Regulation
Section 1.162-27, and "disinterested persons" as defined in SEC Rule
16b-3(c)(2)(i), whichever is the more stringent. The Committee shall
have the sole authority, consistent with the Plan, to determine the
provisions of the options to be granted, to interpret the Plan and the
options granted under the Plan, to adopt, amend and rescind rules and
regulations for the administration of the Plan, and generally to
administer the Plan and to make all determinations in connection
therewith which may be necessary or advisable, and all such actions of
the Committee shall be binding upon all participants. The Committee
shall have the sole authority to name new optionees and to grant shares
to any optionees, including increasing the number of shares available
to any existing optionee, as the Committee in its sole discretion deems
appropriate.
Committee decisions and selections shall be made by a majority
of the members present at a meeting at which a quorum is present, and
shall be final. Any decision or selection reduced to writing and signed
by the Chairman of the Committee on behalf of all of the members of the
Committee reflecting its decision shall be as fully effective as if it
had been made at a meeting duly held.
4. ELIGIBILITY
Each option is granted in consideration of each optionee:
(i) being or agreeing to become an employee, officer or
director of the Company and/or its subsidiaries; or
(ii) being or agreeing to become a non-employee director
of the Company and/or its subsidiaries, excluding
members of the Committee while serving on the
Committee; and
(iii) performing or agreeing to perform services, on a
non-employee or independent contract basis, for or on
behalf of the Company and/or its subsidiaries.
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<PAGE> 20
The persons who shall receive options under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among
those eligible, and the Committee shall determine, in its sole
discretion, the number of shares to be covered by the option or options
granted to each such optionee selected.
5. TERMS AND CONDITIONS OF STOCK OPTIONS
All options granted under this Plan shall be subject to all
the applicable provisions of the Plan, including the following terms
and conditions, and to such other terms and conditions not inconsistent
therewith as the Committee shall determine:
(a) Maximum Shares Per Optionee. The maximum number of
options that may be granted to any one eligible
optionee shall be limited to seven hundred fifty
thousand (750,000). The maximum number shall include
all options previously issued, outstanding, cancelled
and reissued, exercised, or expired.
(b) Option Price. The option price shall be the closing
price at which the Common Stock of the Company traded
on the date the option was granted. If the stock was
not traded on the date the option was granted, then
the option price shall be determined by using the
closing price for the stock on the last trading date
preceding the date the option was granted.
(c) When Options Expire. No option shall be exercisable
after the Expiration Date, except as provided in
paragraph (h) below. The Expiration Date shall be the
thirtieth (30th) day following the fifth (5th)
anniversary of the date the option is granted.
(d) When Options Become Exercisable. Each option shall be
exercisable: (i) twenty percent (20%) after twelve
months from the date of the granting of the option,
and an additional twenty percent (20%) after each
twelve (12) month period thereafter, except as
otherwise provided in (h) below; or (ii) sooner, at
the discretion of the Committee. Thus, each option,
to the extent not previously exercised, would be one
hundred percent (100%) exercisable on the fifth (5th)
anniversary date of the granting of the option.
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<PAGE> 21
(e) How Options are Exercised. Each option shall be
exercised by giving written notice to the Company
specifying the number of shares to be purchased and
accompanied by payment as described in (e) below. No
optionee shall have any rights to dividends or other
rights of a stockholder with respect to shares
subject to the option until written notice of
exercise of the option has been given to the Company,
and payment in full for such shares has been made.
(f) Payment Upon Exercise of Options. Upon exercise of an
option, the option price for the shares to be
purchased shall be paid for, at the election of the
optionee:
(1) In cash;
(2) By retendering to the Company a sufficient
number of shares so optioned or other shares
of Common Stock of the Company, to produce a
fair market value (calculated at the closing
price at which the Company's Common Stock
traded on such date) equal to the total
exercise price;
(3) By a loan from the Company to the optionee
for the amount of the total exercise price.
The terms of the note or loan agreement
shall be determined by the Committee,
interest shall not exceed prime plus 1% at
the time of the loan, and the principal and
interest shall not be due thereunder until
at least the end of the twelfth (12th) month
after the date of the loan or one (1) month
after termination of employment, whichever
is earlier; or
(4) By any combination of the above.
(g) Retender or Withholding for Income Tax Liability. The
optionee may also retender to the Company a number of
the optioned shares sufficient to pay the optionee's
income tax liability arising from the exercise of an
option. The optionee may retender an amount of shares
equal in value to the income tax withholding
liability or the optionee's marginal income tax rate
liability, if higher, resulting from the exercise,
whichever the optionee chooses. If an optionee
chooses not to retender shares for such tax liability
and if the Company is subject to income tax
withholding liability for such exercise, the
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<PAGE> 22
Company may withhold an amount of shares equal in
value to such liability or may otherwise require the
optionee to pay or indemnify the Company for such
liability as the Committee may determine.
(h) Accelerated Exercisability Upon Certain Events.
(1) Permanent Disability. If prior to the
Expiration Date an optionee becomes
permanently disabled, the options, to the
extent not previously exercised, shall
immediately become 100% exercisable. Such
options may thereafter be exercised in full
at any time within three hundred sixty-five
(365) days after the date of such date of
permanent disability.
(2) Death. If prior to the Expiration Date an
optionee shall die, the options, to the
extent not previously exercised, shall
immediately become 100% exercisable. Such
options may thereafter be exercised in full
by the legal representative of the estate or
by the legatee of the optionee under a last
will at any time within three hundred
sixty-five (365) days after the date of the
optionee's death.
(3) Change of Control. In the event of a change
of control of the Company, the options, to
the extent not previously exercised, shall
immediately become 100% exercisable. For
purposes herein, change of control is
defined as any person (or any person and
affiliates of such person), other than
Ronald L. Jensen, his spouse, his adult
children, or any trust controlled by such
persons, acquiring the beneficial ownership,
directly or indirectly, of more than 25% of
the Company's outstanding voting stock.
(4) Retirement. If an optionee retires as an
employee of the Company, having reached the
age of at least sixty-five (65) and having
been an employee of the Company for not less
than ten (10) years, then the options, to
the extent not previously exercised, shall
immediately become 100% exercisable. Such
options may thereafter be exercised in full
within ninety (90) days of the date of the
optionee's retirement date.
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<PAGE> 23
(5) Termination for any Other Reason. If an
optionee who is an employee, officer or
director of the Company and/or its
subsidiaries terminates employment for any
reason other than death or permanent
disability, or if a non-employee director of
the Company and/or its subsidiaries ceases
to be a director of such company for any
reason other than death or permanent
disability, or other non-employee optionee
ceases to perform services for or on behalf
of the Company for any reason other than
death or permanent disability, the
unexercised options may thereafter be
exercised the earlier of ninety (90) days
after the date of such termination or
cessation, or the Expiration Date, but only
to the extent they were exercisable at the
time of such termination.
However, in the event of termination of
employment or cessation of association for
any reason other than death or permanent
disability, the Committee, in its sole and
absolute discretion, may determine that
options previously granted shall not expire
and be forfeited for reason of such
termination of employment or cessation of
association, but shall continue to be
exercisable as set forth in this paragraph
5. The Committee may take into account, on
an individual basis as to each optionee, the
nature of the services rendered by the
optionee, the optionee's past, present or
potential contributions to the Company's
success and such other factors as the
Committee in its discretion shall deem
relevant. Nothing in this paragraph shall be
deemed to give any optionee an absolute
right hereunder.
(i) Options Not Transferable. The option by its
terms shall be personal and shall not be
transferable by the optionee other than by
will or by the laws of descent and
distribution. During the lifetime of an
optionee, the option shall be exercisable
only by the optionee, or by a duly appointed
legal representative.
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6. STOCK RESTRICTIONS
The Company agrees that it shall register the shares for which
options are granted hereunder with the Securities and Exchange
Commission and shall take all other reasonable actions necessary to
allow for the unrestricted transfer by the optionees of shares optioned
hereunder, to the extent permitted under applicable law. Registration
shall be within one year after exercise of the option.
7. LEAVE OF ABSENCE
For the purpose of the Plan a leave of absence, duly
authorized in writing by the Company and which leave of absence is
recognized in writing by the Committee, shall not be deemed a
termination of relationship with the Company.
8. RIGHTS OF OPTIONEES
(a) No person shall have any rights or claims under the
Plan except in accordance with the provisions of the
Plan.
(b) Nothing contained in the Plan shall be deemed to give
any optionee the right to a continuance of any
relationship with the Company or its subsidiaries.
9. CHANGES IN CAPITAL
If the outstanding Common Stock of the Company subject to the
Plan shall at any time be changed or exchanged by a declaration of a
stock dividend, stock split, combination of shares, recapitalization,
merger, consolidation or other corporate reorganization in which the
Company is the surviving corporation, the number and kind of shares
subject to this Plan and the option prices shall be appropriately and
equitably adjusted so as to maintain the option price thereof. In the
event of a dissolution or liquidation of the Company or a merger,
consolidation, sale of all or substantially all of its assets, or any
other corporate reorganization in which the Company is not the
surviving corporation, or any merger in which the Company is the
surviving corporation but the holders of its Common Stock receive
securities of another corporation, there shall be substituted for any
outstanding options hereunder a new option of the surviving
corporation, pursuant to which optionees shall receive not less than
substantially the same economic benefit as they would have received
under the Plan. The existence of the Plan or options hereunder shall
not in any way
PAGE 22
<PAGE> 25
prevent any transaction described herein, and no holder of an option
shall have the right to prevent any such transaction.
10. USE OF PROCEEDS
Proceeds from the sale of shares pursuant to the options
granted under this Plan shall constitute general funds of the Company.
11. AMENDMENTS
The Board of Directors of the Company, in its sole discretion,
may discontinue the Plan at any time, but may amend or alter the Plan
only upon the recommendation of and pursuant to the recommendation of
the Committee. No amendment, alteration or discontinuation shall be
made which would impair the rights of any holder of an option
theretofore granted, without the optionee's consent.
12. CONDITIONS SUBSEQUENT
This Plan is subject to approval by the shareholders of the
Company at the next Annual Meeting.
This Restatement of the Plan was adopted by the Board of Directors of the
Company on the 16th day of March, 1999.
------------------------------------
Richard T. Mockler, Chairman
Stock Option Committee
PAGE 23
<PAGE> 26
UICI
PROXY
4001 MCEWEN DRIVE, SUITE 200, DALLAS, TEXAS 75244
VOTING INSTRUCTIONS TO ESOSP TRUSTEES
The undersigned participant in the UICI Employee Stock Ownership and
Savings Plan (the "ESOSP") hereby instructs the Trustees of the ESOSP to vote as
directed herein all shares of common stock of UICI held of record on March 12,
1999 by the Trustees for the undersigned participant's account under the ESOSP.
Such shares are to be voted in person or by proxy by the Trustees at the annual
meeting of stockholders to be held on May 5, 1999 or any adjournment thereof.
The substance of the proxy solicited on behalf of the Board of Directors is set
forth below.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.) Ronald L. Jensen, Gregory T.
Mutz, Richard J. Estell, Richard T. Mockler, Patrick J. McLaughlin, Stuart D.
Bilton and George H. Lane
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
public accountants for the Company:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued on other side)
<PAGE> 27
(Continued from other side)
3. TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION of the Company
to increase the authorized shares of Common Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. TO APPROVE AN AMENDMENT TO THE UICI 1987 Amended and Restated Stock Option
Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will direct the Trustees of the
Employee Stock Ownership and Savings Plan to vote in the manner directed herein.
If no direction is made by an ESOSP participant, the shares so held by the ESOSP
for such participant will be voted by the Trustees in the ratio of the results
of the Instructions received by the Trustees.
Please sign exactly as name appears on the label below.
Dated , 1999
-----------------------------
-----------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN
PROXY CARD PROMPTLY.
<PAGE> 28
UICI
PROXY
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Connie Palacios and Robert B. Vlach as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote as designated below, all the shares of common
stock of UICI held of record by the undersigned on March 12, 1999 at the annual
meeting of stockholders to be held on May 5, 1999 or any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Ronald L. Jensen Gregory T. Mutz Richard J. Estell
Richard T. Mockler Patrick J. McLaughlin Stuart D. Bilton
George H. Lane
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
public accountants for the Company:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued on other side)
<PAGE> 29
(Continued from other side)
3. TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION of the Company
to increase the authorized shares of Common Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. TO APPROVE AN AMENDMENT TO THE UICI 1987 Amended and Restated Stock Option
Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
for Proposals 1, 2, 3 and 4. Please sign exactly as name appears on the label
below. When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Dated: , 1999
-----------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN PROXY
CARD PROMPTLY.
