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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNITED WISCONSIN SERVICES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
WISCONSIN 39-1431799
(State of incorporation) (I.R.S. Employer
Identification
No.)
</TABLE>
401 WEST MICHIGAN STREET
MILWAUKEE, WISCONSIN
53203-2896
(414) 226-6900
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
THOMAS R. HEFTY, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
UNITED WISCONSIN SERVICES, INC.
401 WEST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53203-2896
(414) 226-6900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPY TO:
GEOFFREY R. MORGAN
MICHAEL, BEST & FRIEDRICH
100 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-4108
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT* PRICE* REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value....................... 800,000 $36.75 $29,400,000.00 $8,909
</TABLE>
* CALCULATED SOLELY FOR THE PURPOSE OF THIS OFFERING UNDER RULE 457(C) OF THE
SECURITIES ACT OF 1933 ON THE BASIS OF THE AVERAGE OF THE HIGH AND LOW SELLING
PRICES PER SHARE OF THE COMMON STOCK OF REGISTRANT ON JUNE 12, 1997, AS REPORTED
BY THE NEW YORK STOCK EXCHANGE. 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 COMMISSION, ACTING PURSUANT
TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
UNITED WISCONSIN SERVICES, INC.
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
800,000 SHARES OF COMMON STOCK (NO PAR VALUE)
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The Dividend Reinvestment and Direct Stock Purchase Plan (the "Plan") of
United Wisconsin Services, Inc. (the "Company") provides each holder of record
of shares ("Record Owner") and each Beneficial Owner (as defined in the Plan) of
the Company's common stock, no par value per share (the "Common Stock"), with a
convenient and economical way of purchasing additional shares of Common Stock
through the automatic reinvestment of cash dividends of Common Stock and/or
through optional cash payments. Any Record Owner or Beneficial Owner of shares
of Common Stock is eligible to participate. An investor who participates in any
feature of the Plan (a "Participant") will pay no brokerage commissions or other
expenses in connection with the purchase of shares of Common Stock under the
Plan. The Reinvestment Agent (as defined in the Plan) will administer the Plan.
Participation in the Plan may take several forms:
- Record Owners and Beneficial Owners may reinvest automatically their cash
dividends and have the option of investing limited additional amounts by
making cash payments of not less than $100 per calendar quarter, or
- Record Owners and Beneficial Owners may reinvest automatically a portion
of their cash dividends while continuing to receive the remainder of their
cash dividends and have the option of investing limited additional amounts
by making cash payments of not less than $100 per calendar quarter, or
- Record Owners and Beneficial Owners may invest only by making optional
cash payments of not less than $100 per calendar quarter, or
- An investor who is not a Record Owner or Beneficial Owner may become a
full participant in the Plan through the Plan's direct stock purchase
feature by making a cash payment of not less than $100 for shares in the
Plan.
Shares purchased for Participants' Noncertificated Share Accounts (as
defined in the Plan) will generally be issued by the Company, either through
original issuance or out of treasury shares held by the Company. However, the
Company reserves the right to purchase shares for the Plan on the open market.
The purchase price of shares of Common Stock purchased from the Company will be
an amount equal to the average of the high and low sale prices for the Common
Stock on the Reinvestment Date (as defined in the Plan). If no Common Stock was
traded on the Reinvestment Date, the purchase price per share will be based on
the most recent date immediately prior to the Reinvestment Date that the Common
Stock was traded. The price per share for additional shares purchased on the
open market for the Plan will be the average of the price of all such shares
purchased for the Plan on any Reinvestment Date.
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A Record Owner or Beneficial Owner who does not wish to participate in the
Plan will receive cash dividends, as declared, in the usual manner. Such
investors need not take any action to continue to receive their dividends.
The outstanding shares of Common Stock are, and the additional shares
offered hereby will be, listed on the New York Stock Exchange under the symbol
"UWZ."
The Company will receive all of the net proceeds from the sale of the Common
Stock purchased from the Company and none of the proceeds from the sale of
Common Stock purchased in the open market.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
You should rely only on the information contained in this document or other
document to which we have referred you. We have not authorized anyone to provide
you with information that is different.
YOU SHOULD CONSIDER CAREFULLY THE FACTORS UNDER THE CAPTION "RISK FACTORS"
PRIOR TO MAKING ANY INVESTMENT IN COMMON STOCK.
The date of this Prospectus is June 17, 1997.
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AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Information as of
particular dates concerning directors and officers, their remuneration and any
material interest of such persons in transactions with the Company is disclosed
in reports, proxy statements and other information distributed to shareholders
of the Company and filed with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at certain Regional Offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048, and at Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained in person from the Public Reference Section of the
Commission at its principal office located at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 25049, at prescribed rates. The Common
Stock is listed on the New York Stock Exchange (the "NYSE"), and such reports,
proxy statements and other information also may be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005. The Commission also
maintains a website (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants such as the
Company that file electronically with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all exhibits and schedules thereto, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement are on file at the offices
of the Commission and may be obtained upon payment of the prescribed fee or may
be examined without charge at the public reference facilities of the Commission
described above. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the Company under the
Exchange Act, are incorporated in this Prospectus and made a part hereof by
reference:
1. Annual Report on Form 10-K for the year ended December 31, 1996;
2. Quarterly Report on Form 10-Q for the Quarter ended March 31, 1997;
3. Current Report on Form 8-K dated June 12, 1997;
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4. The description of Common Stock included in the Company's registration
statement on Form 8-A filed pursuant to Section 12 of the Exchange Act
and declared effective October 24, 1991.
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the conclusion of the offerings contemplated hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the dates of filing of such documents or reports. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be modified or superseded for the purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
incorporated document or in an accompanying prospectus supplement, if any, which
is or is not deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not, except as so modified or superseded, constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Common Stock, to whom this Prospectus is delivered, upon
such person's written or oral request, a copy of the documents which have been
incorporated by reference (other than exhibits unless such exhibits are
specifically incorporated by reference in any such document) in this Prospectus.
Written or telephone requests for copies of such documents should be directed to
United Wisconsin Services, Inc., 401 Michigan Street, Milwaukee, Wisconsin
53203-2896, telephone (414) 226-6900, attention: Corporate Secretary.
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RISK FACTORS
Prospective investors should consider carefully the following factors,
together with other information set forth in this Prospectus, in evaluating an
investment in shares of Common Stock offered hereby.
INCREASING HEALTH CARE COSTS AND HEALTH CARE INDUSTRY
The Company's profitability depends in large part on its ability to predict
and manage effectively health care costs. The aging of the population and other
demographic characteristics and advances in medical technology continue to
contribute to rising health care costs. Government-imposed limitations on
Medicare and Medicaid reimbursements also have caused the private sector to bear
a greater share of increasing health care costs. Changes in health care prices,
inflation, new technologies, major epidemics, natural disasters and numerous
other factors affecting the delivery and cost of health care are beyond any
Company's control and may limit the Company's ability to predict and control
health care costs and claims.
Competitive price pressures in the group health insurance industry, which
generally result from the entry and exit of health care companies in the
marketplace, historically have resulted in pricing and profitability cycles. The
extent to which recent structural changes in the managed health care and health
insurance industry have altered cyclical patterns is uncertain. There can be no
assurance that cyclical patterns will not adversely affect the Company in the
future.
HEALTH CARE REFORM LAWS
In recent years, many states, including certain of the principal states in
which the Company conducts business, have enacted or are considering various
health care reform statutes. These include small group reform statutes that
limit the ability of insurers to underwrite and rate, and statutes that provide
for the creation of regional purchasing pools. Implementation of such reform
measures by a substantial number of states, particularly measures mandating
purchasing pools, could significantly increase competition in the health care
industry. In 1996, Congress enacted H.R. 3103, the Kennedy-Kassebaum bill, which
provides for guaranteed issue, group-to-individual portability and pre-existing
condition limitations for certain insurance coverages. It also requires states
to evaluate and potentially rewrite their laws to conform to new guidelines.
Legislation adopted during 1996 also included maternity mandates and mental
health parity. The impact of such newly enacted legislation on the Company
cannot yet be determined.
Also in recent years, both the Clinton Administration and several members of
Congress have proposed numerous other health care reform measures. The Company
is unable to predict when or whether any federal or state proposals, or some
combination thereof, will be enacted or, if enacted, the likely impact on the
Company. It is possible, however, that enactment of such health care reform
legislation could adversely affect the Company's results of operations.
FLUCTUATION OF OPERATING RESULTS
A variety of factors may cause period-to-period fluctuations in the
operating results of the Company. Such factors include, but are not limited to,
competitive pricing pressures, revenue and
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expenses related to new products or revisions to existing products, delays in
regulatory approvals and changes in distribution channels or product mix,
changes in legislation or industry cost reform, increased fees charged by health
care providers and increased utilization of medical services by Company
insureds. Singularly or in combination, these factors could adversely affect the
Company's operating results and financial condition.
BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN OWNERSHIP; POTENTIAL CONFLICT
OF INTEREST
As of the date of this prospectus, Blue Cross Blue & Shield United of
Wisconsin ("BCBSUW") owned approximately 38% of the total outstanding Common
Stock. Such ownership limits the ability of a third party to acquire control of
the Company and, therefore, could adversely affect the market price of the
Common Stock in certain circumstances. The Company and BCBSUW have entered into
a service agreement (the "Service Agreement") with respect to the provision of
certain services, including sales and marketing, computerized data processing,
legal, investment, actuarial and other management services. Under the Service
Agreement, the company receiving a service pays the company providing the
service an amount which the Company and BCBSUW believe approximates cost. The
Company has entered into reinsurance agreements with BCBSUW in the past, and may
do so in the future, on terms that are believed to be reasonable at the time but
that may not in retrospect be beneficial to the Company. Pursuant to Wisconsin
statutory and regulatory requirements, such reinsurance agreements and the
Service Agreement are required to be filed with the Office of the Commissioner
of Insurance for the State of Wisconsin ("OCI") for its review to determine
whether the "transaction at the time it is entered into is reasonable and fair
to the interest of the insurer." In addition, BCBSUW's sales force markets and
sells some of the Company's products. Also, certain of the Company's products
may compete with managed health care products offered by BCBSUW in Wisconsin. If
BCBSUW were to discontinue providing or receiving services, negotiate for
material changes to the Service Agreement or stop marketing and selling certain
of the Company's products, the Company's business and operations could be
adversely affected. Several of the Company's executive officers devote portions
of their time to the operations of BCBSUW. Three of the nine directors of the
Company also are directors of BCBSUW.
REGULATION
The Company is subject to extensive regulation in Wisconsin and the other
states in which it does business. Such regulation includes, among other things,
restrictions on the amount of dividends and other distributions that can be paid
by certain of the Company's subsidiaries without prior approval or notification,
the granting and revoking of licenses to transact business, trade practices,
premium rate regulation, underwriting standards, policy forms, claims payment,
licensing of agents and brokers, the amount and type of investments that the
Company may hold, minimum reserve and surplus requirements, risk-based capital
requirements and compelled participation in, and assessments in connection with,
risk-sharing pools and guaranty funds. Such regulation is intended primarily to
protect policyholders rather than investors.
Statutory capital and surplus requirements vary based upon the types of
risks underwritten and the nature of the provider contracts. The premiums
written by HMOs and insurance companies are
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limited by the amount of their statutory capital and surplus. Statutory capital
and surplus requirements for workers' compensation coverage are greater than
those for the Company's other businesses. In addition, risk-based capital
formulas, which are currently in effect or may be adopted, affect the Company's
statutory capital and surplus requirements. In order to maintain its recent rate
of growth in premium revenue, to underwrite workers' compensation coverage and
to continue to meet risk-based capital requirements, the Company may have to
obtain additional statutory capital or utilize reinsurance agreements to cede a
greater percentage of premium revenue. Should additional resources be necessary,
the Company may be required to obtain additional financing. There can be no
assurance such financing could be obtained upon terms acceptable to the Company.
DEPENDENCE ON KEY PERSONNEL
The future success of the Company is dependent on a number of key management
and technical employees. Competition for highly skilled people with extensive
experience in the health care industry is intense. The Company will be dependent
on the continued services and management experience of its executive officers.
If such executive officers were to leave, the operating results of the Company
could be adversely affected. The future success of the Company will also be
dependent on its ability to continue to attract key managerial and technical
personnel.
THE PLAN
The following questions and answers constitute a summary of the Plan.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The purpose of the Plan is to provide interested investors, Record Owners
and Beneficial Owners with a convenient means of investing in the Company
through new investments in Common Stock and through the regular reinvestment of
cash dividends paid on Common Stock. Shares of the Common Stock for the Plan may
be purchased, in the discretion of the Company, either directly from the Company
through the reinvestment agent (the "Reinvestment Agent") and/or in the open
market.
If shares are purchased from the Company, the proceeds from such purchases
will be received by the Company and will be used from time to time for general
corporate purposes.
ADVANTAGES
2. WHAT ARE SOME OF THE ADVANTAGES OF THE PLAN?
Participants in the Plan may elect to have all or a designated portion of
cash dividends on their shares of Common Stock automatically reinvested and/or
build their ownership in the Company through additional cash investment of not
less than $100 per calendar quarter and not more than $100,000 in any calendar
year. (See Question 4 for information on who is eligible to participate.)
Participants in the Plan will pay the Market Price (as defined in Question
15) for shares whether reinvesting all or a designated portion of their cash
dividends or purchasing additional shares through the cash investment option
available under the Plan.
7
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All service charges and brokerage commissions, if any, in connection with
purchases under the Plan will be paid by the Company.
Full investment under the Plan is possible because the Plan permits
fractions of shares, as well as full shares, to be purchased for Participants.
In addition, dividends with respect to such fractions, as well as with respect
to full shares, will be used to purchase additional shares for Participants.
Regular statements will provide Participants with a record of each transaction.
(See Question 21 for information regarding frequency of reports.) All share
purchases, by reinvestment of dividends or by optional cash payments, will be
credited to the Participant's account established for the Plan (a
"Noncertificated Share Account").
ADMINISTRATION
3. WHO ADMINISTERS THE PLAN FOR PARTICIPANTS?
The Reinvestment Agent administers the Plan for Participants. The present
Reinvestment Agent is Firstar Trust Company ("Firstar").
The Reinvestment Agent maintains a continuing record of all Participants'
Noncertificated Share Accounts, sends statements of account to each Participant,
and performs other duties relating to the Plan. The Reinvestment Agent will hold
for safekeeping the certificates for shares purchased for each Participant under
the Plan until termination of the shareholder's participation in the Plan, or
until a written request is received from the Participant for withdrawal of the
shares.
Should Firstar cease to act as the Reinvestment Agent under the Plan, the
Company may perform these administrative duties itself or may designate another
agent. In such event, all references herein to Firstar or the Registration Agent
shall be deemed to be references to the Company or such other agent as the
Company may designate.
Participants can contact the Reinvestment Agent either by telephone at (414)
276-3737 or by mail addressed to:
Firstar Trust Company
615 E. Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
PARTICIPATION
4. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
All Record Owners and Beneficial Owners of the Common Stock are eligible to
participate in all features of the Plan. A Beneficial Owner is a shareholder who
beneficially owns shares of Common Stock that are registered in a name other
than his or her own name (e.g., the shares are held in the name of a broker,
bank or other nominee). Record Owners and Beneficial Owners may make optional
cash payments whether or not they also have elected to reinvest dividends on
Common Stock registered in their names.
You must be a Record Owner or Beneficial Owner to participate in the
dividend reinvestment feature of the Plan and only shares of Common Stock of
which you are the Record Owner or Beneficial Owner may have their dividends
reinvested pursuant to the Plan.
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The Company may refuse participation in the Plan in its entirety, or
participation through any particular option under the Plan, to shareholders
residing in states whose securities laws do not exempt from registration shares
offered pursuant to the Plan, or pursuant to any particular participation option
under the Plan.
5. HOW DOES AN ELIGIBLE SHAREHOLDER OR INVESTOR PARTICIPATE?
In order to participate in the Plan, a Record Owner must properly complete
an authorization card furnished by the Reinvestment Agent (the "Authorization
Card") and return it to the Reinvestment Agent. An Authorization Card and
postage-paid envelope are enclosed with this Prospectus and additional cards may
be obtained at any time by any shareholder by written or oral request to the
Reinvestment Agent (see Question 3). Telephone requests or general inquiries may
also be made by calling the Reinvestment Agent at (414) 276-3737 (see Question
3).
Beneficial Owners who wish to participate in the Plan must instruct their
broker, bank or other nominee to complete and sign the Authorization Card and
return it to the Plan Administrator. See Question 7 for a discussion of the
Broker and Nominee Form (the "B&N Form") which is required to be used for
optional cash payments of a Beneficial Owner whose broker, bank or other nominee
holds the Beneficial Owner's shares in the name of a securities depository. See
also Question 12.
An Authorization Card will be mailed to all new Record Owners of Common
Stock by the Reinvestment Agent. Authorization Cards may also be obtained at any
time by written request to the Reinvestment Agent.
Shareholders who do not wish to participate in the Plan will receive cash
dividends, as declared, in the usual manner.
If a shareholder returns a properly executed Authorization Card to the
Reinvestment Agent without electing an investment option, such Authorization
Card will be deemed to indicate the intention of such shareholder to apply all
cash dividends, together with any optional cash payments, toward the purchase of
additional shares of Common Stock.
If a Participant's shares are registered in more than one name or in a
representative capacity (i.e., joint tenants, trustees, etc.), all registered
holders must sign the Authorization Card exactly as their names appear on the
Company's stock transfer records.
6. WHAT DOES THE AUTHORIZATION CARD PROVIDE?
The Authorization Card provides for the purchase by any entity, whether or
not a record holder of Common Stock, of additional shares of Common Stock
through the following investment options offered under the Plan:
- Full Dividend Reinvestment--Record Owners may reinvest cash dividends on
all shares owned by the Participant. Optional cash payments of not less
than $100 may also be made quarterly.
- Partial Dividend Reinvestment--Record Owners may reinvest cash
distributions on less than all of the shares owned by the Participant and
continue to receive cash dividends on the other shares. Optional cash
payments of not less than $100 may also be made quarterly.
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- Optional Payments Only--Record Owners may invest by making optional cash
payments of not less than $100 per calendar quarter.
- Initial Direct Purchase--Investors who are not currently Record Owners may
participate in the Plan by making a cash payment of not less than $100 to
the Plan.
Cash dividends on shares credited to the Participant's Noncertificated Share
Account under the Plan are automatically reinvested to purchase additional
shares.
7. WHAT DOES THE BROKER AND NOMINEE FORM PROVIDE?
The B&N Form must be submitted for optional cash payments of a Beneficial
Owner whose broker, bank or other nominee holds the Beneficial Owner's shares in
the name of a registered security depository. A B&N Form must be delivered to
the Plan Administrator each time that such broker, bank or other nominee
transmits optional cash payments on behalf of a Beneficial Owner. B&N Forms will
be furnished at any time upon request to the Reinvestment Agent (see Question
3).
Prior to submitting the B&N Form, the broker, bank or other nominee for a
Beneficial Owner must have established participation in the Plan by means of a
duly completed and executed Authorization card on behalf of the Beneficial Owner
(see Questions 5 and 6).
The Reinvestment Agent will make purchases for the Plan once a month on the
first business day of each month ("Investment Date"). Accordingly, the B&N Form
and appropriate instructions must be received by the Reinvestment Agent no later
than the 25th day of the preceding month or the optional cash payment will not
be invested until the following Investment Date.
8. IS PARTIAL PARTICIPATION POSSIBLE UNDER THE PLAN?
Yes, a shareholder who desires the dividends on only some full shares to be
reinvested under the Plan may indicate such number of shares on the
Authorization Card. Cash dividends will continue to be made on the remaining
shares.
9. MAY A PARTICIPANT CHANGE HIS/HER METHOD OF PARTICIPATION IN THE PLAN AFTER
ENROLLMENT?
Yes, by submitting a revised Authorization Card or sending a written request
signed by all registered owners to the Reinvestment Agent at the address
specified in Question 3. A change in dividend reinvestment will be effective
with the next Dividend Payment Date (as defined in Question 10), if the request
for change is received at least two weeks before that Date.
10. WHEN MAY A SHAREHOLDER OR INVESTOR JOIN THE PLAN?
If an Authorization Card specifying a dividend reinvestment feature is
properly completed and received by the Reinvestment Agent at least two weeks
before the record date established for the payment of a particular dividend,
reinvestment of dividends will commence with that dividend payment.
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If an Authorization Card is received from a shareholder after the record
date established for a particular dividend, the reinvestment of such dividends
will begin on the dividend payment date following the next record date if such
shareholder is still a holder of record.
Dividend payment dates are anticipated to be in March, June, September and
December each year ("Dividend Payment Date").
Record Owners and Beneficial Owners wishing to make additional optional cash
payments through the Plan or investors not owning shares but wishing to make an
initial direct purchase through the Plan may do so at any time.
INITIAL DIRECT PURCHASE AND OPTIONAL CASH PAYMENTS
11. WHO IS ELIGIBLE TO MAKE OPTIONAL CASH PAYMENTS?
Record Owners who have executed an Authorization Card, and Beneficial Owners
who have executed an Authorization Card and a B&N Form, are eligible to make
optional cash payments of not less than $100 in the aggregate for any quarter
(noncumulative from quarter to quarter). The maximum aggregate amount of
optional cash payments under the Plan may not exceed $100,000 in any calendar
year.
12. HOW ARE INITIAL DIRECT PURCHASE AND OPTIONAL CASH PAYMENTS MADE?
A new Participant may make an initial cash payment when enrolling in the
Plan by sending the Reinvestment Agent a check or money order, payable to
Firstar Trust Company, for not less than $100, with a completed Authorization
Card.
Once a Participant has enrolled in the Plan and the initial investment is
made, whether of dividends or through an initial direct purchase through the
Plan, a Participant will have the ability to make optional cash payments. Any
check or money order for an optional cash payment must be made to Firstar Trust
Company and should be accompanied by a properly completed Authorization Card.
Checks and cards should be mailed to Firstar Trust Company (see Question 3 for
address), Attention: Dividend Reinvestment. Beneficial Owners whose broker, bank
or other nominee holds the shares of the Beneficial Owner in a registered
securities depository must make their optional cash payments through the use of
the B&N Form rather than through the use of an Authorization Card.
Initial direct purchases and subsequent optional cash payments must be in
United States dollars, payable at a United States bank, and may not be less than
$100 for initial direct purchases or $100 in the aggregate for any quarterly
period between Dividend Payment Dates for optional cash payments (noncumulative
from quarter to quarter). The same amount need not be sent each time, and there
is no obligation to make an optional cash payment in any quarter. Do not send
cash.
Optional cash payments of Participants can be refunded if a written request
is received by the Reinvestment Agent at the above address at least two business
days prior to the Investment Date (see Question 16).
Optional cash payments received on or prior to each Investment Date will be
invested on that Investment Date. No interest will be paid on funds held between
receipt and investment. You are
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therefore strongly encouraged to send your optional cash payments so that they
are received by the Reinvestment Agent close to, but not later than the
Investment Date (see Question 16).
COSTS
13. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH PURCHASES UNDER
THE PLAN?
No. Participants will incur no brokerage commissions, service or other
charges for purchases made under the Plan. Any costs of administration of the
Plan will be borne by the Company. However, charges will be incurred by a
Participant upon the sale of his or her shares (see Questions 25, 27 and 28),
and certain fees may be charged to Participants by brokers when shares are held
by brokers. The benefit of any reduced brokerage commission charges will be
passed on, pro rata, to Participants.
PURCHASES
14. HOW MANY SHARES WILL BE PURCHASED FOR PARTICIPANTS?
The number of shares to be purchased will be determined by the amount of the
Participant's dividends and/or optional cash payments or initial direct purchase
payments, being reinvested or paid and the Market Price (as defined in Question
15) of the shares. Each Participant's Noncertificated Share Account in the Plan
will be credited with the number of shares, including fractional shares computed
to three decimal places, equal to the amount of the dividends and/or optional
cash to be reinvested or paid divided by the applicable purchase price of the
shares.
15. HOW WILL THE PURCHASE PRICE OF SHARES BE DETERMINED?
Shares may be purchased from the Company through the Reinvestment Agent or
may be purchased, in the discretion of the Company, in the open market by the
Reinvestment Agent. For shares purchased from the Company through the
Reinvestment Agent, the price per share will be the average of the high and low
sale prices of the shares (the "Market Price") on the Reinvestment Date (defined
as the date on which dividends are paid and can first be reinvested in the
Company by the Reinvestment Agent) on the NYSE as reported by The Wall Street
Journal. If no shares were traded on the Reinvestment Date, the Market Price
will be based on the most recent date immediately prior to the Reinvestment Date
that the shares were traded. For shares purchased on the open market, the price
per share will be the average price of all shares purchased for the Plan in
respect of any Reinvestment Date.
16. WHEN WILL DIVIDENDS AND/OR INITIAL DIRECT PURCHASES OR OPTIONAL CASH
PAYMENTS BE INVESTED?
Dividend reinvestment payments will be invested in additional shares and
credited to a Participant's Noncertificated Share Account within thirty days of
each Reinvestment Date. If any dividend reinvestment payments are not reinvested
by the Reinvestment Agent within thirty days after a Reinvestment Date, such
dividend payments will be returned to the Participant without any interest
thereon.
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Record Owners and Beneficial Owners wishing to make additional optional cash
payments through the Plan may do so at any time. The Reinvestment Agent will
make purchases for the Plan once a month on the first business day of each month
(the "Investment Date") to satisfy these investment requests. Accordingly,
Participants and interested investors should send cash investments so as to
reach the Reinvestment Agent by the 25th day of the preceding month.
17. MUST ALL DIVIDENDS ON SHARES CREDITED TO A PARTICIPANT'S NONCERTIFICATED
SHARE ACCOUNT UNDER THE PLAN BE REINVESTED?
Yes. Regardless of the investment option chosen, all cash dividends on
shares held in the Plan for all Participants are automatically reinvested in
additional shares of Common Stock.
SHARE CERTIFICATES
18. WILL CERTIFICATES BE ISSUED TO PARTICIPANTS FOR SHARES PURCHASED UNDER THE
PLAN?
Although the Company reserves the right at any time to issue certificates
for any number of shares in a Participant's Noncertificated Share Account,
certificates for shares will not be issued except as described in Question 19.
Shares purchased under the Plan will be credited to a Participant's
Noncertificated Share Account and will be shown on a Participant's statement of
account. Certificates for the shares purchased pursuant to the Plan will be
issued to Participants upon their written request, except that no certificates
will be issued for fractional shares. A Participant requesting a certificate for
all the shares in Participant's Noncertificated Share Account will receive cash
for a fractional share only if participation in the Plan is terminated. (See
Question 19 for how a Participant may obtain certificates.) Cash dividends on
all shares held in the Participant's Noncertificated Share Account under the
Plan will be automatically reinvested to purchase additional shares which will
be reflected in the Participant's Noncertificated Share Account. If a
Participant is a Beneficial Owner, such request should be placed through such
Participant's broker, banker or other nominee.
19. HOW MAY A PARTICIPANT OBTAIN CERTIFICATES FOR SHARES PURCHASED UNDER THE
PLAN?
A Participant who has purchased shares under the Plan may obtain
certificates for those shares in the Participant's Noncertificated Share Account
at any time by sending a written request to that effect to the Reinvestment
Agent. If a Participant is a Beneficial Owner, such request should be placed
through such Participant's broker, banker or other nominee. No certificates will
be issued for fractional shares, but a Participant requesting termination of
participation in the Plan will receive, in cash, the Market Price of any
fractional share as well as one certificate, unless otherwise requested by the
Participant, for all whole shares held for such terminating Participant in the
Noncertificated Share Account. This notice should be mailed to the Reinvestment
Agent (see Question 3 for address). The Company, however, reserves the right at
any time to issue certificates to Participants for any shares in their
Noncertificated Share Accounts. (See Questions 24-27 for information on
termination of participation.)
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20. MAY COMMON STOCK HELD IN CERTIFICATE FORM BE DEPOSITED IN A PARTICIPANT'S
NONCERTIFICATED SHARE ACCOUNT?
Yes. Common Stock certificates registered in a Participant's name may be
surrendered to the Reinvestment Agent for deposit to the Participant's
Noncertificated Share Account. This procedure enables Participants to avoid the
necessity of safekeeping certificates. The Participant should contact the
Reinvestment Agent (see Question 3) for the proper procedure to deposit
certificates.
Common Stock certificates may be deposited in a Participant's
Noncertificated Share Account whether or not the Participant has previously
authorized reinvestment of dividends on Common Stock registered in the
Participant's name. However, as with all other shares held in the Participant's
Noncertificated Share Account, all dividends on any shares deposited will
automatically be reinvested.
PARTICIPANTS' RECORDS AND ACCOUNTS
21. WHAT TYPE OF REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
As soon as practicable after each Reinvestment Date (in the case of dividend
reinvestment) or Investment Date (in the case of initial direct purchases or
optional cash payments) a Participant in the Plan will receive a statement
indicating the Market Price, the number of shares purchased and the number of
shares in the Participant's Noncertificated Share Account. In addition to the
above information, a statement to a Participant in the dividend reinvestment
feature of the Plan will also show the total dividend payment and the amount of
the dividend payment reinvested. Each of these statements is a record of the
cost of purchases under the Plan and should be retained for tax purposes.
In addition, each Participant will receive copies of the Company's annual
and quarterly reports to shareholders, notices of annual and special meetings,
proxy statements and income tax information for reporting dividends. Beneficial
owners whose shares are registered in names other than their own (for instance,
in the name of a broker, bank nominee or other record holder) must arrange to
obtain their copies of such reports from the record holder.
22. IN WHOSE NAME WILL ACCOUNTS BE MAINTAINED AND CERTIFICATES REGISTERED WHEN
ISSUED?
A Participant's Noncertificated Share Account will be maintained in the name
or names which appear on the Company's shareholder records.
A certificate for shares, when delivered to a Participant, will be
registered in the name or names in which the Noncertificated Share Account is
maintained. Upon written request, certificates can be registered and issued in
names other than the account name, provided that the request bears the signature
of the Participant or Participants and the signature(s) are guaranteed by a
commercial bank or a member of the NYSE.
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MODIFICATION OR TERMINATION BY A PARTICIPANT
23. HOW DOES A PARTICIPANT MODIFY THE MANNER OF PARTICIPATION IN THE PLAN?
A Participant may change participation from partial to total dividend
reinvestment, from total to partial dividend reinvestment, or may simply change
the number of shares that are enrolled in the Plan by executing and delivering a
new Authorization Card to the Reinvestment Agent (see Question 3 for address).
Beneficial Owners must use the B&N Form to change their participation. Notices
to change dividend reinvestments must be received by the Reinvestment Agent at
least two weeks before any Dividend Payment Date to be effective as of that
date.
24. HOW DOES A PARTICIPANT TERMINATE PARTICIPATION IN THE PLAN?
A Participant may terminate participation in the Plan by notifying the
Reinvestment Agent in writing to that effect. Notices will be effective only
upon receipt by the Reinvestment Agent. Notices to discontinue dividend
reinvestment received by the Reinvestment Agent at least two weeks before any
Dividend Payment Date will be effective as of that date. After termination,
dividends will be paid to the shareholder in cash unless and until the
shareholder rejoins the Plan. In order to re-enter the Plan after termination, a
shareholder must complete a new Authorization Card.
25. CAN THE SHARES HELD IN THE PLAN BE SOLD THROUGH THE REINVESTMENT AGENT?
A Participant can instruct the Reinvestment Agent to sell any or all of the
whole shares held in the Plan. The written notification to the Reinvestment
Agent should include the number of shares that are to be sold. The Reinvestment
Agent will make the sale as soon as practicable after receipt of a Participant's
request and will then issue to the Participant a check for the proceeds less
brokerage commission and transfer taxes (if any). In its discretion, the
Reinvestment Agent also may effect a net share exchange between a selling
Participant and another Participant's optional cash purchase or reinvestment of
dividends.
No Participant shall have the authority or power to direct the date or sales
price at which shares may be sold. The request must indicate the number of
shares which may be sold and not the dollar amount to be obtained. Any such
request that does not clearly indicate the number of shares which may be sold
will be returned to the Participant with no action taken. A
withdrawal/termination form will be provided on the stub of the account
statement for this purpose. This notice should be addressed to the Reinvestment
Agent (see Question 3 for address).
26. WHAT HAPPENS TO THE SHARES HELD IN THE NONCERTIFICATED SHARE ACCOUNT WHEN A
PARTICIPANT TERMINATES PARTICIPATION IN THE PLAN?
A certificate for the shares held in the Noncertificated Share Account will
be issued to the Participant upon the Participant's written request or upon a
Participant's termination of participation in the Plan. No fractional shares
will be issued. (See Question 18 for information on share certificates and
Question 19 for information on the cash payment for fractional shares in the
Noncertificated Share Account.)
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27. MAY A PARTICIPANT RECEIVE CASH IN LIEU OF FULL SHARE CERTIFICATES UPON
TERMINATION OF PARTICIPATION?
Yes. The Participant may request, in his or her written notification of
termination, that the Reinvestment Agent sell all full and fractional shares
held in the account under the Plan in which case the Reinvestment Agent will
sell the shares and deliver the Market Price of any fractional share and the
proceeds from the sale of full shares, less brokerage commissions and any taxes
payable in connection with the sale, to the Participant.
28. MAY A PARTICIPANT SELL HIS OR HER RECORD SHARES AND STILL REMAIN IN THE
PLAN?
If a Participant should sell or transfer all of his or her record shares of
Common Stock, the Reinvestment Agent, at its discretion, may continue to
reinvest the dividends on the shares credited to his or her Noncertificated
Share Account under the Plan until notified in writing by the Participant to
withdraw from the Plan, or may terminate the Participant's participation and
sell all of the shares credited to the Participant's Noncertificated Share
Account. Upon termination, the Reinvestment Agent will remit to the former
Participant the proceeds from any sale, less any related brokerage commission
and applicable taxes, and payment for any fractional shares.
29. WHAT HAPPENS IF A PARTICIPANT SELLS OR TRANSFERS SOME BUT NOT ALL OF THE
COMMON STOCK CREDITED TO THE PARTICIPANT'S NONCERTIFICATED SHARE ACCOUNT?
If a Participant is reinvesting dividends on only a portion of his or her
record shares, the Common Stock sold or transferred will be considered to be the
shares receiving cash dividends to the extent possible. Dividend reinvestment
will only be reduced when the number of shares of Common Stock sold or
transferred exceeds the number of shares receiving cash dividends. For example,
if a Participant owns 1,000 shares of Common Stock and has authorized dividends
on 600 of those shares to be reinvested under the Plan, such Participant could
sell up to 400 of his or her record shares without reducing the number of shares
which participate in the dividend reinvestment option of the Plan.
30. MAY A PARTICIPANT STOP REINVESTING THE DIVIDENDS FROM HIS OR HER RECORD
SHARES AND RECEIVE THEM IN CASH AND STILL REMAIN IN THE PLAN?
Yes. A Participant who terminates the reinvestment of dividends paid on his
or her record shares, may leave shares acquired through the Plan in the
Participant's Plan Noncertificated Share Account. Dividends paid on shares left
in the Plan will continue to be automatically reinvested.
31. WHEN MAY A SHAREHOLDER RE-ENROLL IN THE PLAN?
Generally, a shareholder may again become a Participant at any time.
However, the Company reserves the right to reject any Authorization Form from a
previous Participant on grounds of excessive enrolling and termination. This
reservation is intended to minimize administrative expenses and to encourage use
of the Plan as a long-term investment service.
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OTHER INFORMATION
32. WHAT ARE THE DIVIDEND PAYMENT DATES?
Dividend Payment Dates are anticipated to be in March, June, September and
December each year.
33. HOW WILL A PARTICIPANT'S SHARES BE VOTED AT ANNUAL MEETINGS OF SHAREHOLDERS?
The Reinvestment Agent will obtain voting instructions from the Participant
for all full and fractional shares which are held by the Reinvestment Agent for
the Participant's Noncertificated Share Account on the record date established
by the Company for determining shareholders entitled to vote. In the absence of
voting instructions from the Participant, shares accumulated under the Plan will
not be voted.
34. WHAT HAPPENS IF THE COMPANY ISSUES A STOCK DIVIDEND, DECLARES A STOCK SPLIT
OR HAS A RIGHTS OFFERING?
Any stock dividends or split shares distributed by the Company on shares
held by the Reinvestment Agent for the Participant will be credited to the
Participant's Noncertificated Share Account on a pro rata basis. In the event
that the Company makes available to its common shareholders rights to purchase
additional shares, debentures or other securities, the Reinvestment Agent will
sell such rights accruing on shares held by the Reinvestment Agent for
Participants and invest the proceeds in Common Stock of the Company prior to or
with the next regular cash dividend. A Participant who wishes to exercise
purchase rights must request that a stock certificate be sent to him or her by
the Reinvestment Agent prior to the record date for the rights offering.
35. CAN A PARTICIPANT PLEDGE SHARES CREDITED TO HIS OR HER ACCOUNT?
No. Shares in a Participant's Noncertificated Share Account in the Plan may
not be pledged, assigned or otherwise encumbered unless withdrawn from the
Noncertificated Share Account.
36. WHAT IS THE RESPONSIBILITY OF THE COMPANY OR THE REINVESTMENT AGENT UNDER
THE PLAN?
In administering the Plan, neither the Company nor the Reinvestment Agent
nor any agent of either of them will be liable for any act done in good faith,
without negligence, or for any omission to act including, without limitation,
any claims for liability arising out of failure to terminate the Participant's
Noncertificated Share Account upon his or her death prior to receipt of notice
in writing of such death and with respect to the prices at which shares are
purchased or sold for the Participant's Noncertificated Share Account and the
times such purchases or sales are made.
All notices from the Reinvestment Agent to a Participant will be addressed
to the Participant's last known address. Beneficial Owners will receive all
notices and other mailings through their broker, banker or other nominee.
Participant's should notify the Reinvestment Agent promptly in writing of any
change in address.
The risk to Participants is the same as with any other investment in shares
of Common Stock of the Company. It should be recognized that a Participant loses
any advantage otherwise available from
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being able to select the timing of his or her investment. It should also be
recognized that, like any investment, the Company cannot assure the Participant
of a profit or protect the Participant against a loss on the shares purchased by
the Participant under the Plan, nor can the Company control purchases by the
Reinvestment Agent. The Company also cannot guarantee that dividends on shares
of its common stock will not be reduced or eliminated.
37. MAY THE PLAN BE MODIFIED, SUSPENDED OR TERMINATED?
While the Company hopes to continue the Plan indefinitely, the Company
reserves the right to suspend or terminate the Plan at any time. It also
reserves the right to make modifications or amendments to the Plan and in
particular reserves the right to refuse optional cash payments from any
shareholder who, in the sole discretion of the Company, is attempting to
circumvent the interest of the Plan by making excessive optional cash payments
through multiple Noncertificated Share Accounts. To the extent practicable,
notice of any such suspension, termination, modification or amendment will be
sent to all Participants at least 30 days prior to the effective date. Any
modification will be deemed to be accepted by Participants who do not withdraw
prior to the effectiveness of the modification.
If the Plan is terminated, each Participant will receive (1) a certificate
for all whole shares of Common Stock held in the Participant's Noncertificated
Share Account and (2) a check representing the value of any fractional share
held in the Participant's Noncertificated Share Account and any uninvested
optional cash payment held in the account.
FEDERAL INCOME TAX CONSEQUENCES
Participants should consult their personal tax advisors with specific
reference to their own tax situations and potential changes in the applicable
laws as to all federal, state, local, foreign and other tax matters in
connection with the reinvestment of dividends and purchases of Common Stock
under the Plan, the Participant's tax basis and holding period for Common Stock
acquired under the Plan and the character, amount and tax treatment of any gain
or loss realized on the disposition of Common Stock. The following is only a
brief summary of some of the principal federal income tax considerations
applicable to the Plan.
38. WHAT IS THE TAX TREATMENT OF DIVIDENDS RECEIVED BY A PARTICIPANT?
Participants in the Plan who are reinvesting dividends will be treated for
federal income tax purposes as having received with respect to each Reinvestment
Date a dividend equal to the purchase price of the shares purchased by dividend
reinvestment on that date (i.e., the amount that would have been received as a
cash dividend) plus the cash dividend actually received (if any). Dividends will
be taxed in the following manner: (i) if the dividend is paid by the Company out
of its current or accumulated earnings and profits, it will be taxed as ordinary
income; (ii) if the Company has no current or accumulated earnings and profits,
the dividend will be treated as a return of capital, which results in a
reallocation of basis between shares previously owned and shares acquired by
dividend reinvestment; and (iii) if all capital has been returned under (ii),
the dividend will be treated as capital gain income.
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Participants who acquire shares under the Plan, except those shares acquired
as a return of capital, will have a tax basis in the shares so acquired equal to
the amount being paid for those shares increased by any brokerage fees treated
as a dividend to the Participant. Except for those dividends treated as a return
of capital, the holding period for tax purposes for all Participants will begin
on the day following the Reinvestment Date on or for which the shares are
acquired. A Participant will not realize any taxable income when the Participant
receives certificates for whole shares previously credited to the Participant's
Noncertificated Share Account, either upon the Participant's request for those
shares or upon withdrawal from the Plan.
A Participant will realize gain or loss when shares are sold or exchanged,
or when the Participant receives a cash adjustment for a fraction of a share
credited to the Participant's Noncertificated Share Account upon withdrawal from
the Plan. The amount of such gain or loss will be the difference between the
amount which the Participant receives for the shares, or fraction of a share,
and the Participant's tax basis.
39. WHAT IS THE TAX TREATMENT OF SERVICE CHARGES AND BROKERAGE COMMISSIONS, IF
ANY, AS WELL AS OTHER ADMINISTRATIVE EXPENSES OF THE PLAN PAID BY THE
COMPANY?
In connection with purchases of shares on the open market, service charges
and brokerage commissions paid by the Company on the behalf of Participants will
likely be treated as distributions subject to income tax in the same manner as
dividends. With respect to administrative expenses, such expenses paid by the
Company are not likely to be treated as constructive distributions to
Participants and, as a result, not subject to income tax.
40. WHAT PROVISION IS MADE FOR PARTICIPANTS WHOSE DIVIDENDS ARE SUBJECT TO
INCOME TAX BACKUP WITHHOLDING?
In the case of those Participants whose dividends are subject to United
States income tax backup withholding, the Reinvestment Agent will apply the net
amount of their dividends, after the deduction for taxes, to the purchase of
shares of Common Stock. As a general matter, the Company is currently required
to withhold for United States income tax purposes 31% of all dividend payments
to a shareholder if (i) the Participant fails to furnish its taxpayer
identification number (the "TIN") to the Company as required, (ii) the Internal
Revenue Service (the "IRS") notifies the Company that the TIN furnished by the
Participant is incorrect, (iii) the IRS notifies the Company that the
Participant has failed properly to report certain payments as required or (iv)
the Participant fails to certify, when and as required to do so, under penalties
of perjury, that it is not subject to backup withholding. Shareholders may be
requested by the Company or their broker to submit all information and
certifications required in order to exempt them from back-up withholding if such
exemption is available to them.
41. WHAT IS THE TAX TREATMENT OF CASH RECEIVED BY A PARTICIPANT UPON THE SALE OF
SHARES PURCHASED BY THE PARTICIPANT PURSUANT TO THE PLAN?
Assuming that the shares are held as capital assets, a Participant who
receives a cash payment for any full or fractional shares then held in his or
her Plan account will recognize either short-term or long-term capital gain or
loss, depending on his or her particular circumstances, the tax basis of his
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or her shares, and the period of time he or she has held his or her shares.
Federal law requires the Company to notify the IRS of all sales of stock made
under the Plan during the year. If a Participant sells any shares from the Plan,
he or she will be sent a Form 1099B for each sale pursuant to federal income tax
regulations.
42. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN BY
AN IRA, KEOGH PLAN, 401(K) PLAN, SIMPLIFIED PENSION ACCOUNT OR ANY CORPORATE
EMPLOYER-SPONSORED RETIREMENT PLAN?
The tax consequences of participation in the Plan by retirement plans differ
from those outlined above for individuals. Since the law and regulations
regarding the federal income tax consequences of retirement plan participation
are complex and subject to change, those considering such participation should
consult with their own retirement plan trustees, custodians or tax advisors for
specific information.
USE OF PROCEEDS
The net proceeds from the sale of authorized but unissued stock purchased
from the Company will be used for general corporate purposes.
LEGAL OPINION
The validity of the Common Stock to be issued pursuant to the Plan will be
passed upon by Michael, Best & Friedrich, Milwaukee,Wisconsin.
EXPERTS
The consolidated financial statements of the Company appearing in the United
Wisconsin Services, Inc. Annual Report on Form 10-K for the year ended December
31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information............................................................ 3
Incorporation of Certain Documents by Reference.................................. 3
Risk Factors..................................................................... 5
The Plan......................................................................... 7
Purpose........................................................................ 7
Advantages..................................................................... 7
Administration................................................................. 8
Participation.................................................................. 8
Initial Direct Purchase and Optional Cash Payments............................. 11
Costs.......................................................................... 12
Purchases...................................................................... 12
Share Certificates............................................................. 13
Participants' Records & Accounts............................................... 14
Modification or Termination by a Participant................................... 15
Other Information.............................................................. 17
Federal Income Tax Consequences................................................ 18
Use of Proceeds.................................................................. 20
Legal Opinion.................................................................... 20
Experts.......................................................................... 20
</TABLE>
June 17, 1997
This Prospectus does not constitute an offer or solicitation by anyone in
any jurisdiction in which said offer or solicitation is not qualified or in
which the person making such offer or solicitation is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee --
Securities and Exchange Commission.................................. $ 8,909
NYSE Listing Fee.................................................. 1,500
Printing and Engraving Expenses....................................... 5,000
Accounting Fees....................................................... 5,000
Reinvestment Agent Fees............................................... 3,000
Legal Fees and Expenses............................................... 20,000
Miscellaneous......................................................... 591
Total............................................................... $ 44,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the Wisconsin Business Corporation Law
("WBCL"). Under Section 180.0851(1) of the WBCL, the Company is required to
indemnify a director or officer, to the extent such person is successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if such person was a party because he or she was a
director or officer of the Company. In all other cases, the Company is required
by Section 180.0851(2) of the WBCL to indemnify a director or officer against
liability incurred in a proceeding to which such a person was a party because he
or she was a director or officer of the Company, unless it is determined that he
or she breached or failed to perform a duty owed to the Company and the breach
or failure to perform constitutes: (i) a willful failure to deal fairly with the
Company or its shareholders in connection with a matter in which the director or
officer has a material conflict of interest; (ii) a violation of criminal law,
unless the director or officer had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his or her conduct was
unlawful; (iii) a transaction from which the director or officer derived an
improper personal profit; or (iv) willful misconduct. Section 180.0858(1) of the
WBCL provides that, subject to certain limitations, the mandatory
indemnification provisions do not preclude any additional right to
indemnification or allowance of expenses that a director or officer may have
under a corporation's articles of incorporation, bylaws, a written agreement or
a resolution of the board of directors or shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of the
state of Wisconsin to require or permit indemnification, allowance of expenses
and insurance to the extent required to be permitted under Sections 180.0850 to
180.0858 of the WCBL, for any liability incurred in connection with a proceeding
involving a federal or state statute, rule or regulation regulating the offer,
sale or purchase of securities.
Section 180.0828 of the WBCL provides that, with certain exceptions, a
director is not liable to a corporation, its shareholders, or any person
asserting rights on behalf of the corporation or its shareholders, for damages,
settlements, fees, fines, penalties or other monetary liabilities arising from a
breach of, or failure to perform, any duty resulting solely from his or her
status as a director, unless the person asserting liability proves that the
breach or failure to perform constitutes any of the four exceptions to mandatory
indemnification under Section 180.0851(2) referred to above.
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Under Article VI of the Company's Bylaws, directors and officers are
indemnified against liability, in both derivative and nonderivative suits, which
may incur in their capacities as such, subject to certain determinations by the
Board of Directors, independent legal counsel or the shareholders that the
applicable standards of conduct have been met. The scope of such indemnification
is substantially the same as permitted and described in Sections 180.0850 to
180.0858 of the WBCL.
Under Section 180.0833 of the WBCL, directors of the Company against whom
claims are asserted with respect to the declaration of improper dividends or
distributions to shareholders or certain other improper acts which they approved
are entitled to contribution from other directors who approved such actions and
from shareholders who knowingly accepted an improper dividend or distribution,
as provided therein.
The directors and officers of the Company and its subsidiaries are included
in the directors' and officers' liability insurance policy applicable to BCBSUW.
The Company has not obtained substitute directors' and officers' liability
coverage; the officers and directors of the Company and its subsidiaries will
continue to be included in BCBSUW's policy. BCBSUW's insurance policy provides
that, subject to the applicable liability limits and retention amounts, the
insurer will reimburse directors and officers of BCBSUW and its subsidiaries,
including the Company, for a "loss" (as defined in the policy) made against them
for a "wrongful act" (as defined in the policy), except for such a loss against
which BCBSUW or its subsidiaries, including the Company, indemnifies (or is
required or permitted to indemnify) the director or officer. The policy also
provides that, subject to the applicable liability limits and retention amounts,
the insurer will reimburse BCBSUW and its subsidiaries, including the Company,
for a loss for which BCBSUW or its subsidiaries, including the Company, has
lawfully indemnified (or is required or permitted by law to indemnify) a
director or officer resulting from any such claim. Subject to certain exclusions
set forth in the policy, "Wrongful act" is defined in the policy to mean any
negligent act, error, omission, misstatement, misleading statement, or breach of
duty by BCBSUW or its subsidiaries, including the Company's directors or
officers in the discharge of their duties solely in their capacities as such
directors or officers.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
4.1 United Wisconsin Services, Inc., Dividend Reinvestment and Direct Stock Purchase
Plan
5.1 Opinion of Michael, Best & Friedrich
23.1 Consent of Ernst & Young LLP
23.2 Consent of Michael, Best & Friedrich (Included as part of the opinion contained
in Exhibit 5.1 herein)
99.1 Form of Authorization Card
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually
II-2
<PAGE>
or in the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan, annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in said 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 directors, 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 said act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, and the State of Wisconsin, on the 16th
day of June, 1997.
UNITED WISCONSIN SERVICES, INC.
By: /s/ THOMAS R. HEFTY
------------------------------------
Thomas R. Hefty
CHAIRMAN OF THE BOARD AND PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas R. Hefty and C. Edward Mordy, or either of
them, his or her true and lawful attorneys-in-fact and agents, for him or her
and in his or her name, place and stead in any and all capabilities, to sign any
and all amendments (including pre- and post-effective amendments) to this
Registration Statement, and to file all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any state
of the United States, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board
/s/ THOMAS R. HEFTY (Principal Executive
- ------------------------------ Officer), President & June 16, 1997
Thomas R. Hefty Director
/s/ C. EDWARD MORDY Vice President (Principal
- ------------------------------ Financial and Accounting June 16, 1997
C. Edward Mordy Officer)
/s/ RICHARD A. ABDOO
- ------------------------------ Director June 16, 1997
Richard A. Abdoo
II-4
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ MICHAEL D. DUNHAM
- ------------------------------ Director June 16, 1997
Michael D. Dunham
/s/ JAMES L. FORBES
- ------------------------------ Director June 16, 1997
James L. Forbes
/s/ JAMES C. HICKMAN
- ------------------------------ Director June 16, 1997
James C. Hickman
/s/ WILLIAM R. JOHNSON
- ------------------------------ Director June 16, 1997
William R. Johnson
/s/ EUGENE A. MENDEN
- ------------------------------ Director June 16, 1997
Eugene A. Menden
/s/ WILLIAM C. RUPP
- ------------------------------ Director June 16, 1997
William C. Rupp
/s/ CAROL N. SKORNICKA
- ------------------------------ Director June 16, 1997
Carol N. Skornicka
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
4.1 United Wisconsin Services, Inc., Dividend Reinvestment and Direct Stock Purchase
Plan
5.1 Opinion of Michael, Best & Friedrich
23.1 Consent of Ernst & Young LLP
23.2 Consent of Michael, Best & Friedrich (Included as part of the opinion contained
in Exhibit 5.1 herein)
99.1 Form of Authorization Card
</TABLE>
<PAGE>
Exhibit 4.1
UNITED WISCONSIN SERVICES, INC.
TERMS AND CONDITIONS
OF THE
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
The Dividend Reinvestment and Direct Stock Purchase Plan (the "Plan") of
United Wisconsin Services, Inc., (the "Company") provides each holder or record
of shares ("Record Owner") and Beneficial Owner (as defined below) of shares of
the Company's common stock, no par value per share (the "Common Stock"), with a
convenient and economical way of purchasing additional shares of Common Stock
through the automatic reinvestment of cash dividends of Common Stock and/or
through optional cash payments. An individual who is not a Record Owner or
Beneficial Owner may become a full participant in the Plan through the Plan's
direct stock purchase component by making cash payments for shares in the Plan.
An investor who participates in any feature of the Plan is hereafter referred to
as a "Participant."
PURPOSE
1. Purpose of the Plan
The purpose of the Plan is to provide interested investors, Record Owners
and Beneficial Owners with a convenient means of investing in the Company
through new investments in Common Stock and through the regular reinvestment of
cash dividends paid on Common Stock. Shares of the Common Stock for the Plan
may be purchased, in the discretion of the Company, either directly from the
Company through the reinvestment agent (the "Reinvestment Agent") and/or in the
open market.
If shares are purchased from the Company, the proceeds from such purchases
will be received by the Company and will be used from time to time for general
corporate purposes.
ADVANTAGES
2. Advantages of the Plan
Participants in the Plan may elect to have all or a designated portion of
cash dividends on their shares of Common Stock automatically reinvested
and/or build their ownership in the Company through additional cash
investment of not less than $100 per calendar quarter and not more than
$100,000 in any calendar year. (See Section 4 for information on who is
eligible to participate.)
Participants in the Plan will pay the Market Price (as defined in Section
15) for shares whether reinvesting all or a designated portion of their cash
dividends or purchasing additional shares through the cash investment option
available under the Plan.
All service charges and brokerage commissions, if any, in connection with
purchases under the Plan will be paid by the Company.
1
<PAGE>
Full investment under the Plan is possible because the Plan permits
fractions of shares, as well as full shares, to be purchased for Participants.
In addition, dividends with respect to such fractions, as well as with respect
to full shares, will be used to purchase additional shares for Participants.
Regular statements will provide Participants with a record of each transaction.
(See Section 21 for information regarding frequency of reports.) All share
purchases, by reinvestment of dividends or by optional cash payments, will be
credited to the Participant's account established for the Plan (a
"Noncertificated Share Account").
ADMINISTRATION
3. Plan Administrator
The Reinvestment Agent administers the Plan for Participants. The present
Reinvestment Agent is Firstar Trust Company ("Firstar").
The Reinvestment Agent maintains a continuing record of all Participants'
Noncertificated Share Accounts, sends statements of account to each Participant,
and performs other duties relating to the Plan. The Reinvestment Agent will
hold for safekeeping the certificates for shares purchased for each Participant
under the Plan until termination of the shareholder's participation in the Plan,
or until a written request is received from the Participant for withdrawal of
the shares.
Should Firstar cease to act as the Reinvestment Agent under the Plan, the
Company may perform these administrative duties itself or may designate another
agent. In such event, all references herein to Firstar or the Registration
Agent shall be deemed to be references to the Company or such other agent as the
Company may designate.
Participants can contact the Reinvestment Agent either by telephone at
(414) 276-3737 or by mail addressed to:
Firstar Trust Company
615 E. Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
PARTICIPATION
4. Eligibility for Participation in the Plan
All Record Owners and Beneficial Owners of the Common Stock are eligible to
participate in all features of the Plan. A Beneficial Owner is a shareholder
who beneficially owns shares of Common Stock that are registered in a name other
than his or her own name (e.g., the shares are held in the name of a broker,
bank or other nominee). Record Owners and Beneficial Owners may make optional
cash payments whether or not they also have elected to reinvest dividends on
Common Stock registered in their names.
You must be a Record Owner or Beneficial Owner to participate in the
dividend reinvestment feature of the Plan and only shares of Common Stock of
which you are the Record Owner or Beneficial Owner may have their dividends
reinvested pursuant to the Plan.
2
<PAGE>
The Company may refuse participation in the Plan in its entirety, or
participation through any particular option under the Plan, to shareholders
residing in states whose securities laws do not exempt from registration shares
offered pursuant to the Plan, or pursuant to any particular participation option
under the Plan.
5. How to Participate
In order to participate in the Plan, a Record Owner must properly complete
an authorization card furnished by the Reinvestment Agent (the "Authorization
Card") and return it to the Reinvestment Agent. An Authorization Card and
postage-paid envelope are enclosed with this Prospectus and additional cards may
be obtained at any time by shareholders by written or oral request to the
Reinvestment Agent (see Section 3). Telephone requests or general inquiries may
also be made by calling the Reinvestment Agent at (414) 276-3737 (see Section
3).
Beneficial Owners who wish to participate in the Plan must instruct their
broker, bank or other nominee to complete and sign the Authorization Card and
return it to the Plan Administrator. See Section 7 for a discussion of the
Broker and Nominee Form (the "B&N Form") which is required to be used for
optional cash payments of a Beneficial Owner whose broker, bank or other nominee
holds the Beneficial Owner's shares in the name of a securities depository. See
also Section 12.
An Authorization Card will be mailed to all new holders of record of Common
Stock by the Reinvestment Agent. Authorization Cards may also be obtained at
any time by written request to the Reinvestment Agent.
Shareholders who do not wish to participate in the Plan will receive cash
dividends, as declared, in the usual manner.
If a shareholder returns a properly executed Authorization Card to the
Reinvestment Agent without electing an investment option, such Authorization
Card will be deemed to indicate the intention of such shareholder to apply all
cash dividends, together with any optional cash payments, toward the purchase of
additional shares of Common Stock.
If a Participant's shares are registered in more than one name or in a
representative capacity (i.e., join tenants, trustees, etc.), all registered
holders must sign the Authorization Card exactly as their names appear on the
Company's stock transfer records.
6. The Authorization Card
The Authorization Card provides for the purchase by any entity, whether or
not a record holder of the Company's Common Stock, of additional shares of
Common Stock through the following investment options offered under the Plan:
- Full Dividend Reinvestment -- Record Owners may reinvest cash
dividends on all shares owned by the Participant. Optional cash
payments of not less than $100 may also be made quarterly.
- Partial Dividend Reinvestment -- Record Owners may reinvest cash
distributions on less than all of the shares owned by the Participant
and continue to receive cash dividends on
3
<PAGE>
the other shares. Optional cash payments of not less than $100 may
also be made quarterly.
- Optional Payments Only -- Record Owners may invest by making optional
cash payments of not less than $100 per calendar quarter.
- Initial Direct Purchase -- Investors who are not currently Record
Owners may participate in the Plan by making a cash payment of not
less than $100 to the Plan.
Cash dividends on shares credited to the Participant's Noncertificated
Share Account under the Plan are automatically reinvested to purchase additional
shares.
7. WHAT DOES THE BROKER AND NOMINEE FORM PROVIDE?
The B&N Form must be submitted for optional cash payments of a Beneficial
Owner whose broker, bank or other nominee holds the Beneficial Owner's shares
in the name of a registered security depository. A B&N Form must be delivered
to the Plan Administrator each time that such broker, bank or other nominee
transmits optional cash payments on behalf of a Beneficial Owner. B&N Forms
will be furnished at any time upon request to the Reinvestment Agent (see
Section 3).
Prior to submitting the B&N Form, the broker, bank or other nominee for a
Beneficial Owner must have established participation in the Plan by means of a
duly completed and executed Authorization card on behalf of the Beneficial Owner
(see Sections 5 and 6).
The Reinvestment Agent will make purchases for the Plan once a month on the
first business day of each month (the "Investment Date"). Accordingly, the B&N
Form and appropriate instructions must be received by the Reinvestment Agent no
later than the 25th day of the preceding month or the optional cash payment will
not be invested until the following Investment Date.
8. Partial Participation Under the Plan
A shareholder who desires the dividends on only some full shares to be
reinvested under the Plan may indicate such number of shares on the
Authorization Card. Cash dividends will continue to be made on the remaining
shares.
9. Changing the Method of Participation in the Plan After Enrollment
A Participant may change his/her method of participation in the Plan after
enrollment by submitting a revised Authorization Card or sending a written
request signed by all registered owners to the Reinvestment Agent at the address
specified in Section 3. A change in dividend reinvestment will be effective
with the next Dividend Payment Date (as defined in Section 10), if the request
for change is received at least two weeks before that Date.
10. When a Shareholder or Investor May Join the Plan
If an Authorization Card specifying a dividend reinvestment feature is
properly completed and received by the Reinvestment Agent at least two weeks
before the record date established for the payment of a particular dividend,
reinvestment of dividends will commence with that dividend payment.
4
<PAGE>
If an Authorization Card is received from a shareholder after the record
date established for a particular dividend, the reinvestment of such dividends
will begin on the dividend payment date following the next record date if such
shareholder is still a holder of record.
Dividend payment dates are anticipated to be in March, June, September and
December each year ("Dividend Payment Date").
Record Owners and Beneficial Owners wishing to make additional optional
cash payments through the Plan or investors not owning shares but wishing to
make an initial direct purchase through the Plan may do so at any time.
INITIAL DIRECT PURCHASE AND OPTIONAL CASH PAYMENTS
11. Shareholders Eligible to Make Optional Cash Payments
Record Owners who have executed an Authorization Card, and Beneficial
Owners who have executed an Authorization Card and a B&N Form, are eligible to
make optional cash payments of not less than $100 in the aggregate for any
quarter (noncumulative from quarter to quarter). The maximum aggregate amount
of optional cash payments under the Plan may not exceed $100,000 in any calendar
year.
12. How to Make an Initial Direct Purchase or Optional Cash Payments
A new Participant may make an initial cash payment when enrolling in the
Plan by sending the Reinvestment Agent a check or money order, payable to
Firstar Trust Company, for not less than $100, with a completed Authorization
Card.
Once a Participant has enrolled in the Plan and the initial investment is
made, whether of dividends or through an initial direct purchase through the
Plan, a Participant will have the ability to make optional cash payments. Any
check or money order for an optional cash payment must be made to Firstar Trust
Company and should be accompanied by a properly completed Authorization Card.
Checks and forms should be mailed to Firstar Trust Company (see Section 3 for
address), Attention: Dividend Reinvestment. Beneficial Owners whose broker,
bank or other nominee holds the shares of the Beneficial Owner in a registered
securities depository must make their optional cash payments through the use of
the B&N Form rather than through the use of an Authorization Card.
Initial direct purchases and subsequent optional cash payments must be in
United States dollars, payable at a United States bank, and may not be less than
$100 for initial direct purchases or $100 in the aggregate for any quarterly
period between Dividend Payment Dates for optional cash payments (noncumulative
from quarter to quarter). The same amount need not be sent each time, and there
is no obligation to make an optional cash payment in any quarter. Do not send
cash.
Optional cash payments of Participants can be refunded if a written request
is received by the Reinvestment Agent at the above address at least two business
days prior to the Investment Date (see Section 16).
Optional cash payments received on or prior to each Investment Date will be
invested on that Investment Date. No interest will be paid on funds held
between receipt and investment. You are therefore strongly encouraged to send
your optional cash payments so that they are received by the Reinvestment Agent
close to, but not later than the Investment Date (see Section 16)
5
<PAGE>
COSTS
13. Expenses to Participants in Connection with Purchases Under the Plan
Participants will incur no brokerage commissions, service or other charges
for purchases made under the Plan. Any costs of administration of the Plan will
be borne by the Company. However, charges will be incurred by a Participant
upon the sale of his or her shares (see Sections 25, 27 and 28), and certain
fees may be charged to Participants by brokers when shares are held by brokers.
The benefit of any reduced brokerage commission charges will be passed on, pro
rata, to Participants.
PURCHASES
14. Number of Shares will be Purchased for Participants
The number of shares to be purchased will be determined by the amount of
the Participant's dividends and/or optional cash payments or initial direct
purchase payments, being reinvested or paid and the Market Price (as defined in
Section 15) of the shares. Each Participant's Noncertificated Share Account in
the Plan will be credited with the number of shares, including fractional shares
computed to three decimal places, equal to the amount of the dividends and/or
optional cash to be reinvested or paid divided by the applicable purchase price
of the shares.
15. Determination of the Purchase Price of Shares
Shares may be purchased from the Company through the Reinvestment Agent or
may be purchased, in the discretion of the Company, in the open market by the
Reinvestment Agent. For shares purchased from the Company through the
Reinvestment Agent, the price per share will be the average of the high and low
sale prices of the shares (the "Market Price") on the Reinvestment Date (defined
as the date on which dividends are paid and can first be reinvested in the
Company by the Reinvestment Agent) on the NYSE as reported by THE WALL STREET
JOURNAL. If no shares were traded on the Reinvestment Date, the Market Price
will be based on the most recent date immediately prior to the Reinvestment
Date that the shares were traded. For shares purchased on the open market, the
price per share will be the average price of all shares purchased for the Plan
in respect of any Reinvestment Date.
16. Timing of Investment of Dividends, and/or Initial Direct Purchases or
Optional Cash Payments.
Dividend reinvestment payments will be invested in additional shares and
credited to a Participant's Noncertificated Share Account within thirty days of
each Reinvestment Date. If any dividend reinvestment payments are not
reinvested by the Reinvestment Agent within thirty days after a Reinvestment
Date, such dividend payments will be returned to the Participant without any
interest thereon.
Record Owners and Beneficial Owners wishing to make additional optional
cash payments through the Plan may do so at any time. The Reinvestment Agent
will make purchases for the Plan once a month on the first business day of each
month (the "Investment Date") to satisfy these investment requests.
Accordingly, Participants and interested investors should send cash investments
so as to reach the Reinvestment Agent by the 25th day of the preceding month.
17. Reinvestment of all dividends on shares credited to a Participant's
Noncertificated Share Account under the Plan
6
<PAGE>
Regardless of the investment option chosen, all cash dividends on shares
held in the Plan for all Participants are automatically reinvested in additional
shares of Common Stock.
SHARE CERTIFICATES
18. Issuance of Certificates to Participants for Shares Purchased Under the
Plan
Although the Company reserves the right at any time to issue certificates
for any number of shares in a Participant's Noncertificated Share Account,
certificates for shares will not be issued except as described in Section 19.
Shares purchased under the Plan will be credited to a Participant's
Noncertificated Share Account and will be shown on a Participant's statement of
account. Certificates for the shares purchased pursuant to the Plan will be
issued to Participants upon their written request, except that no certificates
will be issued for fractional shares. A Participant requesting a certificate
for all the shares in Participant's Noncertificated Share Account will receive
cash for a fractional share only if participation in the Plan is terminated.
(See Section 19 for how a Participant may obtain certificates.) Cash dividends
on all shares held in the Participant's Noncertificated Share Account under the
Plan will be automatically reinvested to purchase additional shares which will
be reflected in the Participant's Noncertificated Share Account. If a
Participant is a Beneficial Owner, such request should be placed through such
Participant's broker, banker or other nominee.
19. How a Participant May Obtain Certificates for Shares Purchased Under the
Plan
A Participant who has purchased shares under the Plan may obtain
certificates for those shares in the Participant's Noncertificated Share Account
at any time by sending a written request to that effect to the Reinvestment
Agent. If a Participant is a Beneficial Owner,such request should be placed
through such Participant's broker, bank or other nominee. No certificates will
be issued for fractional shares, but a Participant requesting termination of
participation in the Plan will receive, in cash, the Market Price of any
fractional share as well as one certificate, unless otherwise requested by the
Participant, for all whole shares held for such terminating Participant in the
Noncertificated Share Account. This notice should be mailed to the Reinvestment
Agent (see Section 3 for address). The Company, however, reserves the right at
any time to issue certificates to Participants for any shares in their
Noncertificated Share Accounts. (See Sections 24-27 for information on
termination of participation.)
20. Depositing Common Stock Held in Certificate Form in a Participant's
Noncertificated Share Account
Common Stock certificates registered in a Participant's name may be
surrendered to the Reinvestment Agent for deposit to the Participant's
Noncertificated Share Account. This procedure enables Participants to avoid
the necessity of safekeeping certificates. The Participant should contact the
Reinvestment Agent (see Section 3) for the proper procedure to deposit
certificates.
Common Stock certificates may be deposited in a Participant's
Noncertificated Share Account whether or not the Participant has previously
authorized reinvestment of dividends on Common Stock registered in the
Participant's name. However, as with all other shares held in the Participant's
Noncertificated Share Account, all dividends on any shares deposited will
automatically be reinvested.
PARTICIPANTS' RECORDS AND ACCOUNTS
21. Type of Reports Sent to Participants in the Plan
7
<PAGE>
As soon as practicable after each Reinvestment Date (in the case of
dividend reinvestment) or Investment Date (in the case of initial direct
purchases or optional cash payments) a Participant in the Plan will receive a
statement indicating the Market Price, the number of shares purchased and the
number of shares in the Participant's Noncertificated Share Account. In
addition to the above information, a statement to a Participant in the dividend
reinvestment feature of the Plan will also show the total dividend payment and
the amount of the dividend payment reinvested. Each of these statements is a
record of the cost of purchases under the Plan and should be retained for tax
purposes.
In addition, each Participant will receive copies of the Company's annual
and quarterly reports to shareholders, notices of annual and special meetings,
proxy statements and income tax information for reporting dividends. Beneficial
owners whose shares are registered in names other than their own (for instance,
in the name of a broker, bank nominee or other record holder) must arrange to
obtain their copies of such reports from the record holder.
22. Name Under Which Accounts Will Be Maintained and Certificates Registered
When Issued
A Participant's Noncertificated Share Account will be maintained in the
name or names which appear on the Company's shareholder records.
A certificate for shares, when delivered to a Participant, will be
registered in the name or names in which the Noncertificated Share Account is
maintained. Upon written request, certificates can be registered and issued in
names other than the account name, provided that the request bears the signature
of the Participant or Participants and the signature(s) are guaranteed by a
commercial bank or a member of the NYSE.
MODIFICATION OR TERMINATION BY A PARTICIPANT
23. Modifying the Manner of Participation in the Plan
A Participant may change participation from partial to total dividend
reinvestment, from total to partial dividend reinvestment, or may simply
change the number of shares that are enrolled in the Plan by executing and
delivering a new Authorization Card to the Reinvestment Agent (see Section 3
for address). Beneficial Owners must use the B&N Form to change their
Participation. Notices to change dividend reinvestment must be received by
the Reinvestment Agent at least two weeks before any Dividend Payment Date to
be effective as of that date.
24. Terminating Participation in the Plan
A Participant may terminate participation in the Plan by notifying the
Reinvestment Agent in writing to that effect. Notices will be effective only
upon receipt by the Reinvestment Agent. Notices to discontinue dividend
reinvestment received by the Reinvestment Agent at least two weeks before any
Dividend Payment Date will be effective as of that date. After termination,
dividends will be paid to the shareholder in cash unless and until the
shareholder rejoins the Plan. In order to re-enter the Plan after termination,
a shareholder must complete a new Authorization Card.
25. Selling Shares Held in the Plan Through the Reinvestment Agent
A Participant can instruct the Reinvestment Agent to sell any or all of
the whole shares held in the Plan. The written notification to the
Reinvestment Agent should include the number of shares that are to be sold.
The Reinvestment Agent will make the sale as soon as practicable after
receipt of a Participant's request and will then issue to the Participant a
check for the proceeds less brokerage commission and transfer taxes (if any).
In its discretion, the Reinvestment Agent also may effect a net share
exchange between a selling Participant and another Participant's optional
cash purchase or reinvestment of dividends.
8
<PAGE>
No Participant shall have the authority or power to direct the date or
sales price at which shares may be sold. The request must indicate the
number of shares which may be sold and not the dollar amount to be obtained.
Any such request that does not clearly indicate the number of shares which
may be sold will be returned to the Participant with no action taken.
A withdrawal/termination form will be provided on the stub of the account
statement for this purpose. This notice should be addressed to the
Reinvestment Agent (see Section 3 for address).
26. Status of Shares Held in the Noncertificated Share Account When a
Participant Terminates Participation in the Plan
A certificate for the shares held in the Noncertificated Share Account will
be issued to the Participant upon the Participant's written request or upon a
Participant's termination of participation in the Plan. No fractional shares
will be issued. (See Section 18 for information on share certificates and
Section 19 for information on the cash payment for fractional shares in the
Noncertificated Share Account.)
27. Receiving Cash in Lieu of Full Share Certificates upon Termination of
Participation
The Participant may request, in his or her written notification of
termination, that the Reinvestment Agent sell all full and fractional shares
held in the account under the Plan in which case the Reinvestment Agent will
sell the shares and deliver the Market Price of any fractional share and the
proceeds from the sale of full shares, less brokerage commissions and any taxes
payable in connection with the sale, to the Participant.
28. Selling Record Shares and Remaining in the Plan
If a Participant should sell or transfer all of his or her record shares of
Common Stock, the Reinvestment Agent, at its discretion, may continue to
reinvest the dividends on the shares credited to his or her Noncertificated
Share Account under the Plan until notified in writing by the Participant to
withdraw from the Plan, or may terminate the Participant's participation and
sell all of the shares credited to the Participant's Noncertificated Share
Account. Upon termination, the Reinvestment Agent will remit to the former
Participant the proceeds from any sale, less any related brokerage commission
and applicable taxes, and payment for any fractional shares.
29. Selling or Transferring Some but not All of the Common Stock Credited to
the Participant's Noncertificated Share Account
If a Participant is reinvesting dividends on only a portion of his or her
record shares, the Common Stock sold or transferred will be considered to be the
shares receiving cash dividends to the extent possible. Dividend reinvestment
will only be reduced when the number of shares of Common Stock sold or
transferred exceeds the number of shares receiving cash dividends. For example,
if a Participant owns 1,000 shares of Common Stock and has authorized dividends
on 600 of those shares to be reinvested under the Plan, such Participant could
sell up to 400 of his or her record shares without reducing the number of shares
which participate in the dividend reinvestment option of the Plan.
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30. Stopping the Reinvestment of Dividends from the Participant's Record Shares
and Receiving Them in Cash and Still Remaining in the Plan
A Participant who terminates the reinvestment of dividends paid on his or
her record shares, may leave shares acquired through the Plan in the
Participant's Plan Noncertificated Share Account. Dividends paid on shares left
in the Plan will continue to be automatically reinvested.
31. Re-enrolling in the Plan
Generally, a shareholder may again become a Participant at any time.
However, the Company reserves the right to reject any Authorization Form from a
previous Participant on grounds of excessive enrolling and termination. This
reservation is intended to minimize administrative expenses and to encourage use
of the Plan as a long-term investment service.
OTHER INFORMATION
32. Dividend Payment Dates
Dividend Payment Dates are anticipated to be in March, June, September and
December each year.
33. Voting of Participant's Shares at Annual Meetings of Shareholders
The Reinvestment Agent will obtain voting instructions from the Participant
for all full and fractional shares which are held by the Reinvestment Agent for
the Participant's Noncertificated Share Account on the record date established
by the Company for determining shareholders entitled to vote. In the absence of
voting instructions from the Participant, shares accumulated under the Plan will
not be voted.
34. Company Issuance of a Stock Dividend, Declaration of a Stock Split or
Making a Rights Offering
Any stock dividends or split shares distributed by the Company on shares
held by the Reinvestment Agent for the Participant will be credited to the
Participant's Noncertificated Share Account on a pro rata basis. In the event
that the Company makes available to its common shareholders rights to purchase
additional shares, debentures or other securities, the Reinvestment Agent will
sell such rights accruing on shares held by the Reinvestment Agent for
Participants and invest the proceeds in Common Stock of the Company prior to or
with the next regular cash dividend. A Participant who wishes to exercise
purchase rights must request that a stock certificate be sent to him or her by
the Reinvestment Agent prior to the record date for the rights offering.
35. Pledging Shares Credited to a Participant's Account
Shares in a Participant's Noncertificated Share Account in the Plan may not
be pledged, assigned or otherwise encumbered unless withdrawn from the
Noncertificated Share Account.
36. Responsibility of the Company or the Reinvestment Agent Under the Plan
In administering the Plan, neither the Company nor the Reinvestment Agent
nor any agent of either of them will be liable for any act done in good faith,
without negligence, or for any omission to act including, without limitation,
any claims for liability arising out of failure to terminate the Participant's
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Noncertificated Share Account upon his or her death prior to receipt of notice
in writing of such death and with respect to the prices at which shares are
purchased or sold for the Participant's Noncertificated Share Account and the
times such purchases or sales are made.
All notices from the Reinvestment Agent to a Participant will be addressed
to the Participant's last known address. Beneficial Owners will receive all
notices and other mailings through their broker, bank or other nominee.
Participant's should notify the Reinvestment Agent promptly in writing of any
change in address.
The risk to Participants is the same as with any other investment in shares
of Common Stock of the Company. It should be recognized that a Participant
loses any advantage otherwise available from being able to select the timing of
his or her investment. It should also be recognized that, like any investment,
the Company cannot assure the Participant of a profit or protect the Participant
against a loss on the shares purchased by the Participant under the Plan, nor
can the Company control purchases by the Reinvestment Agent. The Company also
cannot guarantee that dividends on shares of its common stock might not be
reduced or eliminated.
37. Modification, Suspension or Termination of the Plan
While the Company hopes to continue the Plan indefinitely, the Company
reserves the right to suspend or terminate the Plan at any time. It also
reserves the right to make modifications or amendments to the Plan and in
particular reserves the right to refuse optional cash payments from any
shareholder who, in the sole discretion of the Company, is attempting to
circumvent the interest of the Plan by making excessive optional cash payments
through multiple Noncertificated Share Accounts. To the extent practicable,
notice of any such suspension, termination, modification or amendment will be
sent to all Participants at least 30 days prior to the effective date. Any
modification will be deemed to be accepted by Participants who do not withdraw
prior to the effectiveness of the modification.
If the Plan is terminated, each Participant will receive (1) a certificate
for all whole shares of Common Stock held in the Participant's Noncertificated
Share Account and (2) a check representing the value of any fractional share
held in the Participant's Noncertificated Share Account and any uninvested
optional cash payment held in the account.
FEDERAL INCOME TAX CONSEQUENCES
Participants should consult their personal tax advisors with specific
reference to their own tax situations and potential changes in the applicable
laws as to all federal, state, local, foreign and other tax matters in
connection with the reinvestment of dividends and purchases of Common Stock
under the Plan, the Participant's tax basis and holding period for Common Stock
acquired under the Plan and the character, amount and tax treatment of any gain
or loss realized on the disposition of Common Stock. The following is only a
brief summary of some of the principal federal income tax considerations
applicable to the Plan.
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38. Tax Treatment of Dividends Received by a Participant
Participants in the Plan who are reinvesting dividends will be treated
for federal income tax purposes as having received with respect to each
Reinvestment Date a dividend equal to the purchase price of the shares
purchased by dividend reinvestment on that date (i.e., the amount that would
have been received as a cash dividend) plus the cash dividend actually
received (if any). Dividends will be taxed in the following manner: (i) if
the dividend is paid by the Company out of its current or accumulated
earnings and profits, it will be taxed as ordinary income; (ii) if the
Company has no current or accumulated earnings and profits, the dividend will
be treated as a return of capital, which results in a reallocation of basis
between shares previously owned and shares acquired by dividend reinvestment;
and (iii) if all capital has been returned under (ii), the dividend will be
treated as capital gain income.
Participants who acquire shares under the Plan, except those shares
acquired as a return of capital, will have a tax basis in the shares so acquired
equal to the amount being paid for those shares increased by any brokerage fees
treated as a dividend to the Participant. Except for those dividends treated as
a return of capital, the holding period for tax purposes for all Participants
will begin on the day following the Reinvestment Date on or for which the shares
are acquired. A Participant will not realize any taxable income when the
Participant receives certificates for whole shares previously credited to the
Participant's Noncertificated Share Account, either upon the Participant's
request for those shares or upon withdrawal from the Plan.
A Participant will realize gain or loss when shares are sold or exchanged,
or when the Participant receives a cash adjustment for a fraction of a share
credited to the Participant's Noncertificated Share Account upon withdrawal from
the Plan. The amount of such gain or loss will be the difference between the
amount which the Participant receives for the shares, or fraction of a share,
and the Participant's tax basis.
39. Tax Treatment of Service Charges, Brokerage Commissions, and other
administrative Expenses of the Plan Paid by the Company
In connection with purchases of shares on the open market, service charges
and brokerage commissions paid by the Company on the behalf of Participants will
likely be treated as distributions subject to income tax in the same manner as
dividends. With respect to administrative expenses, such expenses paid by the
Company are not likely to be treated as constructive distributions to
Participants and, as a result, not subject to income tax.
40. Provisions for Participants Whose Dividends are Subject to Income Tax
Backup Withholding
In the case of those Participants whose dividends are subject to United
States income tax backup withholding, the Reinvestment Agent will apply the net
amount of their dividends, after the deduction for taxes, to the purchase of
shares of Common Stock. As a general matter, the Company is currently required
to withhold for United States income tax purposes 31% of all dividend payments
to a shareholder if (i) the Participant fails to furnish its taxpayer
identification number (the "TIN") to the Company as required, (ii) the Internal
Revenue Service (the "IRS") notifies the Company that the TIN furnished by the
Participant is incorrect, (iii) the IRS notifies the Company that the
Participant has failed properly to report certain payments as required or (iv)
the Participant fails to certify, when and as required to do so, under penalties
of perjury, that it is not subject to backup withholding. Shareholders may be
requested by the Company or their broker to submit all information and
certifications required in order to exempt them from back-up withholding if such
exemption is available to them.
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41. Tax Treatment of Cash Received by a Participant upon the Sale of Shares
Purchased by the Participant Pursuant to the Plan
Assuming that the shares are held as capital assets, a Participant who
receives a cash payment for any full or fractional shares then held in his or
her Plan account will recognize either short-term or long-term capital gain
or loss, depending on his or her particular circumstances, the tax basis of
his or her shares, and the period of time he or she has held his or her
shares. Federal law requires the Company to notify the IRS of all sales of
stock made under the Plan during the year. If a Participant sells any shares
from the Plan, he or she will be sent a Form 1099B for each sale pursuant to
federal income tax regulations.
42. Federal Income Tax Consequences of Participation in the Plan by an IRA,
Keogh Plan, 401(k) Plan, Simplified Pension Account or any Corporate
Employer-sponsored Retirement Plan
The tax consequences of participation in the Plan by retirement plans
differ from those outlined above for individuals. Since the law and regulations
regarding the federal income tax consequences of retirement plan participation
are complex and subject to change, those considering such participation should
consult with their own retirement plan trustees, custodians or tax advisors for
specific information.
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Exhibit 5.1
[MICHAEL, BEST & FRIEDRICH LETTERHEAD]
June 16, 1997
Michael, Best & Friedrich
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4108
Dear Madam or Sir:
We have acted as counsel to United Wisconsin Services, Inc. ("UWS"),
a Wisconsin Corporation, in connection with the registration statement of UWS
on Form S-3 (the "Registration Statement") being filed on or about the date
of this letter with the Securities and Exchange Commission relating to the
proposed issuance of shares of common stock, without par value (the
"Shares"), of UWS pursuant to the terms of the UWS Dividend Reinvestment and
Direct Stock Purchase Plan (the "Plan").
As counsel to UWS, we are familiar with its amended articles of
incorporation, by-laws, minutes of meetings of shareholders and directors,
and other corporate records. We have examined the Registration Statement and
the exhibits thereto, including the Plan. Based upon the foregoing, we are
of the opinion that:
1. UWS is a corporation validly existing under the laws of the State
of Wisconsin; and
2. The Shares being offered pursuant to the Plan are duly authorized
and when delivered in accordance with the terms and conditions of the Plan will
be legally issued, fully paid and non-assessable, except as provided in Wis.
Stat. Section 180.0622(2)(b) and judicial interpretations thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Opinions" in the Registration Statement and related prospectus.
Very truly yours,
MICHAEL, BEST & FRIEDRICH
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus pertaining to the
United Wisconsin Services, Inc. Dividend Reinvestment and Direct Stock
Purchase Plan for the registration of 800,000 shares of its common stock and
the incorporation by reference therein of our report dated February 14, 1997,
with respect to the consolidated financial statements and schedules of United
Wisconsin Services, Inc. included in its Annual Report on Form 10-K for the
year ended December 31, 1996, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
June 13, 1997
<PAGE>
Exhibit 99.1
DIVIDEND REINVESTMENT, OPTIONAL PAYMENT
AND
DIRECT STOCK PURCHASE AUTHORIZATION
I hereby authorize United Wisconsin Services, Inc. (the "Company") to
pay, in accordance with my election below, the Firstar Trust Company ("Firstar")
for my account cash dividends payable to me on either all, or a specified number
(as I have designated below), of the shares of common stock of the Company
registered in my name.
Please check one of the two options and include, where appropriate,
the number of shares registered to you for which dividends are to be reinvested
under the Plan:
/ / All shares
/ / Specified number of shares: _____ shares
I hereby appoint Firstar as my agent (the "Agent") to apply dividends
received from the Company on shares of common stock registered in my name or
held for my account under such plan, plus any optional cash payments in amounts
of at least $100 per quarter, or any payment of at least $100 to join the Plan
pursuant to a direct stock purchase by investors who are not currently
shareholders of record in the Company, to the purchase of full and fractional
shares of common stock of the Company.
Please complete if applicable:
An optional cash payment in the amount of $ is enclosed.
A cash payment in the amount of $ is enclosed to join the
Plan pursuant to a direct stock purchase by investors who are not
currently shareholders of record in the Company.
RETURN TO:
Firstar Trust Company
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
IMPORTANT: PLEASE SIGN YOUR NAME OR NAMES AS THEY APPEAR ON THE REVERSE SIDE OF
THIS AUTHORIZATION.
Signature:
Signature:
Date:
