SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 2, 2002
-------------
UICI
(Exact name of registrant as specified in its charter)
Delaware 001-14953 75-2044750
----------------------------------------------- ---------------- ------------------
(State or other jurisdiction of incorporation (Commission File (IRS Employer
or organization) Number) Identification No.)
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 392-6700
--------------
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS
SUN LITIGATION
As previously disclosed, UICI and Ronald L. Jensen (the Company's
Chairman) are parties to litigation (Sun Communications, Inc. v. SunTech
Processing Systems, LLC, UICI, Ronald L. Jensen, et al) (the "Sun
Litigation") with a third party concerning the distribution of the cash
proceeds from the sale and liquidation of SunTech Processing Systems, LLC
("STP") assets in February 1998.
Effective April 2, 2002, the Company and Mr. Jensen entered into an
Assignment and Release Agreement, which is intended to effectively transfer
the Company's 80% interest in STP to Mr. Jensen and to terminate the
Company's active participation in, and limit the Company's financial
exposure associated with, the Sun Litigation. In accordance with the terms
of the Assignment and Release Agreement, on April 2, 2002 Mr. Jensen made a
total payment to UICI of $15.6 million and granted to UICI various
indemnities against possible losses which UICI might incur resulting from
the Sun Litigation, including (i) any losses arising from the breach of
fiduciary duty claim asserted by Sun against the Company and Sun's related
claim for attorneys' fees, (ii) Sun's claim for attorneys' fees arising out
of the distribution issue in the Sun Litigation, and (iii) all other claims
of any nature asserted by Sun against the Company in the Sun Litigation
arising out of or relating directly to the March 1997 agreement governing
the distribution of cash proceeds from the sale and liquidation of STP. In
exchange therefor, (i) UICI assigned to Mr. Jensen all of UICI's right,
title and interest to the funds held in the registry of the Court in the Sun
Litigation and released Mr. Jensen from any and all obligations arising
under the Jensen 1996 Guaranty and the Assurance Agreement; (ii) UICI
granted to Mr. Jensen an option, exercisable at a nominal exercise price, to
transfer to Mr. Jensen UICI's 80% interest in STP; and (iii) UICI granted to
Mr. Jensen an irrevocable proxy to vote UICI's membership interest in STP
on all matters coming before the members of STP for a vote.
SHAREHOLDER DERIVATIVE LITIGATION
As previously disclosed, on June 1, 1999, the Company was named as a
nominal defendant in a shareholder derivative action captioned Richard
Schappel v. UICI, Ronald Jensen, Richard Estell, Vernon Woelke, J. Michael
Jaynes, Gary Friedman, John Allen, Charles T. Prater, Richard Mockler and
Robert B. Vlach, which was filed in the District Court of Dallas County,
Texas (the "Shareholder Derivative Litigation").
On December 21, 2001, the District Court of Dallas County, Texas,
approved the terms of a Settlement Agreement and Mutual Release between UICI
and each of Richard J. Estell, Vernon Woelke, J. Michael Jaynes, Gary L.
Friedman, John E. Allen, Charles T. Prater, Richard T. Mockler, and Robert
B. Vlach (collectively, the "Individual Defendants"), on the one hand, and
Richard Schappel and Mr. Schappel's counsel, on the other hand. Pursuant to
the Settlement Agreement, the parties reached agreement with respect to the
payment of attorneys' fees and expenses on termination of the Shareholder
Derivative Action, and the Court also entered a Modified Final Judgment in
the case, vacating certain findings of fact that formed a part of an earlier
ruling by the Court rendered on October 14, 2001. The Settlement Agreement
and the Modified Final Judgment had the effect of fully and finally
resolving the matters in dispute in the Shareholder Derivative Litigation
between UICI and the Individual Defendants, on the one hand, and Mr.
Schappel, on the other hand. The terms of the settlement did not have a
material effect on the results of operations or financial condition of UICI.
In accordance with the terms of a Release Agreement, dated as of April
2, 2002, the Company has agreed to release Mr. Jensen from any and all
claims that the derivative plaintiff in the Shareholder Derivative
Litigation brought or could have brought against Mr. Jensen on behalf of
UICI in the Shareholder Derivative Litigation, and Mr. Jensen agreed to
waive and release UICI from any obligation to indemnify Mr. Jensen for any
future costs and/or out-of-pocket expenses associated with any claims that
the derivative plaintiff brought or could have brought against Mr. Jensen in
the Shareholder Derivative Litigation.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements in this report are "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results to differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: changes in general economic
conditions, including the performance of financial markets, and interest rates;
competitive, regulatory or tax changes that affect the cost of or demand for the
Company's products; health care reform; the ability to predict and effectively
manage claims related to health care costs; and reliance on key management and
adequacy of claim liabilities.
The Company's future results will depend in large part on accurately predicting
health care costs incurred on existing business and upon the Company's ability
to control future health care costs through product and benefit design,
underwriting criteria, utilization management and negotiation of favorable
provider contracts. Changes in mandated benefits, utilization rates, demographic
characteristics, health care practices, provider consolidation, inflation, new
pharmaceuticals/technologies, clusters of high-cost cases, the regulatory
environment and numerous other factors are beyond the control of any health plan
provider and may adversely affect the Company's ability to predict and control
health care costs and claims, as well as the Company's financial condition,
results of operations or cash flows. Periodic renegotiations of hospital and
other provider contracts coupled with continued consolidation of physician,
hospital and other provider groups may result in increased health care costs and
limit the Company's ability to negotiate favorable rates. Recently, large
physician practice management companies have experienced extreme financial
difficulties, including bankruptcy, which may subject the Company to increased
credit risk related to provider groups and cause the Company to incur
duplicative claims expense. In addition, the Company faces competitive pressure
to contain premium prices. Fiscal concerns regarding the continued viability of
government-sponsored programs such as Medicare and Medicaid may cause decreasing
reimbursement rates for these programs. Any limitation on the Company's ability
to increase or maintain its premium levels, design products, implement
underwriting criteria or negotiate competitive provider contracts may adversely
affect the Company's financial condition or results of operations.
The Company's Academic Management Services Corp. business could be adversely
affected by changes in the Higher Education Act or other relevant federal or
state laws, rules and regulations and the programs implemented thereunder may
adversely impact the education credit market. In addition, existing legislation
and future measures by the federal government may adversely affect the amount
and nature of federal financial assistance available with respect to loans made
through the U.S. Department of Education. Finally the level of competition
currently in existence in the secondary market for loans made under the Federal
Loan Programs could be reduced, resulting in fewer potential buyers of the
Federal Loans and lower prices available in the secondary market for those
loans.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UICI
---------------------------
(Registrant)
Date April 2, 2002 By /s/ Matthew R. Cassell
---------------------- ------------------------------------
Matthew R. Cassell
Vice President and Chief
Financial Officer