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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No.1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2010
Commission File Number: 0-13265
UCI MEDICAL AFFILIATES, INC.
(Name of Registrant as Specified in its Charter)
Delaware | 59-2225346 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) |
1818 Henderson Street,
Columbia, South Carolina 29201
(Address of Principal Executive Offices, Including Zip Code)
(803) 782-4278
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: | None | |
Securities registered pursuant to Section 12(g) of the Act: | Common Stock, $.05 par value |
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the common equity held by non-affiliates of the registrant on September 30, 2010 was approximately $6,955,843, based on the number of shares held by non-affiliates of the registrant and the reported last sale price of common stock on September 30, 2010 ($2.41), which was the last business day of the registrant’s most recently completed quarter. This calculation does not reflect a determination that persons are affiliates for any other purposes. The registrant has no non-voting common stock outstanding.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨
The number of shares outstanding of the registrant’s common stock, $.05 par value, was 9,934,072 at September 30, 2010.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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UCI MEDICAL AFFILIATES, INC.
PAGE | ||||||
Explanatory Note | 3 | |||||
PART III | ||||||
Item 10. | 4 | |||||
Item 11. | 8 | |||||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 14 | ||||
Item 13. | Certain Relationships and Related Transactions and Director Independence | 15 | ||||
Item 14. | 16 | |||||
PART IV | ||||||
Item 15. | 18 | |||||
19 |
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This Amendment No. 1 on Form 10-K/A, which we refer to as the Amendment, amends our Annual Report on Form 10-K for the fiscal year ended September 30, 2010, originally filed with the Securities and Exchange Commission, or SEC, on December 28, 2010, which we refer to as the Original Filing. We are filing this Amendment to include the information required by Part III that was not included in the Original Filing as we will not file our definitive proxy statement within 120 days of the end of our fiscal year ended September 30, 2010. The reference on the cover of the Original Filing to the incorporation by reference of our definitive proxy statement into Part III of the Original Filing is hereby deleted.
For purposes of this Amendment, and in accordance with Rule 12b-15 under the Exchange Act, Items 10 through 15 of our Original Filing have been amended and restated in their entirety. Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing.
Throughout this report, references to the “Company”, “we”, “us” or “our” refers to UCI Medical Affiliates, Inc., and its consolidated subsidiaries and affiliated entities, taken as a whole, unless the context otherwise indicates. As used herein, the term “UCI-SC” refers to UCI Medical Affiliates of South Carolina, Inc., our wholly-owned subsidiary; the term “DC-SC” refers to Doctors Care P.A., a professional corporation affiliated with us; the term “DC-TN” refers to Doctor’s Care of Tennessee, P.C., a professional corporation affiliated with us; the term “PPT” refers to Progressive Physical Therapy, P.A., a professional corporation affiliated with us; the term “COSM” refers to Carolina Orthopedic & Sports Medicine, P.A., a professional corporation affiliated with us; and the term “P.A.” refers collectively to DC-SC, DC-TN, PPT and COSM.
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PART III
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Board of Directors
The following table identifies the names, ages, Board term expirations, and committee memberships of our current Board members:
Name | Age | Term Expiring In | Audit Committee | Compensation Committee | Nominating Committee | ||||||||||||||||||||
Harold H. Adams, Jr. | 63 | 2012 | * | * | * | ||||||||||||||||||||
Joseph A. Boyle, CPA | 56 | 2011 | |||||||||||||||||||||||
Ann T. Burnett | 57 | 2013 | |||||||||||||||||||||||
Jean E. Duke, CPA | 55 | 2013 | * | * | * | ||||||||||||||||||||
Thomas G. Faulds | 69 | 2011 | * | * | |||||||||||||||||||||
John M. Little, Jr., M.D. | 60 | 2011 | * | ||||||||||||||||||||||
Charles M. Potok | 61 | 2012 | * | * | |||||||||||||||||||||
Timothy L. Vaughn, CPA | 46 | 2013 | * |
* | Member |
** | Chairman |
Harold H. Adams, Jr. has served as one of our directors since June 1994. Since October, 2010 he served as Area Chairman of Gallagher Charitable International Insurance Services (GCIIS). From November, 2006 he served as Area President of Adams & Associates International – Arthur J. Gallagher Risk Management Services (A&AI-AJG) predecessor to GCIIS. From 1992 until November, 2006, he was Chairman and owner of Adams & Associates International (A&AI) and Southern Insurance Managers (SIM). In November 2006 Mr. Adams’ firms A&AI and SIM merged with Arthur J. Gallagher Risk Management Services. Additionally, Mr. Adams is Chairman and part owner of Custom Assurance Placements, Ltd, since its inception in February, 2005. He served as President of Adams Eaddy & Associates, an independent insurance agency from 1980 to 1992. Mr. Adams has been awarded the Chartered Property Casualty Underwriter (CPCU) designation and is currently a member of the President’s Board of Visitors of Charleston Southern University in Charleston, South Carolina. He has received numerous professional awards as the result of over 40 years of involvement in the insurance industry and is a member of many professional and civic organizations. Mr. Adams was most recently reelected as a director at the annual meeting of stockholders in 2010.
Joseph A. Boyle, CPA has served as one of our directors since 2004, and as our Executive Vice President and Chief Financial Officer since December 17, 2008. He has served as the President and Chief Executive Officer of Affinity Technology Group, Inc. since January 2000 and as its Chairman since March 2001. Mr. Boyle served as Affinity’s Senior Vice President and Chief Financial Officer from September 1996 until January 2000 and as Chairman and Chief Executive Officer of Surety Mortgage, Inc., a wholly owned subsidiary of Affinity, from December 1997 until December 2001. In August 2008, Affinity filed a voluntary petition in the United States Bankruptcy Court for the District of South Carolina under the provisions of Chapter 11 of the United States Bankruptcy Code. Mr. Boyle is a certified public accountant and from January 2005 until June 2006 served as Chief Operating Officer of Community Resource Mortgage, Inc., a wholly owned subsidiary of Community Bancshares, Inc. From April 2003 to August 2004, Mr. Boyle was a partner in the accounting firm of Elliott Davis, LLC. From June 1982 until August 1996, Mr. Boyle was employed by Price Waterhouse, LLP and from 1993 until 1996 was a partner in its Kansas City, Missouri office where he specialized in the financial services industry. Mr. Boyle was most recently reelected as a director at the annual meeting of stockholders in 2008.
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Ann T. Burnett has served as one of our directors since 2007, and currently serves as Vice President of the Health Network Services division of BlueChoice HealthPlan of South Carolina, Inc. (“BlueChoice”), a Subsidiary of Blue Cross and Blue Shield of South Carolina. Ms. Burnett has been employed by BlueChoice since 1986. Ms. Burnett was most recently reelected as a director at the annual meeting of stockholders in 2010.
Jean E. Duke, CPA has served as one of our directors since 2007, and has been a financial consultant since February 2008. From October 2006 until February 2008 she served as the Chief Financial Officer of SRC, an Aetna Company. From December 2004 until October 2006, she owned a consulting business providing services primarily for insurance and financial organizations. Prior to that, Ms. Duke was affiliated with Colonial Life & Accident Insurance Company, serving in the roles of Senior Vice President, Customer & Information Services, and President & Chief Financial Officer, from August 2002 to December 2004. Ms. Duke is a certified public accountant. A graduate of Leadership Columbia, she was named the Financial Executive of the Year by the Columbia chapter of the Institute of Management Accountants, the Distinguished Young Alumni by the Moore School of Business, and was honored with the Tribute to Women in Industry award by the Young Women’s Christian Association. Ms. Duke has held leadership and board positions with many professional and business organizations as well as continuing to be active in numerous community organizations. Ms. Duke was most recently reelected as a director at the annual meeting of stockholders in 2010.
Thomas G. Fauldsserved as President and Chief Operating Officer of the Blue Cross Blue Shield Division of Blue Cross and Blue Shield of South Carolina (“BCBS”) from 1998 until his retirement on May 1, 2007, and also served as the senior officer responsible for six subsidiaries: BlueChoice HealthPlan, Planned Administrators, Inc., Companion Benefits Alternatives, Inc., Alpine Agency, Inc., Thomas H. Cooper & Company and CIMR. He was employed by BCBS since March, 1972. Mr. Faulds previously served as one of our directors between August 1996 and June 2003. On December 13, 2005, the Board of Directors appointed Mr. Faulds to our Board of Directors to fill a vacancy on the board. Mr. Faulds was most recently reelected as a director at the annual meeting of stockholders in 2008.
John M. Little, Jr., M.D., MBA has served as one of our directors since August 1998 and is currently the Vice President for HealthCare Services and Chief Medical Officer for Blue Cross Blue Shield of South Carolina. Dr. Little also served in the same position at BlueChoice HealthPlan (formerly known as Companion HealthCare Corporation) from 1994 to 2000. Prior to joining BlueChoice HealthPlan in 1994, Dr. Little served as Assistant Chairman for Academic Affairs, Department of Family Practice, Carolinas Medical Center, Charlotte, North Carolina from 1992 to 1994. Dr. Little was most recently reelected as a director at the annual meeting of stockholders in 2008.
Charles M. Potok has served as our Chairman of the Board since February 2003, and has served as one of our directors since September 1995. He has served as Executive Vice President and Chief Operating Officer of Companion Property and Casualty Insurance Company, a wholly-owned subsidiary of Blue Cross Blue Shield of South Carolina, since March 1984 and, as President of The Companion Property Casualty Group since April 2002. Mr. Potok is an Associate of the Casualty Actuarial Society and a member of the American Academy of Actuaries. Mr. Potok serves on many business and civic boards and is past President of the Indian Waters Council of the Boy Scouts of America. Mr. Potok was most recently reelected as a director at the annual meeting of stockholders in 2010.
Timothy L. Vaughn, CPA has served as one of our directors since 2007, and has served as Vice President and Chief Financial Officer of Blue Cross Blue Shield Division of Blue Cross Blue Shield of South Carolina since November 2010. Mr. Vaughn served as Vice President and Chief Financial Officer of BlueChoice HealthPlan (formerly known as Companion HealthCare Corporation) from January 2000 through November 2010, and Vice President of Underwriting of BlueChoice HealthPlan from October 2005 though July 2010. He served as TRICARE Contracts Manager for Blue Cross Blue Shield of South Carolina from 1997 to 2000. This federal program provided healthcare benefits administration for military dependents and retirees across the nation. Mr. Vaughn is a certified public accountant and has been named a Fellow in both the Academy of Healthcare Management and Life Management Institute and is currently serving as Corporate Secretary and Treasurer of EAP Alliance, Inc. in Columbia, South Carolina. He is a member of numerous professional and civic organizations. Mr. Vaughn was most recently reelected as a director at the annual meeting of stockholders in 2010.
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Executive Officers and Code of Ethics
Executive Officers
The following individuals constitute our current executive officers:
Name | Age | Offices Held | ||||
D. Michael Stout, M.D. | 65 | President and Chief Executive Officer | ||||
Joseph A. Boyle, CPA | 56 | Executive Vice President and Chief Financial Officer |
D. Michael Stout, M.D. has served as Executive Vice President of Medical Affairs of UCI and Doctors Care, P.A. (“DC-SC”) since 1985 and as President and Chief Executive Officer of UCI, UCI-SC, DC-SC and Doctors Care of Tennessee, P.C. since November 1, 2002, and of COSM since April 5, 2005. He is Board Eligible in Emergency Medicine and is a member of the American College of Emergency Physicians, the Columbia Medical Society, and the American College of Physician Executives. He graduated from Brown University Medical School in 1980 and practiced medicine for Doctors Care since 1983. Dr. Stout is the Treasurer of the Board of Directors of the South Carolina Campaign to Prevent Teen Pregnancy and serves on the Board of Directors for the local chapter of Habitat for Humanity, The Columbia Film Society/Nickelodeon Theatre and the Big Brothers Big Sisters of Greater Columbia.
Joseph A. Boyle, CPAhas served as our Executive Vice President and Chief Financial Officer since March 16, 2009. From December 17, 2008 until March 16, 2009, Mr. Boyle served as our Interim Chief Financial Officer. Mr. Boyle also serves as a member of our Board of Directors and further information concerning his background and business experience is discussed above in this ITEM 10 under the caption, “ DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE – Board of Directors.”
Code of Ethics
We adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have filed a copy of this Code as Exhibit 14 to this Amendment No. 1 on Form 10-K/A by incorporating by reference to such Code as filed with the Securities and Exchange Commission on December 5, 2003 as Exhibit 14 to our Annual Report on Form 10-K for the year ended September 30, 2003.
Corporate Governance
The Board has standing Audit, Compensation and Nominating Committees.
Audit Committee. The Audit Committee operates under a written Charter. The Board has determined that all of the members of the Audit Committee as of September 30, 2010 met the independence criteria prescribed by the Securities and Exchange Commission and the Nasdaq Stock Market for service on the Audit Committee and that the current members of the Audit Committee continue to meet such independence criteria. The Board of Directors has determined that as of September 30, 2010, Ms. Duke was a financial expert, as that term is defined in Item 401(h)(2) of Regulation S-K under the Exchange Act. The Audit Committee met 6 times during the fiscal year ended September 30, 2010.
Compensation Committee. The Compensation Committee establishes and oversees the design and functionality of the Company’s executive compensation program. The Board has determined that all of the members of the Compensation Committee are not independent within the meaning of the Nasdaq Stock Market regulations because members of the Compensation Committee are associated with BCBS. The Compensation Committee does not operate under a written Charter. The Compensation Committee met 2 times during the fiscal year ended September 30, 2010.
Nominating Committee. The Nominating Committee makes recommendations to the Board with respect to the size and composition of the Board, reviews the qualifications of potential candidates for election as director, and recommends director nominees to the Board. The Board has determined that all of the members of the Nominating Committee are independent within the meaning of the Nasdaq Stock Market regulations. The Nominating Committee operates under a written Charter. The Nominating Committee did not meet during the fiscal year ended September 30, 2010.
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The Nominating Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and stockholders. As set forth in our Bylaws, any stockholder entitled to vote for the election of Directors at an annual meeting of stockholders may nominate persons for election as Directors only if written notice of such stockholder’s intent to make such nomination is given, by certified mail, postage prepaid, to the Secretary of the Corporation and received at the principal offices of the Corporation at the address not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders. However, if the annual meeting is not held within thirty days before or after the anniversary date of the immediately preceding annual meeting of stockholders, then for the notice by the stockholder to be timely, it must be received by our Secretary of our principal offices not later than the close of business on the tenth day following the date on which the notice of the annual meeting was actually mailed. As set forth in our Bylaws, any stockholder entitled to vote for the election of Directors may nominate persons for election of Directors to be held at a special meeting of stockholders only if written notice of such stockholder’s intent to make such nomination is given, by certified mail, postage prepaid, to the Secretary of the Corporation and received at the principal offices of the Corporation not less than ten days following the date on which notice of such special meeting of stockholders is first given to the stockholders.
Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination, as they appear on our books, (b) the class and number of shares beneficially owned by such stockholder, (c) a representation that such stockholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (d) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder, (e) with respect to each nominee, (i) the nominee’s name and age, (ii) the nominee’s occupation and business address and telephone number, (iii) the nominee’s residence address and telephone number, (iv) the number of shares of each class of our stock held directly or beneficially by the nominee, and (v) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and (f) the consent of each nominee to serve as a Director of the Corporation if elected. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to our Secretary that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Company unless nominated in accordance with the procedures set forth in our Bylaws.
Once the Nominating Committee has identified a prospective nominee, the Nominating Committee makes an initial determination as to whether to conduct a full evaluation of the candidate. The Committee bases this initial determination on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The Committee also bases this initial determination primarily on the need for additional Board members to fill vacancies and the likelihood that the prospective nominee can satisfy the evaluation factors described below.
If the Committee determines, in consultation with the Chairman of the Board and other Board members as appropriate, that additional consideration is warranted, it may gather additional information about the prospective nominee’s background and experience. The Committee then evaluates the prospective nominee against the standards and qualifications set out in its Charter, including without limitation independence, strength of character, business or financial expertise, current or recent experience as an officer or leader of another business, experience as a director of another public company, regulatory compliance knowledge, industry trend knowledge, product/service expertise, practical wisdom, mature judgment, time availability (including the number of other boards he or she sits on in the context of the needs of the board and the company and including time to develop and/or maintain sufficient knowledge of the company and its industry), geography, age, and gender and ethnic diversity on the Board.
In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, one or more members of the Committee, and others as appropriate, interview prospective nominees in person or by telephone. After completing this evaluation and interview, if warranted, the Committee makes a recommendation to the Board as to the persons who should be nominated by the Board. The Board determines the nominees after considering the recommendation and report of the Committee.
The chairman of the meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and should he or she so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.
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Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of filings with the Securities and Exchange Commission and written representations that no other reports were required, we believe that all of our directors and officers complied during our fiscal year ended September 30, 2010 with the filing requirements under Section 16(a) of the 1934 Act.
ITEM 11. | EXECUTIVE COMPENSATION |
Compensation Discussion and Analysis
General Overview of Executive Compensation
The Board of Directors is charged with the responsibility of administering our executive officer compensation program and determining the appropriate levels of executive compensation based on recommendations it receives from the Compensation Committee (the “Committee”). Our Chief Executive Officer has not entered into employment agreement or change in control agreement with the Company. Our Chief Financial Officer has entered into an employment agreement with the Company; however, the agreement does not include any provisions covering changes in control of the Company. Over the last few years, the Board has followed an informal policy of providing our executive officers with a total compensation package that consists of a base salary, cash bonus, stock-based equity awards, deferred compensation, and various other insurance and retirement benefits.
In developing its compensation recommendations for the Board, the Committee considers the overall goals of the Company’s executive compensation program. The first primary goal of our compensation program is to reward our executive officers appropriately on a performance basis. To that extent, our compensation program is designed to reward our officers both for their personal performance and also for the performance of the Company with respect to growth in assets and earnings, expansion and increases in stockholder value. Another primary goal of our program is to attract and retain competent management personnel. To that end, the Committee’s objective in setting compensation is fixing salaries and other benefits at a level that is competitive enough to enable our Company to not only attract, but also to motivate, reward and retain the management talent necessary for our continued success. The final goal of the compensation program is to encourage each of our executive officers to perform. In order to accomplish this goal, the Committee sets salaries and awards bonuses and other equity awards in a manner that encourages our executive officers to perform at their highest levels in order to increase earnings and value for our stockholders.
The Committee ultimately makes all decisions about allocations between long-term and current compensation, cash and non-cash compensation, and allocations among the various forms of non-cash compensation. The members of the Committee make these decisions in their professional discretion based upon their subjective assessment of how each officer’s respective allocation would best meet the overall compensation goals outlined above. In addition to our three basic compensation objectives, the Committee and Board always consider what allocation structures and compensation levels are in the overall best interests of the Company.
Elements of the Compensation Program
The Company’s executive officer compensation program consists of four components: (i) base salary, (ii) incentive cash compensation and cash bonuses; (iii) stock option grants or other forms of equity awards; and (iv) deferred compensation. The Committee utilizes these four elements in their efforts to structure executive officer compensation in a way that appropriately rewards past performance, encourages future performance and provides a standard of living appropriate to each officer’s experience, responsibility and accomplishments. In addition to these main elements, each executive officer also receives additional compensation through our standard benefit plans that are available to all employees of the Company. The Committee reviews base salaries from time to time and adjusts them appropriately. The Committee believes that each element of our executive compensation program is an integral part of the program and, further, that each element is necessary to achieve a proper balance of incentive and reward.
A more detailed discussion of each of these elements of executive compensation, the reasons for awarding such types of compensation, the considerations in setting the amounts of each element of compensation and the amounts actually awarded is set forth in the sections below.
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Base Salary
We include base salary as a part of our executive compensation program because we believe that our executive officers are entitled to receive a level of assured cash compensation that is sufficient in light of each officer’s own professional status and personal accomplishments. The base salary of each executive officer is determined by the Committee and is based in large part on the Committee’s subjective assessment of the executive officer’s performance (which is considered in light of their particular responsibilities and position within the Company) and our overall Company performance during prior periods. Other factors considered by the Committee in setting base salary are described below.
As noted above, the Committee primarily focuses on the Company’s financial performance for the relevant period (as measured by operating income and revenue growth) in making its evaluation of each executive officer’s overall performance. In addition, the Committee also considers the following factors: (i) salary norms for officers with a similar level of experience in comparable positions at comparable companies; (ii) the relative experience and skills of the particular executive officer; (iii) the level of responsibilities assigned to that officer; and (iv) the officer’s historical performance in light of our corporate objectives.
For the year ended September 30, 2010, the Committee set each named executive officer’s base salary as follows:
Name | 2010 Base Salary | ||||
D. Michael Stout, M.D. | $ | 359,816 | |||
Joseph A. Boyle, CPA | $ | 227,065 |
In setting our chief executive officer’s salary for the year ended September 30, 2010, the Committee considered the fact that (i) our chief executive officer has continued to provide the personal leadership and business acumen that is necessary for our continued success; and (ii) the growth of the Company. The Committee also considered the salary levels of other chief executive officers at similar institutions in the Southeast and set a salary level the Committee believed to be fair, both to Dr. Stout and to the Company itself.
In setting our chief financial officer’s salary for the year ended September 30, 2010, the Committee took into consideration (i) the time and expertise required to comply with the complex financial regulatory and reporting requirements applicable to all reporting companies, and (ii) the growth of the Company. In addition to the above mentioned factors, the Committee also considered the salary levels of other chief financial officers at similar institutions in the Southeast and set a salary level the Committee believed to be fair, both to Mr. Boyle and to the Company itself.
Incentive Cash Compensation and Cash Bonuses
We generally include incentive cash bonuses as part of each executive officer’s compensation as a mechanism for rewarding our executive officers for the Company’s (or any applicable subsidiary or business unit’s) achievement of certain performance objectives. Although it does operate mainly as a reward to our executive officers, the incentive cash bonuses are designed to promote the interests of the Company and its stockholders by providing our executives with financial rewards and helping to attract and retain key executives.
Generally, after the commencement of each fiscal year, the Committee determines, and informs the executive officer, of a range of incentive cash bonus, if any, which may be awarded at the conclusion of the fiscal year to such executive officer. In setting the ranges of incentive cash bonuses which could be earned, the Committee takes into account each executive officer’s base salary, duties and responsibilities, as well as management’s estimated revenue and pre-tax income of the Company for such fiscal year.
The Committee determines the amount of any incentive cash bonus that an executive officer receives and awards such bonuses only when the Committee deems a bonus to be appropriate, in its discretion, based on the Company’s and individual executive’s performance. At the conclusion of the fiscal year, the Committee determines the amount of cash incentive compensation earned by each executive officer, if any, based upon the Company’s overall success, growth, and financial performance (measured in large part by the Company’s revenues and pre-tax income) for the year. In fiscal year 2009, there was no formal incentive compensation plan based on overall success, growth, and financial performance. Neither of our executive officers received a cash bonus in 2009; however, our executive officers were paid a discretionary cash bonus in 2010 related to the Company’s financial performance in fiscal year 2009. Dr. Stout and Mr. Boyle were paid discretionary bonuses of $157,290 and $120,583, respectively, in 2010. In addition, pursuant to the 2010 incentive compensation plan approved by the Committee, Dr. Stout and Mr. Boyle earned total incentive compensation of $90,703 and $56,039, respectively.
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The amount of the cash incentive compensation earned by Dr. Stout and Mr. Wells, our former Chief Financial Officer, in 2008 is set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. Consistent with past practice, Mr. Wells and Dr. Stout received advances of $45,000 and $42,000, respectively, on the anticipated cash incentive compensation each would be due for the year ended September 30, 2008.
In addition to the above described cash incentive compensation, the Company on October 6, 2008 awarded to Mr. Wells and Dr. Stout $35,350 and $44,188, respectively, as a cash bonus to reward them for their leadership of the Company during the recent reorganization of the Company.
Stock Options and Equity Awards
The Committee’s use of equity awards as another form of incentive compensation is designed to focus management’s attention on the future of the Company and also on the long-term interests of stockholders. The Company believes that equity awards are instrumental in attracting and retaining the services of outstanding personnel and in encouraging such employees to have a greater financial investment in the Company.
In accordance with the Committee’s approval of the 2010 incentive compensation plan, the Committee specified that 15% of our executives’ incentive compensation be in the form of equity instruments. Accordingly, in 2010 Dr. Stout and Mr. Boyle earned 4,965 and 3,068 shares of the Company’s common stock, valued at $13,605 and $8,406, respectively. The shares will be issued to the executives in the second quarter of fiscal year 2011.
Deferred Compensation Plans
During June 1997, the Company’s Board of Directors approved the UCI/Doctors Care Deferred Compensation Plan (the “Plan”) for key employees of the Company with an effective date of June 1998. The Plan was amended and restated effective January 1, 2005. Eligibility to participate in the Plan is determined at the discretion of the Company’s Board of Directors. Under the Plan, key employees may defer up to 30% of their pre-tax earnings. The Company may match up to three times the employee’s contribution percentage up to a limit of 10% of the employee’s pre-tax earnings. The Company’s matching contribution vests immediately. Distributions from the Plan to the employee or their beneficiaries may occur if the employee resigns or is terminated, becomes disabled or deceased, reaches the normal retirement age of 65, or if there is a change of control of the Company. Participating employees may elect a lump-sum payment or be paid in annual installments; however, in no event may the employee receive the first payment until six months after the event which precipitated the distribution. For fiscal year 2010, the Company’s matching contributions for Dr. Stout and Mr. Boyle were $184,015 and $121,106, respectively. The Company establishes and maintains investment accounts to fund the Deferred Compensation Plan. The deferred compensation liability increases or decreases based on the amounts deferred plus or minus earnings or losses on the deemed investment selections of the participants less any payments to participants. The Plan is a non-qualified Plan, and its assets, which consist of Company Owned Life Insurance, are subject to claims of creditors.
Other Benefits
We provide our executive officers with the same standard benefits and vacation package that all employees of the Company receive. This package includes the provision to our executive officers of the same healthcare, life and disability insurance benefits that we provide all other employees of the Company. It also includes making contributions to our 401(k) plan on each officer’s behalf pursuant to our standard 401(k) matching plan.
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REPORT OF COMPENSATION COMMITTEE
The Compensation Committee establishes and oversees the design and functionality of the Company’s executive compensation program. We have reviewed and discussed the foregoing Compensation Discussion and Analysis (“CD&A”) with management of the Company. Based on this review and discussion, we recommended to the Board of Directors that the CD&A be included in this Report.
Submitted by the members of the Compensation Committee of the Board of Directors:
Charles M. Potok (Chair)
John M. Little, Jr., M.D.
Timothy L. Vaughn, CPA
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been our executive officer or employee or an executive officer or employee of any of our subsidiaries. None of the members of the Compensation Committee is or has been a member of the compensation committees of another entity. None of our executive officers are or have been a member of the compensation committee, or a director, of another entity.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary | Bonus | Stock Award | Non-Equity Incentive Plan Compensation | All Other Compensation (1) | Total | |||||||||||||||||||||
D. Michael Stout, MD | 2010 | $ | 359,816 | $ | 157,290 | $ | 13,605 | $ | 77,098 | $ | 212,343 | $ | 820,152 | |||||||||||||||
President and Chief | 2009 | 348,964 | — | — | — | 169,496 | 518,460 | |||||||||||||||||||||
Executive Officer | 2008 | 348,964 | 44,188 | 32,062 | 113,413 | 163,079 | 701,706 | |||||||||||||||||||||
Joseph A. Boyle, CPA | 2010 | 227,065 | 120,583 | 8,406 | 47,633 | 123,606 | 527,293 | |||||||||||||||||||||
Executive Vice | 2009 | 111,000 | (3) | — | — | — | 25,614 | 136,614 | ||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||
Financial Officer | ||||||||||||||||||||||||||||
Jerry F. Wells, CPA | 2008 | 222,068 | 35,350 | 25,650 | 58,293 | (2) | 121,816 | 463,177 | ||||||||||||||||||||
Former Executive Vice | ||||||||||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||
Financial Officer and | ||||||||||||||||||||||||||||
Corporate Secretary |
(1) | Amounts set forth under the caption, “All Other Compensation” include the Company’s contribution to the respective executives’ deferred compensation plan account. See the table below under the caption “NON-QUALIFIED DEFERRED COMPENSATION” for additional information. In addition, the amounts include payments for automobile allowances paid in lieu of mileage reimbursements, health insurance supplements, Company contributions to the executives’ 401k account and for Dr. Stout, reimbursement for long-term disability insurance. Dr. Stout received an automobile allowance of $8,574 in 2010 and $12,350 in 2009. Mr. Wells received an automobile allowance of $12,350 in 2008. In each year set forth in the above table, the Company contributed $2,500 to the 401k accounts of Dr. Stout and Mr. Wells. In 2010 and 2009, the Company contributed $2,500 and $6,660, respectively, to Mr. Boyle’s 401k account. Health insurance supplements totaled $3,150 for Dr. Stout in 2009 and 2008 and $3,350 for Mr. Wells in 2008. Dr. Stout was reimbursed $17,254, $10,270 and $10,161 in 2010, 2009 and 2008, respectively, for long-term disability insurance premiums. |
(2) | Mr. Wells’ employment was terminated on December 17, 2008 as a result of the discovery of improper expense reimbursements he claimed and other fraudulent activities in which he engaged. Prior to the date of the discovery of theses matters, Mr. Wells was paid $45,000 under the Company’s Non-Equity Incentive Plan. The remaining $13,293 was not paid to Mr. Wells. |
(3) | For 2009, Mr. Boyle’s salary information is for the period March 16, 2009 through September 30, 2009. From December 17, 2008 until March 16, 2009 (the date on which he became an employee of the Company), Mr. Boyle worked as Interim Chief Financial Officer on a contractual basis. During that period he was paid $64,080 for his services. |
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2010 OPTION EXERCISES AND STOCK VESTED
During 2010, our executive officers were not issued any stock options or stock, nor did they exercise any stock options or vest in any stock awards. As explained above in this Item 11. under the sub-caption, “Stock Options and Equity Awards,” in 2010, Dr. Stout and Mr. Boyle earned 4,965 and 3,068 shares of the Company’s common stock, valued at $13,605 and $8,406, respectively. The shares will be issued to the executives in the second quarter of fiscal year 2011.
NON-QUALIFIED DEFERRED COMPENSATION (1)
Name | Executive Contributions in Last FY | Registrant Contributions in Last FY (2) | Aggregate Earnings in Last FY | Aggregate Withdrawals/Distributions | Aggregate Balance at Last FYE | |||||||||||||
D. Michael Stout, MD | $ | 61,338 | $ | 184,015 | $ | 98,173 | — | $ | 1,384,560 | |||||||||
Joseph A. Boyle, CPA | 40,369 | 121,106 | 8,815 | — | 205,327 |
(1) | The significant provisions of the Company’s Deferred Compensation Plan are discussed in this Form 10-K under the caption, Part III – Item 10. – EXECUTIVE COMPENSATION – Compensation Discussion and Analysis – Elements of Compensation Program – Deferred Compensation Plans.” |
(2) | These amounts are included in the respective Executive’s 2010 “All Other Compensation” column of the Summary Compensation Table above. |
2010 GRANTS OF PLAN-BASED AWARDS
Name | Grant Date | Estimated Future Payouts Under Non Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/Sh) | ||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | (#) | (#) | ($/Sh) | ||||||||||||||
D. Michael Stout | Jan. 11, 2011 | $ | 4,460 | $107,045 | $214,089 | — | — | — | — | — | — | |||||||||||
Joseph A. Boyle | Jan. 11, 2011 | 2,838 | 67,119 | 136,239 | — | — | — | — | — | — |
(1) | This represents the total (including cash and equity awards) annual incentive opportunity for 2010 under the 2010 Incentive Program. The actual amounts paid out under this plan for 2008 are reported in the Summary Compensation Table. The threshold reflects the amount that would be payable under the plan if the minimum performance goals (with respect to bonus qualification) were achieved for both revenue and pre-tax income. If the minimum performance goal for either revenue or pre-tax income goals were not achieved, no bonus would be payable under the plan. |
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DIRECTOR COMPENSATION
Currently, members of our Board receive the following retainer fees: $6,000 per fiscal year for the Chairman, $5,000 per year for Committee members, and $4,000 per year for all other members of the Board. We also reimburse directors for out-of-pocket expenses reasonably incurred by them in the discharge of their duties as directors. Compensation we paid to our Directors for the year ended September 30, 2010 is as follows:
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | Other Compensation ($) | Total ($) | |||||||||||||||||||||
Harold H. Adams, Jr. | $ | 5,000 | — | — | — | — | $ | 8,250 | $ | 13,250 | ||||||||||||||||||
Joseph A. Boyle, CPA | $ | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||
Ann T. Burnett | $ | 4,000 | — | — | — | — | $ | — | $ | 4,000 | ||||||||||||||||||
Jean E. Duke, CPA | $ | 5,000 | — | — | — | — | $ | 17,625 | $ | 22,625 | ||||||||||||||||||
Thomas G. Faukls | $ | 5,000 | — | — | — | — | $ | 6,875 | $ | 11,875 | ||||||||||||||||||
John M. Little, Jr. M.D. | $ | 5,000 | — | — | — | — | $ | — | $ | 5,000 | ||||||||||||||||||
Charles M. Potok | $ | 6,000 | — | — | — | — | $ | — | $ | 6,000 | ||||||||||||||||||
Timothy L. Vaughn, CPA | $ | 5,000 | — | — | — | — | $ | — | $ | 5,000 |
(1) | Amounts in this column reflect amounts paid in cash in fiscal 2010 for normal services to the Company. In addition, we paid members of our Audit Committee additional compensation in fiscal year 2010 for the services they rendered related to the investigation of the fraudulent activities of our former Chief Financial Officer. The compensation paid to each member, included in the above Table under the caption, “Other Compensation,” was determined based on the number of Audit Committee meetings the member attended and the additional time each member individually devoted to the investigation and related activities. |
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ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as of September 30, 2010. Information is presented for (i) stockholders owning more than five percent of the outstanding common stock as indicated in their respective Schedule 13D filings as filed with the Securities and Exchange Commission as of September 30, 2010, (ii) each of our directors, each nominee for director, and each of our executive officers individually, and (iii) all of our directors and executive officers, as a group. The percentages are calculated based on 9,934,072 shares of common stock outstanding on September 30, 2010.
Name | Shares Beneficially Owned (1) | Percentage | ||||||
Blue Cross and Blue Shield of South Carolina (2) | 6,726,019 | 67.71 | % | |||||
Bandera Partners LLC (3) | 1,323,357 | 13.32 | % | |||||
Harold H. Adams, Jr. | 2,500 | * | ||||||
Joseph A. Boyle, CPA | 0 | 0 | ||||||
Ann T. Burnett | 0 | 0 | ||||||
Jean E. Duke, CPA | 2,000 | * | ||||||
Thomas G. Faulds. | .5,000 | * | ||||||
John M. Little, Jr., M.D. | 0 | 0 | ||||||
Charles M. Potok | 5,000 | * | ||||||
Timothy L. Vaughn, CPA. | 0 | 0 | ||||||
D. Michael Stout, M.D. | 307,310 | 3.09 | % | |||||
All current directors and executive officers As a group (9 persons) | 321,810 | 3.24 | % |
* | Amount represents less than 1.0 percent. |
(1) | Beneficial ownership reflected in the table is determined in accordance with the rules and regulations of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock issuable upon the exercise of options currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for computing the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise specified, each of the stockholders named in the table has indicated to us that such stockholder has sole voting and investment power with respect to all shares of common stock beneficially owned by that stockholder. |
(2) | The business address of the named beneficial owner is I-20 at Alpine Road, Columbia, SC 29219. The shares reflected in the table are held of record by BlueChoice HealthPlan (“BlueChoice”) [formerly known as Companion HealthCare Corporation ‘CHC’] 6,107,838 shares and Companion Property & Casualty Corporation (“CP&C”) 618,181 shares, wholly owned subsidiaries of Blue Cross Blue Shield of South Carolina. |
(3) | This information is based on a Schedule 13D filed with the SEC on February 8, 2010 (the “Schedule 13D”). The business address of the named beneficial owner is 26 Broadway, Suite 1607, New York, New York 10004. The named beneficial holder has indicated in filings with the Securities Exchange Commission that the shares are indirectly beneficially owned by Bandera Partners, LLC, Gregory Bylinsky and Jefferson Gramm (the “Master Fund Shares”) are directly owned by Bandera Master Fund L.P., a Cayman Islands exempted limited partnership (“Bandera Master Fund”). Bandera Partners LLC is the investment manager of Bandera Master Fund and may be deemed to have beneficiary ownership of the Master Fund Shares by virtue of the sole and exclusive authority granted to Bandera Partners LLC by Bandera Master Fund to vote and dispose of the Master Fund Shares. Mr. Bylinsky and Mr. Gramm may be deemed to have beneficial ownership of the Master Fund Shares in their capacities as Managing Partners, Managing Directors and Portfolio Managers of Bandera Partners LLC. Mr. Bylinsky also has reported direct ownership of an additional 15,011 shares and Mr. Gramm has reported direct ownership of an additional 20,500 shares. |
The Schedule 13D states that Bandera Master Fund intends to seek representation on the Company’s Board of Directors, and that it or its affiliates may hold discussions with or otherwise communicate with the Company’s management and the Board or Directors and other representatives of the Company, or other stockholders and relevant parties, regarding these matters. The Schedule 13D further states that one or more members of Bandera Master Fund or its affiliates may also hold discussions or otherwise communicate with such Company parties regarding any one or more of the following: the acquisition or disposition of additional securities of the Company; an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; a change in the present Board of Directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Board; any material change in the present
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capitalization or dividend policy of the Company; any other material change to the Company’s business or corporate structure; any changes to the Company’s Certificate of Incorporation, Bylaws, or comparable instruments or other actions that may impede the acquisition of control of the Company by any person; causing a class of Company securities (to the extent then listed or quoted) to be delisted from a national securities exchange or cease to be authorized to be quoted on an inter-dealer quotation system; the eligibility for termination of registration of the Company’s equity securities pursuant to Section 12(g)(4) of the Exchange Act; or any action similar to the foregoing. The Schedule 13D further advises that the Bandera Master Fund or any of its affiliates may purchase from time to time in the open market or privately negotiated purchases additional Company securities, options or derivatives related thereto, and may dispose of all or a portion of its shares of the Company’s Common Stock at any time.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
Administrative Services Agreements
UCI-SC has entered into Administrative Services Agreements with each P.A. Under these Administrative Services Agreements, which have an initial term of forty years, UCI-SC performs all non-medical management for the P.A. and has exclusive authority over all aspects of the business of the P.A. (other than those directly related to the provision of patient medical services or as otherwise prohibited by state law). The non-medical management provided by UCI-SC includes, among other functions, treasury and capital planning, financial reporting and accounting, pricing decisions, patient acceptance policies, setting office hours, contracting with third-party payers, and all administrative services. UCI-SC provides all of the resources (systems, procedures and staffing) to bill third-party payers or patients, and provides all of the resources (systems, procedures and staffing) for cash collection and management of accounts receivables, including custody of the lockbox where cash receipts are deposited. From the cash receipts, UCI-SC pays all physician and physical therapist salaries, and all other operating expenses of the centers and of UCI-SC. UCI-SC sets compensation guidelines for the licensed medical professionals at the P.A. and establishes guidelines for establishing, selecting, hiring, and firing of the licensed medical professionals. UCI-SC also negotiates and executes substantially all of the provider contracts with third-party payers, with the P.A. executing certain of the contracts at the request of a minority of payers. UCI-SC does not loan or otherwise advance funds to any P.A. for any purpose.
During our fiscal years ended September 30, 2010 and 2009, the P.A. received an aggregate of approximately $86,905,000 and $80,350,000, respectively, in fees prior to deduction by the P.A. of their payroll and other related deductible costs covered under the Administrative Services Agreements. For accounting purposes, we combine the operations of the P.A. with our operations, as reflected in our consolidated financial statements.
D. Michael Stout, M.D. is the sole shareholder of DC-SC, DC-TN and COSM, and since November 1, 2002, has served as the President and Chief Executive Officer of UCI, UCI-SC, DC-SC and DC-TN. Since its incorporation on April 1, 2005, Dr. Stout has served as the President of COSM. Prior to November 1, 2002, Dr. Stout was the Executive Vice President of Medical Affairs for UCI and UCI-SC, and was the President of DC-SC and DC-TN. Barry E. Fitch, P.T. is the sole shareholder of PPT and has served as its President since the incorporation of PPT on April 5, 2005.
Other Transactions with Related Parties
As of September 30, 2010, BlueChoice HealthPlan, a wholly owned subsidiary of Blue Cross Blue Shield of South Carolina (“BCBS”), owns 6,107,838 shares of our common stock and Companion Property and Casualty Insurance Company another wholly owned subsidiary of BCBS, owns 618,181 shares of our common stock, which combine to approximately 67.71 percent of our outstanding common stock. The following is a historical summary of purchases of our common stock by BCBS subsidiaries from us.
Date Purchased | Blue Cross Blue Shield of South Carolina Subsidiary | Number of Shares | Price per Share | Total Purchase Price | ||||||||||
12/10/93 | BlueChoice HealthPlan | 333,333 | �� | $ | 1.50 | $ | 500,000 | |||||||
06/08/94 | BlueChoice HealthPlan | 333,333 | 3.00 | 1,000,000 | ||||||||||
01/16/95 | BlueChoice HealthPlan | 470,588 | 2.13 | 1,000,000 | ||||||||||
05/24/95 | BlueChoice HealthPlan | 117,647 | 2.13 | 250,000 | ||||||||||
11/03/95 | BlueChoice HealthPlan | 218,180 | 2.75 | 599,995 | ||||||||||
12/15/95 | BlueChoice HealthPlan | 218,180 | 2.75 | 599,995 |
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03/01/96 | BlueChoice HealthPlan | 315,181 | 2.75 | 866,748 | ||||||||||
06/04/96 | Companion Property and Casualty | 218,181 | 2.75 | 599,998 | ||||||||||
06/23/97 | Companion Property and Casualty | 400,000 | 1.50 | 600,000 |
Our common stock acquired by BlueChoice and CP&C was purchased pursuant to exemptions from the registration requirements of federal securities laws available under Section 4(2) of the 1933 Act. Consequently, the ability of the holders to resell such shares in the public market is subject to certain limitations and conditions. BlueChoice and CP&C purchased these shares at share prices below market value at the respective dates of purchase in part as a consequence of the lower issuance costs incurred by us in the sale of these unregistered securities and in part as consequence of the restricted nature of the shares. BlueChoice and CP&C have the right to require registration of the stock under certain circumstances as described in the respective stock purchase agreements.
From time to time, BlueChoice has purchased additional shares of our common stock directly from other stockholders of the company. We were not a party to those transactions.
BlueChoice and CP&C have the option to purchase as many shares from us as may be necessary for BCBS and its subsidiaries in the aggregate to obtain and maintain ownership of 48 percent of the outstanding common stock. To the extent either of these BCBS subsidiaries exercises its right in conjunction with a sale of voting stock by us, the price to be paid by such entity is the average price to be paid by the other purchasers in that sale. Otherwise, the price is the average closing bid price of our voting stock on the ten trading days immediately preceding the election by a BCBS subsidiary to exercise its purchase rights. Consequently, to the extent either of the BCBS subsidiaries elects to exercise any or a portion of its rights under these anti-dilution agreements, the sale of shares of common stock to a BCBS subsidiary will have the effect of reducing the percentage voting interest in us represented by a share of the common stock.
During the fiscal year ended September 30, 1994, UCI-SC entered into an agreement with CP&C pursuant to which UCI-SC, through DC-SC, acts as the primary care provider for injured workers of firms carrying worker’s compensation insurance through CP&C. We believe the terms of the agreement with CP&C to be no more or less favorable to UCI-SC than those that would have been obtainable through arm’s-length negotiations with unrelated third parties for similar arrangements. In addition, in 2008 the Company maintained an employee dishonesty policy with CP&C and has filed a proof of loss and claim pursuant to that policy. The claim relates to the fraudulent activities of the Company’s former Chief Financial Officer.
UCI-SC, through DC-SC, provides services to members of a health maintenance organization operated by BlueChoice who have selected DC-SC as their primary care provider. We believe the terms of the agreement with BlueChoice to be no more or less favorable to UCI-SC than those that would have been obtainable through arm’s-length negotiations with unrelated third parties for similar arrangements.
Director Independence
The Board has determined that Harold H. Adams, Jr., Jean E. Duke, CPA and Thomas G. Faulds meet the independence criteria prescribed by the Nasdaq Stock Market. Joseph A. Boyle, CPA is not considered independent because he now serves as the Company’s Executive Vice President and Chief Financial Officer. Ann T. Burnett, John M. Little, Jr., M.D., Charles M. Potok and Timothy L. Vaughn, CPA are not considered independent because each is associated with BCBS, the majority stockholder of the Company.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The following table presents fees for professional services rendered by Elliott Davis for the audit of our annual financial statements for fiscal years 2010 and 2009 together with fees for audit-related services, tax services and other services rendered by Elliott Davis for those periods.
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Fiscal Year 2010 | Fiscal Year 2009 | |||||||
Audit Fees (1) | $ | 130,000 | $ | 145,000 | ||||
Tax Fees (2) | 25,000 | 25,000 | ||||||
Audit-related Fees (3) | 10,500 | 10,500 | ||||||
$ | 165,500 | $ | 180,500 | |||||
(1) | Audit fees consisted primarily of the audit of the Company’s annual financial statements and for reviews of the consolidated financial statements included in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q. These fees include amounts paid or expected to be paid for each year’s respective audit. |
(2) | Tax fees include fees for the preparation of the Company’s income tax returns. |
(3) | Audit-related fees include fees for the audit of the Company’s 401(k) plan |
All audit, audit-related and tax services were pre-approved by the Audit Committee, which concluded that provision of such services by the respective Independent registered accounting firm was compatible with the maintenance of the firms’ independence in the conduct of its auditing functions.
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PART IV
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a)(1) Financial Statements
The applicable financial statements required under this item 15(a)(1) are presented in the Company’s consolidated financial statements and notes thereto under item 8 of our Annual Report on Form 10-K as of September 30, 2010, as filed with the SEC on December 28, 2010.
(a)(2) Financial Statement Schedules
The applicable financial statement schedules required under this item 15(a)(2) are presented in the Company’s consolidated financial statements and notes thereto under item 8 of our Annual Report on Form 10-K as of September 30, 2010, as filed with the SEC on December 28, 2010.
(a)(3) Exhibits
The exhibits listed in the Exhibit Index are attached and incorporated by reference and field as a part of this report.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant, UCI Medical Affiliates, Inc., has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
UCI MEDICAL AFFILIATES, INC. | Date | |||
/s/ D. Michael Stout, M.D. D. Michael Stout, M.D. | January 28, 2011 | |||
Its: President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ D. Michael Stout, M.D. D. Michael Stout, M.D. | President and Chief Executive Officer (principal executive officer) | January 28, 2011 | ||
/s/ Joseph A. Boyle, CPA Joseph A. Boyle, CPA | Executive Vice President and Chief Financial Officer, and Director (principal financial and accounting officer) | January 28, 2011 | ||
/s/ Harold H. Adams, Jr., CPCU Harold H. Adams, Jr., CPCU | Director | January 28, 2011 | ||
/s/ Charles M. Potok Charles M. Potok | Director | January 28, 2011 | ||
/s/ Thomas G. Faulds Thomas G. Faulds | Director | January 28, 2011 | ||
/s/ John M. Little, Jr., M.D., MBA John M. Little, Jr., M.D., MBA | Director | January 28, 2011 | ||
/s/ Timothy L. Vaughn, CPA Timothy L. Vaughn, CPA | Director | January 28, 2011 | ||
/s/ Jean E. Duke, CPA Jean E. Duke, CPA | Director | January 28, 2011 | ||
/s/ Ann Thomas Burnett Ann Thomas Burnett | Director | January 28, 2011 |
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UCI MEDICAL AFFILIATES, INC.
EXHIBIT INDEX
Exhibit | Description | |
2.1 | Order of Confirmation of UCI Medical Affiliates, Inc. (“UCI”) Dated August 7, 2002 (Incorporated by reference to Exhibit 2.1 on the Form 8-K filed August 16, 2002) | |
2.2 | Order of Confirmation of UCI Medical Affiliates of South Carolina Dated August 5, 2002 (Incorporated by reference to Exhibit 2.2 on the Form 8-K filed August 16, 2002) | |
2.3 | Order of Confirmation of UCI Medical Affiliates of Georgia, Inc. Dated August 7, 2002 (Incorporated by reference to Exhibit 2.3 on the Form 8-K filed August 16, 2002) | |
2.4 | Order of Confirmation of Doctors Care, P.A. Dated August 8, 2002 (Incorporated by reference to Exhibit 2.4 on the Form 8-K filed August 16, 2002) | |
2.5 | Order of Confirmation of Doctors Care of Tennessee, P.C. Dated August 6, 2002 (Incorporated by reference to Exhibit 2.5 on the Form 8-K filed August 16, 2002) | |
2.6 | Order of Confirmation of Doctors Care of Georgia, P.C. Dated August 7, 2002 (Incorporated by reference to Exhibit 2.6 on the Form 8-K filed August 16, 2002) | |
2.7 | Plan of Reorganization for UCI (Incorporated by reference to Exhibit 2.7 on the Form 8-K filed August 16, 2002) | |
2.8 | Plan of Reorganization for UCI Medical Affiliates of South Carolina, Inc. (Incorporated by reference to Exhibit 2.8 on the Form 8-K filed August 16, 2002) | |
2.9 | Plan of Reorganization of UCI Medical Affiliates of Georgia, Inc. (Incorporated by reference to Exhibit 2.9 on the Form 8-K filed August 16, 2002) | |
2.10 | Plan of Reorganization of Doctors Care, P.A. (Incorporated by reference to Exhibit 2.10 on the Form 8-K filed August 16, 2002) | |
2.11 | Plan of Reorganization of Doctors Care of Tennessee, P.C. (Incorporated by reference to Exhibit 2.11 on the Form 8-K filed August 16, 2002) | |
2.12 | Plan of Reorganization for Doctors Care of Georgia, P.C. (Incorporated by reference to Exhibit 2.12 on the Form 8-K filed August 16, 2002) | |
2.13 | Joint Disclosure Statement Filed as of May 3, 2002 (Incorporated by reference to Exhibit 2.13 on the Form 8-K filed August 16, 2002) | |
2.14 | Addendum to Joint Disclosure Statement and Plans of Reorganization Filed as of June 14, 2002 (Incorporated by reference to Exhibit 2.14 on the Form 8-K filed August 16, 2002) | |
2.15 | Second Addendum to Plans of Reorganization Filed as of July 29, 2002 (Incorporated by reference to Exhibit 2.15 on the Form 8-K filed August 16, 2002) | |
3.1 | Amended and Restated Certificate of Incorporation of UCI filed with the Delaware Secretary of State as of July 27, 1994 (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
3.2 | Amended and Restated Bylaws of UCI dated as of November 23, 1993 (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) |
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3.3 | Amendment to Amended and Restated Bylaws of UCI dated as of August 21, 1996 (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
3.4 | Amendment to Amended and Restated Bylaws of UCI dated as of August 15, 2002 (Incorporated by reference to Exhibit 3.4 on the Form 8-K filed as of October 28, 2002) | |
3.5 | Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State as of February 24, 1999 (Exhibit 3.5 on the Form 10-K filed for fiscal year 2002) | |
4.1 | The rights of security holders of the registrant are set forth in the registrant’s Certificate of Incorporation and Bylaws, as amended, included as Exhibits 3. 1 through 3. 5 | |
10.17 | Administrative Services Agreement dated April 24, 1998 by and between Doctors Care of Georgia, P.C. and UCI Medical Affiliates of Georgia, Inc. (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
10.18 | Administrative Services Agreement dated April 24, 1998 by and between Doctors Care of Tennessee, P.C. and UCI Medical Affiliates of Georgia, Inc. (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
10.19 | Administrative Services Agreement dated August 11, 1998 between UCI Medical Affiliates of South Carolina, Inc. and Doctors Care, P.A. (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
10.21 | Stock Purchase Option and Restriction Agreement dated September 1, 1998 by and among D. Michael Stout, M.D.; UCI Medical Affiliates of Georgia, Inc. and Doctors Care of Georgia, P.C. (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
10.22 | Stock Purchase Option and Restriction Agreement dated July 15, 1998 by and among D. Michael Stout, M.D.; UCI Medical Affiliates of Georgia, Inc.; and Doctors Care of Georgia, P.C. (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
10.31 | Stock Purchase Option and Restriction Agreement dated as of October 31, 2002 by and among D. Michael Stout, M.D.; UCI Medical Affiliates of South Carolina, Inc.; and Doctors Care, P.A. (Incorporated by reference to Exhibit 10.31 filed on Form 10-K for fiscal year 2002) | |
10.32* | UCI Medical Affiliates, Inc. 2007 Equity Incentive Plan (Incorporated by reference to Exhibit 10.32 filed on Form 10-K for fiscal year 2007) | |
10.33* | The Executive Nonqualified Excess Plan (Incorporated by reference to Exhibit 10.33 filed on Form 10-K for fiscal year 2007) | |
10.34* | The Executive Nonqualified Excess Plan Adoption Agreement (Incorporated by reference to Exhibit 10.34 filed on Form 10-K for fiscal year 2007) | |
10.35 | BB&T Promissory Note (Incorporated by reference to Exhibit 10.35 filed on Form 10-Q for quarter ended June 30, 2008) | |
10.36 | Carolina First Promissory Note (Incorporated by reference to Exhibit 10.36 filed on Form 10-Q for quarter ended June 30, 2008) | |
10.37* | Employment Agreement of Joseph A. Boyle dated March 16, 2009 (Incorporated by reference to Exhibit 10.37 filed on Form 8-K on March 18, 2009) |
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Table of Contents
10.38 | First Amended and Restated Loan Agreement dated November 23, 2009, by and among UCI Medical Affiliates, Inc.; UCI Medical Affiliates of South Carolina, Inc.; Doctors Care, P.A.; Doctor’s Care of Tennessee, P.C.; Progressive Physical Therapy, P.A.; Carolina Orthopedic & Sports Medicine, P.A.; and Branch Banking and Trust Company (Incorporated by reference to Exhibit 10.38 filed on Form 8-K on December 2, 2009). | |
10.39 | Second Amendment and Modification to Loan Agreement dated November 23, 2009, by and between UCI Properties, LLC and Branch Banking and Trust Company (Incorporated by reference to Exhibit 10.39 filed on Form 8-K on December 2, 2009). | |
14 | Code of Ethics dated as of November 25, 2003 (Incorporated by reference to the exhibit of same number on the Form 10-K filed for fiscal year 2003) | |
21 | Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21 filed on Form 10-K for fiscal year 2007) | |
23 | Consent of Independent Auditors (Previously filed) | |
31.1# | Rule 13a-14(a)/15d-14(a) Certification of D. Michael Stout, M.D. | |
31.2# | Rule 13a-14(a)/15d-14(a) Certification of Joseph A. Boyle, CPA | |
32# | Section 1350 Certification |
#Filed herewith
* | Denotes a management contract or compensatory plan or arrangement. |
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