SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant [ X ] Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [X] Definitive proxy statement. [ ] Definitive
additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12. [ ]
Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)).
UCI MEDICAL AFFILIATES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[X ] No fee required.
UCI MEDICAL AFFILIATES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JULY 26, 2005
The 2005 annual meeting of stockholders of UCI Medical Affiliates, Inc.
will be held at The Capital City Club, 1201 Main Street, 25th Floor, Columbia,
South Carolina, on Tuesday, July 26, 2005, beginning at 11:00 a.m. eastern time,
for the following purposes:
(1) To elect three members to our Board of Directors;
(2) To ratify the appointment of Scott McElveen, L.L.P., Certified
Public Accountants, as our independent auditors for the fiscal
year ending September 30, 2005; and
(3) To transact any other business that properly comes before the annual
meeting or any adjournment of the meeting.
Only holders of record of our common stock at the close of business on
June 8, 2005 are entitled to notice of, and to vote at, the annual meeting or
any adjournment of the meeting.
You are cordially invited and urged to attend the annual meeting in
person, but if you are unable to do so, please date, sign, and promptly return
your proxy in the enclosed, self-addressed, postage-paid envelope. If you attend
the annual meeting and desire to revoke your proxy and vote in person, you may
do so. In any event, a proxy may be revoked at any time before it is exercised.
Each stockholder who attends the meeting may be asked to present valid
picture identification, such as a driver's license or passport. Stockholders
attending the meeting and holding stock in brokerage accounts ("street name"
holders) will need to bring a copy of a brokerage statement reflecting stock
ownership as of the record date.
By Order of the Board of Directors,
D. Michael Stout, M.D.
President and Chief Executive Officer
Columbia, South Carolina
June 22, 2005
PROXY STATEMENT.....................................................................................................1
ABOUT THE MEETING...................................................................................................1
What is the purpose of the annual meeting?.................................................................1
Who is entitled to vote at the meeting.....................................................................1
What are the voting rights of the holders of our common stock?.............................................1
Who can attend the meeting?................................................................................1
What constitutes a quorum?.................................................................................2
How do I vote?.............................................................................................2
Can I change my vote after I return my proxy card?.........................................................2
What vote is required to approve each item?................................................................3
Who bears the cost of this proxy statement and who may solicit proxies?....................................3
ELECTION OF DIRECTORS...............................................................................................3
RATIFICATION OF APPOINTMENT OF AUDITORS.............................................................................4
OTHER BUSINESS......................................................................................................4
STOCK OWNERSHIP.....................................................................................................5
Who are the largest owners of our stock, and how much stock do our directors and executive officers own?...5
Section 16(a) Beneficial Ownership Reporting Compliance....................................................5
GOVERNANCE OF THE COMPANY...........................................................................................6
Who are the current members of the Board?..................................................................6
Important Information Regarding Directors..................................................................6
What is the role of the Board's committees?................................................................8
How does the Board select nominees for the Board?..........................................................8
How often did the Board meet during fiscal year 2004?......................................................9
How are directors compensated?.............................................................................9
Does the company have a code of ethics?...................................................................10
How do stockholders communicate with the Board?...........................................................10
What related party transactions exist?....................................................................10
AUDIT COMMITTEE REPORT.............................................................................................13
FEES TO INDEPENDENT AUDITORS.......................................................................................14
EXECUTIVE COMPENSATION.............................................................................................15
Compensation Committee Report On Executive Compensation...................................................15
Compensation Committee Interlocks and Insider Participation...............................................16
Employment Contracts......................................................................................16
Executive Compensation Summary Table......................................................................16
Fiscal Year End Option Values.............................................................................17
Securities Authorized for Issuance Under Equity Compensation Plan.........................................18
COMPARISON OF CUMULATIVE TOTAL RETURNS.............................................................................18
ADVANCE NOTICE PROCEDURES..........................................................................................19
ANNUAL REPORT ON FORM 10-K.........................................................................................20
MISCELLANEOUS......................................................................................................21
28
UCI MEDICAL AFFILIATES, INC.
4416 Forrest Drive
Columbia, South Carolina 29206
PROXY STATEMENT
This proxy statement contains information related to the 2005 annual
meeting of our stockholders to be held at The Capital City Club, 1201 Main
Street, 25th Floor, Columbia, South Carolina, on Tuesday, July 26, 2005 at 11:00
a.m. eastern time, and at any adjournment of the meeting. We are mailing this
proxy statement to stockholders on or about June 22, 2005.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At our annual meeting, stockholders will act upon the matters outlined
in the notice of meeting on the cover page of this proxy statement, including
the election of directors, and the ratification of our independent auditors. In
addition, management will report on our performance and respond to questions
from stockholders.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on June 8, 2005,
the record date for the meeting, are entitled to receive notice of and to
participate in the annual meeting, or any adjournment of the meeting.
What are the voting rights of the holders of our common stock?
Cumulative voting for the election of directors is not available under
our Certificate of Incorporation. Consequently, each outstanding share of our
common stock is entitled to one vote on each matter to be voted upon at the
annual meeting.
Who can attend the meeting?
Subject to space availability, all stockholders as of the record date,
or their duly appointed proxies, may attend the meeting, and one guest may
accompany each stockholder. Because seating is limited, admission to the meeting
will be on a first-come, first-served basis. Registration and seating will begin
at 10:30 a.m. eastern time. If you attend, please note that you may be asked to
present valid picture identification, such as a driver's license or passport. If
you hold your shares in "street name" (that is, through a broker or other
nominee), you will need to bring a copy of a brokerage statement reflecting your
stock ownership as of the record date and check in at the registration desk at
the meeting. We will not permit cameras, recording devices, or other electronic
devices at the meeting.
What constitutes a quorum?
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of our common stock on the record date constitutes a
quorum, permitting the meeting, or any adjournment of the meeting, to take
place. As of the record date, approximately 267 stockholders held of record
9,740,472 issued and outstanding shares of our common stock. Consequently, the
presence of the holders of common stock representing at least 4,870,237 votes
will be required to establish a quorum.
We will consider directions to withhold authority to vote for
directors, abstentions, and broker non-votes to be present in person or by proxy
and entitled to vote. Therefore, we will count these shares for purposes of
determining whether a quorum is present at the annual meeting. (A broker
non-vote occurs when a broker or other nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
broker or nominee does not have the discretionary voting power and has not
received voting instructions from the beneficial owner.)
If a quorum is not present or represented at the annual meeting, the
stockholders entitled to vote, present in person or represented by proxy, have
the power to adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present or represented. Our
directors, officers, and regular employees may solicit proxies for the
reconvened meeting in person or by mail, telephone, or telegraph. At any
reconvened meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
scheduled.
How do I vote?
If you complete and properly sign the accompanying proxy card and
return it to us, the individuals designated by the Board of Directors on the
proxy card as proxy holders will vote it as you direct. If you are a holder of
record as of the record date and attend the meeting, you may deliver your
completed proxy card in person. "Street name" stockholders who wish to vote at
the meeting will need to obtain a proxy form from the institution that holds
their shares.
Unless you give other instructions on your proxy card, the designated
proxy holders will vote in accordance with the Board's recommendations set forth
below. With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation
is given, in their own discretion.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may revoke or change
your vote at any time before the proxy is exercised at the annual meeting by (i)
delivering to our Corporate Secretary a written notice, bearing a date later
than the proxy, stating that the proxy is revoked, (ii) signing and so
delivering a proxy relating to the same shares and bearing a later date prior to
the vote at the annual meeting, or (iii) attending the annual meeting and voting
in person. Please note that your attendance at the meeting will not
automatically revoke your proxy. You must specifically revoke your proxy.
Whether or not you plan to attend the annual meeting, you are urged to sign and
return the enclosed proxy.
What vote is required to approve each item?
Election of Directors. The three nominees receiving the greatest number
of votes cast (although not necessarily a majority of the votes cast) at the
annual meeting will be elected to the Board of Directors. Accordingly,
directions to withhold authority, abstentions, and broker non-votes will have no
effect on the outcome of the vote. You cannot vote, in person or by proxy, for a
greater number of persons than three, the number of nominees named in the proxy.
Other Items. For each other item, the affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote on the item will be required for approval.
Street Name. If you hold your shares in "street name" through a broker
or other nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval.
Who bears the cost of this proxy statement and who may solicit proxies?
We will bear the cost of preparing, assembling, and mailing this proxy
statement and the form of proxy. Our directors, officers, and employees may also
solicit proxies personally or by mail, telephone, or telegram. No compensation
will be paid for these solicitations. In addition, we may request banking
institutions, brokerage firms, custodians, nominees, and fiduciaries to forward
our proxy solicitation materials to the beneficial owners of our common stock
held of record by these entities, and we will reimburse their reasonable
forwarding expenses.
PROPOSAL ONE
ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for a classified Board of
Directors so that, as nearly as possible, one-third of the members of the Board
is elected at each annual meeting to serve until the third annual stockholders'
meeting after their election. The Board consists of seven directorships divided
into two classes of two and one class of three. The Board proposes three
individuals, Joseph A. Boyle, CPA, Ashby M. Jordan, M.D. and John M. Little,
Jr., M.D., as nominees to serve from the date of their election at the annual
meeting until the 2008 annual meeting of stockholders, or until their successors
shall have been earlier elected and qualified.
Each of the nominees is currently a member of the Board, and all the
nominees were recommended by our Nominating Committee. Each of these nominees
has consented to serve if elected. If any of them becomes unavailable to serve
as a director, the persons named as proxy holders on the attached proxy card may
designate a substitute nominee in accordance with their best judgment. In that
case, the proxy holders will vote for the substitute nominee. For additional
information on each of these nominees, see the information set forth later in
this proxy statement under the heading "Governance of the Company."
Terms Expiring in 2008: Joseph A. Boyle, CPA, Ashby M. Jordan, M.D. and
John M. Little, Jr., M.D.
The Board recommends that stockholders vote "FOR" each of the persons
listed above.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Scott McElveen, L.L.P., as independent auditors for the fiscal year
ending September 30, 2005, subject to stockholder ratification. If the
stockholders do not ratify this appointment, the Board of Directors upon
recommendation of the Audit Committee will consider other certified public
accountants. We describe services of Scott McElveen, L.L.P., to us and our
subsidiaries below under the heading "Fees to Independent Auditors." We provide
additional information relating to our Audit Committee below under the heading
"Audit Committee Report."
We expect a representative of Scott McElveen, L.L.P., to be in
attendance at the annual meeting. The representative will have the opportunity
to make a statement and will be available to respond to appropriate questions.
The Board recommends that stockholders vote "for" the ratification of
Scott McElveen, L.L.P., as our independent auditors for fiscal year ending
September 30, 2005.
OTHER BUSINESS
As of the date of this proxy statement, our Board knows of no other
matter to come before the annual meeting. However, if any matter requiring a
vote of the stockholders should arise, the Board designees intend to vote the
proxy in accordance with the Board's recommendation, or in the absence of a
Board recommendation, in accordance with their best judgment.
STOCK OWNERSHIP
Who are the largest owners of our stock, and how much stock do our
directors and executive officers own?
The following table sets forth certain information known to us
regarding the beneficial ownership of our common stock as of June 8, 2005.
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 June 8, 2005,
(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 9,740,472 shares of common
stock outstanding on June 8, 2005.
Shares
Name Beneficially Percentage
Owned (1)
- ------------------------------------------------------------------------- ---------------- -------------
Blue Cross and Blue Shield of South Carolina (2)...............................6,726,019 69.05
Harold H. Adams, Jr................................................................2,500 *
Joseph A. Boyle, CPA...................................................................0 0
Jean E. Duke, CPA......................................................................0 0
Ashby M. Jordan, M. D................................................................. 0 0
John M. Little, Jr., M.D...............................................................0 0
Charles M. Potok.......................................................................0 0
Timothy L. Vaughn, CPA.................................................................0 0
D. Michael Stout, M.D. (3).......................................................414,010 4.25
Jerry F. Wells, Jr. (4)..........................................................134,825 1.38
All current directors and executive officers
As a group (9 persons).......................................................551,510 5.66
* 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 Companion HealthCare Corporation (6,107,838 shares) and
Companion Property and Casualty (618,181 shares), each of which is a
wholly owned subsidiary of Blue Cross and Blue Shield of South
Carolina.
(3) Includes 109,850 shares issuable pursuant to currently exercisable
stock options and 10,000 shares held by Dr. Stout's spouse, Paulette J. Stout.
(4) All shares are issuable pursuant to currently exercisable stock
options.
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, 2004 with the filing requirements under Section 16(a)
of the 1934 Act.
GOVERNANCE OF THE COMPANY
Who are the current members of the Board?
The following table identifies the names, ages, Board term expiration,
and committee memberships of our Board members as of the date of this proxy:
Name Age Term Audit Compensation Nominating
---- --- --------
Expiring In Committee Committee Committee
Harold H. Adams, Jr. 57 2006 * **
Joseph A. Boyle, CPA 51 2005(1) ** *
Jean E. Duke, CPA 50 2007 * *
Ashby M. Jordan, M.D. 65 2005(1) *
John M. Little, Jr., M.D. 54 2005(1) *
Charles M. Potok 56 2006 **
Timothy L. Vaughn, CPA 40 2007 *
(1) This director is nominated for re-election at the 2005 annual meeting of
stockholders for a term expiring at the annual meeting expected to be held in
2008. * Member ** Chairman
Important Information Regarding Directors
Director Nominees for Terms Expiring at the Annual Meeting Expected to be
Held in 2008:
Joseph A. Boyle, CPA, 51, 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. Mr. Boyle is a
certified public accountant and since January 2005 has 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 elected as a director at the
annual meeting of stockholders in 2004.
Ashby M. Jordan, M.D., 65, has served as one of our directors since August
1996 and as Vice President of Medical Affairs of Blue Cross and Blue Shield of
South Carolina since December 1986. Prior to joining Blue Cross and Blue Shield
of South Carolina, Dr. Jordan was the Vice President of Medical Affairs for
CIGNA HealthPlan of South Florida, Inc. Dr. Jordan is Board Certified by the
American Board of Pediatrics. Dr. Jordan was most recently reelected as a
director at the annual meeting of stockholders in 2003.
John M. Little, Jr., M.D., MBA, 54, 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 Companion HealthCare from 1994 to
2000. Prior to joining Companion HealthCare Corporation 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 2003.
Directors Whose Terms Expire at the Annual Meeting Expected to be Held in 2007:
Jean E. Duke, CPA, 50, has owned a consulting business since December
2004 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 and 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 elected as a director at the annual meeting of
stockholders in 2004.
Timothy L. Vaughn, CPA, 40, has served as Chief Financial Officer of
Companion HealthCare since January, 2000. He serves as TRICARE Contracts Manager
for Blue Cross Blue Shield of South Carolina from 1997 to 2000. This federal
program provides health 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
elected as a director at the annual meeting of stockholders in 2004.
Directors Whose Terms Expire at the Annual Meeting Expected to be Held in 2006:
Harold H. Adams, Jr., 57, has served as one of our directors since June
1994 and as Chairman and owner of Adams and Associates International and
Southern Insurance Managers since June 1992. He served as President of Adams
Eaddy and Associates, an independent insurance agency, from 1980 to 1992. Mr.
Adams has been awarded the Chartered Property Casualty Underwriter 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 34 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 2003.
Charles M. Potok, 56, 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 Company, a wholly-owned subsidiary of Blue Cross and Blue
Shield of South Carolina, since March 1984; and, as President of Companion
Property and Casualty Company since April 2002. Mr. Potok is an Associate of the
Casualty Actuarial Society and a member of the American Academy of Actuaries.
Prior to joining Companion Property and Casualty Company, Mr. Potok served as
Chief Property and Casualty Actuary and Director of the Property and Casualty
Division of the South Carolina Department of Insurance. Mr. Potok was most
recently reelected as a director at the annual meeting of stockholders in 2003.
What is the role of the Board's committees?
The Board has standing Audit, Compensation and Nominating Committees.
Audit Committee. We describe the functions of the Audit Committee under
the heading "Report of the Audit Committee." The Audit Committee operates under
a written Charter. All of the members of the Audit Committee are independent
within the meaning of SEC regulations. The Board of Directors has determined
that Mr. Boyle and Ms. Duke are financial experts, as that term is defined in
Item 401(h)(2) of Regulation S-K under the Exchange Act. The Audit Committee met
four times during the fiscal year ended September 30, 2004.
Compensation Committee. We describe the functions of the Compensation
Committee under the heading of "Report of Compensation Committee." The
Compensation Committee met one time during the fiscal year ended September 30,
2004.
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. All of the members of the Nominating Committee
are independent within the meaning of SEC regulations. The Nominating Committee
operates under a written Charter. The Nominating Committee met one time during
the fiscal year ended September 30, 2004.
How does the Board select nominees for the Board?
The Nominating Committee considers candidates for Board membership
suggested by its members and other Board members, as well as management and
stockholders. A stockholder who wishes to recommend a prospective nominee for
the Board should notify our corporate Secretary in writing with whatever
supporting material the stockholder considers appropriate, as long as the
material includes at a minimum pertinent information concerning the nominee's
background and experience. The Nominating Committee will also consider whether
to nominate any person nominated by a stockholder pursuant to the provisions of
our Certificate relating to stockholder nominations as described below under the
heading "Advance Notice Provisions."
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.
How often did the Board meet during fiscal year 2004?
Our Board held a total of four meetings during our fiscal year ended
September 30, 2004. No directors attended fewer than seventy-five percent of the
aggregate of: (1) the total of these Board meetings; and (2) the total number of
meetings of the committees upon which the director served. All our current
directors, other than Harold H. Adams, Jr., attended our 2004 annual stockholder
meeting. We expect our directors to dedicate sufficient time, energy, and
attention to ensure the diligent performance of his duties, including attending
our stockholder meetings and the meetings of the Board and its Committees on
which he serves.
How are directors compensated?
Currently, members of our Board receive the following retainer fees:
$6,000 per fiscal year for the Chairman, $5,000 per year for Committee Chairs,
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 of our company.
During the fiscal year ended September 30, 1996, we adopted a
Non-Employee Director Stock Option Plan (the "1996 Non-Employee Plan"). The 1996
Non-Employee Plan provided for the granting of options to two non-employee
directors for the purchase of 10,000 shares of our common stock at the fair
market value as of the date of grant. Under this plan, we issued 5,000 options
to Harold H. Adams, Jr., CPCU and 5,000 options to Russell J. Froneberger. These
options are exercisable during the period commencing on March 20, 1999 and
ending on March 20, 2006. At September 30, 2003, stock options for 5,000 shares
were outstanding under the 1996 Non-Employee Plan, all of which were
exercisable.
During the fiscal year ended September 30, 1997, we adopted a
Non-Employee Director Stock Option Plan (the "1997 Non-Employee Plan"). The 1997
Non-Employee Plan provided for the granting of options to three non-employee
directors for the purchase of 20,000 shares of our common stock at the fair
market value as of the date of grant. Under this plan, we issued 5,000 options
each to Thomas G. Faulds, Ashby M. Jordan, M.D., and Charles M. Potok. These
options are exercisable during the period commencing on March 28, 2000 and
ending on March 28, 2007. At September 30, 2003, stock options for 10,000 shares
were outstanding under the 1997 Non-Employee Plan, all of which were
exercisable.
Does the company have a 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 an Exhibit to our annual report on Form 10-K.
How do stockholders communicate with the Board?
Stockholders and other parties interested in communicating directly
with the Board may do so by addressing correspondence to our Chairman of the
Board at the address indicated on page one of this proxy statement. Stockholders
and other parties interested in communicating directly with individual Board
members may do so by addressing correspondence to the individual Board member at
the address indicated on page one of this proxy statement. The corporate
Secretary or his designee will review all such correspondence and regularly
forward to the Board a summary of the correspondence and copies of the
correspondence that, in the opinion of the corporate Secretary, deals with the
functions of the Board or its committees or that he otherwise determines
requires their attention. Directors may at any time review a log of all
correspondence received by the company that is addressed to members of the Board
and request copies of such correspondence. Concerns relating to accounting,
internal controls, or auditing matters may be addressed to the attention of our
Audit Committee.
What related party transactions exist?
Administrative Services Agreements
As used in this proxy statement, 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.'s refers collectively to
DC-SC, DC-TN, PPT and COSM.
UCI-SC has entered into Administrative Services Agreements with each of
the P.A.'s. Under these Administrative Services Agreements, UCI-SC performs all
non-medical management for the P.A.'s and has exclusive authority over all
aspects of the business of the P.A.'s (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 payors, and all administrative services. UCI-SC provides all of the
resources (systems, procedures and staffing) to bill third party payors or
patients, and provide 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
costs of the centers and of UCI-SC. UCI-SC sets compensation guidelines for the
licensed medical professionals at the P.A.'s 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 payors, with the P.A.'s executing certain of
the contracts at the request of a minority of payors. UCI-SC does not loan or
otherwise advance funds to any P.A. for any purpose.
During our fiscal years ended September 30, 2004 and 2003, the P.A.'s
received an aggregate of approximately $47,474,000 and $43,518,000,
respectively, in fees prior to deduction by the P.A.'s 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.'s
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 s 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.
Medical Center Leases
A partnership in which M. F. McFarland III, MD., our former Chief
Executive Officer and Chairman of the Board, is a general partner leases to
UCI-SC the Doctors Care Northeast facility. We renewed the lease in October 1997
for a fifteen-year term. We believe the terms of this lease 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.
Total lease payments made by UCI-SC under this lease during the fiscal years
ended September 30, 2004 and 2003 were $96,000 each year, plus utilities and
real estate taxes.
Other Transactions with Related Parties
As of June 8, 2005, Companion Healthcare Corporation ("CHC"), a wholly
owned subsidiary of Blue Cross and Blue Shield of South Carolina ("BCBS"), owns
6,107,838 shares of our common stock and Companion Property and Casualty
Insurance Company ("CP&C"), another wholly owned subsidiary of BCBS, owns
618,181 shares of our common stock, which combine to approximately 69.05 percent
of our outstanding common stock. The following is a historical summary of
purchases of our common stock by BCBS subsidiaries from us.
Blue Cross and Blue Shield of South Price Total
Date Carolina Number per Purchase
Purchased Subsidiary of Shares Share Price
------------------- ------------------------------------- -------------- ------------ ------------------
12/10/93 Companion HealthCare Corporation 333,333 $1.50 $ 500,000
06/08/94 Companion HealthCare Corporation 333,333 3.00 1,000,000
01/16/95 Companion HealthCare Corporation 470,588 2.13 1,000,000
05/24/95 Companion HealthCare Corporation 117,647 2.13 250,000
11/03/95 Companion HealthCare Corporation 218,180 2.75 599,995
12/15/95 Companion HealthCare Corporation 218,180 2.75 599,995
03/01/96 Companion HealthCare Corporation 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 CHC and CP&C from us 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. CHC 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.
CHC 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, CHC has purchased additional shares of our common
stock directly from other stockholders of the company. We were not a party to
those transactions.
CHC 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, 1998, UCI-SC entered into a
capital lease purchase agreement with BCBS for a new billing and accounts
receivable system, which includes computer equipment, for an aggregate purchase
price of $1,253,000. UCI-SC has the option to purchase the equipment at the end
of the lease term for $1. The lease obligation recorded at September 30, 2004 is
$274,000, which includes lease addenda. We believe the terms of the lease
purchase agreement to be no more or less favorable to UCI-SC than the terms that
would have been obtainable through arm's-length negotiations with unrelated
third parties for a similar billing and accounts receivable system, which
includes computer equipment.
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. Additionally, during the fiscal year ended September 30,
1995, UCI-SC executed a $400,000 note payable to CP&C payable in monthly
installments of $4,546 (including 11 percent interest) from April 1, 1995 to
March 1, 2010. 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.
UCI-SC, through DC-SC, provides services to members of a health
maintenance organization operated by CHC who have selected DC-SC as their
primary care provider. We believe the terms of the agreement with CHC 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.
AUDIT COMMITTEE REPORT
The Audit Committee's charter, as revised, specifies that the purpose
of the Committee is to oversee and monitor:
(1) the integrity of the company's accounting and financial
reporting process, including the financial reports and other
financial information provided by the company to the public,
(2)......the independence and qualifications of the company's external
auditor,
(3)......the performance of the company's external auditor,
(4)......the company's system of internal accounting and financial
controls,
(5)......the company's system of public and private disclosure controls,
and the company's compliance with laws, regulations, and the company's Code of
Ethics and any other code of ethics applicable to the company.
The full text of the Charter is attached to this Proxy Statement as
Appendix A. In carrying out its responsibilities, the Audit Committee, among
other things
(1)......monitors preparation of quarterly and annual financial reports by
our management;
(2) supervises the relationship between us and our independent
auditors, including: having direct responsibility for our
auditor's appointment, compensation, and retention; reviewing
the scope of our auditor's audit services; approving
significant non-audit services; and confirming the
independence of our auditors; and
(3) oversees management's implementation and maintenance of
effective systems of internal and disclosure controls.
The Committee schedules its meetings with a view to ensuring that it
devotes appropriate attention to all of its tasks. The Committee's meetings
include, whenever appropriate, executive sessions with our independent auditors
and with our internal auditors.
As part of its oversight of our financial statements, the Committee
reviewed and discussed with both management and our independent auditors the
audited consolidated financial statements for the year ended September 30, 2004.
Management advised the Committee that these financial statements had been
prepared in accordance with generally accepted accounting principles. The
discussions with Scott McElveen, L.L.P. also included the matters required by
Statement on Auditing Standards No. 61 (Communication with Audit Committees) as
amended by Statement on Auditing Standards No. 90, including the quality of our
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in our financial statements. The Committee also
discussed with Scott McElveen, L.L.P. matters relating to Scott McElveen
L.L.P.'s independence, including a review of audit and non-audit fees and the
written disclosures and letter from Scott McElveen, L.L.P. to the Committee as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
Based on the above-described discussions and reviews, the Audit
Committee recommended to the Board that the Board approve the inclusion of our
audited consolidated financial statements in our Annual Report on Form 10-K for
the year ended September 30, 2004 for filing with the Securities and Exchange
Commission.
Submitted by the Audit Committee of the Board of Directors.
Joseph A. Boyle, CPA, Chairman
Harold H. Adams, Jr.
Jean E. Duke, CPA
FEES TO INDEPENDENT AUDITORS
The following table presents for the fiscal years ending September 30,
2004 and 2003 under the heading: (1) "Audit Fees," the aggregate fees billed for
professional services rendered by Scott McElveen, L.L.P. for the audit of our
annual financial statements and review of financial statements included in our
Forms 10-Q and for services that are normally provided by Scott McElveen, L.L.P.
in connection with our statutory and regulatory filings or engagements; (2)
"Audit-Related Fees," the aggregate fees billed for assurance and related
services by Scott McElveen, L.L.P. that are reasonably related to the
performance of the audit or review of our financial statements; (3) "Tax Fees,"
the aggregate fees billed for professional services rendered by Scott McElveen,
L.L.P. for tax compliance, tax advice, and tax planning; and (4) "All Other
Fees," the aggregate fees billed for all other products and services provided by
Scott McElveen, L.L.P.
Fiscal Year 2004 Fiscal Year 2003
Audit Fees(1) $66,125 $64,000
Audit Related Fees(2) $ 7,350 $ 7,200
Tax Fees(3) $16,500 $16,500
(1) Includes primarily fees relating to the audit of the Company's annual
financial statements and for reviews of the financial statements included in
the Company's reports on Form 10-Q.
(2) Includes fees for services related to the audit of the Company's 401(k)
Plan and Form 5500 preparation.
(3) Includes fees related to tax compliance, tax advice, and tax planning.
The Audit Committee pre-approved all audit related services, tax
services, and other services and concluded that provision of these services was
compatible with maintaining Scott McElveen, L.L.P.'s independence in conducting
its audit services.
EXECUTIVE COMPENSATION
Executive Officers
The following individuals constitute our executive officers:
Name Age Offices Held
D. Michael Stout, M.D. 60 President and Chief Executive Officer
Jerry F. Wells, Jr., CPA 43 Executive Vice President,
Chief Financial Officer
and Secretary
D. Michael Stout, M.D., has served as Executive Vice President of
Medical Affairs of UCI and DC-SC since 1985 and as President and Chief Executive
Officer of UCI, UCI-SC and the P.A.'s since November 1, 2002. He is Board
Certified 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.
Jerry F. Wells, Jr., CPA, has served as our Executive Vice President
and Chief Financial Officer since he joined us in February 1995 and as our
Corporate Secretary since December 1996. He has served as Executive Vice
President of Finance, Chief Financial Officer and Corporate Secretary of UCI-SC
since December 1996, and as Corporate Secretary of DC-SC since December 1996.
Prior to joining us, he served as a Senior Manager and consultant for
PricewaterhouseCoopers LLP from 1985 until February 1995. Mr. Wells is a
certified public accountant and is a member of the American Institute of
Certified Public Accountants, the South Carolina Association of Certified Public
Accountants, and the North Carolina CPA Association.
Compensation Committee Report On Executive Compensation
The Compensation Committee of the Board of Directors generally
determines the compensation of our executive officers. This committee reviews
and recommends to the Board the salaries and other compensation of all of our
officers and directors. The Compensation Committee also administers our Stock
Incentive Plans. The following report is being furnished with respect to certain
compensation paid or awarded to our executive officers during the fiscal year
ended September 30, 2004.
General Policies. Our compensation program is intended to enable us to
attract, motivate, reward, and retain the management talent to achieve corporate
objectives and thereby increase shareholder value. Our policy is to provide
incentives to senior management to achieve both short-term and long-term
objectives. To attain these objectives, our executive compensation program is
composed of a base salary, incentive compensation and stock options.
Base Salary. Base salaries for Dr. Stout and Mr. Wells were determined
by a subjective assessment of the executive officer's performance, in light of
the officer's responsibilities and position with us and our performance during
prior periods. In evaluating our overall performance, the primary focus is on
financial performance for the relevant annual period measured by operating
income. The Committee also considers the recommendations of the Chief Executive
Officer (except in the case of his own compensation); to the extent available,
the salary norms for persons in comparable positions at comparable companies;
and the person's experience. The Committee reviews base salaries from time to
time and adjusts them appropriately.
Incentive Compensation. The Compensation Committee determines cash
bonuses for all executive officers and awards the bonuses only if we, or any
applicable subsidiary or business unit, achieve performance objectives. We
designed our long-term incentive compensation for executive officers to focus
management's attention on our future. We provide long-term compensation through
grants of stock options. The number of stock options granted is based upon the
executive's salary, performance, and responsibilities. Each executive officer
also receives additional compensation through standard benefit plans available
to all employees, including but not limited to matching contributions pursuant
to a 401(k) plan, paid vacation, and group health, life, and disability
insurance. The Compensation Committee believes each of these benefits is an
integral part of the overall compensation program that helps to ensure that our
executive officers receive competitive compensation.
Stock Options. Executive compensation includes the grant of stock
options in order to more closely align the interests of the executive with the
long-term interests of the shareholders.
Submitted by the Compensation Committee of the Board of Directors.
Charles M. Potok, Chairman
John M. Little, Jr., M.D.
Ashby M. Jordan, 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.
Employment Contracts
We have not entered into employment agreements with our Executive
Officers.
Executive Compensation Summary Table
The following table summarizes for each of the indicated years the
compensation earned by our President and Chief Executive Officer and by each of
our other executive officers, as that term is defined by Securities and Exchange
Commission rules, whose annual compensation from us for all services provided to
us or our subsidiaries during any of the indicated years exceeded $100,000.
Summary Compensation Table
Long Term
Annual Compensation Compensation
Securities
Underlying All Other
Name and Principal Position Fiscal Year Salary (1) Bonus (1) Options Compensation
- --------------------------- ----------- ---------- --------- ------- ------------
D. Michael Stout, M.D. 2004 261,000 (2) 81,000 0 0
President and 2003 227,000 (2) 88,000 0 0
Chief Executive Officer 2002 210,000 (2) 58,000 0 0
Jerry F. Wells, Jr., CPA 2004 166,100 59,000 0 0
Executive Vice President, 2003 144,500 39,000 0 0
Chief Financial Officer, 2002 138,000 38,000 0 0
and Corporate Secretary
(1) Amounts included under the heading "Salary" and "Bonus" include
compensation from both UCI-SC and DC-SC. The remuneration described in
the table above does not include our cost of benefits furnished to
certain officers that were extended in connection with the conduct of
our business. The amount of such benefits accrued for each of the named
executives in each of the years reflected in the table did not exceed
10% of the total annual salary and bonus reported for such executive in
such year.
(2) For services performed by Dr. Stout for UCI-SC, Dr. Stout received an
annual salary of $50,000 in each of the three fiscal years ended
September 30, 2004, 2003, and 2002. For services performed by Dr. Stout
for DC-SC, Dr. Stout received an annual salary of $211,000, $177,000
and $160,000 in the fiscal years ended September 30, 2004, 2003 and
2002. Dr. Stout has served as the President and Chief Executive Officer
of UCI, UCI-SC, and DC-SC since November 1, 2002.
Fiscal Year End Option Values
The following table sets forth certain information with respect to
unexercised options to purchase our common stock held at September 30, 2004.
None of the named executive officers exercised any options during the fiscal
year ended September 30, 2004. Additionally, no options were granted to any
officer or director during the fiscal year ended September 30, 2004.
2004 Fiscal Year End
Option Values
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money
Fiscal Year End Options at Fiscal Year End
------------------------------------------ ---------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------- ---------------------- -------------------- -------------------
109,850 0 0 0
D. Michael Stout, M.D.
President and
Chief Executive Officer
134,825 0 0 0
Jerry F. Wells, Jr., CPA
Executive Vice President,
Chief Financial Officer, and
Secretary
Securities Authorized for Issuance Under Equity Compensation Plan
The following table provides information about our common stock
authorized for issuance under all of our existing equity compensation plans as
of September 30, 2004.
Equity Compensation Plan Information
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans {excluding
outstanding options, outstanding options, securities reflected in
Plan category warrants and rights warrants and rights column (a)3
(a) (b) (c)
- ---------------------------------- ----------------------- ----------------------- -------------------------
- ---------------------------------- ----------------------- ----------------------- -------------------------
Equity compensation plans
approved by security holders 341,650 2.87 438,250
Equity compensation plans not
approved by security holders 0 0 0
----------------------- ----------------------- -------------------------
----------------------- ----------------------- -------------------------
Total 341,650 2.87 438,250
======================= ======================= =========================
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following graph compares cumulative total shareholder return of our
common stock over a five-year period with The Nasdaq Stock Market (US) Index and
with a Peer Group of companies for the same period. Total shareholder return
represents stock price changes and assumes the reinvestment of dividends. The
graph assumes the investment of $100 on September 30, 1999.
[Performance Graph will be reflected in the printed version.]
Fiscal Year Ended
-----------------------------------------------------------------------------------
09/30/99 09/30/00 09/30/01 09/30/02 09/30/03 09/30/04
----------- ---------- ----------- ---------- ---------- ----------
UCI Medical Affiliates, Inc. 100.00 72.21 55.11 46.22 211.56 211.56
Peer Group 100.00 89.54 251.14 189.56 281.33 340.80
NASDAQ Market Index 100.00 136.79 56.05 45.09 69.11 73.27
The members of the Peer Group are AmeriPath, Inc., Continucare Corporation,
IntegraMed America, Inc., Pediatrix Medical Group, Inc., and Metropolitan Health
Networks. The returns of each company in the Peer Group have been weighted
according to their respective stock market capitalization for purposes of
arriving at a Peer Group average. The prices of our common stock used in
computing the returns reflected above are the average of the high and low bid
prices reported for our common stock during the fiscal year ended on such dates.
ADVANCE NOTICE PROCEDURES
Proposals Considered for Inclusion in 2006 Proxy Statement. If you
would like to have a proposal considered for inclusion in the proxy statement
for the 2006 annual meeting, we must receive your written proposal at the
address on the cover of this proxy statement, attention Corporate Secretary, no
later than February 22, 2006. Each stockholder submitting proposals for
inclusion in the proxy statement must comply with the proxy rules under the
Securities Exchange Act of 1934, as amended, including without limitation being
the holder of at least $2,000 in market value, or 1%, of the securities entitled
to be voted on the proposal at the annual meeting for at least one year by the
date the stockholder submits the proposal and continue to hold those securities
through the date of the 2006 annual meeting.
Other Proposals for Consideration at the 2006 Annual Meeting. If you
wish to submit a proposal for consideration at the 2006 annual meeting, but
which will not be included in the proxy statement for the meeting, we must
receive your proposal in accordance with our bylaws, as amended. Our bylaws
require timely advance written notice of any proposals to be presented at an
annual meeting of stockholders. For a notice to be timely, it must be received
at our principal offices at the address on the cover of this proxy statement
sixty days, but not more than ninety days, prior to the anniversary date of the
immediately preceding annual meeting of stockholders. In other words, proposals
for the 2006 annual meeting must be received by at least May 29, 2006, but not
prior to April 27, 2006. However, if the 2006 annual meeting is not held within
thirty days before or after July 26, 2006, then for the notice by the
stockholder to be timely, it must be received at our principal offices at the
address on the cover of this proxy statement not later than the close of
business on the tenth day following the date on which the notice of the 2006
annual meeting was actually mailed. The notice must give: (a) a brief
description of the business desired to be brought before the 2006 annual meeting
(including the specific proposal(s) to be presented) and the reasons for
conducting the business at the 2006 annual meeting; (b) the name and address, as
they appear on our books, of the stockholder(s) proposing the business; (c) the
class and number of shares that are held beneficially, but not held of record,
by the proposing stockholder(s) as of the record date for the 2006 annual
meeting, if the date has been made publicly available, or as of a date within
ten days of the effective date of the notice by the proposing stockholder(s) if
the record date has not been made publicly available, and (d) any interest of
the proposing stockholder(s) in the business. Stockholders desiring to make
proposals to be presented at the 2006 annual meeting are directed to these
requirements as more specifically set forth in our bylaws, as amended, a copy of
which is available upon request to our Corporate Secretary at the address listed
on the cover of this proxy statement. The chairman of the 2006 annual meeting
may exclude from the meeting any matters that are not properly presented in
accordance with these bylaw requirements.
ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2004, which was filed with the Securities and Exchange Commission
on November 30, 2004, accompanies this proxy statement. Stockholders to whom
this proxy statement is mailed who desire an additional copy of the Form 10-K
may obtain one without charge by making written request to Jerry F. Wells, Jr.,
Chief Financial Officer, 4416 Forest Drive, Columbia, South Carolina 29206.
MISCELLANEOUS
The information referred to under the captions "Compensation Committee
Report on Executive Compensation", "Performance Graph" and "Audit Committee
Report" (to the extent permitted under the Securities Exchange Act of 1934): (i)
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission or subject to Regulation 14A or the
liabilities of Section 18 of the Securities Exchange Act of 1934, and (ii)
notwithstanding anything to the contrary that may be contained in any filing by
us under the Securities Exchange Act of 1934 or the Securities Act of 1933,
shall not be deemed to be incorporated by reference in any such filing.
By Order of the Board of Directors,
D. Michael Stout, M.D.
President and Chief Executive Officer
Columbia, South Carolina
June 22, 2005
Appendix A
UCI Medical Affiliates, Inc.
Audit Committee Charter
Last Revised June 9, 2005
1. PURPOSE
The board of directors of UCI Medical Affiliates, Inc. (referred to
herein as the "company") appoints the company's Audit Committee (the
"Committee") to assist the company's board of directors (referred to herein as
the "board") in fulfilling its oversight responsibilities for the company's
accounting and financial reporting processes, the audits of the company's
financial statements, and compliance by the company and its personnel with
applicable legal, regulatory, and ethics programs of the company. In undertaking
these activities, the Committee shall oversee and monitor:
(a) the integrity of the company's accounting and financial reporting process,
including the financial reports and other financial information provided by the
company to the public,
(b) the independence and qualifications of the company's external auditor,
(c) the performance of the company's external auditor,
(d) the company's system of internal accounting and financial controls,
(e) the company's system of public and private disclosure controls, and
(f) the company's compliance with laws, regulations, and the company's Senior
Financial Officer Code of Ethics and any other code of ethics applicable to the
company.
2. AUTHORITY
(a) Scope. The Committee has authority to conduct or authorize examinations into
any matters within its scope of responsibility. It has sole authority to:
(i) Engage External Auditor: Appoint, compensate, retain, and directly oversee
the work of the company's external auditor (subject to stockholder approval, if
applicable).
(ii) Approve Audit and Non-Audit Services: Pre-approve all audit services and
permitted non-audit services provided to the company by its external auditor
(subject to the de minimis exceptions for permitted non-audit services described
in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), which are approved by the Committee prior to completion of the
audit).
In this connection, the Committee also has authority to:
(1) retain outside advisors, including counsel, as it determines necessary to
carry out its duties.
(2) when appropriate, form and delegate to subcommittees consisting of one or
more independent members, the authority to grant pre-approvals of audit services
and permitted non-audit services, provided that decisions of the subcommittee to
grant pre-approvals shall be presented to the full Committee at its next
scheduled meeting.
(3) establish detailed pre-approval policies for permitted non-audit services.
(4) meet with company officers, external auditors, or outside counsel, as
necessary.
(5) seek any information it requires from external parties or from employees of
the company, each of whom is directed to cooperate with the Committee's
requests.
(iii) Resolve Reporting Disagreements: Resolve any disagreements between
management and the external auditor regarding financial reporting.
(iv) Address Accounting and Auditing Complaints: Receive and address all
complaints received by the company regarding accounting, internal accounting
controls, and auditing matters and concerns regarding questionable accounting or
auditing matters.
(b) Funding of Activities. The company shall provide appropriate funding, as
determined by the Committee, for payment of: (i) compensation to any registered
public accounting firm engaged for the purpose of rendering or issuing an audit
report or related work or performing other audit, review, or attest services for
the company; (ii) compensation to any advisors employed by the Committee; and
(iii) ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.
3. COMPOSITION
(a) Appointment. The board will appoint Committee members and the Committee
chairman. The Board may replace any or all Committee members.
(b) Number of Members. The Committee will consist of at least two members of the
board.
(c) Eligibility Requirements of Regulatory Authorities. In addition to any other
eligibility requirements for members of the Committee set forth in this Audit
Committee Charter, each Committee member shall meet the independence and
experience requirements of:
(i) Section 10A(m)(3) of the Exchange Act, including Rule 10A-3 of the Exchange
Act;
(ii) the Sarbanes-Oxley Act of 2002; and
(iii) the other rules and regulations of the Securities Exchange Commission (the
"Commission").
(d) Independence of Each Member.
(i) Generally. Except as stated in Section 3(d)(iii) below, each Committee
member shall be independent. To be independent, a member of the Committee may
not, other than in his or her capacity as a member of the Committee, the board,
or any other board committee:
(1) accept, directly or indirectly, any consulting , advisory, or other
compensatory fees from the company; or
(2) be an affiliated person of the company or its affiliates.
Prohibited indirect acceptance of fees includes acceptance by
a: (i) spouse; (ii) a minor child or stepchild; (iii) a child or stepchild
sharing a home with the Committee member; or (iv) an entity in which such member
is a partner, member, or an executive officer or managing director and which
provides accounting, consulting, legal, investment banking, or financial
advisory services to the company or its subsidiaries. Prohibited compensatory
fees do NOT include the receipt of fixed amounts of compensation under a
retirement plan (including deferred compensation) for prior services with the
listed issuer (provided that such compensation is not contingent in any way on
continued service).
Committee members that also sit on the board of directors of
an affiliate of the company are exempt from 3(d)(i)(2) if the members, except
for being a director on each of such boards, otherwise meet the independence
requirements for each entity.
(ii) Persons NOT Independent. The following persons shall not be considered
independent:(1)
(1) A director who is, or during the past three years was, employed by the
company or any of its affiliates.
(2) A director who accepts, or has an immediate family member who accepts, any
payments from the company or any of its affiliates in excess of $60,000 during
the current or any of the past three fiscal years, other than compensation for
board service, payments arising solely from investments in the company's
securities, compensation paid to an immediate family member who is a
non-executive employee of the company or its affiliates, compensation received
for former services as an interim chairman or chief executive officer, benefits
under a tax-qualified retirement plan, non-discretionary compensation, or loans
permitted under section 13(k) of the Exchange Act.
(3) A director who is an immediate family member of an individual who is, or has
been in any of the past three years, employed by the company or any of its
affiliates as an executive officer.
(4) A director who is, or has an immediate family member who is, a partner in,
or a controlling stockholder or an executive officer of, any organization to
which the company made, or from which the company received, payments (other than
those arising solely from investments in the company's securities or payments
under non-discretionary charitable contribution matching programs) that exceed
5% of the organization's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the most recent three fiscal years.
(5) A director of the company who is, or has an immediate family member who is,
employed as an executive officer of another entity where at any time during the
most recent three fiscal years any of the company's executives serve on that
entity's compensation committee.
(6) A director who is, or has an immediate family member who is, a current
partner of the company's outside auditor, or was a partner or employee of the
company's outside auditor who worked on the company's audit at any time during
any of the past three years.
"Immediate family member" includes a person's spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-law, sister-in-law,
son-in-law, daughter-in-law, and anyone who resides in such person's home (other
than domestic employees).
(iii) Limited Exceptions. Notwithstanding the
requirement that every member of the Committee be
independent, as long as three members serve on the Committee, one director who
is not independent as set forth in Section 121(A) of the American Stock Exchange
listing requirements, but who satisfies the requirements of Rule 10A-3 under the
Securities Exchange Act of 1934, and who is not a current officer or employee of
the company or an immediate family member of a current officer or employee, may
be appointed as a new member to the Committee if:
(1) the board, under exceptional and limited circumstances, determines that
membership on the Committee by the individual is required by the best interests
of the company and its stockholders, and
(2) the board discloses, in the next annual proxy statement of the company
subsequent to such determination, the nature of the relationship that makes the
individual not independent and the reasons for the board's determination that
membership on the Committee by the individual is required by the best interests
of the company and its stockholders.
A director appointed to the Committee pursuant to this limited
exception may not serve for in excess of two consecutive years and may not chair
the Committee. Additionally, if a Committee member ceases to be independent for
reasons outside the member's reasonable control, that person may remain a
Committee member until the earlier of the next annual stockholders meeting or
one year from the occurrence of the event that caused the member to be no longer
independent.
(iv) Financial Expert. At least one member of the Committee shall satisfy the
definition of, and be designed as, a "financial expert", as defined by the
Commission in Regulation S-K, Item 401(h).
(e) Service on Other Audit Committees. The Committee shall direct the company to
include appropriate disclosures in its Commission filings with regard to service
by Committee members on the audit committees of other public companies as
required by Commission rules and regulations then in effect.
4. MEETINGS
The Committee may establish its own rules of procedure and will meet as
often as such rules or the Committee otherwise determines is appropriate, but
not less frequently than quarterly. The chairman of the Committee shall preside
at each Committee meeting. In the absence of the appointed chairman during any
Committee meeting, the Committee may designate a chairman pro tempore. All
Committee members are expected to attend each meeting, in person or via
telephone or videoconference. A majority of the Committee shall constitute a
quorum for the conduct of business at any Committee meeting. The Committee shall
act only on the affirmative vote of a majority of members at a meeting at which
a quorum is present or by unanimous written consent. The Committee periodically
will hold private meetings with management, the internal auditor(s), and the
external auditor. The Committee may invite any officer or employee of the
company, the external auditor, the company's outside legal counsel, the
Committee's outside legal counsel, or others to attend meetings and provide
pertinent information. The Committee chairperson will prepare agendas and
provide the agendas in advance to members, along with appropriate briefing
materials. A member of the Committee or a person designated by the Committee
will keep minutes.
5. RESPONSIBILITIES
The Committee's job is one of oversight. The company's management is
responsible for preparing the company's financial statements and for developing
and maintaining systems of internal accounting and financial control, and the
external auditor is responsible for auditing those financial statements and
reviewing the internal controls. Additionally, the Committee recognizes that
financial management, including the internal accounting staff, as well as the
external auditors, has more time and knowledge and more detailed information
concerning the company than do Committee members. Consequently, in carrying out
its responsibilities, the Committee is not providing any expert or special
assurance as to the company's financial statements or any professional
certificate as to the external auditor's work. The Committee does not plan or
conduct audits or determine whether the company's financial statements are
complete, accurate, or in accordance with generally accepted accounting
principles.
The Committee will carry out the following responsibilities. These
responsibilities are set forth as a guide, with the understanding that the
Committee may diverge from this guide as appropriate upon advice of advisors to
the Committee given any particular circumstances:
(a) Financial Statements and Company Reports.
(i) Significant Accounting Issues. Review and discuss with management and the
external auditor significant accounting and financial reporting issues,
including complex or unusual transactions and judgments concerning significant
estimates or significant changes in the company's selection or application of
accounting principles, and recent professional, accounting, and regulatory
pronouncements and initiatives, and understand their impact on the company's
financial statements.
(ii) Results of the Audit. Review and discuss with management and the external
auditor the results of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities or access
to requested information, and any significant disagreements with management.
(iii) Annual Financials Included in Form 10-K. Review and discuss with
management and the external auditor the annual financial statements, along with
any off-balance sheet structures, including disclosures made in management's
discussion and analysis of financial condition and results of operations, and
recommend to the board whether such disclosures should be included in the
company's Annual Report on Form 10-K filed with the Commission or other
applicable regulatory filings with regulators.
(iv) Interim Financial Statements. Understand how management prepares interim
financial information and the nature and extent of internal and external auditor
involvement. Review and discuss with management and the external auditor any
interim financial statements, including the results of the external auditor's
review of the company's quarterly financial statements, before filing the
company's Quarterly Report on Form 10-Q with the Commission or other applicable
regulatory filings with regulators.
(v) CEO and CFO Internal Control Disclosures. Review disclosures made to the
Committee by the company's Chief Executive Officer and Chief Financial Officer
during their certification process for the company's Annual Report on Form 10-K
and the company's Quarterly Reports on Forms 10-Q about any significant
deficiencies in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other employees who
have a significant role in the company's internal controls.
(vi) Disclosure Controls. As required by Section 302 of the Sarbanes-Oxley Act
of 2002, review and discuss with management and the external auditor and the
internal auditors the company's disclosure controls and procedures, any
deficiencies in such disclosure controls and procedures, and any fraud.
(vii) External Auditor's Reports. At least annually prior to the filing of the
audit report with the Commission (and more frequently if appropriate), review
and discuss reports from the external auditor on:
(1) all critical accounting policies and practices to be used,
(2) all alternative treatments of financial information within GAAP that have
been discussed with management, including ramifications of the use of such
alternative disclosures and treatments and the treatment preferred by the
external auditor, and
(3) other material written communications between the external auditor and
management, such as any management letter or schedules of unadjusted
differences.
(viii) SAS Nos. 61 & 90. Review and discuss with management and the external
auditor all matters required to be communicated to the Committee under generally
accepted auditing standards, including matters required to be discussed by
Statement on Auditing Standards No. 61 relating to conduct of the audit, as
amended by Statement on Auditing Standards No. 90.
(ix) Earnings Disclosure. Discuss with management the company's earnings press
releases, including the use of "pro forma" or "adjusted" non-GAAP information,
as well as financial information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally (consisting of discussing
the types of information to be disclosed and the types of presentations to be
made).
(x) Audit Committee Report. Prepare the report required by the rules of the
Commission (including without limitation Rule 14a-101, Item 7(d)(3) and
Regulation S-K, Item 306) to be included in the company's annual proxy
statement.
(b) Internal Controls and Risk Management.
(i) Review of Controls. Understand the scope of the external auditor's reviews
of internal control over financial reporting, and obtain reports from the
external auditor on significant findings and recommendations, together with
management's responses.
(ii) Effectiveness of Internal Controls. Consider the effectiveness of the
company's internal control systems, including information technology security
and control. Beginning with fiscal year 2006 or such later date as the
Commission deems appropriate, review management's report on the company's
internal control over financial reporting and the related attestation report of
the external auditor.
(iii) Financial Risk Exposure. Meet with management to review the company's
major financial risk exposures and the steps management has taken to monitor and
control such exposures, including the company's risk assessment and risk
management policies.
(c) Review of External Auditor.
(i) Direct Reporting. Have the external auditor report directly to the
Committee.
(ii) Auditor Accountability. Consider the external auditor's ultimate
accountability to the Committee and the board, as representatives of the
stockholders, when evaluating, and, where appropriate, replacing the external
auditor (and in nominating the external auditor to be proposed for stockholder
approval in any proxy statement).
(iii) Auditor Quality Control Review. Obtain and review a report from the
external auditor regarding its quality control procedures, and material issues
raised by the most recent internal quality control review, or peer review, of
the external auditor or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting one or more
of the independent audits carried out by the external auditor, and any steps
taken to deal with any such issues and all relationships between the external
auditor and the company.
(iv) Auditor Independence Review. Take, or recommend to the board the taking of,
appropriate action to oversee the independence of the external auditor,
including actively engaging in a dialogue with the external auditor with respect
to any disclosed relationships or services that may impact the objectivity and
independence of the external auditor.
(v) ISBS No. 1. Obtain and review a formal written statement from the external
auditor delineating all relationships between the external auditor and the
company, consistent with Independence Standards Board Standard 1.
(vi) Pre-Approval of Audit and Non-Audit Services. Pre-approve all audit and
permissible non-audit services to be provided by external auditors (subject to
the de minimis exceptions for permitted non-audit services described in Section
10A(i)(1)(B) of the Exchange Act). Consider the appropriateness of the related
fees and whether the provision of any services by the independent auditors not
related to the audit of the annual financial statements and the review of the
interim financial statements included in the Company's Forms 10-Q for such year
is compatible with maintaining the auditor's independence. The external auditor
shall not provide any non-audit services unless:
(1) the non-audit services are not prohibited non-audit services, as set forth
in section 201 of the Sarbanes-Oxley Act of 2002 and the rules and regulations
of the Commission thereunder;
(2) the Committee approves in advance the provision of permissible non-audit
services, as required by the Sarbanes-Oxley Act of 2002 and rules and
regulations of the Commission thereunder, and
(3) the company makes complete and adequate disclosure of the services and the
approval.
(vii) Auditor Evaluation. Taking into account the opinions of management and the
internal auditors, evaluate and present to the board the conclusions of the
Committee regarding the qualifications, performance, and independence of the
external auditor, including considering whether the auditor's quality controls
are adequate and whether permitted non-audit services are compatible with
maintaining the auditor's independence.
(viii) Audit Partner Rotation. Ensure the rotation of the audit partners as
required by law (including without limitation section 203 of the Sarbanes-Oxley
Act of 2002 and the rules promulgated thereunder) and consider whether in order
to assure continuing auditor independence it is appropriate to adopt a policy of
rotating the external audit firm on a regular basis.
(ix) Hiring of Auditor Personnel. Establish policies concerning the company's
hiring of employees or former employees of the external auditor, as required by
law (including without limitation section 203 of the Sarbanes-Oxley Act of 2002
and the rules promulgated thereunder) and by applicable listing standards.
(x) Private Meetings. On a regular basis, meet separately with the external
auditor to discuss any matters that the Committee or external auditor believes
should be discussed privately.
(d) Conduct of Audit.
(i) Pre-Audit Meeting. Meet with the external auditor to discuss the external
auditor's proposed audit planning, scope, staffing, and approach, including
coordination of its effort with internal audit.
(ii) Management Letter and Audit Issues. Review with the external auditor any
problems or difficulties the auditor may have encountered and any management
letter provided by the auditor and the company's response to that letter. Such
review should cover any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities or access to
required information.
(iii) Response to Auditor Discovery of Illegal Acts. Obtain from the external
auditor assurance that Section 10A(b) of the Exchange Act has not been
implicated.
(e) Compliance.
(i) Code of Ethics and Business Conduct. Advise the board with respect to the
company's policies and procedures regarding compliance with applicable laws and
regulations and with the company's Senior Financial Officer Code of Ethics and
any other applicable code of ethics, including review of the process for
monitoring compliance and for communicating the Senior Financial Officer Code of
Ethics or other applicable code of ethics to company personnel.
(ii) Handling of Complaints. Establish procedures for:
(1) the receipt, retention, and treatment of complaints received by the company
from external sources regarding accounting, internal accounting controls, or
auditing matters; and
(2) the confidential, anonymous submission by the company's employees of
concerns regarding questionable accounting or auditing matters.
(iii) Assess Impact of Third Party Observations. Review and discuss with
management and the external auditor any correspondence with, or the findings of
any examinations by, regulatory agencies, published reports, or auditor
observations that raise significant issues regarding the company's financial
statements or accounting policies.
(iv) Compliance Updates from Management and Counsel. Obtain regular updates from
management and company counsel regarding compliance matters and legal matters
that may have a significant impact on the financial statements or the company's
compliance policies.
(f) Other Responsibilities.
(i) Regularly report to the board about Committee activities, issues, and
related recommendations.
(ii) Provide an open avenue of communication between the external auditor and
the board.
(iii) Institute and oversee special investigations as needed.
(iv) Review and evaluate any related party transactions, make appropriate
recommendations to the board, and review any related disclosures to the
Commission.
(v) Annually review and assess the adequacy of this Audit Committee Charter,
requesting board approval for proposed changes, and ensure appropriate
disclosure as may be required by law or regulation.
(vi) Annually review the Committee's own performance.
(vii) Review any other reports the company issues that relate to Committee
responsibilities.
(viii) Perform other activities related to this Audit Committee Charter as
requested by the board.
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(1) In accordance with Rule 14a-101, Item 7(d)(3)(iv)(B), we are selecting the
definition of independence that is found in the American Stock Exchange Rule
121A. From the date of this charter until December 1, 2004, the three-year look
back period referenced in Sections (3)(ii)(1)-(6) above shall be only a one-year
look back period, as permitted by the American Stock Exchange Rule 121A.