SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UCI MEDICAL AFFILIATES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee:
[ X ] No fee required.
<PAGE>
UCI MEDICAL AFFILIATES, INC.
1901 Main Street, Suite 1200
Mail Code 1105
Columbia, South Carolina 29201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 21, 1997
Notice is hereby given that the Annual Meeting of Shareholders of UCI
Medical Affiliates, Inc. will be held at the Adam's Mark Hotel, 1200 Hampton
Street, Columbia, South Carolina on Wednesday, May 21, 1997, at 10:00 a.m., for
the following purposes:
(1) To elect two members to the Board of Directors;
(2) To ratify the appointment of Price Waterhouse LLP as the
Company's independent auditors for the fiscal year ending
September 30, 1997; and
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only shareholders whose names appeared of record on the books of the
Company at the close of business on April 1, 1997 will be entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof.
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
the enclosed proxy in the enclosed 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.
By Order of the Board of Directors,
M. F. McFarland, III, M.D.
Chairman of the Board
Columbia, South Carolina
April 14, 1997
<PAGE>
UCI MEDICAL AFFILIATES, INC.
1901 MAIN STREET, SUITE 1200
MAIL CODE 1105
COLUMBIA, SOUTH CAROLINA 29201
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of UCI Medical Affiliates, Inc. (the
"Company") to be used in voting at the Annual Meeting of Shareholders of the
Company to be held at the Adam's Mark Hotel, 1200 Hampton Street, Columbia,
South Carolina, on Wednesday, May 21, 1997, at 10:00 a.m., and at any
adjournment thereof. The purposes of the Annual Meeting are (1) to elect two
directors to the Company's Board of Directors, (2) to ratify the appointment of
Price Waterhouse LLP as the Company's independent auditors for the fiscal year
ending September 30, 1997; and (3) to transact such other business as may
properly come before the Annual Meeting or any adjournment thereof. This Proxy
Statement and the accompanying form of proxy are being mailed to shareholders
commencing on or about April 14, 1997.
Any shareholder who executes the form of proxy referred to in this
Proxy Statement may revoke it at any time before it is exercised. The proxy may
be revoked by either giving written notice to the Secretary of the Company of
such revocation, or by executing and delivering to the Secretary of the Company
a proxy bearing a later date. The voting of such proxy will be suspended if the
person executing the proxy attends the Annual Meeting and elects to vote in
person. Whether or not you plan to attend, you are urged to sign and return the
enclosed proxy.
The cost of preparing, assembling and mailing this Proxy Statement and
the form of proxy will be borne by the Company. Directors, officers and
employees of the Company may also solicit proxies personally or by mail,
telephone or telegram. No compensation will be paid for such solicitations. In
addition, the Company may request banking institutions, brokerage firms,
custodians, nominees and fiduciaries to forward the Company's proxy solicitation
materials to the beneficial owners of the Company's common stock, $0.05 par
value (the "Common Stock"), held of record by such entities, and the Company
will reimburse their reasonable forwarding expenses.
VOTING SECURITIES OUTSTANDING
The Board of Directors has fixed the close of business on April 1, 1997
as the record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting or at any adjournment
thereof. As of the Record Date, there were 4,807,803 issued and outstanding
shares of the Common Stock held of record by approximately
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<PAGE>
652 shareholders. All of such shares are eligible to be voted on each matter
currently scheduled to come before the Annual Meeting, and there are no other
outstanding shares of capital stock of the Company eligible to be voted at the
Annual Meeting. Cumulative voting for the election of directors is not available
under the Company's Restated Certificate of Incorporation. Consequently, each
share of Common Stock is entitled to one vote on each matter to be voted upon at
the Annual Meeting. Except for the election of directors, for each matter
specified in this Proxy Statement to be submitted for shareholder approval at
the Annual Meeting, the affirmative vote of a majority of the shares of Common
Stock present at the Annual Meeting in person or by proxy and entitled to vote
on such matter is required for approval. Abstentions will be considered shares
present in person or by proxy and entitled to vote and, therefore, will have the
effect of a vote against the matter. Broker non-votes will be considered shares
not present for this purpose and will have no effect on the outcome of the vote.
The Bylaws of the Company provide that the presence in person or by
proxy of the holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum at
the meeting or any adjournment thereof. Directions to withhold authority to vote
for directors, abstentions and broker non-votes will be counted for purposes of
determining if a quorum is present at the Annual Meeting. If a quorum is not
present or represented at the Annual Meeting, the chairman of the meeting or the
shareholders holding a majority of the shares of Common Stock 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. Directors, officers and employees of
the Company may solicit proxies for the reconvened Annual Meeting in person or
by mail, telephone or telegraph. At any such reconvened Annual 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock of the Company as of the
Record Date. Information is presented for (i) shareholders owning more than five
percent of the outstanding Common Stock, (ii) each director and executive
officer of the Company, individually, and (iii) all directors and executive
officers of the Company, as a group. Except as otherwise specified, each of the
shareholders named in the table has indicated to the Company that such
shareholder has sole voting and investment power with respect to all shares of
Common Stock beneficially owned by that shareholder. Beneficial ownership
reflected in the table below is determined in accordance with the rules and
regulations of the Securities and Exchange Commission (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 sixty 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.
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<PAGE>
<TABLE>
<CAPTION>
NAME (1) NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE
- ------------- ------------------------ -----------------
<S> <C> <C>
Blue Cross and Blue Shield of South Carolina......... 2,224,623 (2) 46.27%
M.F. McFarland, III, M.D............................. 543,629 (3) 11.26%
D. Michael Stout, M.D................................ 258,860 (4) 5.37%
Harold H. Adams, Jr.................................. 2,000 *
Charles P. Cannon.................................... -0- -0-
Thomas G. Faulds..................................... -0- -0-
Russell J. Froneberger............................... 2,000 *
Ashby M. Jordan, M.D................................. -0- -0-
Jon G. Keith......................................... -0- -0-
Jitendra Mehta....................................... 10,000 (5) *
Charles M. Potok..................................... -0- -0-
Jerry F. Wells, Jr................................... 21,666 (6) *
All current directors and executive officers
as a group (11 persons)........................... 838,155
- ------------
</TABLE>
* Amount represents less than 1.0%.
(1) The address of Blue Cross and Blue Shield of South Carolina is I-20
at Alpine Road, Columbia, South Carolina 29219. The address of Dr.
McFarland and Dr. Stout is 1901 Main St., Suite 1200, Mail Code
1105, Columbia, South Carolina 29201.
(2) Shares are held of record by Companion HealthCare Corporation
(2,006,442 shares) and Companion Property and Casualty Insurance Co.
(218,181 shares), each of which is a wholly-owned subsidiary of Blue
Cross and Blue Shield of South Carolina.
(3) Includes 21,667 shares which may be acquired pursuant to the exercise
of stock options.
(4) Includes 10,000 shares which may be acquired pursuant to the exercise
of stock options.
(5) Includes 10,000 shares which may be acquired pursuant to the exercise
of stock options.
(6) Includes 21,666 shares which may be acquired pursuant to the exercise
of stock options.
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires the Company's directors and officers to file reports of holdings and
transactions in the Company's Common Stock with the SEC. On the basis of Company
records and other information, the Company believes that all SEC filing
requirements under Section 16(a) of the Act applicable to its officers and
directors with respect to the Company's fiscal year ended September 30, 1996
were complied with.
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<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the age and certain other biographical information
with respect to each of the current executive officers and directors of the
Company.
M.F. MCFARLAND, III, M.D., 48, has served as Chairman of the Board and
Chief Executive Officer of the Company since January 1987, as President of the
Company since November 1993, and as a director of the Company since September
1984. From September 1984 until January 1987, he served as Vice President of the
Company. He served as Associate Professional Director of the Emergency
Department of Richland Memorial Hospital in Columbia, South Carolina from 1978
to 1981 and as President of the South Carolina Chapter of the American College
of Emergency Physicians in 1979. Dr. McFarland is currently a member of the
Columbia Medical Society, the South Carolina Medical Association and the
American Medical Association. In November 1992, a voluntary proceeding under
Chapter 11 of the United States Bankruptcy Code was filed with respect to Dr.
McFarland. Dr. McFarland's term as a director expires at the forthcoming Annual
Meeting, and he has been nominated by the Board of Directors for election as a
director at the forthcoming Annual Meeting.
JON G. KEITH, 48, Executive Vice President and Chief Operating Officer,
joined the Company in January 1997. Prior to that time, Mr. Keith served as Vice
President for Corporate Services and Vice President for Administration for
Baptist Healthcare System of South Carolina and Baptist Medical Center from 1985
until January 1997. Mr. Keith is a Diplomate with the American College of
Healthcare Executives and a member of the Medical Group Management Association.
JERRY F. WELLS, JR., 34, Executive Vice President of Finance and Chief
Financial Officer, joined the Company in February 1995. As of December 18, 1996,
Mr. Wells is serving as Corporate Secretary of the Company. Prior to joining the
Company, he served as a Senior Manager and consultant for Price Waterhouse 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.
D. MICHAEL STOUT, M.D., 52, Executive Vice President of Medical
Affairs, joined the Company in 1983. Dr. Stout is Board Certified in Emergency
Medicine and is a member of the American College of Emergency Physicians, the
American College of Physician Executives, the Columbia Medical Society, the
South Carolina Medical Association and the American Medical Association.
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<PAGE>
JITENDRA S. MEHTA, 46, Executive Vice President of Development and
Procurement of the Company joined the Company in November 1993. Prior to that
time, he served as Partner and Vice President of Citrus Diagnostic Center from
1990 to November 1993, as Business Director of Multispecialty Clinic in Maryland
from 1985 to 1989. Mr. Mehta is a member of the American Registry for
Radiological Technology and the Nuclear Medicine Technologist Certification
Board.
HAROLD H. ADAMS, JR., 49, has served as a director of the Company since
June 1994 and as President and owner of Adams and Associates International,
Adams and Associates, and Southern Insurance Managers since June 1992. Mr. Adams
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 designation and is a member of the President's Board of
Visitors of Charleston Southern University in Charleston, South Carolina. Mr.
Adams' term as a director expires at the Company's 1999 Annual Meeting of
Shareholders.
CHARLES P. CANNON, 46, has served as a director of the Company since
September 1995 and as Vice President, Corporate Controller and Assistant
Treasurer for Blue Cross and Blue Shield of South Carolina ("BCBS") since April
1988 and as Assistant Treasurer for its subsidiary, Companion HealthCare
Corporation ("CHC"), since April 1988 and Director of CHC since May 1996. Prior
to joining BCBS in April 1988, he was a Senior Manager and consultant for Price
Waterhouse LLP for eleven years. Mr. Cannon is a member of the American
Institute of Certified Public Accountants, the South Carolina Association of
Certified Public Accountants, the Institute of Management Accountants and the
Tennessee Society of Certified Public Accountants. Mr. Cannon's term as a
director expires at the Company's 1998 Annual Meeting of Shareholders.
THOMAS G. FAULDS, 55, has served as a director of the Company since
August 1996 and as Executive Vice President for BCBS since October 1991. Mr.
Faulds has been with BCBS since March 1972 and has served in key senior
management positions in government programs, information systems and operations.
Mr. Faulds' term as a director expires at the Company's 1999 Annual Meeting of
Shareholders.
RUSSELL J. FRONEBERGER, 51, has served as a director of the Company
since June 1994 and as President of Global Consulting, a multinational marketing
and financial consulting firm, since 1991. Mr. Froneberger has over 29 years of
international corporate finance and marketing experience, having been associated
with Manufacturers Hanover Trust Company from 1967 to 1972, and South Carolina
National Bank, where he served as Senior Vice President of Marketing and
Corporate Development Relations from 1972 to 1991. Mr. Froneberger's term as a
director expires at the Company's 1998 Annual Meeting of Shareholders.
ASHBY M. JORDAN, M.D., 58, has served as a director of the Company
since August 1996 and as Vice President of Medical Affairs of BCBS since
December 1986. Prior to BCBS, Dr. Jordan was the Vice President of Medical
Affairs for CIGNA HealthPlan of South Florida,
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<PAGE>
Inc. Dr. Jordan is Board Certified by the American Board of Pediatrics. Dr.
Jordan's term as a director expires at the Company's 1998 Annual Meeting of
Shareholders.
CHARLES M. POTOK, 48, has served as a director of the Company since
September 1995 and as Executive Vice President and Chief Operating Officer of
Companion Property and Casualty Insurance Company ("CP&C") since March 1984. Mr.
Potok is an Associate of the Casualty Actuarial Society and a member of the
American Academy of Actuaries. Prior to joining CP&C, 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's term as a director
expires at the forthcoming Annual Meeting, and he has been nominated by the
Board of Directors for election as a director at the forthcoming Annual Meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting. The Company's
Restated Certificate of Incorporation provides for a classified Board of
Directors so that, as nearly as possible, one-third of the Company's Board of
Directors is elected each year to serve a three-year term. Currently, the Board
of Directors consists of seven directorships with staggered terms expiring at
the forthcoming Annual Meeting and at the Annual Meetings of Shareholders in
1998 and 1999. M.F. McFarland, III, M.D. and Charles M. Potok are the directors
whose terms as directors expire at the forthcoming Annual Meeting. Dr. McFarland
and Mr. Potok have been nominated by the Board of Directors for reelection as
directors at the forthcoming Annual Meeting for terms expiring at the 2000
Annual Meeting of Shareholders.
In accordance with the Bylaws of the Company, those 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 and broker non-votes will have no
effect on the outcome of the vote. The Company's Restated Certificate of
Incorporation does not allow for cumulative voting in the election of directors.
The persons named in the accompanying proxy have been designated by the
Board of Directors and, unless authority is specifically withheld, they intend
to vote for the election of the nominees listed above. A shareholder executing
the enclosed proxy may vote for the nominees or may withhold such vote from the
nominees. In each case where the shareholder has appropriately specified how the
proxy is to be voted, it will be voted in accordance with such shareholder's
specifications. Although it is not contemplated that the nominees will become
unable to serve prior to the Annual Meeting, the persons named on the enclosed
proxy will have the authority to vote for the election of another person in
accordance with their best judgment.
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<PAGE>
THE PERSONS NAMED IN THE FORM OF PROXY WILL VOTE THE PROXY AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES LISTED ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company had a total of four regular
meetings and three special meetings during the Company's fiscal year ended
September 30, 1996. No director attended fewer than 75% of the total of such
Board meetings and the meetings of the committees upon which the director
served. Among the standing committees established by the Board of Directors are
a Compensation Committee, an Audit Committee, and a Revenue Enhancement
Committee.
The Compensation Committee consists of Messrs. Adams, Cannon,
Froneberger and Potok. This Committee monitors the Company's executive
compensation plan, practice and policies, including all salaries, bonus awards
and fringe benefits, and makes recommendations to the Board of Directors with
respect to changes in existing executive compensation plans and the formation
and adoption of new executive compensation plans. This Committee met one time
during the Company's fiscal year ended September 30, 1996.
The Audit Committee consists of Messrs. Adams and Cannon. This
Committee recommends to the Board of Directors the engagement of the independent
auditors for the Company, determines the scope of the auditing of the books and
accounts of the Company, reviews the reports submitted by the auditors, examines
procedures employed in connection with the Company's internal control structure,
undertakes certain other activities related to the fiscal affairs of the Company
and makes recommendations to the Board of Directors as may be appropriate. As
this Committee was formed on December 18, 1996, this Committee did not meet
during the Company's fiscal year ended September 30, 1996.
The Revenue Enhancement Committee consists of Messrs. Adams, Faulds,
Froneberger and Potok. This Committee monitors the Company's ancillary and
complementary services, and makes recommendations to the Board of Directors with
respect to changes in such existing services. As this Committee was formed on
December 18, 1996, this Committee did not meet during the Company's fiscal year
ended September 30, 1996.
MANAGEMENT COMPENSATION
COMPENSATION OF DIRECTORS
Non-employee Directors of the Company are paid a fee of $500 for
attendance at each meeting of the Board of Directors. Directors of the Company
are also reimbursed by the Company for all out-of-pocket expenses reasonably
incurred by them in the discharge of their
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<PAGE>
duties as directors, including out-of-pocket expenses incurred in attending
meetings of the Board of Directors. During the fiscal year ended September 30,
1996, the Company adopted a Non-Employee Director Stock Option Plan (the "1996
Non-Employee Plan"). The 1996 Non-Employee Plan provides for the granting of
options to two non-employee directors for the purchase of 10,000 shares of the
Company's Common Stock at the fair market value as of the date of grant. Under
this plan, 5,000 options were issued to Harold H. Adams, Jr. and 5,000 options
were issued 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, 1996, there were stock options outstanding under the 1996 Non-Employee Plan
for 10,000 shares, none of which were exercisable.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation earned during
fiscal year ended September 30, 1996 and during each of the two prior fiscal
years by the Company's President and Chief Executive Officer and the executive
officers of the Company whose annual compensation from the Company exceeded
$100,000 for all services provided to the Company, UCI Medical Affiliates of
South Carolina, Inc. ("UCI-SC"), and Doctor's Care, P.A. (the "P.A."). No other
executive officer of the Company, UCI-SC or the P.A. earned compensation in
excess of $100,000 for services provided to the Company, UCI-SC or the P.A. in
any of the three fiscal years reflected below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FY SALARY(1) BONUS(1) OPTIONS COMPENSATION(2)
-------- ----------------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 1996 $ 315,000 (3) $ 63,500 (4) 30,000 $ 7,368
CHAIRMAN, PRESIDENT AND 1995 194,616 (3) 145,000 (4) 35,000 6,818
CHIEF EXECUTIVE OFFICER 1994 160,000 (3) 101,000 (4) 0 6,928
D. Michael Stout, M.D. 1996 $198,316 (5) $ 0 (6) 10,000 0
EXECUTIVE VICE PRESIDENT OF 1995 157,600 (5) 32,000 (6) 20,000 0
MEDICAL AFFAIRS 1994 150,394 (5) 30,000 (6) 0 0
</TABLE>
(1) AMOUNTS INCLUDED UNDER THE HEADING "SALARY" AND "BONUS" INCLUDE
COMPENSATION FROM BOTH UCI-SC AND THE P.A.
(2) AMOUNTS INCLUDED UNDER THE HEADING "ALL OTHER COMPENSATION" INCLUDE
PREMIUMS FOR LONG TERM DISABILITY AND LIFE INSURANCE PROVIDED BY THE
COMPANY FOR THE BENEFIT OF DR. MCFARLAND.
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(3) FOR SERVICES PERFORMED BY DR. MCFARLAND FOR UCI-SC, A WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY, DR. MCFARLAND RECEIVED AN ANNUAL SALARY OF
$157,500 DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1996. DR. MCFARLAND
SERVED WITHOUT COMPENSATION FROM UCI-SC FOR HIS SERVICES DURING THE FISCAL
YEARS ENDED SEPTEMBER 30, 1995 AND 1994. FOR SERVICES PERFORMED BY DR.
MCFARLAND FOR THE P.A., AN AFFILIATED PROFESSIONAL ASSOCIATION THAT
CONTRACTS WITH UCI-SC TO PROVIDE ALL MEDICAL SERVICES AT THE COMPANY'S
MEDICAL FACILITIES, DR. MCFARLAND RECEIVED AN ANNUAL SALARY OF $157,500,
$194,616 AND $160,000 FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1996, 1995
AND 1994, RESPECTIVELY.
(4) PURSUANT TO THE EMPLOYMENT AGREEMENT DATED OCTOBER 1, 1995 BETWEEN UCI-SC
AND DR. MCFARLAND, UCI-SC ACCRUED AN INCENTIVE BONUS DURING THE FISCAL YEAR
ENDED SEPTEMBER 30, 1996 PAYABLE TO DR. MCFARLAND OF $63,500, AND MADE NO
PAYMENTS TO DR. MCFARLAND AGAINST THE ACCRUED BONUS. THE P.A. ACCRUED
BONUSES PAYABLE TO DR. MCFARLAND DURING THE FISCAL YEARS ENDED SEPTEMBER
30, 1995 AND 1994 OF $145,000 AND $101,000, RESPECTIVELY. DR. MCFARLAND
RECEIVED DRAWS FROM THE P.A. OUT OF PREVIOUSLY ACCRUED BONUSES OF $120,000,
$167,430 AND $183,500 DURING THE FISCAL YEARS ENDED SEPTEMBER 30, 1996,
1995 AND 1994, RESPECTIVELY.
(5) FOR SERVICES PERFORMED BY DR. STOUT FOR UCI-SC, DR. STOUT RECEIVED AN
ANNUAL SALARY OF $45,833 DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1996.
DR. STOUT SERVED WITHOUT COMPENSATION FROM UCI-SC FOR HIS SERVICES DURING
THE FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND 1994. FOR SERVICES PERFORMED
BY DR. STOUT FOR THE P.A., DR. STOUT RECEIVED AN ANNUAL SALARY OF $152,483,
$157,600 AND $150,394 FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1996, 1995
AND 1994, RESPECTIVELY.
(6) THE P.A. ACCRUED AND PAID BONUSES TO DR. STOUT OF ZERO, $32,000 AND
$30,000 DURING THE FISCAL YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994,
RESPECTIVELY.
OPTION GRANTS
The following table sets forth certain information with respect to
options to purchase Common Stock granted during the fiscal year ended September
30, 1996 to certain of the Company's executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FY 1996 PER SHARE DATE
- -------------------------------- ---------------- -------------------- -------------- -------------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 30,000 21.35% $ 4.40 Dec. 13, 2005
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
D. Michael Stout, M.D. 10,000 7.12% 4.00 Dec. 13, 2005
EXECUTIVE VICE PRESIDENT OF
MEDICAL AFFAIRS
</TABLE>
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<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
unexercised options to purchase Common Stock held at September 30, 1996. None of
the named executive officers exercised any options during the fiscal year ended
September 30, 1996.
1996 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT 09/30/96 IN-THE-MONEY OPTIONS AT 09/30/96
---------------------------------------- -----------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 21,667 43,333 $ 0 $ 0
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
D. Michael Stout, M.D. 10,000 20,000 1,666 3,334
EXECUTIVE VICE PRESIDENT OF
MEDICAL AFFAIRS
</TABLE>
CERTAIN TRANSACTIONS
AGREEMENTS WITH DOCTOR'S CARE
GENERAL. All of the Company's operations are conducted through its
wholly-owned subsidiary, UCI-SC, which as of March 31, 1997 operates a network
of 29 freestanding primary care medical centers (the "Centers") located
throughout South Carolina, substantially all of which conduct business under the
name "Doctor's Care." In order to comply with prohibitions against corporations
other than professional medical associations providing medical care, all medical
services at these medical facilities are provided by or under the supervision of
the P.A. The P.A. is wholly-owned by M.F. McFarland, III, M.D., the Company's
Chairman, President and Chief Executive Officer and a principal shareholder of
the Company.
FACILITIES AGREEMENT. Pursuant to a Facilities Agreement between UCI-SC
and the P.A. (the "Facilities Agreement"), UCI-SC supplies to the P.A. the
facilities, equipment and assets of the Centers as well as such non-medical
personnel as are reasonably required by the P.A. in the operation of the
Centers. In exchange, the P.A. provides the necessary staffing for the
performance of medical services at the Centers, including a physician to serve
as Executive Medical Director having overall responsibility for the operations
of the Centers. From the fees paid each month to the P.A. for services rendered
at the Centers, the P.A. retains an amount equal to the cost of all narcotic
drugs purchased by the P.A. during the month and an amount sufficient to satisfy
the payroll and related personnel costs of the P.A. for physicians and other
medical providers at the Centers, with the balance of the fees paid to UCI-SC.
During the
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Company's fiscal years ended September 30, 1996, 1995 and 1994, the P.A.
received an aggregate of approximately $23,254,000, $17,987,000 and $12,540,000,
respectively, in fees prior to deduction by the P.A. of its payroll and other
related deductible costs covered under the Facilities Agreement. For accounting
purposes, the operations of the P.A. are combined with the operations of the
Company and are reflected in the consolidated financial statements of the
Company. Pursuant to the employment agreement between the P.A. and Dr.
McFarland, Dr. McFarland serves as Executive Medical Director of the Centers,
and is paid an annual salary for his services in such position. Refer to
footnotes (3) and (4) of the Summary Compensation Table for compensation paid to
Dr. McFarland by the P.A. during the fiscal years ended September 30, 1996, 1995
and 1994. Pursuant to the employment agreement between the P.A. and Dr. Stout,
Dr. Stout provides medical services to the P.A., and is paid an annual salary
for such services. Refer to footnotes (5) and (6) of the Summary Compensation
Table for compensation paid to Dr. Stout by the P.A. during the fiscal years
ended September 30, 1996, 1995 and 1994. In September 1994, the Facilities
Agreement was renewed for an additional five year term. In January 1995, the
Facilities Agreement was modified to provide UCI-SC with certain rights to
terminate the Facilities Agreement (a) upon the death of Dr. McFarland, (b) upon
Dr. McFarland ceasing to own, either directly or indirectly, a controlling
interest in the P.A., or (c) upon Dr. McFarland becoming a "disqualified person"
as defined by the South Carolina Business Corporation Act of 1988, as amended.
REFUND AGREEMENT. Pursuant to a Facilities Fee Refund Agreement (the
"Refund Agreement") entered into among the Company, UCI-SC and the P.A., the
P.A. was entitled to receive a refund of a portion of the fees payable to UCI-SC
under the Facilities Agreement with respect to fourteen of the Centers. The
Refund Agreement was terminated effective October 1, 1995. During the Company's
fiscal year ended September 30, 1996, UCI-SC made payments to the P.A. of
$120,000 against accumulated refunds payable. During the Company's fiscal year
ended September 30, 1995, UCI-SC accrued total refunds payable to the P.A. under
the Refund Agreement of $177,000, and made payments of approximately $200,000
against accumulated refunds payable. At September 30, 1996 and 1995, UCI-SC had
refunds payable to the P.A. of approximately $156,000 and $276,000,
respectively.
FACILITY LEASES
UCI-SC leases six medical center facilities from Companion HealthCare
Corporation ("CHC") and one medical center facility from Companion Property and
Casualty Insurance Company ("CP&C") under operating leases with fifteen year
terms expiring in 2008, 2009 and 2010. Each of these leases has a five year
renewal option, and a rent guarantee by the P.A. One of the leases has a
purchase option allowing UCI-SC to purchase the facility at fair market value
after February 1, 1995. Total lease payments made by UCI-SC under these leases
during the Company's fiscal years ended September 30, 1996, 1995 and 1994 were
$306,178, $271,100, and $205,901, respectively.
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Several of the medical center facilities operated by UCI-SC are leased
or were leased from entities owned or controlled by certain related parties.
(bullet) The Doctor's Care Northeast facility is leased from a partnership in
which Dr. McFarland is a general partner. The lease was renewed in
October 1994 for a five year term. The lease has two five year renewal
options and provides UCI-SC with an option to purchase the facility at
its fair market value after October 1995. Total lease payments made by
UCI-SC under this lease during the fiscal years ended September 30,
1996, 1995 and 1994 were $45,600, $45,600 and $42,696, respectively,
plus utilities and real estate taxes.
(bullet) The Doctor's Care Lexington and the Doctor's Care Forest Acres
facilities were leased from a general partnership in which Dr.
McFarland and Dr. Stout were general partners. The Doctor's Care
Lexington and the Doctor's Care Forest Acres facilities were sold in
February 1996 and August 1995, respectively, to unrelated third parties
who lease them to the Company. Total lease payments made by UCI-SC
under these two leases during the fiscal years ended September 30,
1996, 1995 and 1994 were $14,125, $90,000 and $75,166, respectively,
plus utilities and real estate taxes.
(bullet) The Doctor's Care West Columbia and the Doctor's Care Beltline
facilities were leased from a general partnership in which Dr.
McFarland and Dr. Stout were general partners. Both of these centers'
facilities were sold in May 1996 to unrelated third parties who lease
them to the Company. Total lease payments made by UCI-SC under these
two leases during the fiscal years ended September 30, 1996, 1995 and
1994 were $46,516, $84,000 and $87,000, respectively, plus utilities
and real estate taxes. In connection with its agreement to lease these
two facilities, UCI-SC guaranteed the lessor's mortgage debt relating
to the two facilities. At September 30, 1996, 1995 and 1994 the
outstanding balance of such debt was zero, $382,697 and $386,110,
respectively, plus utilities and real estate taxes.
(bullet) The Doctor's Care Lugoff facility was leased directly from Dr.
McFarland. This facility was sold in May 1996 to an unrelated third
party who leases it to the Company. Total lease payments made by UCI-SC
under this lease during the fiscal years ended September 30, 1996, 1995
and 1994 were $16,613, $24,666 and $23,333, respectively, plus
utilities and real estate taxes.
Five of the medical center facilities operated by UCI-SC are leased
from various physician employees of the P.A., pursuant to applicable acquisition
agreements.
(bullet) Lease payments made by UCI-SC for the Doctor's Care Myrtle Beach
facility during the fiscal years ended September 30, 1996, 1995 and
1994 were $63,600, $63,600 and $10,600, respectively, plus utilities
and real estate taxes.
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(bullet) Lease payments made by UCI-SC for the Doctor's Care Family Medical
Center facility during the fiscal years ended September 30, 1996, 1995
and 1994 were $54,000, $40,500 and zero, respectively, plus utilities
and real estate taxes.
(bullet) Lease payments made by UCI-SC for the Doctor's Care Waccamaw facility
during the fiscal years ended September 30, 1996, 1995 and 1994 were
$48,000, $36,000 and zero, respectively, plus utilities and real estate
taxes.
(bullet) Lease payments made by UCI-SC for the Doctor's Care Berea facility
during the fiscal years ended September 30, 1996, 1995 and 1994 were
$10,100, zero and zero, respectively, plus utilities and real estate
taxes.
(bullet) Lease payments made by UCI-SC for the Doctor's Care Wateree facility
during the fiscal years ended September 30, 1996, 1995 and 1994 were
$14,245, zero and zero, respectively, plus utilities and real estate
taxes.
OTHER TRANSACTIONS WITH RELATED COMPANIES
Blue Cross Blue Shield of South Carolina ("BCBS") owns 100% of CHC,
CP&C and Companion Technologies, Inc. ("CT"), respectively. At September 30,
1996, CHC owned 2,006,442 shares of the Company's outstanding Common Stock and
CP&C owned 218,181 shares of the Company's outstanding Common Stock, which in
the aggregate is approximately 46% of the Company's outstanding Common Stock.
The following is a historical summary of BCBS and its subsidiaries'
purchases of the Company's common stock.
<TABLE>
<CAPTION>
DATE NUMBER TOTAL
PURCHASED ENTITY OF SHARES PURCHASE PRICE
- --------------------- --------------- ----------------- -------------------
<S> <C> <C> <C>
12/10/93 CHC 333,333 $ 500,000
06/08/94 CHC 333,333 1,000,000
01/16/95 CHC 470,588 1,000,000
05/24/95 CHC 117,647 250,000
11/03/95 CHC 218,180 599,995
12/15/95 CHC 218,180 599,995
03/01/96 CHC 109,091 300,000
06/04/96 CP&C 218,181 599,998
</TABLE>
Including shares purchased by CHC from third parties, at September 30,
1996, BCBS controls 2,224,623 shares, or approximately 46% of the Company's
outstanding Common Stock. The shares acquired by CHC and CP&C from the Company
were purchased pursuant to stock purchase agreements and were not registered
under the Securities Act of 1933, as amended. CHC and CP&C have the right to
require registration of the stock under certain circumstances as described in
the agreement. Also, BCBS and its subsidiaries have the option
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to purchase as many shares of the Company's Common Stock as may be necessary for
BCBS to maintain ownership of 47% of the outstanding Common Stock of the Company
in the event that the Company issues additional stock to other parties
(excluding shares issued to employees or directors of the Company).
During the Company's fiscal year ended September 30, 1994, UCI-SC
purchased a new billing and accounts receivable system from CT for an aggregate
purchase price of $504,000. The Company entered into a capital lease agreement
for this system, which includes computer equipment. The Company has the option
to purchase the equipment at the end of the lease term for $1. The lease
obligation recorded at September 30, 1996 is $420,852, which includes lease
addenda. Management of the Company believes that the terms of the purchase
agreement are 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 Company's fiscal year ended September 30, 1994, UCI-SC
entered into an agreement with CP&C pursuant to which UCI-SC, through the P.A.,
acts as the primary care provider for injured workers of firms carrying worker's
compensation insurance through CP&C. Additionally, during the Company's fiscal
year ended September 30, 1995, UCI-SC entered into a financing arrangement with
CP&C for the purchase of the Doctor's Care - Donaldson facility, which consists
of a note payable in monthly installments of $4,546 (including 11% interest)
from April 1, 1995 to March 1, 2010, collateralized by certain accounts
receivable. Management of the Company believes that the terms of these
agreements with CP&C are 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 the P.A., provides services to members of a health
maintenance organization ("HMO") operated by CHC who have selected the P.A. as
their primary care provider. Management of the Company believes that the terms
of the agreement with CHC are 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.
During the year ended September 30, 1996, BCBS provided a non-interest
bearing loan to the Company in the amount of $600,000. At September 30, 1996,
the amount outstanding of this loan equaled $600,000. Subsequently in December
1996, this obligation was paid in full. Management of the Company believes that
the terms of the arrangement with BCBS were no less favorable to UCI-SC than
those that would have been obtainable through arm's-length negotiations with
unrelated third parties for similar arrangements.
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The employees of the Company are offered health, life, and dental
insurance coverage at group rates from BCBS and its subsidiaries. Management of
the Company believes that the group rates offered to the employees of the
Company are no more or less favorable to the Company than those that would have
been obtainable through arm's-length negotiations with unrelated third parties
for similar services.
The Company contracts with Adams and Associates for its business
owners, workers' compensation and professional liability insurance coverage.
Aggregate premiums paid during the fiscal year ended September 30, 1996 in
connection with such policies were approximately $125,000. Adams and Associates
contracts with CP&C to be the insurance carrier for the Company's workers'
compensation insurance coverage. During the fiscal year ended September 30,
1996, Adams and Associates provided short-term financing to the Company for
approximately $17,000 in workers' compensation audit premiums. Harold H. Adams,
Jr. is the President and owner of Adams and Associates and is also a director of
the Company. The Company believes that the terms of its contracts with Adams and
Associates are no more or less favorable to the Company than those that would
have been obtainable through arm's-length negotiations with unrelated third
parties for similar services.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Price Waterhouse LLP
as independent auditors to make an examination of the accounts of the Company
for the fiscal year ending September 30, 1997, subject to shareholder
ratification. If the shareholders do not ratify this appointment, other
certified public accountants will be considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL. THE
PERSONS NAMED IN THE FORM OF PROXY WILL VOTE THE PROXY AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED "FOR" THE RATIFICATION OF THE
COMPANY'S INDEPENDENT AUDITORS.
A representative of Price Waterhouse LLP is expected to be in
attendance at the Annual Meeting and will have the opportunity to make a
statement and be available to respond to appropriate questions.
CHANGES IN CERTIFYING ACCOUNTANT
On July 27, 1995, the Company notified Scott and Holloway, LLP
(formerly, Moore Kirkland Scott & Beauston) that it would not be retained as the
Company's independent accountants for the fiscal year ending September 30, 1995.
The Company's decision not to retain Scott and Holloway, LLP was approved by the
Board of Directors at a meeting held on
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July 26, 1995 and was not the result of any prior, existing or expected
disagreement with the Company. The reports of Moore Kirkland Scott & Beauston on
the financial statements of the Company for the fiscal years ended September 30,
1994 and 1993 contained no adverse opinion or disclaimer of opinion. The reports
were modified because of an uncertainty as to the Company's ability to continue
as a going concern as a consequence of losses incurred from continuing
operations. In connection with its audits of financial statements of the Company
for the fiscal years ended September 30, 1994 and 1993, and the interim period
through July 27, 1995, the Company had no disagreement with Moore Kirkland Scott
& Beauston on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Moore Kirkland Scott & Beauston, would have
caused them to make reference to the subject matter of the disagreement in
connection with their report on the financial statements for such periods.
Scott and Holloway, LLP has furnished the Company with a letter
addressed to the SEC stating that they agree with the statements made by the
Company with respect to their dismissal.
On July 26, 1995, the Company engaged Price Waterhouse LLP as its
independent accountants to audit the Company's financial statements for the
fiscal year ending September 30, 1995. The decision to engage Price Waterhouse
LLP was approved by the Board of Directors of the Company at a meeting held on
July 26, 1995. During the Company's fiscal years ended September 30, 1994 and
1993, the Company did not consult with Price Waterhouse LLP regarding any
matters (a) which were, or should have been, subject to SAS 50, or (b)
concerning the subject matter of a disagreement or reportable event with the
Company's former independent accountants (as described in Regulation S-B, Item
304(a)(2)).
OTHER BUSINESS
The Board of Directors of the Company knows of no other matter to come
before the Annual Meeting. However, if any matter requiring a vote of the
shareholders should arise, it is the intention of the persons named in the
enclosed form of proxy to vote such proxy in accordance with their best
judgment.
PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company by December 11, 1997 for
possible inclusion in the proxy material relating to such meeting.
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<PAGE>
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED SEPTEMBER 30, 1996, WHICH HAS BEEN FILED WITH THE SEC, IS INCLUDED IN
THE COMPANY'S 1996 ANNUAL REPORT TO SHAREHOLDERS WHICH ACCOMPANIES THIS PROXY
STATEMENT.
By order of the Board of Directors,
M. F. McFarland, III, M.D.
Chairman of the Board
Columbia, South Carolina
April 14, 1997
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********************************************************************************
APPENDIX
UCI MEDICAL AFFILIATES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON WEDNESDAY, MAY 21, 1997, AT THE ADAM'S MARK HOTEL,
1200 HAMPTON STREET, COLUMBIA, SOUTH CAROLINA AT 10:00 A.M. LOCAL TIME.
The undersigned hereby appoints Jerry F. Wells, Jr. and Barbara B.
Windham, or any of them acting in the absence of the other, as attorneys and
proxies of the undersigned, with full power of substitution, to vote all of the
shares of the common stock of UCI Medical Affiliates, Inc., a Delaware
corporation, held or owned by the undersigned or standing in the name of the
undersigned at the 1997 Annual Meeting of Shareholders of the Company and at any
adjournment thereof, and the undersigned hereby instructs said attorneys to vote
as follows:
1. Election of Directors:
[ ] FOR all nominees below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote as to all nominees
(This is considered a vote for all
nominees.)
NOTE: To withhold authority to vote for any individual nominee, strike
through the nominee's name in the list below:
Three year term: M.F. McFarland, III, M.D.
Charles M. Potok
2. The ratification of the appointment of Price Waterhouse LLP as independent
auditors for the Company for the fiscal year ending September 30, 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
DATE: ____________________, 1997 ______________________________________
(Signature)
______________________________________
(Signature)
NUMBER OF SHARES _________ ______________________________________
(PLEASE PRINT NAME)
(Please sign exactly as shown on
envelope addressed to you. If
securities are jointly owned, each
should sign.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH
INSTRUCTIONS, THIS PROXY WILL BE VOTED "FOR" MATTERS (1) AND (2) ABOVE, AND THE
PROXIES HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR JUDGMENT.
<PAGE>
