<PAGE> 1
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 [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
UNITED DENTAL CARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[UNITED DENTAL CARE LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 1997
To the Stockholders of United Dental Care, Inc.:
The Annual Meeting of Stockholders of United Dental Care, Inc. will be
held at the Sheraton Park Central Hotel, 12720 Merit Drive, Dallas, Texas 75251
on April 18, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect eight directors for the ensuing year;
2. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.
Stockholders of record as of the close of business on March 14, 1997
will be entitled to notice of and to vote at the meeting or any adjournment
thereof. A complete list of such stockholders will be available for inspection
at the Annual Meeting and during ordinary business hours at the offices of the
Company for a period of ten days prior to the meeting.
By Order of the Board of Directors,
Mark E. Pape
Secretary
Dallas, Texas
March 27, 1997
<PAGE> 3
[UNITED DENTAL CARE LOGO]
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXY
This proxy statement is furnished in connection with the solicitation
by the board of directors of United Dental Care, Inc. (the "Company") of
proxies in the accompanying form to be voted at the Annual Meeting of
Stockholders to be held on April 18, 1997. Shares represented by each proxy
properly executed and returned will be voted as specified therein unless
revoked. This proxy statement and the accompanying form of proxy, together
with the Company's annual report to stockholders, were first mailed to
stockholders on or about March 27, 1997. On Friday, March 14, 1997, the record
date for the determination of stockholders entitled to vote at the annual
meeting, there were outstanding 8,925,416 shares of the Company's common stock,
each share having one vote.
The holders of a majority of the outstanding shares of common stock
entitled to vote at the Annual Meeting, present in person or represented by
proxy, will constitute a quorum for the Annual Meeting. Directors will be
elected at the Annual Meeting by a plurality of the votes of the shares present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the election of directors. Accordingly, the eight nominees for director
receiving the highest number of affirmative votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors at the Annual Meeting will be elected as directors. The affirmative
vote of the holders of a majority of the shares of common stock entitled to
vote, present in person or represented by proxy at the Annual Meeting, will be
required to approve all other matters to be acted upon at the Annual Meeting.
Abstentions will be counted for purposes of determining the presence or absence
of a quorum, but not voted. Abstentions will, therefore, have the same effect
as votes against any proposal requiring the affirmative vote of a majority of
the shares present and entitled to vote thereon. Broker non-votes will be
counted for purposes of determining the presence or absence of a quorum, but
will have no effect on the outcome of the matters to be acted upon at the
Annual Meeting.
Unless authority to vote for the election of directors (or for any one
or more nominees) is withheld, proxies will be voted for the entire slate of
directors proposed by the board. Management is not aware of any other matters
that are likely to be brought before the Annual Meeting. However,
- 1 -
<PAGE> 4
if any such matters properly come before the Annual Meeting, the proxy holders
are authorized to vote thereon in accordance with their judgement.
A proxy may be revoked at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company, by submitting a subsequently dated proxy or by attending the
Annual Meeting and requesting to the Secretary of the Company in writing that
the proxy be withdrawn. Attendance at the Annual Meeting will not, by itself,
constitute revocation of the proxy.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. The solicitation of proxies by mail may be followed by
solicitation in person or by telephone by employees of the Company without
additional compensation. The Company anticipates no expenditures in connection
with the solicitation of proxies other than the cost of printing and mailing
this proxy statement and the reimbursement of nominees such as banks, brokerage
firms and trustees for their costs in forwarding proxy materials to the
beneficial owners of the Company's common stock.
The Company's executive offices are located at 13601 Preston Road,
Suite 500 East, Dallas, Texas 75240. Its telephone number is (972) 458-7474.
ELECTION OF DIRECTORS
GENERAL INFORMATION
As set by the board of directors pursuant to the bylaws of the
Company, the authorized number of directors of the Company is eight. Eight
directors will be elected at the Annual Meeting. All directors of the Company
are elected annually and hold office until their respective successors are
elected and qualified or until their earlier resignation or removal.
The nominees for the board of directors set forth below, if elected by
the stockholders, will serve until the next succeeding annual meeting of the
stockholders or until their respective successors have been duly elected. Each
nominee is presently a director of the Company and has consented to serve as a
director if elected. If any nominee should become unavailable to serve for any
reason (which is not anticipated), the persons named as proxies will vote for
the election of the remaining nominees and for such other person or persons as
may be designated by the board of directors as a substitute nominee.
INFORMATION REGARDING NOMINEES FOR THE BOARD OF DIRECTORS
Set forth below is certain information with respect to each director
nominee. Additional information regarding certain of the nominees is set forth
in other sections of this proxy statement.
- 2 -
<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE TITLE DIRECTOR SINCE
---- --- ----- --------------
<S> <C> <C> <C>
Jack R. Anderson 72 Chairman of the Board December 1985
of Directors
George E. Bello 61 Director December 1995
James E. Buncher 60 Director February 1996
William H. Longfield 58 Director January 1986
Robert J. Nettinga 46 Director September 1994
James Ken Newman 53 Director January 1986
Donald E. Steen 50 Director May 1996
William H. Wilcox 44 President and Chief May 1996
Executive Officer;
Director
</TABLE>
JACK R. ANDERSON has been Chairman of the board of directors of the
Company since December 1985. Mr. Anderson has been the President of Calver
Corporation, a health care consulting and investment firm, and a private
investor since 1982. Mr. Anderson currently serves on the board of directors
of Horizon Mental Health Management, Inc. and Talbert Medical Management
Holdings Corporation. Mr. Anderson is a member of the executive committee and
the compensation committee of the board of directors of the Company.
GEORGE E. BELLO has been Executive Vice President and Controller and a
member of the board of directors of Reliance Group Holdings, Inc., an insurance
holding company, since 1982. Mr. Bello also serves on the board of directors
of Zenith National Insurance Corp. and Horizon Mental Health Management, Inc.
Mr. Bello is a member of the audit committee of the Company's board of
directors.
JAMES E. BUNCHER has served as President, Health Plans Group of Value
Health, Inc., a national specialty managed care company, since September 1995
and has served as President and Chief Executive Officer of Community Care
Network, Inc., a Value Health subsidiary, since August 1992. During 1992, he
served as a general management consultant to TakeCare, Inc., and, from 1987
through 1991, he served as a general partner in Lake Investments, a Dallas,
Texas based investment company. He currently serves on the board of directors
of Alliance Imaging, Inc. Mr. Buncher is a member of the audit committee of
the Company's board of directors.
WILLIAM H. LONGFIELD has been the Chairman and Chief Executive Officer
of C.R. Bard, Inc., a multi-national developer, manufacturer and marketer of
health care products, since September 1995. Mr. Longfield was President and
Chief Executive Officer of C.R. Bard Inc. from October 1993 to September 1995,
President and Chief Operating Officer from September 1991 to October 1993 and
Executive Vice President and Chief Operating Officer from February 1989 to
September
- 3 -
<PAGE> 6
1991. Mr. Longfield currently serves on the board of directors of C.R. Bard,
Inc., Manor Care, Inc., Horizon Mental Health Management, Inc., The West
Company, Health Industry Manufacturers Association and Atlantic Health
Systems. He is currently a Trustee of Centenary College. Mr. Longfield is a
member of the compensation committee of the board of directors of the Company.
ROBERT J. NETTINGA was a founder of the predecessor to International
Dental Health, Inc. ("IDH"), a managed dental benefits company acquired by the
Company in September 1994, and served as a director of IDH and its predecessor
from 1977 until 1994.
JAMES KEN NEWMAN has been the President and Chief Executive Officer of
Horizon Mental Health Management, Inc., a contract manager of mental health
services for general acute care hospitals, since July 1989 and Chairman since
February 1992. Mr. Newman currently serves on the board of directors of
Horizon Mental Health Management, Inc. and Telecare Corporation. Mr. Newman is
a member of the executive committee of the board of directors of the Company.
DONALD E. STEEN has been the President of the International Group of
Columbia/HCA Healthcare Corporation, a health care services corporation
primarily involved in the ownership and operation of hospitals and providing
related services since September 1995. From September 1994 to September 1995,
he was the President of the Western Group of Columbia/HCA Healthcare
Corporation. From August 1981 to September 1994, Mr. Steen was the Chief
Executive Officer of Medical Care America, Inc., a corporation that operated
ambulatory surgery centers which was acquired by Columbia/HCA Healthcare
Corporation in September 1994. Mr. Steen currently serves on the board of
directors of Horizon Mental Health Management, Inc.
WILLIAM H. WILCOX has been the President, Chief Executive Officer and
a director of the Company since May 1996. From September 1995 to May 1996, Mr.
Wilcox served as the President of the Surgery Group of Columbia/HCA Healthcare
Corporation and from September 1994 to September 1995 he was President and
Chief Executive Officer of the Ambulatory Surgery Division of Columbia/HCA
Healthcare Corporation. Prior to assuming this position in September 1994, Mr.
Wilcox was the Chief Operating Officer and a member of the board of directors
of Medical Care America, Inc. from September 1993 to September 1994. Prior to
September 1993, Mr. Wilcox was the Chief Operating Officer and a member of the
board of directors of Medical Care International, Inc. Medical Care America,
Inc. was acquired by Columbia/HCA Healthcare Corporation in September 1994.
Mr. Wilcox is a member of the executive committee of the Company's board of
directors.
The Company, certain of its stockholders and Mr. Nettinga entered into
a Stockholders Agreement dated September 16, 1994 pursuant to which such
stockholders agreed to vote all shares of common stock owned by them for the
election of Mr. Nettinga as a director of the Company, and the Company and
such stockholders agreed that the board of directors of the Company would
consist of not less than seven members. The Stockholders Agreement has a term
ending upon the earlier of four years from the date of the agreement or the
date on which all obligations are paid under a non-competition agreement and a
consulting agreement among the Company, Mr. Nettinga and an
- 4 -
<PAGE> 7
affiliated entity. The stockholders who are parties to the Stockholders
Agreement include Messrs. Anderson, Newman, and Longfield and Mr. James B.
Kingston, who served as President, Chief Executive Officer and a director of
the Company from December 1985 to May 1996. The stockholders who are parties
to the Stockholders Agreement beneficially own in the aggregate 20.3% of the
outstanding common stock of the Company.
SHARES REPRESENTED BY THE ACCOMPANYING PROXY CARD WILL BE VOTED "FOR"
THE ELECTION OF THE NOMINEES NAMED ABOVE EXCEPT TO THE EXTENT AUTHORITY TO VOTE
FOR ONE OR MORE NOMINEES IS WITHHELD. AS INDICATED ON THE PROXY CARD,
STOCKHOLDERS MAY (I) VOTE FOR THE ENTIRE SLATE OF NOMINEES, (II) WITHHOLD THE
AUTHORITY TO VOTE FOR THE ENTIRE SLATE OF NOMINEES OR (III) BY WRITING THE NAME
OF ONE OR MORE NOMINEES IN THE SPACE PROVIDED ON THE PROXY CARD, WITHHOLD
AUTHORITY TO VOTE FOR SUCH SPECIFIED NOMINEE OR NOMINEES.
MEETINGS
The board of directors conducts its business through meetings of the
full board, the executive committee, the compensation committee and the audit
committee and through telephone meetings followed by unanimous written consent.
During the year ended December 31, 1996, the board of directors met four times
in person and action was taken by written consent five times. All directors,
with the exceptions of Messrs. Longfield, Nettinga and Newman who each missed
one meeting, attended the board meetings, and all directors joined in the five
written actions. Each current director of the Company attended at least 75% of
the aggregate of the total number of 1996 meetings of the board of directors
and of the committees of the board on which the respective director served that
were held subsequent to his election to the board of directors. Mr. Steen and
Mr. Wilcox were elected to the board in May 1996. Mr. Buncher was elected to
the board in February 1996.
The compensation committee, currently composed of Messrs. Anderson and
Longfield, but which, until August 1996, was composed of Messrs. Anderson and
Newman, meets as the need arises. In 1996, the committee met five times
through telephone meetings and one time in person. In addition, the committee
met numerous times on an informal basis. Both members were present at all
meetings.
The audit committee, currently composed of Messrs. Bello and Buncher,
makes recommendations to the board of directors concerning the engaging and
discharging of the independent auditors, reviews with the independent auditors
the scope and results of their activities, reviews the independence of the
auditors, considers and determines audit and non- audit fees, reviews the
adequacy of the Company's system of internal accounting controls and considers
such other matters relating to the effectiveness of the external audits of the
accounts of the Company as the committee may determine to be warranted. The
audit committee met two times in 1996 and Messrs. Bello and Buncher both
attended the meetings.
During the year ended December 31, 1996, the Company had no nominating
committee or other committee of the board of directors performing similar
functions.
- 5 -
<PAGE> 8
DIRECTOR COMPENSATION
Directors do not receive compensation for service on the board of
directors or any committee thereof but are reimbursed for their out-of-pocket
expenses incurred in attending meetings of the board of directors and
committees. Qualifying directors who are not employees of the Company receive
an automatic grant of options for 16,000 shares of common stock of the Company
under the 1995 Stock Option Plan. In 1996, Messrs. Buncher and Steen each
received grants of stock options to purchase 16,000 shares of common stock
under this plan. Stock options granted to directors under the plan vest and
become exercisable in four equal cumulative annual installments on each annual
anniversary of the grant date. Such stock options terminate on the date any
optionee ceases to be a director of the Company for any reason other than death
(in the event of the optionee's death, stock options vested at the date of
death are exercisable for one year thereafter).
EXECUTIVE OFFICERS OF THE COMPANY
CURRENT EXECUTIVE OFFICERS
The executive officers of the Company, their respective ages,
positions held and tenure as officers are as follows:
<TABLE>
<CAPTION>
Position(s) Held Officer of the
Name Age With the Company Company Since
- ----------------------------- ---------- --------------------------------------- ---------------
<S> <C> <C> <C>
William H. Wilcox . . . . . . 44 President, Chief Executive Officer and May 1996
Director
Mark E. Pape . . . . . . . . 46 Senior Vice President, Chief Financial January 1995
Officer, Secretary and Treasurer
Peter R. Barnett, DMD . . . . 43 Senior Vice President, Chief January 1995
Officer
</TABLE>
BUSINESS EXPERIENCE
Information concerning the business experience of Mr. Wilcox is
provided in the section above entitled "Information Regarding Nominees for the
Board of Directors."
Mr. Pape has been Senior Vice President and Chief Financial Officer,
Treasurer and Secretary of the Company since January 1995. From September 1991
to January 1995, he was the Executive Vice President and Chief Financial
Officer of American Income Holding, Inc., an insurance holding company with
subsidiaries that issued individual supplemental life and accident insurance.
From January 1988 to September 1991, he was an Associate Director of Bear,
Stearns & Co. Inc., an investment banking company.
Dr. Barnett served as Senior Vice President, Operations of the Company
from January 1995 until January 1996 when he became Senior Vice President,
Chief Operations Officer. From August 1994 to January 1995, he was an
Executive Director of Prudential DMO, a managed dental care
- 6 -
<PAGE> 9
company, where he was responsible for its southeastern United States
operations. From March 1993 to August 1994, he was an independent consultant
to managed health care companies. From October 1991 to March 1993, he was a
Senior Vice President of Pearle Vision, Inc., an optical care company, where he
had responsibility for managed vision care programs, quality assurance,
professional affairs and franchise operations. He served as a Vice President
of Pearle Vision, Inc. from July 1988 to October 1991.
There are no family relationships between any of the executive
officers and directors of the Company. The Company has an employment agreement
with each of its executive officers. See "Other Compensation Arrangements"
below.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth, as of March 12, 1997, the beneficial
ownership of the Company's common stock; (i) by each stockholder known by the
Company to own beneficially more than 5% of the outstanding common stock; (ii)
by each director and director nominee; (iii) by the Company's executive
officers; and (iv) by all executive officers and directors as a group. Except
as otherwise indicated below, each named beneficial owner has sole voting and
investment power with respect to the shares of common stock listed.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
-----------------------
Name NUMBER PERCENT
- ------------------------------------------------- -----------------------
<S> <C> <C>
Strong Capital Management, Inc. (1) . . . . . . . 1,038,525 11.6%
T. Rowe Price Associates, Inc. (1) . . . . . . . 895,000 10.0
Columbia Funds Management Company(1) . . . . . . 487,500 5.5
Jack R. Anderson (1)(2) . . . . . . . . . . . . . 1,081,600 12.1
Citibank, N.A. and George E. Bello,
Trustees (1)(3) . . . . . . . . . . . . . . . 778,500 8.7
George E. Bello (4) . . . . . . . . . . . . . . . 352,168 4.0
James Ken Newman (5) . . . . . . . . . . . . . . 69,660 *
William H. Longfield (5) . . . . . . . . . . . . 68,000 *
Donald E. Steen (6) . . . . . . . . . . . . . . . 6,000 *
James E. Buncher (6) . . . . . . . . . . . . . . 4,000 *
Robert J. Nettinga . . . . . . . . . . . . . . . 250 *
William H. Wilcox . . . . . . . . . . . . . . . . ---- ----
Mark E. Pape (7) . . . . . . . . . . . . . . . . 59,237 *
Peter R. Barnett (8) . . . . . . . . . . . . . . 7,563 *
All directors and executive officers as a
group (10 persons) . . . . . . . . . . . . . 1,648,484 18.3
</TABLE>
- ----------------------------
* Less than 1%.
- 7 -
<PAGE> 10
(1) The address of Strong Capital Management, Inc. is 100 Heritage
Reserve, Menomonee Falls, WI 53051. The address of T. Rowe Price
Associates, Inc. is 100 E. Platt Street, Baltimore, MD 21202. The
address of Columbia Funds Management Company is 1300 SW Sixth Avenue,
P. O. Box 1350, Portland, OR 97207. The address of Jack R. Anderson
is 16475 Dallas Parkway, Suite 735, Dallas, TX 75248. The address of
Citibank, N.A. and George E. Bello, Trustees is c/o Citibank, N.A.,
153 East 53rd Street, 25th Floor, New York, NY 10043.
(2) Includes 778,500 shares held by the two trusts of which Citibank, N.A.
and George E. Bello are trustees. See Note (3) below. Relatives of
Mr. Anderson are beneficiaries of both trusts. Excludes shares of
common stock held by other trusts of which relatives of Mr. Anderson
are beneficiaries. Mr. Anderson disclaims beneficial ownership of the
shares owned by all of the trusts.
(3) Citibank, N.A. and George E. Bello are trustees having shared voting
and investment power under two trusts owning in the aggregate the
number of shares shown in the table. Relatives of Jack R. Anderson
are beneficiaries of both trusts. Mr. Anderson disclaims beneficial
ownership of the shares owned by the trusts.
(4) Excludes 778,5000 shares of common stock held by the two trusts of
which Citibank, N.A. and George E. Bello are trustees. See Note (3)
above. Relatives of Mr. Anderson are beneficiaries of both trusts.
Messrs. Anderson and Bello disclaim beneficial ownership of the shares
owned by the trusts.
(5) Assumes exercise of options for 4,000 shares that are currently
exercisable and for 4,000 shares that will be exercisable within 60
days of the date of this proxy statement.
(6) Assumes exercise of options for 4,000 shares that will be exercisable
within 60 days of this proxy statement.
(7) Assumes exercise of warrants for 40,000 shares and options for 8,000
shares that are currently exercisable. Includes 3,000 shares held in
a trust. Mr. Pape and his spouse are income beneficiaries of the
trust and jointly have full discretionary investment authority.
(8) Assumes exercise of options for 6,000 shares that are currently
exercisable.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and the
regulations of the Securities and Exchange Commission require the Company's
executive officers and directors and persons who own more than ten percent of
the Company's common stock, as well as certain affiliates of such persons, to
file initial reports of ownership and changes in ownership of such common stock
with the Securities and Exchange Commission and the Nasdaq Stock Market.
Executive officers, directors and persons owning more than ten percent of the
Company's common stock are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it
and representations that no other reports were required for those persons, the
Company believes that, for the year ended December 31, 1996, all filing
requirements applicable to its executive officers, directors and owners of more
than ten percent of the Company's common stock have been satisfied. The
following filings were not made within the required time period but were filed
within several weeks of the applicable due date: (i) a statement of changes in
beneficial ownership (Form 4) for February 1996 to report the sale of 6,000
shares by Mr. Longfield was inadvertently filed late; (ii) an initial statement
of beneficial ownership (Form 3) for Mr. Steen, reporting his election to the
board of directors was inadvertently filed late; and (iii) annual statements of
changes in beneficial ownership (Form 5) reporting stock options granted during
1996 for Mr. Wilcox, Dr. Barnett and Mr. Pape, all due February 14, 1997, were
inadvertently filed late. An initial statement of beneficial ownership (Form
3) for Mr. Wilcox, reporting his election as an officer and a director and no
ownership of common stock, due on May 5, 1996 was not filed until March 3,
1997.
- 8 -
<PAGE> 11
EXECUTIVE COMPENSATION
The "Summary Compensation Table" below includes individual
compensation information on the Chief Executive Officer and those executive
officers whose compensation for 1996 exceeded $100,000 for services rendered in
all capacities during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ SECURITIES
NAME AND OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION Year Salary Bonus (1) COMPENSATION (2) OPTIONS (#)
- --------------------------- -------- -------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
William H. Wilcox (3) . . . . 1996 $190,961 $140,625 $1,624 300,000
President and Chief
Executive Officer
James B. Kingston (4) . . . . 1996 78,282 ---- 2,376 20,000
President and Chief 1995 180,000 100,000 4,901 ----
Executive Officer 1994 150,000 60,000 3,728 48,000
Mark E. Pape (5) . . . . . . 1996 165,000 82,500 3,926 10,000
Senior Vice President, 1995 137,760 53,400 2,467 40,000
Chief Financial Officer,
Secretary and Treasurer
Peter R. Barnett, DMD (6) . . 1996 165,000 82,500 3,632 15,000
Senior Vice President, 1995 123,216 51,280 2,586 30,000
Chief Operations Officer
</TABLE>
- --------------------------------------------
(1) Amounts shown for 1996 represent bonuses earned in the year ended December
31, 1996 and paid in 1997. Amounts shown for 1995 represent bonuses earned
in 1995 and paid in 1996. Amounts shown for 1994 represent bonuses earned
in 1994 and paid in 1995. The 1995 bonus amounts exclude deferred bonus
payments not payable until 1997, or later, that are contingent upon
continued employment with the Company. Such deferred amounts for Mr. Pape
and Dr. Barnett were $19,320, and $18,030, respectively.
(2) Represents premiums paid by the Company for the employee's health
insurance, net of employee's contribution, and for the employee's
long-term disability insurance.
(3) Mr. Wilcox was elected to the position of President and Chief Executive
Officer in May 1996. In August 1996, Mr. Wilcox was granted stock
options to purchase 300,000 shares of common stock at a price of $33.75
per share, which options vest in five equal installments beginning August
1998.
(4) Mr. Kingston resigned his position as President and Chief Executive
Officer in May 1996. In January 1996, Mr. Kingston was granted options
to purchase 20,000 shares of common stock at a price of $37.13 per share.
On December 31, 1994, Mr. Kingston was granted options to purchase 48,000
shares of common stock at a price of $6.00 per share. All options
terminated when Mr. Kingston resigned from the Company.
- 9 -
<PAGE> 12
(5) Mr. Pape joined the Company in January 1995. In January 1996, Mr. Pape
was granted options to purchase 10,000 shares of common stock at a price
of $37.13 per share. In January 1995, Mr. Pape was granted stock options
to purchase 40,000 shares of common stock at a price of $6.00 per share.
All options vest in five equal annual installments beginning two years
after the grant date. In January 1995, Mr. Pape purchased from the
Company warrants to purchase 40,000 shares of common stock.
(6) Dr. Barnett joined the Company in January 1995. In January 1996, Dr.
Barnett was granted options to purchase 15,000 shares of common stock at a
price of $37.13 per share. In January 1995, Dr. Barnett was granted stock
options to purchase 30,000 shares of common stock at a price of $6.00 per
share. All options vest in five equal annual installments beginning two
years after the grant date.
STOCK OPTION EXERCISES, YEAR-END VALUES AND GRANTS
The following table sets forth certain information concerning stock
options exercised in the year ended December 31, 1996 and the number of shares
covered by unexercised stock options held by the executive officers of the
Company who held stock options as of December 31, 1996. Also reported are
values of "in-the-money" stock options representing the difference between the
respective exercise prices of such outstanding stock options and the fair
market value of the common stock as of December 31, 1996.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
VALUE YEAR ENDED (#) (1) AT FISCAL YEAR END ($) (2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- --------------- ---------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Wilcox . . ---- ---- ---- 300,000 ---- $ ----
James B. Kingston (3) 10,000 $347,500 ---- ---- ---- ----
Mark E. Pape . . . . ---- ---- ---- 50,000 ---- $ 975,200
Peter R. Barnett, DMD ---- ---- ---- 45,000 ---- 731,400
</TABLE>
- ------------------------------------------
(1) The options shown for each of the executive officers have a maximum term
of ten years, subject to earlier termination in the event of the
optionee's cessation of service with the Company.
(2) Calculated based on $30-3/8 per share, the closing sales price of the
common stock on The Nasdaq Stock Market on the last business day of 1996
(December 31), less the applicable exercise price.
(3) Mr. Kingston exercised options for 10,000 shares on March 4, 1996. The
aggregate exercise price for such options was $15,000 and the value of the
stock on the exercise date was estimated to be $36.25 per share. Mr.
Kingston resigned his position as President and Chief Executive Officer in
May 1996. All remaining, unexercisable options terminated due to the
cessation of the optionee's service as a Company employee.
The following table sets forth information regarding the grant of
options to purchase shares of common stock to the executive officers of the
Company who received such grants in the year ended December 31, 1996. No stock
appreciation rights have been granted.
- 10 -
<PAGE> 13
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS EXERCISE OR PRICE APPRECIATION FOR
UNDERLYING GRANTED TO BASE OPTION TERMS (3)
GRANTED (1) EMPLOYEES IN PRICE (2) EXPIRATION ------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- ---------------------- --------------- -------------- --------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
William H. Wilcox . . . 300,000 85.5% $33.75 08/09/2006 $6,367,558 $16,136,642
James B. Kingston (4) . 20,000 5.7 37.13 01/03/2006 467,017 1,183,513
Mark E. Pape . . . . . 10,000 2.8 37.13 01/03/2006 233,509 591,757
Peter R. Barnett, DMD . 15,000 4.3 37.13 01/03/2006 350,263 887,635
</TABLE>
- ----------------------------------------
(1) The options shown have a maximum term of ten years, subject to earlier
termination in the event employment with the Company is terminated. The
options vest and are exercisable cumulatively in equal installments over a
five year period commencing two years from the date of grant.
(2) The exercise price per share of the options equaled or exceeded the fair
market value of the underlying shares of common stock on the date the
options were granted, as determined by the Company's board of directors.
(3) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the common stock does in fact
appreciate over the option term, no value will be realized from the option
grants. The closing sales price on December 31, 1996 for the Company's
common stock as reported by Nasdaq was $30-3/8.
(4) Mr. Kingston resigned his position as President and Chief Executive Officer
in May 1996. Consequently, the options granted in January 1996 terminated
in May 1996.
1997 EXECUTIVE INCENTIVE PLAN
The Company has adopted an incentive bonus plan for its executive and
other officers for 1997. Under the bonus plan, officers are entitled to earn
certain cash bonuses if specified performance criteria are satisfied. The
target bonuses that may be earned by the named executive officers under the
bonus plan are: (i) $300,000 for Mr. Wilcox; (ii) $110,550 for Mr. Pape; and
(iii) $110,550 for Dr. Barnett. The bonuses are payable in 1998.
OTHER COMPENSATION ARRANGEMENTS
In 1996, the Company entered into employment agreements with Mr.
Wilcox, Mr. Pape and Dr. Barnett. Under their employment agreements, Mr.
Wilcox, Mr. Pape and Dr. Barnett are entitled to base salaries that are subject
to increase, but not decrease, by the board of directors of the Company. The
annual base salaries for Mr. Wilcox, Mr. Pape and Dr. Barnett were $300,000,
$165,000 and $165,000, respectively, as of December 31, 1996. The employment
agreements provide that the board of directors will adopt each year a bonus
plan under which the employee may earn a bonus with the terms and performance
criteria of the bonus plan to be determined by the board of directors. The
employment agreements also allow Mr. Wilcox, Mr. Pape and Dr. Barnett to
- 11 -
<PAGE> 14
participate in the insurance and other fringe benefit plans provided to the
Company's employees generally from time to time.
The employment agreement with Mr. Wilcox has a term ending March 1999.
The employment agreements with Mr. Pape and Dr. Barnett each has a term ending
May 1998. Each of the employment agreements is terminable by either party
thereto with or without cause upon at least 30 days prior written notice. In
addition, either party may terminate the employment agreement "with cause"
under certain circumstances. The employee can terminate with cause if the
Company materially breaches or fails to perform under the agreement. For such
purpose, all employment agreements expressly provide that, in the event of a
change of control of the Company, a material breach includes a material
decrease in responsibility and authority or the relocation of the Company's
principal executive offices without consent. The Company may terminate an
employment agreement with cause if the employee thereunder (i) is unable to
perform his duties due to illness, injury or incapacity for more than six
months, (ii) is convicted of a felony or (iii) breaches or neglects to perform
under the agreement. If an employment agreement is terminated without cause by
the Company or with cause by the employee thereunder, the terminated employee
will be entitled to receive (i) any bonus previously earned; (ii) a severance
payment of up to two years' base salary in the case of Mr. Wilcox and one
year's base salary in the cases of Mr. Pape and Dr. Barnett; and (iii)
accelerated vesting of certain outstanding stock options and other benefits or
bonuses or, alternatively, with respect to any benefits or bonuses that cannot
be fully vested pursuant to applicable law, the terminated employee will be
entitled to receive, if allowed by law, cash equal to the amount of benefits or
bonuses forfeited. The employment agreements contain certain non-competition
and non-solicitation covenants binding on the employee during the employment
term and for specified periods thereafter, unless the employment agreement is
terminated by the Company without cause or by the employee with cause. The
employment agreement also contains certain confidentiality and non-disclosure
covenants on the part of the employee that survive termination for any reason.
BOARD REPORT ON EXECUTIVE COMPENSATION
General
The compensation committee of the board of directors of the Company
reviews and approves the salaries and annual incentive bonuses of the officers
of the Company at or above the $100,000 annual salary level and all grants of
options to purchase shares under the Company's stock option plans to officers
and key employees. The compensation committee is composed exclusively of
directors who are "disinterested persons" as defined by Securities and Exchange
Commission rules, and its members are neither employees nor former employees of
the Company nor have such individuals participated in any of the Company
executive or other employee compensation programs. During fiscal 1996, the
committee was composed of two directors, Messrs. Anderson and Newman for
January through July and Messrs. Anderson and Longfield for August through
December.
United Dental Care's executive compensation policies are intended to
provide a competitive compensation program that will enable the Company to
attract, incentivize and retain executives who
- 12 -
<PAGE> 15
have the abilities and leadership required to effectively discharge their
duties. The compensation policy is based on the principle that the financial
rewards to the executive should be aligned with the financial interest of the
stockholders of the Company.
The Company's executive compensation program is comprised of three
elements: base salary; annual bonus incentive compensation; and long-term
incentive compensation (stock options).
Base Salary
Base salary compensation is based on offering competitive salaries in
comparison to market and industry practices. Independent survey data for
executive positions in other similarly sized companies is used to establish
compensation ranges for each executive position. These ranges may be
subjectively adjusted for factors such as local market conditions or unique
aspects, responsibilities or qualifications of the position not believed to
normally be associated with the position in other similarly sized companies.
Base salary ranges are reviewed annually. The base salary for each executive
is set after an annual subjective review of performance in areas of the
executive's responsibilities, including achievement of specific personal or
departmental goals, position requirements and financial performance in relation
to expected performance. No specific weighting of factors is used in
evaluating overall job performance.
Annual Bonus Incentive Compensation
The compensation committee authorizes the establishment and payment of
discretionary annual bonus incentive compensation based upon an assessment of
an executive's exceptional contributions to the Company. Bonuses are based
upon the overall achievement in increasing the Company's profitability and its
membership as well as improving customer service and are closely aligned with
enhancing stockholder value.
Stock Option Grants
The compensation committee is authorized to grant stock options to key
employees and officers of the Company. Such option grants are intended to
provide long-term incentive to increase stockholder value by improving overall
corporate performance and ensuring that operating decisions are based on
long-term results that benefit the Company and ultimately the stockholders.
Currently, stock options are not necessarily granted annually, but are granted
from time to time. While no specific formula is used, grants are generally
based upon a subjective evaluation of the grantee's past contribution to
Company performance and expected contribution toward meeting long-term
strategic goals of the Company.
Members of the Compensation Committee
Jack R. Anderson William H. Longfield
- 13 -
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 1996, executive officer compensation decisions were made by the
compensation committee. Members of the compensation committee are Messrs.
Anderson and Newman for January 1996 through July 1996 and Messrs. Anderson and
Longfield for August 1996 through December 1996. None of these individuals was
at any time during the year ended December 31, 1996, or at any time prior
thereto, an officer or employee of the Company or any of its subsidiaries. No
executive officer of the Company served during 1996 as a director or as a
member of the compensation committee of any entity in which an executive
officer of such entity served as a director of the Company or as a member of
the Company's compensation committee.
PERFORMANCE GRAPH
The following graph demonstrates the aggregate stockholder's return
since September 21, 1995, when the Company's shares were first offered to the
public at $22.00, through December 31, 1996, when the closing sales price as
reported by Nasdaq was $30-3/8. For comparison, the graph includes the return
to investors in the CRSP Total Return Indexes for The Nasdaq Stock Market, US
Companies ("Nasdaq-US") and the Nasdaq Financial Stocks ("Nasdaq-Industry").
The total return for the Company's stock and for each index assumes the
reinvestment of dividends, although dividends have never been declared on the
Company's stock, and is based on the returns of the component companies
weighted according to their capitalizations as of the end of each period.
Nasdaq-US tracks the aggregate price performance of all equity securities of
U.S. companies traded on The Nasdaq National Market and the Nasdaq SmallCap
Market. Nasdaq- Industry tracks the aggregate price performance of equity
securities of financial companies traded on The Nasdaq Stock Market. The
Company's common stock trades on the Nasdaq National Market tier of The Nasdaq
Stock Market under the symbol "UDCI" and is a component of both the Nasdaq-US
and the Nasdaq-Industry indexes. The stockholder's return shown on the graph
is not necessarily indicative of future stock price performance.
[GRAPH OF CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED 12/31/96]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
09/21/95 12/31/95 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United Dental Care, Inc. $100.00 $187.50 $138.07
- --------------------------------------------------------------------------------
NASDAQ--U.S. $100.00 $ 99.78 $122.73
- --------------------------------------------------------------------------------
NASDAQ--Financial $100.00 $107.61 $137.97
- --------------------------------------------------------------------------------
</TABLE>
- 14 -
<PAGE> 17
CERTAIN TRANSACTIONS
The Company has a non-competition agreement with Robert J. Nettinga
and The Adaven Group Limited Partnership and a consulting agreement with The
Adaven Group Limited Partnership. Mr. Nettinga is the president and principal
stockholder of the corporation that is the general partner of the Adaven Group
Limited Partnership. Under the non- competition agreement, the Company is
obligated to make six annual payments of $554,952.42 each ($3,329,714.50 in the
aggregate), the first of which was paid on September 16, 1994. Under the
consulting agreement, the Company is obligated to make six annual payments of
$200,000 each ($1,200,000 in the aggregate), the first of which was paid on
September 16, 1994. The Company has the right to prepay such installments on a
discounted present value basis using a discount rate of 5%. The obligations of
the Company under the non-competition agreement and the consulting agreement
are secured by a letter of credit in the original amount of $4,023,500 which
amount declines annually after the payment dates of the annual installments
under such agreements.
The Company also has a non-competition agreement with Omega Marine
Development, Inc. and Paul C. Nettinga under which the Company is obligated to
make six annual payments of $91,897.58 ($551,385.48 in the aggregate) and a
consulting agreement with Omega Marine Development, Inc. under which the
Company is obligated to make six annual payments of $50,000 ($300,000 in the
aggregate). Paul C. Nettinga is the brother of Robert J. Nettinga. Paul C.
Nettinga is also the president of Omega Marine Development, Inc. The terms of
the non-competition agreement and the consulting agreement for Paul C. Nettinga
and Omega Marine Development, Inc. are substantially the same as the agreements
with Robert J. Nettinga and The Adaven Group Limited Partnership.
The non-competition agreements restrict the parties thereto from
competing directly or indirectly, with the business of the Company in the
continental United States and from soliciting the employment of any employee of
the Company until September 16, 2000. Under the consulting agreements, the
parties agreed to provide to the Company services as an independent consultant
and adviser with respect to such business and financial matters as may be
reasonably requested by the Company from time to time for a period of six
years. The party providing such consulting services may not be required to
render such services outside of the state of residence of such party without
the consent of such party or at any time that the rendering of such services
would interfere with other business obligations of such party.
The Company, certain stockholders of the Company and Robert J.
Nettinga entered into a Stockholders Agreement on September 16, 1994 pursuant
to which such stockholders agreed to vote shares of common stock of the Company
owned by them for the election of Robert J. Nettinga as a director of the
Company until the earlier of the expiration of four years from the date of such
agreement or the date when all monetary obligations of the Company have been
paid under the non-competition agreement and the consulting agreement with
Robert J. Nettinga.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Price Waterhouse LLP, 2001 Ross Avenue, Suite 1800,
Dallas, Texas 75201, examined the financial statements of the Company for the
fiscal year ended December 31, 1996.
- 15 -
<PAGE> 18
Price Waterhouse LLP also served as the Company's independent accountant for
the year ended December 31, 1995 and is, therefore, familiar with the affairs
and financial procedures of the Company. To the knowledge of management,
neither such firm nor any of its members has any direct or material indirect
financial interest in the Company nor any connection with the Company in any
capacity other than as independent accountants. Audit and audit-related
services performed by Price Waterhouse LLP for the fiscal year ended December
31, 1996, included the audit of the annual financial statements of the Company
and of the annual financial statements filed with state regulatory authorities
for the Company's regulated subsidiaries.
Management understands that representatives of Price Waterhouse LLP
have expressed the desire to continue to serve for the 1997 fiscal year. The
audit committee of the board of directors will review the performance and audit
cost of Price Waterhouse LLP before making such determination.
Representatives of Price Waterhouse LLP will attend the stockholders'
annual meeting in person and such representatives will be available to respond
to appropriate questions from stockholders. However, representatives of Price
Waterhouse LLP will not make a statement at the stockholders' annual meeting,
having indicated no desire to do so..
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 annual
meeting (for the year ended December 31, 1997) should be submitted by certified
mail, return receipt requested and must be received by the Company at its
offices on or before November 26, 1997 to be eligible for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The board of directors of the Company knows of no matters, other than
those referred to in the accompanying Notice of Annual Meeting of Stockholders,
that are to be brought before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournment thereof, it is the intention of the persons named as proxies
on the enclosed form of proxy card to vote the shares represented by all valid
proxy cards in accordance with their judgement.
- 16 -
<PAGE> 19
ANNUAL REPORT
The Company's Annual Report to Stockholders, containing the Company's
annual report on Form 10-K as filed with the Securities and Exchange Commission
(excluding exhibits), which includes audited consolidated financial statements
of the Company for the fiscal year ended December 31, 1996, is being mailed to
stockholders with this proxy statement. The Annual Report to Stockholders does
not form a part of the proxy solicitation materials.
By Order of the Board of Directors,
Mark E. Pape
Secretary
Dallas, Texas
March 27, 1997
- 17 -
<PAGE> 20
[UNITED DENTAL CARE LOGO]
Suite 500 East
13601 Preston Road
Dallas, Texas 75240
<PAGE> 21
- --------------------------------------------------------------------------------
PROXY
UNITED DENTAL CARE, INC.
13601 PRESTON ROAD, SUITE 500 EAST, DALLAS, TEXAS 75240
PROXY SOLICITATION BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 18, 1997
Mark E. Pape and Peter R. Barnett, or either of them, are hereby appointed
as proxy of the undersigned with full power of substitution to vote the
undersigned's shares at the Annual Meeting of Stockholders to be held
Friday, April 18, 1997, in the Sheraton Park Central Hotel (12720 Merit
Drive, Dallas, Texas 75251) beginning at 9:00 A.M. (and all adjournments
thereof), as indicated below.
<TABLE>
<S> <C> <C>
1) ELECTION OF EIGHT (8) [ ] FOR all nominees listed below (except as [ ] WITHHOLD AUTHORITY to vote
DIRECTORS. marked to the contrary below) for all nominees listed below
</TABLE>
JACK R. ANDERSON, GEORGE E. BELLO, JAMES E. BUNCHER, WILLIAM H. LONGFIELD,
ROBERT J. NETTINGA, JAMES KEN NEWMAN, DONALD E. STEEN, AND WILLIAM H.
WILCOX
To withhold authority to vote for specified nominees, write their names in
the space provided:
(NOTE: IF NO SPECIFICATION IS MADE, THE SHARES SHALL BE VOTED FOR ALL
DIRECTOR NOMINEES LISTED)
---------------------------------------------------------------------------
2) To transact and vote in their discretion upon such other business and
matters as may properly come before the meeting or any adjournment
thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
<PAGE> 22
- --------------------------------------------------------------------------------
The undersigned hereby revokes any proxy heretofore given with respect to said
stock, acknowledges receipt of the Notice and the Proxy Statement for the annual
meeting accompanying this proxy, each dated March 27, 1997, and authorizes the
proxies or their substitutes to vote the undersigned's shares as indicated
hereon.
Dated ______________________, 1997
__________________________________
Signature
__________________________________
Signature, if held jointly
IMPORTANT: Please date this proxy
and sign exactly as your name or
names appear(s) hereon. If the
stock is held jointly, signatures
should include both names.
Personal representatives,
trustees, guardians and others
presigning in a representative
capacity should give full title.
If you attend the meeting, you
may, if you wish, withdraw your
proxy and vote in person.
PLEASE RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
