UNITED AMERICAN HEALTHCARE CORP - DEF 14A - 20021030 - DIRECTOR_COMPENSATION
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no fees for their
services as a Director or as a Committee member. Each of the Directors who is
not an employee of the Company receives $300 for each Board of Directors meeting
and each Board committee meeting attended. In addition, the Chairman of the
Board of Directors receives an annual stipend of $32,400 as compensation for
services in such office and each other non-employee Director receives an annual
stipend of $24,000 as compensation for Director services.. Directors are also
entitled to reimbursement for reasonable out-of-pocket expenses incurred in
providing services to the Company in their capacities as Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended June 30, 2002, 2001 and 2000 concerning the compensation of the Company's
Chief Executive Officer and the Company's only other executive officer as of
June 30, 2002 whose annual salary and bonus exceeded $100,000 (collectively, the
"named Executive Officers").
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NAME AND FISCAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) (1)
------------------ ----- ---------- --------- --------------------
GREGORY H. MOSES, JR.................. 2002 306,923 Stock(2) 1,822
Chief Executive Officer and President 2001 306,923 100,000 800
2000 271,154 100,000 200
OSBIE HOWARD.......................... 2002 228,000 34,000 1,822
Senior Vice President of 2001 174,744 60,000 800
United American of Tennessee, Inc. 2000 161,666 30,000 619
(1) This column represents the Company's annual contribution to the 401(k)
Savings Plan. For fiscal year 2002, in lieu of a cash bonus Mr. Moses
received a restricted stock award of 6,993 shares of Common Stock of the
Company; but other than that, for the years set forth in the table, neither
of the named Executive Officers had any long-term compensation (including
restricted stock awards and LTIP payouts). On March 13, 2002, Mr. Howard
was granted a stock option for 5,000 shares of Common Stock under the
Company's 1998 Stock Option Plan, at an exercise price of $5.28 per share
(the closing price of the stock on the grant date). Such options vest in
four equal installments on the first four anniversaries of the grant date
and expire 10 years after the grant date.
(2) For fiscal year 2002, in lieu of a cash bonus Mr. Moses received a
restricted stock award of 6,993 shares of Common Stock of the Company,
valued at $50,000 based on the closing stock price of $7.15 per share on
the date of the award, February 1, 2002.
OPTION FISCAL YEAR-END VALUES
The following table shows the aggregated numbers and value of
unexercised stock options held by the named Executive Officers at June 30, 2002.
NUMBER OF
COMMON SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME AT FISCAL YEAR-END AT FISCAL-YEAR END (1)
---------------------------------- --------------------- ------ ----------------
Gregory H. Moses, Jr. 125,000 $ 432,750
Osbie Howard 9,000 (2) $ 14,560
(1) Calculated based on the closing price of Company Common Stock on June
28, 2002 (the last business day of the fiscal year) of $4.89 less the
option exercise price. An option is in-the-money if the market value of
the Common Stock subject to the option is greater than the exercise
price. All of the described stock options remain unexercised at the
date of this proxy statement, at which date none of such unexercised
stock options is in the money.
(2) These options: (A) as to 4,000 shares, vest in four equal installments
on the first four anniversaries of the grant date, December 15, 1998;
and (B) as to an additional 5,000 shares, vest in four equal
installments on the first four anniversaries of the grant date, March
13, 2002.
STOCK OPTION PLANS; EMPLOYEE STOCK PURCHASE PLAN
The Company has a 1998 Stock Option Plan (the "Plan"), under which
stock options (Nonqualified Options and Incentive Options, as defined in the
Plan) may be granted to officers, Directors and key employees of the Company or
its subsidiaries. The maximum number of shares of Common Stock which may be
issued pursuant to stock options under the Plan is 500,000, and no Participant
can receive stock options for more than 300,000 shares over the term of the
Plan.
The Plan is administered by a committee (the "Committee") specified by
the Board of Directors, currently its Compensation Committee. The selection of
persons who are eligible to participate in the Plan and grants to those
individuals are determined by the committee, in its sole discretion. The only
established criterion to determine eligibility under the Plan is that
individuals must be officers, Directors or key employees of the Company or any
Subsidiary (as
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defined in the Plan) who, in the judgment of the Committee, are or will become
responsible for the direction and financial success of the Company or any
Subsidiary.
An Incentive Option granted under the Plan must have an exercise price
not less than 100% of the fair market value of the shares on the date such
option is granted. For an Incentive Option granted to a Participant who owns
more than 10% of the total combined voting stock of the Company or of any parent
or subsidiary of the Company, the exercise price must be at least 110% of the
fair market value of the shares on the date such option is granted. A
Nonqualified Option granted under the Plan must have an exercise price not less
than 75% of the fair market value of the shares on the date such option is
granted. Each stock option granted under the Plan must expire not more than ten
years after the date of the grant; and an Incentive Option granted to an
individual who, at the time of the grant, owns more than 10% of the total
combined voting stock of all classes of stock of the Company or of any parent or
Subsidiary must expire not more than five years after the date of the grant.
The Company's Employee Stock Purchase Plan ("ESPP"), which became
effective October 1996, enables all eligible employees of the Company to
subscribe for shares of Common Stock on an annual offering date at a purchase
price which is the lesser of 85% of the fair market value of the shares on the
first day or the last day of the annual period. There were no employee
contributions to the ESPP for fiscal 2002. 200,000 common shares were reserved
for issuance under the ESPP.
The Company has not granted any Stock Appreciation Rights, and it did
not grant any awards under a long-term incentive plan during fiscal year 2002.
The Company on November 30, 2001 and March 13, 2002 granted certain stock
options under the Plan.
401(K) SAVINGS PLAN
The Company sponsors a retirement plan intended to be qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended. All employees
over age 21, other than non-resident aliens, are eligible to participate in the
Plan. Employees may contribute to the plan on a tax-deferred basis up to 15% of
their total salary through April 1, 2001 and 20% thereafter. Under the plan, the
Company makes matching contributions on each employee's behalf, up to a maximum
of 1% of each employee's total salary through January 1, 2001 and 2% thereafter.
As of June 30, 2002, 152 employees had elected to participate in the plan. For
the fiscal year ended June 30, 2002, the Company contributed approximately
$95,000 to the plan. See the "Summary Compensation Table" above for additional
information.
COMPENSATION COMMITTEE REPORT
Compensation for the Company's key executives is determined by the
Compensation Committee of the Board of Directors. Salaries, bonuses and other
compensation of the Company's key executives are based upon profitability,
enrollment levels of the Company's clients, including OmniCare-TN and (although
no longer, after the date of this proxy statement) OmniCare-MI, revenue growth,
return on equity and market share.
The Compensation Committee believes that compensation of the Company's
key executives should be sufficient to attract and retain highly qualified
personnel and also provide meaningful incentives for measurable superior
performance. During fiscal year 2002, the Company's executive compensation
included a base salary and bonus (stock or cash). Based
9
upon available data, the Company believes the base salaries of its executives
were set at the levels of comparable companies in its line of business.
The Compensation Committee is comprised of Mr. Goss (Chairman), Dr.
Richard M. Brown, Dr. Julius V. Combs, Ronald E. Hall, Sr., Peter F. Hurst, Jr.
and Emmett S. Moten, Jr.; in addition, William C. Brooks, Chairman of the Board
of the Company, and Gregory H. Moses, Jr., President and Chief Executive Officer
of the Company, are ex officio members of the Compensation Committee. Messrs.
Brooks and Moses do not participate in Compensation Committee meetings during
which their own compensation is considered.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The ownership, operation and management of the Company involve various
potential conflicts of interest, including the relationships and transactions
described below. Management of the Company believes that these agreements and
transactions have been on terms which are as fair to the Company as could have
been obtained from unaffiliated parties.
MANAGEMENT AGREEMENT. The Company's management agreements with its
managed plans, OmniCare-MI and OmniCare-TN, were negotiated between related
entities. However, such management agreements were reviewed, revised and
approved by each plan's Board. Since July 31, 2001, OmniCare-MI is no longer a
related entity with respect to the Company, and that management agreement will
terminate November 1, 2002. OmniCare-TN is an HMO which is 75%-owned by the
Company through its wholly-owned subsidiary, United American of Tennessee, Inc.
COMMON OFFICERS AND DIRECTORS. As indicated in the chart below, (1)
only during the first month of fiscal year 2002 (i.e., only during July 2001),
certain individuals who then were officers or Directors of the Company were also
officers or members of the Board of Trustees of OmniCare-MI (not a subsidiary of
the Company), and (2) during and since fiscal year 2002, certain officers or
Directors of the Company were also officers or members of the Board of Directors
of OmniCare-TN (which is 75% owned by the Company through its wholly owned
subsidiary, United American of Tennessee, Inc.). Consequently, such individuals
were or are likely to influence the operation of the Company and negotiations
and arrangements between the Company and these entities (but only before August
1, 2001 in the case of OmniCare-MI), including the negotiation of and operation
under the respective management agreements. Conflicts of interest may arise
relating to matters that are presented to the Company's Board of Directors for
consideration and with respect to which the Company and OmniCare-TN may have
differing interests, including matters relating to their management agreement.
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POSITION WITH OMNICARE-MI (2)
NAME COMPANY (1) (ONLY BEFORE AUGUST 1, 2001) OMNICARE-TN
---- ----------- ---------------------------- -----------
William C. Brooks................ Chairman of the Board, -- Director
Director
Gregory H. Moses, Jr............. President, CEO, Director President, CEO, Trustee President, Director
Anita C. R. Gorham............... Secretary, Director Trustee --
Harcourt G. Harris, M.D.......... First Vice Chairman Chairman of the Board, --
of the Board, Director Trustee
William B. Fitzgerald............ Director Vice Chairman of the --
Board, Trustee
Julius V. Combs, M.D............. Director Chairman Emeritus, --
Trustee
William E. Jackson, II........... Chief Financial Officer, Chief Financial --
Treasurer Officer
(1) In the case of Ms. Gorham, Dr. Harris and Mr. Jackson, only during the time
relevant to the OmniCare-MI column of this chart.
(2) A court order on July 31, 2001 placed OmniCare-MI in rehabilitation. Since
that date, pursuant to the order the Company continued to perform that
management agreement and no Company officers or directors were any longer
OmniCare-MI officers or directors. That OmniCare-MI management agreement
will terminate November 1, 2002.
HEALTH INSURANCE BENEFITS FOR COMPANY EMPLOYEES. Health care benefits
for some employees of the Company are provided through OmniCare-MI or
OmniCare-TN. For the fiscal year ended June 30, 2002, the Company paid premiums
of approximately $1.4 million for such benefits (approximately $0.6 million and
$0.8 million for OmniCare-MI and OmniCare-TN, respectively).
NEW EXECUTIVE OFFICER BEGINNING OCTOBER 28, 2002
Stephen D. Harris has served as Chief Financial Officer and Treasurer
of the Company since October 28, 2002. Mr. Harris, age 31, is a certified public
accountant with experience in consulting, auditing and accounting for major
companies in the automotive manufacturing, energy, and managed health care
industries. Prior to joining the Company, he served as a Manager for Deloitte
Consulting since 1998. From 1994 to 1996, he was a senior auditor for Deloitte &
Touche LLP, reviewing, preparing and auditing financial statements of numerous
medium-sized and Fortune 500 companies to assure conformance with generally
accepted accounting principles and Securities and Exchange Commission (SEC)
reporting requirements. In the period between those positions, Mr. Harris earned
a Masters of Business Administration degree from the Kenan-Flagler Business
School at University of North Carolina - Chapel Hill. His expertise also
encompasses program management, procurement, accounts payable/receivable,
inventory management, financial planning and analysis, and benefits/payroll
administration.
II. PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the
Board's Audit Committee, has appointed KPMG LLP as independent auditors of the
Company for its fiscal year ending June 30, 2003. The Board asks the
shareholders to ratify the appointment of KPMG LLP.
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KPMG LLP has served as independent auditors of the Company since
January 12, 1998. A representative of KPMG LLP is expected to be present at the
2002 Annual Meeting to make a statement, if requested, and be available to
respond to questions with respect to the 2002 audit.
The Board of Directors considers KPMG LLP to be well qualified to serve
as the independent auditors for the Company. If the appointment of KPMG LLP is
not ratified by the shareholders, the Board of Directors may appoint other
independent auditors based upon the recommendation of the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY
THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE 2003 FISCAL YEAR.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
OTHERWISE SPECIFY IN THEIR PROXIES.
III. REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the "Committee") is made up of the following
members: Darrel W. Francis and Pearl M. Holforty (Co-Chairpersons), Dr. Julius
V. Combs, and Linda A. Watters, with the Company's Chairman of the Board,
William C. Brooks, as an ex officio member. The Committee operates pursuant to a
written Charter (a copy of which was an appendix in the proxy statement for the
2001 Annual Meeting). In accordance with the Charter, all of the members of the
Committee are independent (as defined in the rules of the New York Stock
Exchange) and financially literate and at least one member of the Committee has
accounting or related financial management expertise.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent auditors are responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
expressing an opinion on the conformity of the Company's audited consolidated
financial statements with accounting principles generally accepted in the United
States of America. As provided in its Charter, the Committee's responsibilities
include monitoring and oversight of these processes.
In this context and in accordance with its Charter, the Committee has
met and held discussions with management and the independent auditors.
Management represented to the Committee that the Company's audited consolidated
financial statements for the fiscal year ended June 30, 2002 (the "Financial
Statements") were prepared in accordance with generally accepted accounting
principles, and the Committee has reviewed and discussed the Financial
Statements with management and the independent auditors. The Committee also
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
In addition, the Committee has discussed with the independent auditors
the independent auditors' independence from management and the Company,
including the matters in the written disclosures from the independent auditors
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). In concluding that the independent auditors
are independent, the Committee considered, among other factors, whether the
nonaudit services provided by the independent auditors (principally tax
services) were compatible with their independence. The recently enacted
Sarbanes-Oxley Act of 2002 will require the Committee to pre-approve all audit
and non-audit services, subject to a narrow de minimis exception.
In fulfilling its oversight responsibility of reviewing the services
performed by the Company's independent auditors, the Committee carefully reviews
the policies and procedures for the engagement of the independent auditors. The
Committee also met with the independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The Committee also reviewed and discussed with the independent
auditors the fees paid to the independent auditors; these fees are described
under "Fees Paid to Independent Auditors" following this report.
Based on the Committee's review and discussions of the matters referred
to above, the Committee recommended to the Board that the Financial Statements
be included in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002, for filing with the SEC. The Committee also recommended
that the Board select KPMG LLP to serve as the Company's independent auditors
for fiscal year 2003.
Audit Committee
Darrel W. Francis and Pearl M. Holforty, Co-Chairpersons,
Julius V. Combs, M.D., and Linda A. Watters
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FEES PAID TO INDEPENDENT AUDITORS
During fiscal year 2002, the Company retained its independent auditors,
KPMG LLP, to provide services in the following categories, for which KPMG LLP
earned the amounts set forth below:
Audit Fees, including services rendered in reviewing quarterly financial information and
auditing the Company's annual consolidated financial
statements .......................................................................... $250,000
Financial Information Systems Design and Implementation Fees ........................... $ 0
All Other Fees, principally tax services ............................................... $ 51,950
During fiscal year 2002, Julius V. Combs, M.D. failed to timely file
Forms 4 with the SEC to report transactions in which he exercised stock options
for 25,000 shares of Common Stock and in which all of his beneficially owned
Common Stock was sold. During fiscal year 2002, Darrel W. Francis failed to
timely file a Form 4 with the SEC to report transactions in which he exercised
stock options for 20,000 shares of Common Stock and sold 20,000 shares of Common
Stock. The Company is informed that such individuals intend to file a Form 5
with respect to such transactions promptly after the date of this proxy
statement.
EXPENSES OF SOLICITATION
The cost of this solicitation of proxies will be borne by the Company
and may include requests by mail and personal contact by its Directors, officers
and employees. In addition, the Company has retained Georgeson Shareholder to
aid in the solicitation of proxies from brokers, banks, other nominees and
institutional holders at a fee not to exceed $5,000 plus out-of-pocket expenses.
The Company will reimburse brokers or other nominees and institutional holders
for their expenses in forwarding proxy materials to principals. Any person
giving a proxy has the power to revoke it at any time before it is voted.
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STOCK PERFORMANCE CHART
The following graph compares the cumulative total return for the
previous five fiscal years on a $100 investment on June 30, 1997 in each of the
Company's Common Stock, the Standard & Poor's 500 Stock Index and peer group
indices. The graph assumes reinvestment of dividends, if any
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
JUNE 2002
A shareholder proposal which is intended to be presented at the 2003
Annual Meeting of the Shareholders must be received by the Company at its
principal executive offices by July 10, 2003.
Dated: October 30, 2002
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PROXY UNITED AMERICAN HEALTHCARE CORPORATION PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
November 22, 2002
The undersigned appoints Tom A. Goss and Emmett S. Moten, Jr., and each of
them, as Proxies, with full power of substitution, to attend the Annual Meeting
of Shareholders of United American Healthcare Corporation on November 22, 2002,
and any adjournments, and to represent and vote the shares which the undersigned
is entitled to vote on the following matters as directed on the reverse side:
(The Board of Directors recommends a vote FOR Items 1 and 2.)
1. Election of two Directors for a term of 3 years. The nominees are William
C. Brooks and Gregory H. Moses, Jr.
2. Ratification of the appointment of KPMG LLP as independent auditors for the
current fiscal year.
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF YOU DO NOT PROVIDE DIRECTION, THIS PROXY
WILL BE VOTED FOR ITEMS 1 AND 2.
YOUR VOTE IS IMPORTANT!
(SEE REVERSE SIDE)
A. ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
01 - William C. Brooks [ ] FOR [ ] WITHHOLD
02 - Gregory H. Moses, Jr. [ ] FOR [ ] WITHHOLD
B. ISSUE - The Board of Directors recommends a vote FOR the following proposal.
2. Ratification of appointment of independent auditors.
[ ] FOR [ ] AGAINST [ ] WITHHOLD
C. AUTHORIZED SIGNATURES -- SIGN HERE -- THIS SECTION MUST BE
COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
Dated _______________________________________________ , 2002
_____________________________________________________________
Signature 1
_____________________________________________________________
Signature 2
Note: Please sign exactly as name appears on this card. Joint
owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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