UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

 

Amendment No. 1

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Section 240.14a-12

 

UNITED AMERICAN HEALTHCARE CORPORATION

(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):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UNITED AMERICAN HEALTHCARE CORPORATION
300 RIVER PLACE, SUITE 4950
DETROIT, MICHIGAN 48207-5062

 

Dear Shareholder:

 

We invite you to attend the Annual Meeting of Shareholders of United American Healthcare Corporation (the “Company”). The meeting will be held on Thursday, September 30, 2010 at the MGM Grand Hotel, 1777 Third Street, Detroit, Michigan at 10:30 a.m., Eastern time. During the annual meeting, shareholders will have the opportunity to vote on each item of business described in the enclosed notice of the annual meeting and accompanying proxy statement. Please refer to the attached notice and proxy statement for additional information regarding each of the proposals and the annual meeting. Your Board of Directors (“Board”) and management look forward to greeting personally those shareholders who are able to attend.

 

Among other matters, your Board is recommending (1) the re-election of five directors whose terms are expiring at the annual meeting and (2) the election of four non-incumbent nominees. Please note that Strategic Turnaround Equity Partners, LP (Cayman) and related persons (the “Strategic Equity Group”) have provided notice to us and filed a definitive proxy statement with the U.S. Securities and Exchange Commission that they intend to nominate their own slate of nominees for election as directors at the annual meeting and to solicit proxies for their use at the annual meeting to vote in favor of their own slate in opposition to the Board’s nominees. Mr. Bruce Galloway, a director of the Company, is a member of the Strategic Equity Group.

 

It is important that your shares be represented and voted at the annual meeting, whether or not you plan to attend. You may vote in one of four ways as further described in the accompanying proxy statement and the WHITE proxy card: (1) via the telephone; (2) via the Internet; (3) by signing, dating and returning the enclosed WHITE proxy card; or (4) by casting your vote in person at the annual meeting. You may receive proxy solicitation materials from the Strategic Equity Group or other persons affiliated with them, including an opposition proxy statement and proxy card. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE BOARD’S NOMINEES ON THE ENCLOSED WHITE PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN, OR OTHERWISE VOTE USING, ANY PROXY CARD SENT TO YOU BY THE STRATEGIC EQUITY GROUP OR OTHER PERSONS AFFILIATED WITH THEM. Even if you have previously signed or otherwise voted using a proxy card sent by the Strategic Equity Group or their affiliates, you have the right to change your vote by using the enclosed WHITE proxy card to vote by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy you submit will be counted.

 

Sincerely,

 

 

William C. Brooks

President and Chief Executive Officer

 

September 9, 2010

 

 

 

UNITED AMERICAN HEALTHCARE CORPORATION

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

 

To the Shareholders of United American Healthcare Corporation:

 

Notice is hereby given that the Annual Meeting of Shareholders of United American Healthcare Corporation will be held on Thursday, September 30, 2010 at the MGM Grand Hotel, 1777 Third Street, Detroit, Michigan at 10:30 a.m., Eastern time, for the following purposes:

 

(1) To elect two directors for terms to expire at the 2011 annual meeting of shareholders, three directors for terms to expire at the 2012 annual meeting of shareholders and four directors for terms to expire at the 2013 annual meeting of shareholders, and in each case until their respective successors are duly elected and qualified, from among the nominees described in the attached Proxy Statement and, if properly brought before the meeting, the nominees provided by Strategic Turnaround Equity Partners, LP (Cayman) and related persons;

 

(2) To ratify the appointment of UHY LLP as the Company’s independent registered public accounting firm for fiscal 2011; and

 

(3) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

Your Board of Directors recommends a vote FOR the Board’s nominees for Proposal 1 and FOR Proposal 2. The accompanying proxy statement contains additional information for your careful review. A copy of the Company’s annual report for fiscal 2010 is also enclosed.

 

Shareholders of record of the Company’s common stock at the close of business on September 1, 2010 are entitled to receive notice of, and to vote at, the annual meeting and any adjournment or postponement thereof. Your vote is important. You may vote in one of four ways as further described in the accompanying proxy statement and the WHITE proxy card: (1) via the telephone; (2) via the Internet; (3) by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided; or (4) by casting your vote in person at the annual meeting.

 

By Order of the Board of Directors

 

 

William C. Brooks

President and Chief Executive Officer

 

TABLE OF CONTENTS

 

UNITED AMERICAN HEALTHCARE CORPORATION

300 RIVER PLACE, SUITE 4950
DETROIT, MICHIGAN 48207-5062

 

 

 

 

PROXY STATEMENT

 

 

 

 

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 2010

 

 

 

 

The Board of Directors (the “Board”) of United American Healthcare Corporation (the “Company”) is soliciting proxies for use at the annual meeting of shareholders of the Company and any adjournment or postponement thereof. The annual meeting will be held at the MGM Grand Hotel, 1777 Third Street, Detroit, Michigan at 10:30 a.m., Eastern time. The Company expects to first mail these proxy materials on or about September 13, 2010 to shareholders of record of the Company’s common stock (the “common stock”).

 

All references in this proxy statement to fiscal 2009, fiscal 2010 or fiscal 2011 mean the fiscal years ended June 30, 2009, 2010 and 2011, respectively.

 

What is the purpose of the annual meeting of shareholders?

 

At the annual meeting, shareholders will act upon the matters outlined in the accompanying Notice of Meeting, including:

 

(1) the election of two directors for terms to expire at the 2011 annual meeting of shareholders, the election of three directors for terms to expire at the 2012 annual meeting of shareholders and the election of four directors for terms to expire at the 2013 annual meeting of shareholders, and in each case until their respective successors are duly elected and qualified, from among the nominees described in this proxy statement and, if properly brought before the meeting, the nominees provided by Strategic Turnaround Equity Partners, LP (Cayman) and related persons (the “Strategic Equity Group”); and

 

(2) the ratification of the appointment of UHY LLP as the Company’s independent registered public accounting firm for fiscal 2011.

 

In addition, management will report on the performance of the Company and will respond to questions from shareholders. The Company expects that representatives of UHY LLP will be present at the annual meeting and will be available to respond to appropriate questions. Such representatives will also have an opportunity to make a statement.

 

What are the Board’s recommendations?

 

The Board recommends a vote:

 

Proposal 1 — FOR the election of William C. Brooks and John M. Fife for terms to expire at the 2011 annual meeting of shareholders, the election of Darrel W. Francis, Tom A. Goss and Emmett S. Moten, Jr. for terms to expire at the 2012 annual meeting of shareholders and the election of Grayson Beck, Herbert J. Bellucci, Richard M. Brown, D.O. and Ronald E. Hall, Sr. for terms to expire at the 2013 annual meeting of shareholders.

 

Proposal 2 — FOR the ratification of UHY LLP as the Company’s independent registered public accounting firm for fiscal 2011.

 

What is the current status of the director nominations by stockholders?

 

The Strategic Equity Group consists of Strategic Turnaround Equity Partners, LP (Cayman), Galloway Capital Management, LLC, Bruce Galloway (a current director of the Company), Gary L. Herman, Seth M. Lukash, Fred

Zeidman, Howard Brod Brownstein and Martin R. Wade, III. The Strategic Equity Group have provided notice to the Company and filed a definitive proxy statement with the U.S. Securities and Exchange Commission (“SEC”) that they intend to nominate their own slate of nominees for election as directors at the annual meeting and solicit proxies for their use at the annual meeting to vote in favor of their own slate in opposition to the Board’s nominees.

 

What should I do if I receive a proxy card from the Strategic Equity Group?

 

You may receive proxy solicitation materials from the Strategic Equity Group or other persons affiliated with them, including an opposition proxy statement and proxy card. THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN, OR OTHERWISE VOTE USING, ANY PROXY CARD SENT TO YOU BY THE STRATEGIC EQUITY GROUP OR OTHER PERSONS AFFILIATED WITH THEM. Even if you have previously signed or otherwise voted using a proxy card sent by the Strategic Equity Group or their affiliates, you have the right to change your vote by using the enclosed WHITE proxy card to vote by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy you submit will be counted.

 

Who is entitled to vote?

 

Only record holders of common stock at the close of business on the record date of September 1, 2010 are entitled to receive notice of the annual meeting and to vote the common stock that they held on the record date. Each outstanding share of common stock is entitled to one vote on each matter to be voted upon at the annual meeting.

 

For ten days prior to the annual meeting, a complete list of shareholders will be available during regular business hours at the Company’s principal executive office, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062. The list will also be available at the annual meeting. A shareholder may examine the list for any legally valid purpose related to the annual meeting.

 

What constitutes a quorum?

 

The presence at the annual meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding and entitled to vote on the record date will constitute a quorum for all purposes. As of the record date, 9,772,156 shares of common stock were outstanding. Proxies marked with abstentions or withhold votes will be counted as present in determining whether or not there is a quorum.

 

What is the difference between holding common stock as a shareholder of record and a beneficial owner?

 

Shareholders of Record.  If your common stock is registered directly in your name with the Company’s transfer agent, Computershare Investor Services, LLC, you are considered the shareholder of record with respect to such common stock, and these proxy materials (including a WHITE proxy card) are being sent directly to you by the Company. As the shareholder of record, you have the right to grant your voting proxy directly to the Company as set forth on the WHITE proxy card, including through the enclosed WHITE proxy card, through the Internet or by telephone, or to vote in person at the annual meeting.

 

Beneficial Owners.  Many of the Company’s shareholders hold their common stock through a broker, bank or other nominee rather than directly in their own name. If your common stock is so held, you are considered the beneficial owner of such common stock, and these proxy materials (including a WHITE voting instruction card) are being forwarded to you by your broker, bank or nominee who is considered the shareholder of record with respect to such common stock. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the annual meeting. However, since you are not the shareholder of record, you may not vote the common stock in person at the annual meeting unless you obtain a proxy from your broker, bank or nominee and bring such proxy to the annual meeting. Your broker, bank or nominee has enclosed a WHITE voting instruction card for you to use in directing the broker, bank or nominee on how to vote the common stock.

May I vote my shares in person at the annual meeting?

 

Even if you plan to be present at the meeting, the Company encourages you to vote your common stock prior to the meeting.

 

You will need to present photo identification, such as a driver’s license, and proof of United American Healthcare Corporation share ownership as of the record date when you arrive at the meeting. If you hold your shares through a bank, broker or other holder of record and you plan to attend the annual meeting, you must present proof of your ownership of United American Healthcare Corporation shares, such as a bank or brokerage account statement, in order to be admitted to the meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the annual meeting.

 

Shareholders of Record.  If you are a shareholder of record and attend the annual meeting, you may deliver your completed WHITE proxy card or vote by ballot in person at the annual meeting.

 

Beneficial Owners.  If you hold your common stock through a broker, bank or other nominee and want to vote such common stock in person at the annual meeting, you must obtain a proxy from your broker, bank or other nominee giving you the power to vote such common stock.

 

Can I vote my shares without attending the annual meeting?

 

By Mail.  You may vote by signing, dating and returning the enclosed WHITE proxy card or voting instruction card in the postage-paid envelope provided.

 

By telephone or through the Internet.  You may vote by telephone or through the Internet as indicated on your enclosed WHITE proxy card or voting instruction card.

 

Can I change my vote after I return my proxy card or voting instruction card?

 

Shareholders of Record.  You may change your vote at any time before the proxy is exercised by filing with the Secretary of the Company either a notice revoking the proxy or a new proxy that is dated later than the proxy card. You may also change your vote through the Internet, by telephone or by taking action at the annual meeting, as set forth on the WHITE proxy card. If you attend the annual meeting, the individuals named as proxy holders in the enclosed WHITE proxy card will nevertheless have authority to vote your common stock in accordance with your instructions on the proxy card unless you properly file such revocation notice or new proxy.

 

Beneficial Owners.  If you hold your common stock through a bank, broker or other nominee, you should contact such person prior to the time such voting instructions are exercised.

 

What does it mean if I receive more than one proxy card or voting instruction card?

 

If you receive more than one WHITE proxy card or voting instruction card, it means that you have multiple accounts with banks, brokers, other nominees and/or the Company’s transfer agent. Please sign and deliver, or otherwise vote, each WHITE proxy card and voting instruction card that you receive. The Company recommends that you contact such persons to consolidate as many accounts as possible under the same name and address.

 

As previously noted, the Strategic Equity Group have provided notice to the Company and filed a definitive proxy with the SEC that they intend to nominate their own slate of nominees for election as directors at the annual meeting and solicit proxies for their use at the annual meeting to vote in favor of their own slate in opposition to the Board’s nominees. As a result, you may receive proxy cards from both the Strategic Equity Group and the Company. Only the latest dated proxy card or voting instruction card you submit will be counted.

 

THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN, OR OTHERWISE VOTE USING, ANY PROXY CARD SENT TO YOU BY THE STRATEGIC EQUITY GROUP OR OTHER PERSONS AFFILIATED WITH THEM. Even if you have previously signed or otherwise voted using a proxy card sent by the Strategic Equity Group or their affiliates, you have the right to change your vote by using the enclosed WHITE proxy card or voting instruction card to vote by telephone, by Internet or by signing, dating and

returning the enclosed WHITE proxy card or voting instruction card in the postage-paid envelope provided. Only the latest dated proxy you submit will be counted.

 

What if I do not vote for some of the items listed on my WHITE proxy card or voting instruction card?

 

Shareholders of Record.  If you return your signed WHITE proxy card but do not provide voting instructions on certain matters, your shares will be voted in accordance with the recommendations of the Board on such matters. With respect to any matter not set forth on the WHITE proxy card that properly comes before the annual meeting, the proxy holders named in the WHITE proxy card will vote as the Board recommends or, if the Board gives no recommendation, in their own discretion.

 

Beneficial Owners.  If you hold your common stock in street name through a broker, bank or other nominee and do not return, or vote on all the matters set forth on, the WHITE voting instruction card, such nominee will determine if it has the discretionary authority to vote your common stock. Under applicable law and the New York Stock Exchange (“NYSE”) rules and regulations, brokers have the discretion to vote on routine matters, such as the ratification of the appointment of the Company’s independent registered public accounting firm, but do not have discretion to vote on non-routine matters. Whether or not the Strategic Equity Group contests the election of directors, as of January 1, 2010, all director elections are considered non-routine matters and a bank, broker or nominee cannot vote on your behalf with respect to our director election if you do not instruct your bank, broker or nominee on how to vote your shares in the manner set forth on your voting instruction card. Therefore, in particular, it is very important for you to vote your shares for the election of directors.

 

“Broker non-votes” are shares held by a bank, broker or other nominee that are represented at the shareholder meeting, but with respect to which the bank, broker or other nominee is not instructed by the beneficial owner of such common stock to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. Common stock subject to broker non-votes will be considered present at the meeting for purposes of determining whether there is a quorum but the broker non-votes will not be considered votes cast with respect to such proposals.

 

We urge you to provide instructions to your broker, bank or other nominee so that your votes may be counted for each item of business at the annual meeting.

 

What vote is required to approve each item?

 

Proposal 1 — Election of Directors.  The two nominees that were nominated for election for terms ending 2011, the three nominees that were nominated for election for terms ending 2012, and the four nominees that were nominated for election for terms ending 2013, respectively, who receive the most votes cast at the annual meeting will be elected to such terms. Withheld votes and broker non-votes will have no effect on the outcome of the vote. The Board has nominated William C. Brooks and John M. Fife for terms to expire at the 2011 annual meeting of shareholders, Darrel W. Francis, Tom A. Goss, Emmett S. Moten, Jr. for terms expiring at the 2012 annual meeting of shareholders, and Grayson Beck, Herbert J. Bellucci, Richard M. Brown, D.O. and Ronald E. Hall, Sr. for terms to expire at the 2013 annual meeting of shareholders, in each case until their respective successors are duly elected and qualified. All director nominees are currently serving as directors of the Company, except Grayson Beck, Herbert J. Bellucci, William C. Brooks and John M. Fife.

 

Proposal 2 — Ratification of Appointment of Independent Registered Public Accounting Firm.  The affirmative vote of a majority of the votes cast at the annual meeting will be necessary to ratify the Finance and Audit Committee’s appointment of UHY LLP as the Company’s independent registered public accounting firm for fiscal 2011. Abstentions will not be counted as votes cast at the annual meeting and will have no effect on the result of the vote. Although shareholder ratification of the appointment is not required by law and is not binding on the Company, the Finance and Audit Committee will take the appointment under advisement if such appointment is not so ratified. Even if the shareholders ratify the appointment of UHY LLP, the Finance and Audit Committee may in its sole discretion terminate such engagement and direct the appointment of another independent registered public accounting firm at any time during the year, although it has no current intention to do so.

Other Matters.  If any other matter is properly submitted to the shareholders at the annual meeting, its adoption will generally require the affirmative vote of a majority of the votes cast at the annual meeting. The Board of Directors does not propose to conduct any business at the annual meeting other than as stated above.

 

Who will count the votes?

 

William L. Dennis, the Company’s Chief Financial Officer and Treasurer, will tabulate the votes and act as the inspector of election.

 

How do I find out the voting results?

 

Voting results will be announced after they are certified by the inspector of elections and will also be published by the Company in a Current Report on Form 8-K within four business days of the annual meeting.

 

How can I access the Company’s proxy materials and annual report on Form 10-K?

 

As a holder of common stock, you should have received a copy of the fiscal 2010 annual report to shareholders (which includes the annual report on Form 10-K, excluding certain exhibits) together with this proxy statement. Such proxy materials are also available at www.uahc.com.

 

The Company’s website, www.uahc.com, provides access, free of charge, to SEC reports as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the SEC, including proxy materials, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports. In addition, a copy of the Company’s Annual Report on Form 10-K for fiscal 2010 will be sent to any shareholder, without charge, upon written request sent to the Company’s executive office: United American Healthcare Corporation, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062, Attention: Secretary. Further, the SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including the Company, at www.sec.gov.

 

The references to the website addresses of the Company and the SEC in this proxy statement are not intended to function as a hyperlink and, except as specified herein, the information contained on such websites are not part of this proxy statement.

 

Who can I contact if I have questions or need assistance in voting my shares?

 

Please contact Georgeson Inc., the firm assisting the Company in the solicitation of proxies, at:

 

Shareholders Call Toll-Free: 800-903-2897

Banks and Brokers Call Collect: 212-440-9800

 

The following table sets forth information regarding the beneficial ownership of the common stock as of September 1, 2010 with respect to (i) each director, nominee and named executive officer, (ii) all of the directors, nominees and executive officers as a group, and (iii) to the Company’s knowledge, each beneficial owner of more than 5% of the outstanding common stock (including their respective address). Unless otherwise indicated, each owner (1) holds such shares directly and (2) has sole voting and investment powers with respect to the shares listed below. The percentage of common stock owned is based on 9,772,156 shares of common stock outstanding as of September 1, 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

The Board of Directors currently consists of seven directors serving three-year staggered terms. On August 31, 2010, the Board increased the size of the Board to 10 directors, effective as of the September 30, 2010 annual meeting. Two directors will be elected for terms to expire at the 2011 annual meeting of shareholders, three directors will be elected for terms to expire at the 2012 annual meeting of shareholders and four directors will be elected for terms to expire at the 2013 annual meeting of shareholders, or in each case until their respective successors are duly elected and qualified (or until such director’s earlier resignation, retirement or death). The two nominees that were nominated for election for the terms ending at the 2011 annual meeting, the three nominees that were nominated for election for the terms ending at the 2012 annual meeting, and the four nominees that were nominated for the terms ending at the 2013 annual meeting, respectively, and who receive the most votes cast at the annual meeting will be elected to such terms.

 

Please see below for a description of the Board’s nine nominees, Grayson Beck, Herbert J. Bellucci, William C. Brooks, Richard M. Brown, D.O., John M. Fife, Darrel W. Francis, Tom A. Goss, Ronald E. Hall, Sr. and Emmett S. Moten, Jr. All of the Board’s director nominees are currently serving as directors of the Company, except Grayson Beck, Herbert J. Bellucci, William C. Brooks and John M. Fife. The Board recommends that you vote FOR the election of the Board’s nine nominees on the WHITE proxy card. The Board urges you not to sign or return, or otherwise vote using, any proxy card sent to you by the Strategic Equity Group or one of their affiliates.

 

Each of the Board nominees has consented to serve the respective term and to be named in this proxy statement. If for any reason any of the nominees becomes unavailable for election, the Board may designate a substitute nominee. In such case, the persons named as proxies in the accompanying WHITE proxy card will vote for the Board’s substitute nominee.

 

Introduction

 

The Board has called an annual meeting of the shareholders of the Company and proposed, among other things, the election of two nominees for director to serve until the 2011 annual meeting of shareholders, the election of three nominees for director to serve until the 2012 annual meeting of shareholders and the election of four nominees for director to serve until the 2013 annual meeting of shareholders. The Board believes that its nominees will provide leadership, stability and continuity that will be instrumental to the Company during this critical stage of its existence.

 

The Strategic Equity Group has delivered notice to the Company announcing their intent to nominate a slate of five individuals to stand for election as directors at the upcoming annual meeting. As of the record date, the Strategic Equity Group beneficially owns approximately 814,963 shares of our common stock, or 8.3% of the total outstanding shares.

 

Acquisition of Pulse Systems, LLC

 

On June 18, 2010, the Company announced that it acquired privately-held Pulse Systems, LLC (“Pulse Systems”) after an extensive review of its strategic alternatives, which included the review of numerous acquisition, merger, joint venture and strategic partnership opportunities. In connection with the transaction, the Board commissioned an independent due diligence report from international business advisory firm BBK, Ltd. and various other reports from its advisors.

 

Pulse Systems is now a wholly owned subsidiary of the Company and represents all of the ongoing operations of the Company. The Company believes that the acquisition of Pulse Systems met each of its key investment criteria, including significant revenue contribution, positive EBITDA and long-term growth potential.

 

Based in Concord, California, Pulse Systems provides contract manufacturing services to the medical device industry, with a focus on precision laser-cutting capabilities and the processing of thin-wall tubular metal components, sub-assemblies and implants, primarily in the cardiovascular market. Since August 2007, Pulse has been managed by its current President and CEO, Herbert J. Bellucci, who has more than 25 years of experience

in the medical device industry. Financial information regarding Pulse Systems is set forth in the Company’s 2010 annual report and in the Company’s current report on Form 8-K/A filed with the SEC on September 2, 2010.

 

The consideration paid to acquire the common units and warrants of Pulse Systems totaled approximately $9.46 million, which consisted of (a) cash paid at closing of $3.40 million, (b) a non-interest bearing note payable of $1.75 million (secured by a subordinated pledge of all the common units of Pulse Systems), (c) 1,608,039 shares of the Company’s common stock determined based on an initial value of $1.6 million, (d) an estimated purchase price adjustment of $210,364 based on targeted levels of net working capital, cash and debt of Pulse at the acquisition date (e) and the funding of $2.5 million for certain obligations of Pulse as discussed below. The 1,608,039 shares of the Company’s common stock were issued on July 12, 2010 to Chicago Venture Partners, L.P., an Illinois limited partnership, Pulse Systems Corporation, a California corporation, Vince Barletta, Demian Backs, Rodger Bell and Merrill Weber, upon approval by the Board on July 7, 2010. The shares of the Company’s common stock had a fair value of $1.05 million as of June 30, 2010, and a fair value of $884,000 on July 12, 2010, the date the shares were issued and recorded. The Company also assumed Pulse’s term loan to a bank of $4.25 million, after making a payment at closing as discussed below.

 

In connection with the acquisition of the Pulse Systems common units, Pulse Systems entered into a redemption agreement with Pulse Systems Corporation, the holder of its preferred units, to redeem the preferred units for $3.99 million. Pulse Systems is only allowed to redeem the preferred units if the Company makes additional cash equity contributions to Pulse Systems in an amount necessary to fully fund each such redemption. The Company funded an initial payment of $1.75 million to the preferred unit holders on June 18, 2010. Pulse has agreed to redeem the remaining preferred units over a two-year period ending in June 2012. Finally, as an additional condition of closing, the Company funded a $750,000 payment toward Pulse Systems’ outstanding term loan with a bank and pledged all of the common units of Pulse Systems to the bank as additional security for the remaining $4.25 million outstanding under the loan. The initial payment of $1.75 million to the preferred unit holders and the $750,000 payment to the bank by the Company are considered additional consideration for the acquisition of Pulse Systems. The funding of the remaining redemption payments totaling $2.24 million and the assumption of Pulse Systems’ revolving and term loan are not included in the $9.46 million purchase price listed above.

 

Prior to the Pulse Systems transaction, director nominee Mr. John M. Fife served as Chairman of Pulse Systems. Mr. Fife owns 64.8% of Chicago Venture Partners, L.P., which owned approximately 59 percent of the common units of Pulse Systems prior to it being acquired by the Company. In consideration for its common units of Pulse Systems, Chicago Venture Partners, L.P. received approximately $1.41 million in cash ($66,451 of which was deposited in escrow) and 1,068,559 shares of the Company’s common stock (267,140 shares of which were deposited in escrow) valued at approximately $1.1 million as of the closing date. In addition, approximately $1.2 million of the $1.75 million note payable to Pulse Sellers, LLC referenced above is allocable to Chicago Venture Partners, L.P. As a result of the share issuance relating to the transaction, Chicago Venture Partners, L.P. became a beneficial owner of more than 5% of the Company’s outstanding common stock.

 

Director nominee Mr. Grayson Beck has served on the Board of Managers of Pulse Systems since 2004 and owns 50% of Pulse Systems Corporation, the holder of the outstanding preferred units of Pulse Systems. In consideration for its common units and warrants in Pulse Systems, Pulse Systems Corporation received $671,785 in cash ($19,801 was deposited in escrow) and 318,408 shares of the Company’s common stock (79,602 shares of which were deposited in escrow) valued at approximately $316,816 as of the closing date. In addition, approximately $346,517 of the $1.75 million note payable to Pulse Sellers, LLC referenced above is allocable to Pulse Systems Corporation. Finally, the Company agreed to pay Pulse Systems Corporation an additional $3.99 million as detailed above for the redemption of the preferred units of Pulse Systems.

 

Wind Down of Tennessee Operations and Strategic Alternative Review

 

The acquisition of Pulse Systems marks a significant milestone in the Company’s history. Throughout the past two years, the Board and management encountered a number of significant challenges, which has led to a significant decline in shareholder value. Among those challenges was the loss of the Company’s most significant contract in its core Medicaid services business (with the State of Tennessee, Bureau of TennCare, referred to as the TennCare contract), with the transition of members in November 2008 and the ultimate expiration of the contract in

June 2009, the Company’s determination not to seek renewal of its Medicare contract (with the Centers for Medicare & Medicaid Services, referred to as the CMS contract), and the resulting wind-down of such operations. Throughout this time, the Board and management remained steadfastly committed to enhancing long-term shareholder value through its focus on (1) winding down existing operations in accordance with its contracts and applicable law, while minimizing expenses and resolving contingent liabilities (to allow for the release of certain statutory cash reserves from government restrictions) and (2) conserving cash to enable the Company to evaluate and execute long-term strategic alternatives, including the acquisition of Pulse Systems.

 

First, the Board and management have overseen a significant and complex list of matters necessary to complete the wind down of its healthcare management operations. The wind down of TennCare presented particular challenges because the Company was obligated to perform under the contract through the expiration date of June 30, 2009, although TennCare members transferred to other managed care organizations on November 1, 2008 and the Company ceased earning revenue under the contract around the time of such transfer.

 

Throughout the wind down process, the Board and management were diligent in reducing costs, conserving cash and obtaining the release of statutory cash reserves from government restrictions. For example, the Company subleased its Tennessee facility in April 2009, which resulted in a cost savings of approximately $0.4 million. The Company also reduced the number of its employees from 122 at June 30, 2008 to 16 at June 30, 2009 to 8 at June 17, 2010 (immediately prior to the Pulse acquisition), resulting in a cost saving of more than $2.6 million. In addition, the Company resolved its one outstanding material litigation in September 2009, which had been pending since 2005, and thereby avoided considerable future legal expenses and limited the uncertainty and potential risk exposure of protracted litigation. Further, the Company obtained the release of $5.5 million in cash reserves from government restrictions, all of which has been distributed to the Company. During this process, the Company avoided any material objections from the contract’s counterparties, and the Company did not have any material problems with adjudicating continuing claims.

 

To ensure that the risks and potential liabilities to the Company are properly mitigated, limited additional work remains in the wind down of the Company’s healthcare management operations, including the wind down processing of the CMS contract through December 2010.

 

In addition to the achievements discussed above, the Board also:

 

 

 

 

 

The Strategic Equity Group

 

In June 2007, Strategic Turnaround Equity Partners, L.P. (Cayman) (“Strategic”) filed its initial Schedule 13D disclosing its beneficial ownership of more than 5% of the issued and outstanding shares of the Company.

 

In April 2008, Strategic, Galloway Capital Management, LLC (“GCM”), the general partner of Strategic, Gary L. Herman, a managing member of GCM, and Bruce Galloway, a managing member of GCM, entered into a Joint Filing Agreement and disclosed their aggregate beneficial ownership of the Company’s common stock.

 

In August 2008, the Strategic Equity Group nominated Bruce Galloway, Gary L. Herman and Seth Lukash for election to the Board at the 2008 annual meeting of the shareholders of the Company held in November 2008. The Company’s Governance Committee interviewed several candidates, including the Strategic Equity Group’s nominees. Following the voluntary resignation from the Board by Mr. Brooks and one additional director, the Board determined to reduce the size of the Board from nine directors to seven directors and nominated

Bruce Galloway for election as a director for the 2008 annual meeting. The Strategic Equity Group ceased proceeding with its nomination of its other two nominees following the Board’s nomination of Mr. Galloway.

 

Since joining the Board in November 2008, Mr. Galloway has participated in discussions of the Board and, from the date of his appointment until his removal on June 25, 2010, the Audit and Finance Committee. In fact, throughout the Company’s review of its strategic alternatives, Mr. Galloway made several suggestions for acquisitions of companies. As with other opportunities suggested by Board members, Mr. Galloway was asked to forward the information he had regarding those opportunities to the Company’s financial adviser for review and evaluation. Nevertheless, in spite of due diligence and negotiations on a number of projects, no acquisition alternative suggested by Mr. Galloway satisfied the Board’s standards for strategic opportunities.

 

By letter dated July 28, 2009, the Strategic Equity Group nominated Seth Lukash, Gary L. Herman and Fred Zeidman for election to the Board at the Company’s next annual meeting for terms to expire at the 2012 annual meeting of shareholders.

 

On September 11, 2009, the Strategic Equity Group filed a preliminary proxy statement with the SEC that they intended to nominate the foregoing slate of three nominees for election as directors at the annual meeting and to solicit proxies for their use at the annual meeting to vote in favor of their own slate in opposition to the Board’s nominees.

 

By letter dated November 4, 2009 to the Board, the Strategic Equity Group inquired as to the date of the next annual shareholders’ meeting or investor conference call. The Board did not respond to the letter.

 

On January 12, 2010, the Company issued a press release announcing that the annual shareholders’ meeting was to be held on Friday, April 23, 2010.

 

By letter dated January 20, 2010 to the Board, the Strategic Equity Group expressed its dissatisfaction with the scheduling of the annual shareholders’ meeting for April 23, 2010. The Board did not respond to the letter.

 

By letter dated February 1, 2010 to the Company, the Strategic Equity Group requested to inspect the Company’s shareholder list and an expansive list of the Company’s books and records pursuant to Section 450.1487 of the Michigan Business Corporation Act. By letter dated February 8, 2010, Mr. Brooks responded on behalf of the Company that although the Company was not acknowledging the sufficiency of the Strategic Equity Group’s demand pursuant to Michigan law, it nevertheless would provide the shareholder list and certain other requested items in its possession on or near the record date, provided however that the Strategic Equity Group (1) bear the reasonable costs incurred by the Company as a result of the request and (2) only use the information provided by the Company for the sole purpose of communicating with the Company’s shareholders in connection with the election of directors to be submitted to a vote of the shareholders at the annual meeting.

 

On February 10, 2010, William L. Dennis, the Company’s Chief Financial Officer and Treasurer, and the Company’s outside counsel discussed the Strategic Equity Group’s February 1, 2010 demand letter with Gary Herman of the Strategic Equity Group and representatives of Okapi Partners, L.P., the Strategic Equity Group’s proxy solicitor. The Company informed the Strategic Equity Group that Georgeson Inc. would coordinate with Okapi Partners, L.P. in the distribution of the shareholder list and certain other related items to the Strategic Equity Group.

 

On March 22, 2010, the Company filed its preliminary proxy statement on Schedule 14A (which was subsequently re-filed on March 23, 2010 under another SEC filing code).

 

On March 23, 2010, the Strategic Equity Group filed its definitive proxy statement on Schedule 14A.

 

On March 26, 2010, the Company filed additional definitive proxy materials pursuant to Schedule 14A, which contained a letter to the Company’s shareholders from Mr. Brooks, on behalf of the Board.

 

On April 6, 2010, the Company issued a press release announcing that the Company’s annual meeting was to be held on July 30, 2010.

 

On May 3, 2010, the Company issued a press release announcing that the Company’s annual meeting was to be held on June 29, 2010. By letter dated May 4, 2010, the Strategic Equity Group affirmed its previous nomination of Seth Lukash, Gary L. Herman and Fred Zeidman for the next annual meeting.

 

On June 10, 2010, the Company filed its definitive proxy statement on Schedule 14A.

 

By letter dated June 21, 2010 to Messrs. Goss, Brooks and Dennis, Mr. Bruce Galloway expressed his dissatisfaction with the Pulse Systems transaction discussed above. Messrs. Goss, Brooks and Dennis did not respond to the letter.

 

On June 25, 2010, the Company announced that the annual meeting had been postponed.

 

On July 15, 2010, the Company announced that its annual meeting would be set for September 30, 2010, with a record date of September 1, 2010.

 

By letter dated July 22, 2010, the Strategic Equity Group affirmed its previous nomination of Seth Lukash, Gary L. Herman and Fred Zeidman for the next annual meeting.

 

On August 11, 2010, the Company announced that its 2010 annual meeting of shareholders would be scheduled for Thursday, September 30, 2010 to coincide with its previously announced 2009 annual meeting and that three additional directors would be elected at the meeting.

 

By letter dated August 23, 2010, the Strategic Equity Group nominated Howard Brod Brownstein for election to the Board at the Company’s next annual meeting for a term to expire at the 2013 annual meeting of shareholders.

 

On September 1, 2010, the Company announced that the size of the Board had been expanded from seven directors to ten, effective with the director elections to be held at the upcoming annual meeting and that as a result of the expansion, three additional directors would be elected at the meeting, bringing the total number of directors up for election to nine.

 

By letter dated September 3, 2010, the Strategic Equity Group nominated Martin R. Wade, III for election to the Board at the Company’s next annual meeting for a term to expire at the 2013 annual meeting of shareholders.

 

In connection with the foregoing events, the parties have brought various actions in court, including as follows:

 

On March 31, 2010, Strategic filed suit against the Company, Tom A. Goss (Chairman of the Company’s Board), Mr. John M. Fife and his affiliates, Iliad Research and Trading, L.P., Iliad Management, LLC, and Fife Trading Inc. (collectively, with Mr. Fife, the “Fife Group”) in the United States District Court for the Eastern District of Michigan, Case No. 10-cv-11305, seeking an injunction against (i) a proxy solicitation by the Company, (ii) voting of Fife shares, and (iii) implementation of a Voting and Standstill Agreement dated March 19, 2010 between the Company and St. George Investments, LLC, one of the Fife affiliates. On June 25, 2010, the Company filed a counter-claim against the Strategic Equity Group in the United States District Court for the Eastern District of Michigan, Case No. 10-cv-11305, for violations of the federal securities laws and a third party complaint against Mr. Galloway for violations of Michigan law.

 

On June 28, 2010, the district court issued an opinion and order on the parties’ respective motions. The district court granted the Company’s motion to dismiss in part, holding that Strategic’s claim against the Company under Section 14(a) of the Securities Exchange Act of 1934 failed to state an actionable claim. Such claim was dismissed with prejudice. The district court dismissed without prejudice the remainder of Strategic’s claims against the Company for lack of subject-matter jurisdiction. The district court further ordered that the Company’s counter-complaint and third-party complaint be stricken.

 

On July 2, 2010, Strategic filed suit against the Company in the Wayne County (Michigan) Circuit Court, Case No. 10-007629-CZ, seeking a mandatory injunction to order the Company to hold its annual meeting on or before August 4, 2010, and to set a record date of July 7, 2010. On July 21, 2010, the circuit court entered an order that the Company must hold its annual meeting on the date the Company selected (September 30, 2010) and the record date will be the date selected by the Company (September 1, 2010).

 

On August 13, 2010, Strategic and Mr. Galloway filed suit against the Company and others in the Wayne County (Michigan) Circuit Court, Case No. 10-009344-CZ, seeking, among other things, a rescission of the Pulse

Systems acquisition and an injunction against the voting of shares issued pursuant to the Pulse Systems acquisition. On August 27, 2010, STEP and Mr. Galloway filed a motion for preliminary injunction. The hearing on STEP’s and Mr. Galloway’s motion for preliminary injunction has been noticed for September 17, 2010.

 

Agreement with St. George Investments, LLC, John M. Fife and Related Persons

 

Background

 

In November 2009, Mr. John M. Fife, Iliad Research and Trading, L.P., Iliad Management, LLC, and Fife Trading Inc. (collectively, the “Fife Group”) entered into a Joint Filing Agreement and filed their initial Schedule 13D disclosing their aggregate beneficial ownership of more than 5% of the issued and outstanding shares of the Company’s common stock.

 

Shortly thereafter, Mr. Brooks called Mr. Fife to introduce himself as the CEO and President of the Company and to explore Mr. Fife’s intentions, as stated in Mr. Fife’s Schedule 13D filing. Mr. Brooks also explained to Mr. Fife the Company’s business strategy and plans to re-build shareholder value. Mr. Fife called Mr. Brooks shortly thereafter and asked to meet Mr. Brooks and representatives of the Company in Detroit. The meeting occurred on or around January 19, 2010. During the meeting, Mr. Brooks emphasized the Company’s commitment and plans to re-building shareholder value.

 

Shortly after the Detroit meeting, Mr. Fife called Mr. Brooks to propose that Mr. Fife work collaboratively with the Company to re-build shareholder value. Over the intervening weeks, several proposals were discussed but none were sufficiently developed to present to the Board.

 

By letter dated January 22, 2010, Mr. Fife nominated Robert Sullivan, Scott Leece and Matthew Tolman for election to the Board at the Company’s upcoming annual meeting.

 

Mr. Fife and Mr. Brooks then had further discussions to develop the framework for an agreement for the Company and the Fife Group to work collaboratively to re-build shareholder value and to avoid or minimize the distraction and substantial expense to the Company of insurgent activities. On February 9, 2010, Mr. Brooks and representatives of the Company met Mr. Fife and his representatives in Chicago. At this meeting, proposals were discussed for collaboration but no proposal was sufficiently developed to take before the Board.

 

Additional meetings were held in Chicago on February 17 and 25, 2010 between Mr. Brooks and representatives of the Company and Mr. Fife and his representatives. Various proposals for collaboration were again discussed, but no proposal was sufficiently developed to take before the Board.

 

Following these meetings, representatives of Mr. Fife and the Company held a series of teleconferences to further discuss collaboration proposals. These discussions continued through the weekend of March 6 and 7, 2010 and into the following week. As a result of these discussions, the parties agreed that a proposal had now been sufficiently developed to take before the Board.

 

On March 11, 2010, a Board meeting was held to discuss the Fife Group proposal. At the meeting, Mr. Brooks discussed the benefits that the proposal offered to the Company including (i) establishing sufficient stability to enable the Board and the Company’s management to have sufficient time to execute their plans to re-build shareholder value, (ii) a $600,000 additional investment from the Fife Group to bolster the Company’s treasury, and (iii) a call at the option of the Company to buy back all of the Fife Group’s shares at a 10% discount to the current market price. Several Board members raised a number of concerns with the proposal, including concerns with the terms of the Fife Group’s proposed additional investment in the Company through its proposed purchase of Series A Convertible Preferred Stock. A number of directors believed if the preferred shares were to be issued, they should be priced at or around the then-current market price of the Company’s common stock. Other concerns related to the terms of a proposed option to be granted to the Fife Group, exercisable after 18 months, to put back his common shares to the Company at or around the then-current market price, if shareholder value was not created. Following an extensive discussion among the directors at the meeting, the proposal was defeated by a vote of 4 to 3.

 

As a result of the Board’s decision, representatives of the Fife Group and the Company engaged in further negotiations. Mr. Fife and his representatives came to Detroit on March 17, 2010 to meet with Mr. Brooks and Company representatives for further negotiations. As a result of these negotiations, the Fife Group agreed to

significant modifications to the proposal. These modifications included changes to the timing and mechanism for issuing any preferred shares to the Fife Group and changes to the pricing of such preferred shares.

 

Another Board meeting was called for March 19, 2010 to consider the new proposal with Mr. Fife. After deliberations, and with the modifications that were made as a result of the last round of negotiations, the Board decided to accept the proposal by a vote of 6 to 1.

 

On March 19, 2010, the Fife Group assigned their beneficial ownership in 1,882,583 shares of common stock of the Company, which represented all of the Fife Group’s shares of the Company, to their affiliate, St. George Investments, LLC (“St. George”), effective March 11, 2010.

 

The Agreement with St. George

 

On March 19, 2010, the Company and St. George entered into a Voting and Standstill Agreement (the “Standstill Agreement”). Under the Standstill Agreement, St. George has agreed to cause the withdrawal of the Fife Group’s slate of nominees for election to the Board and to vote in favor of the candidates nominated by the Board for election at the Company’s upcoming annual meeting. St. George also agreed for a minimum period of 18 months to customary standstill provisions, which include, among other things, not, directly or indirectly, unless specifically requested by the Company or by a resolution of a majority of the directors:

 

 

(collectively, the “Standstill Obligations”).

 

St. George has agreed to vote all shares it currently beneficially owns or thereafter may acquire (collectively “Shares”) as recommended by a majority of the Board and has granted an irrevocable proxy to effectuate the voting agreement (the “Voting Agreement”). St. George has agreed not to acquire beneficial ownership of shares of common stock that would represent more than 35% of the issued and outstanding common stock of the Company (excluding shares acquired upon conversion of any preferred stock issued to St. George pursuant to the Capital Call (as defined below)).

 

The Standstill Obligations and the Voting Agreement continue until March 31, 2012, unless earlier terminated if the Put (as defined below) is exercised or if there is an event of default (as defined in the Standstill Agreement).

 

The Company has the right to purchase all of the Shares (the “Call”) and St. George has the right to require the Company to purchase some or all of the Shares (the “Put”). The Put price is $1.26 — the volume weighted average of the closing prices of the common stock during the 30 calendar days prior to March 16, 2010. The trading price on March 16, 2010 was $1.08 per share. The Company may exercise the Call at $1.14 per share — a 10% discount to the Put price — if the Call is exercised on or prior to June 30, 2011. If the Call occurs between July 1, 2011 and September 30, 2011, the Call price is the same as the Put price. The Call expires upon the earliest of September 30,

2011 and a “Triggering Event” which is defined to mean the Company’s execution of a letter of intent for a business combination, the Company’s execution of definitive documents for a business combinations and the Company’s public announcement of a business combination. A business combination would include an acquisition of the Company or by the Company. Effective June 18, 2010, the closing date of the Pulse Systems acquisition, the Company entered into an agreement with St. George and The Dove Foundation (as discussed below, a party joined to the Standstill Agreement on June 7, 2010), whereby St. George and The Dove Foundation agreed that the Pulse Systems acquisition shall not be considered a “Triggering Event” under the Standstill Agreement.

 

The Put can be exercised beginning on October 1, 2011 and expires March 31, 2012. However, the Put can be accelerated at any time immediately upon the occurrence of certain events of default, which are: a breach of the Standstill Agreement that is not cured within 10 days of receipt of notice of such breach; the insolvency of or a bankruptcy petition filed by the Company; a judgment against the Company in excess of $2 million, which is not stayed or discharged within 60 days and which results in the Company having insufficient cash on hand to satisfy the Put obligations; the Company’s delinquency in its periodic reporting obligations under Section 13 of the Exchange Act; the Company’s common shares are not listed on Nasdaq or quoted on the OTC Bulletin Board; and the exercise of the Company’s right to require St. George Investments, LLC to invest $600,000 in the Company (the “Capital Call”) and an event of default occurs under the certificate of designations that govern the preferred shares issued pursuant to the Capital Call.

 

The Company is required to register the Shares with the SEC not later than June 30, 2011. If, following the effective date of such registration, the trading price of the Shares exceeds $2.21 over the period of time specified in the Standstill Agreement, the Put is eliminated.

 

St. George can transfer the Shares in private transactions (subject to the continued effect of the Standstill Agreement, including the Standstill Obligations, Voting Agreement, Put/Call and other provisions) and in open market transactions. Following the date that the Put is eliminated because of the increase in the trading price of the Shares after registration, St. George must nevertheless maintain beneficial ownership of at least 1,882,583 shares of common stock until March 31, 2012.

 

St. George has granted to the Company the right, commencing May 1, 2010, to require St. George to invest $600,000 in the Company — the Capital Call. The Capital Call expires upon the earlier of July 1, 2011 and the Company’s filing of a registration statement for St. George’s shares. If the Capital Call is exercised, St. George would be issued that number of shares of a newly designated series of non-voting convertible preferred stock (the “Preferred Stock”) based on the dollar volume weighted average closing price of the Company’s common stock for the 30 calendar days prior to the date of the issuance of the shares of Preferred Stock, however, if there is a Triggering Event, the calculation would be based on the 30 calendar pays prior to the Triggering Event. The Preferred Stock would be convertible at any time at the option of St. George into shares of the Company’s common stock at a ratio of 1:1, with such conversion ratio subject to adjustment in the event of certain stock splits or dividends or in the event of a business combination or similar transaction. The Preferred Stock would have a 3% per annum dividend which, at the option of the Company, would be payable in cash or in additional shares of Preferred Stock. The common shares acquired upon conversion of the Preferred Stock is subject to the Company’s Call right, and the holder of the Preferred Stock has a Put right, on the same terms and conditions as are applicable to the shares of common stock beneficially owned by St. George. In no event would the aggregate number of shares of common stock issued to St. George upon conversion of the Preferred Stock exceed 20% of the outstanding shares of common stock prior to such issuance, unless the Company obtains shareholder approval if required by the Nasdaq Rules. The terms of the Preferred Stock are set forth in the Certificate of Designation which is an exhibit to the Standstill Agreement. The Certificate of Designation would be filed by the Company concurrently with exercise of the Capital Call.

 

The Company has agreed to maintain certain reserves of its unrestricted cash on its balance sheet, initially equal to 20% of the Company’s pro forma estimate of its 2010 fiscal year end shareholders’ equity and then equal to the Company’s actual 2010 fiscal year-end shareholders’ equity thereafter. The Company’s shareholders’ equity as of 2010 fiscal year end is approximately $10.0 million, which requires a minimum corresponding reserve of approximately $2.0 million. The Standstill Agreement permits St. George and its assigns to own up to 35% of the Company’s issued and outstanding common shares, which corresponds to a maximum reserve of $3.5 million. As

described below, on June 7, 2010, the Company entered into an Amendment to the Standstill Agreement which permits the Company, at its option, to eliminate the cash reserve provided that the Company provides substitute collateral reasonably acceptable to St. George.

 

Additionally, if the Capital Call is exercised (either at the Company’s option or due to a Triggering Event, the Company would have to reserve cash to satisfy the put on the shares of Preferred Stock issued pursuant to the Capital Call, in addition to the amounts reserved for the Company’s Put obligations on the common stock. The reserve for the put on the shares on the Preferred Stock cannot be calculated until the Capital Call is exercised because although the price of the put on the shares of Preferred Stock is set at $1.26, the number of shares of Preferred Stock issued pursuant to the Capital Call is based upon the dollar volume weighted average closing price of the Company’s common stock for the 30 calendar days prior to the date of the issuance of the shares of Preferred Stock, or if there a Triggering Event, the calculation would be based on the 30 calendar days prior to the Triggering Event.

 

St. George is also given the right to have an observer to the Board and its committee meetings.

 

Upon request, St. George will assist the Company in identifying merger and acquisition opportunities without requiring any finders or similar fees. St. George invests in publicly traded companies for the proprietary account of Mr. John M. Fife. Mr. Fife is a professional investor and is the sole member of St. George. Fife Trading, Inc. is the manager of St. George. Mr. Fife owns and controls Fife Trading, Inc. Mr. Fife and his affiliates have significant experience with mergers and acquisitions and equity and debt investments in public and private companies.

 

On March 19, 2010, Mr. Fife sent a letter to the Secretary of the Company that withdrew the names of nominees previously proposed by Mr. Fife for the election of directors.

 

On March 22, 2010, the Company filed additional definitive proxy materials pursuant to Schedule 14, announcing the transaction with St. George. Also on March 22, 2010, Mr. Fife filed a definitive proxy statement disclosing the assignment of the 1,882,583 shares of common stock of the Company to St. George and the withdrawal of the slates of nominees previously proposed by Mr. Fife for the election of directors.

 

Amendment of the Standstill Agreement and Joinder by The Dove Foundation

 

On June 4, 2010, with the consent of the Company as required by the Standstill Agreement, St. George sold 1,603,647 shares to The Dove Foundation (the “Trust”), a charitable trust organized under the laws of Illinois and intending to qualify as a 501(c)(3) organization under the Internal Revenue Code. The Trust purchased the shares through the issuance of an unsecured promissory note in the amount of $1,555,537.59.

 

On and effective June 7, 2010, the Company and St. George agreed to amend the Standstill Agreement to, among other things, permit the Company to replace the cash reserve supporting the Company’s Put obligation with other collateral reasonably acceptable to St. George.

 

On and effective June 7, 2010, the Trust entered into an agreement to join the Standstill Agreement, as amended by the Company and St. George, and be bound by all of the terms and conditions, benefits and restrictions, as applicable to St. George, other than the provisions relating to the Capital Call.

 

The Board currently consists of seven members serving three-year staggered terms. On August 31, 2010, the Board increased the size of the Board to 10 directors, effective as of the September 30, 2010 annual meeting. Under the Company’s Amended and Restated Bylaws, at least three of the Company’s directors must not be officers or employees of the Company or its subsidiaries. The directors and director nominees of the Company are as follows, although information regarding Mr. Stephen D. Harris has been omitted because his director term will not continue following the annual meeting due to his determination not to stand for re-election.

 

 

Director Background and Qualifications

 

The following sets forth the business experience during at least the past five years of each Board nominee and each of the directors whose term of office will continue after the annual meeting.

 

In addition, the following includes a brief discussion of the specific experience, qualifications, attributes and skills that led to the conclusion that the directors and nominees should serve on the Board at this time. The Governance Committee has not established specific, minimum qualifications for recommended nominees or specific qualities or skills for its directors to possess. Generally, the Governance Committee will re-nominate incumbent directors who it believes will continue to make important contributions to the Board and who consent to continue their service on the Board. The Governance Committee considers the experience, mix of skills and other qualities of the existing Board to ensure appropriate Board composition. including members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to the Company’s business.

 

The Board believes that the directors and nominees have an appropriate balance of knowledge, experience, attributes, skills and expertise as a whole to ensure the Board appropriately fulfills its oversight responsibilities and acts in the best interests of shareholders. In addition, the Board has six independent directors in accordance with the applicable rules of Nasdaq. Further, each director or nominee brings a strong background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas.

 

Tom A. Goss has served as Chairman since November 2008 and a director since 2000. He previously served as Vice Chairman from November 2001 to November 2008. Mr. Goss has extensive knowledge and experience in executive management, insurance, manufacturing and entrepreneurship.

 

He has been Chairman of Goss LLC, an insurance agency, since November 2000. He also has been Chairman of The Goss Group, Inc., an insurance products and services company, since November 2000, and earlier was a Partner/Advisor of that company since March 1997. He was Chairman of Goss Steel & Processing LLC, a steel processing center, from April 2003 until 2005, when the company was sold. He served as Director of Athletics for The University of Michigan from September 1997 to April 2000.

 

Darrel W. Francis has served as a director since 1998. Mr. Francis has extensive knowledge and experience in executive management, finance, accounting, manufacturing and entrepreneurship. Mr. Francis qualifies as a financial

expert under SEC rules based on such experience, as detailed below. In addition, Mr. Francis has seven years experience in the medical device industry, serving as Director of Sales for Datascope Corporation.

 

Mr. Francis has been President of Precision Industrial Service, a full-service flooring company, since June 1999. He also was President of Metropolitan Facility Resources, an office furniture sales and design company, from January 1994 to December 1999. From January 1996 to October 1998, he was President of Advantage Pavilion, Inc., an office furniture sales and design company.

 

Emmett S. Moten, Jr. has served as a director since 1988. Mr. Moten has extensive knowledge and experience in executive management, strategic planning, real estate and government policy.

 

Mr. Moten has been the President of Moten Associates, a real estate development and consulting firm. From July 1988 to October 1996, he was Vice President of Development for Little Caesar Enterprises, Inc., a national fast food franchise company, and the Detroit Tiger’s Ball Club. Prior to assuming that position, Mr. Moten was Director of the Community & Economic Development Department of the City of Detroit for almost ten years. Mr. Moten holds a Master of Arts in Education from Louisiana State University and a B.S. in Foreign Language from Grambling State University in Louisiana.

 

Richard M. Brown, D.O. has served as a director since 2001. Mr. Moten has extensive knowledge and experience in executive management, healthcare services and policy and the medical device development process, including the adoption and use of new medical devices.

 

Dr. Brown founded Park Medical Centers in 1961. He is a practicing physician and has been President of Park Family Health Care in Detroit, Michigan since 1995. During his career, he has also served as Chief of Staff of the following hospitals in Michigan: Michigan Health Center, Detroit Central Hospital, Botsford General Hospital and Zeiger Osteopathic Hospital. Dr. Brown has been a delegate to the American Osteopathic Association since 1989 and to the Michigan Association of Osteopathic Physicians and Surgeons since 1986. He is a past Board member of the Barbara Ann Karmanos Cancer Institute and the University of Osteopathic Medicine and Health Services in Des Moines, Iowa.

 

Bruce R. Galloway has served as a director since 2008. Mr. Galloway has extensive knowledge and experience in finance, accounting, capital markets and investment banking. Mr. Galloway also has Board and Board committee experience at other public companies.

 

Mr. Galloway has been a managing member of Galloway Capital Management, LLC, an investment firm focused primarily on investments in undervalued public companies. In addition, since August 2005, he has been a managing director of Arcadia Securities, LLC, a New York-based FINRA registered broker-dealer. Previously, he had been a managing director with Burnham Securities Inc., a New York-based investment banking firm. Mr. Galloway is also a member of the board of directors, as well as a member of the Audit, Compensation and Nominating Committees, of Forward Industries, Inc. Mr. Galloway holds a B.S. from Hobart College as well as an MBA from the New York University Stern School of Business.

 

Ronald E. Hall, Sr. has served as a director since 2001. Mr. Hall has extensive knowledge and experience in executive management, finance, accounting, manufacturing and entrepreneurship.

 

Mr. Hall has been President, Chief Executive Officer and majority owner of Bridgewater Interiors, LLC in Detroit, Michigan since November 1998. Bridgewater Interiors is a major supplier of seating and overhead systems to the automotive industry. He is also the President/CEO of Renaissance Capital Alliance, an equipment leasing company and he is the Chairman/CEO of New Center Stamping, an automotive service parts stamping facility. From 1992 to October 1998, Mr. Hall served as President of the Michigan Minority Business Development Council, a privately funded, nonprofit, business development organization.

 

Grayson Beck has nearly 20 years experience in engineering and manufacturing precise components for the medical device and transportation industries with extensive experience in medical device design, development and manufacturing.

 

Mr. Beck is a professional investor and has served on the Board of Managers of Pulse Systems, LLC since 2004. Mr. Beck co-founded Pulse Systems Corporation in 1998 and served as its vice president and secretary until the company’s business was acquired in 2004 by a group of investors led by John M. Fife, which resulted in the

formation of Pulse Systems, LLC. From 1994 to 1998, Mr. Beck served as a manager of the engineering and manufacturing group for Autocam California, a division of Autocam Corporation, a global leader in manufacturing precision automotive and medical device components. From 1991 to 1994, Mr. Beck served as group lead for New United Motor Manufacturing, Inc. (NUMMI), where he led a special projects group responsible for designing and operating new automotive assembly lines. Mr. Beck holds a bachelor of science degree in electronic engineering from Chico State University.

 

Herbert J. Bellucci has more than 25 years experience in the medical device industry with extensive knowledge and experience in medical device design, development, marketing and manufacturing.

 

Mr. Bellucci has served as the President and Chief Executive Officer of Pulse Systems since August 2007. From August 2005 to July 2007, Mr. Bellucci served as Vice President of Manufacturing and then Vice President of Manufacturing and International of Alphatec Holdings (Nasdaq: ATEC) and its subsidiary Alphatec Spine, Inc., a medical device company that designs, develops, manufactures and markets products for the surgical treatment of spine disorders. From May 2003 to April 2005, he served as Senior Vice President of Operations for Digirad Corporation (Nasdaq: DRAD), a publicly-held developer and manufacturer of solid-state gamma cameras for nuclear cardiology and general nuclear medicine applications. Mr. Bellucci holds a bachelor of science degree in engineering from Brown University and an MBA from Stanford Graduate School of Business.

 

William C. Brooks has extensive knowledge and experience in executive management, leadership, healthcare services and government policy. He also has extensive Board experience through his prior service as director of the Company and five other public companies.

 

Mr. Brooks has served as President and Chief Executive Officer of the Company since November 22, 2002. He also served as a director of the Company from 1997, and as Chairman of Board of Directors since January 1998, until November 2008. He retired as a Vice President of General Motors Corporation, Inc. in 1997. He is a retired Air Force Officer, and was Assistant Secretary of the U.S. Department of Labor from July 1989 to December 1990. He served as a member of the U.S. Social Security Advisory Board from February 1996 to January 1998. He is a retired member of the Board of Directors of Caraco Pharmaceutical Laboratories, Ltd. (AMEX: CPD), Louisiana-Pacific Corporation (NYSE: LPX) and DTE Energy (NYSE: DTE) and former public companies Covansys Corporation (NASDAQ: CVCS) and Lason, Inc. (NASDAQ: LSON). Most recently, Mr. Brooks served as a director of Covansys Corporation from 1998 to 2007. In addition, he is a past member of the Board of Trustees of The Detroit-Macomb Hospital Association, the Henry Ford Health System and the Pontiac Osteopathic Hospital. Mr. Brooks holds an MBA from the University of Oklahoma and also completed the Harvard Business School Advanced Management Program.

 

John M. Fife has extensive knowledge and experience in acquisitions, capital markets, finance, marketing, international business, entrepreneurship and healthcare.

 

Mr. Fife is a professional investor. Mr. Fife has served as President of CVM, Inc. since 1998. CVM, Inc. is the manager of Chicago Venture Management, LLC, which is the general partner of Chicago Venture Partners, L.P., a private equity fund based in Chicago, Illinois. Mr. Fife also has served as President and Chief Executive Officer of ISP Holdings, Inc., an internet service provider formed in June 2001 as MStar.net, LLC, since 2010 and the President of Utah Resources International, Inc., a Utah-based real estate and oil & gas investment company, since 1996. Mr. Fife also has served as Chairman of Typenex Medical, LLC, a manufacturer of bands for patient identification in connection with blood transfusions, since 2004 and a board member of Strategix Performance, Inc., since 2004, all of which are portfolio companies of Chicago Venture Partners, L.P. Mr. Fife holds an MBA from Harvard Business School.

 

On January 18, 2007, the Securities and Exchange Commission filed a complaint that Fife and Clarion Management, LLC (“Clarion”) engaged in a scheme in 2002 and 2003 to purchase variable annuity contracts issued by an insurance company in order to engage in market timing for the benefit of a Clarion affiliate. Fife and Clarion consented to the entry of the final judgment, without admitting or denying the allegation in the Commission’s complaint. On August 9, 2007, the U.S. District Court for the Northern District of Illinois entered a final judgment against John M. Fife and Clarion that permanently restrained and enjoined them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and required them to pay disgorgement in the amount of $234,339, plus pre-judgment interest of $60,584; and additionally ordered Fife to

pay a civil penalty of $234,399. As part of the settlement of the case, Mr. Fife consented to the entry of an Order barring him from associating with any investment advisor, with a right to re-apply after eighteen months.

 

The table and biographies below set forth information, as of September 1, 2010, regarding the executive officers of the Company. Executive officers are appointed by, and serve at the pleasure of, the Board.

 

 

See “Proposal 1 — Election of Directors — Directors and Executive Officers” for biographical and other information regarding Herbert J. Bellucci and William C. Brooks.

 

William L. Dennis was appointed as the Chief Financial Officer and Treasurer of the Company in January 2010. Mr. Dennis brings more than 30 years of accounting and finance experience to his role at the Company. From May 2008 through April 2009, he served as Vice President of Finance and Accounting for Toyota Boshoku America North American Interior Parts Operations, a key business unit comprised of plants in the United States, Canada and Mexico. From 1981 to 2006, he held a number of finance and accounting positions at Chrysler, including serving as Controller with responsibility over financial reporting for the company’s international operations. Mr. Dennis holds a bachelor’s degree in business administration from Wright State University and an MBA in finance from the University of Akron.

 

Former Executive Officers in Fiscal 2010.  Mr. Harris ceased serving as Executive Vice President and Chief Financial Officer of the Company in August 2009 and as Treasurer of the Company in November 2009. Ms. Anita R. Davis resigned as Chief Financial Officer and Treasurer of the Company in January 2010. Prior to such resignation, she had served as Chief Financial Officer since August 2009 and as Treasurer since November 2009.

 

The Board has general oversight responsibility of the Company’s affairs and the directors, in exercising their fiduciary duties, represent and act on behalf of the shareholders. Although the Board does not have responsibility for the Company’s day-to-day management, it stays regularly informed about the Company’s business and provides guidance to management through periodic meetings and other informal communications. The Board is significantly involved in, among other things, the Company’s strategic and financial planning process, including the recently completed review of strategic alternatives, as well as other functions carried out through the Board committees as described below.

 

Board Leadership.  Our Board is led by its non-executive Chairman, Mr. Tom Goss. The Board does not have a specific policy on whether the Chairman should be a non-employee director or if the Chairman and Chief Executive Officer positions should be separate, or whether there should be a lead independent director if the Chairman and Chief Executive Officer positions are combined. Instead, the Board will review such decisions on a case-by-case basis, with the goal of ensuring sufficient checks and balances to further the interests of shareholders of the Company. In any event, the Board believes that its independent directors, who represent six of the current seven Board seats, are deeply engaged and provide significant independent leadership and direction given their executive and Board experience noted above. See “— Director Background and Qualifications” above. The independent directors are the sole members of the Finance and Audit, Compensation, and Governance committees, which oversee critical matters of the Company such as the integrity of the Company’s financial statements, the compensation of executive management, the selection and evaluation of directors, and the development and implementation of the Company’s corporate governance policies and structures. The independent directors also meet regularly in executive session at Board and committee meetings and have access to independent advisors as they deem appropriate. Management supports this oversight role through its tone-at-the-top and open communication.

 

Oversight of Risk Management.  The Board oversees the Company’s risk management. This oversight is administered primarily through the following:

 

 

 

 

 

 

 

 

Meetings.  In fiscal 2010, the Board held 8 meetings. Non-management directors hold regularly scheduled executive sessions in which non-management directors meet without the presence of management. These executive sessions generally occur around regularly scheduled meetings of the Board of Directors. Mr. Goss, as non-executive Chairman, presides at such executive sessions. For information on how you can communicate with the Company’s non-management directors, including the non-executive Chairman, see “— Communicating with the Board.”

 

Directors are expected to attend all Board and committee meetings, as well as the annual meeting of shareholders. In fiscal 2010, all of the directors attended at least 75% of the aggregate of the meetings of the Board and all committees of the Board on which they served. All of the directors attended the fiscal 2008 annual meeting of shareholders, except for Dr. Richard M. Brown.

 

Director Independence.  The Board conducted its annual review of director independence in accordance with the applicable rules of Nasdaq. The independence rules include a series of objective tests, including that the director is not employed by the Company and has not engaged in various types of business dealings with the Company. In addition, the Board is required to make a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined, after considering all of the relevant facts and circumstances, that Mr. Goss, Dr. Brown, Mr. Francis, Mr. Galloway, Mr. Hall and Mr. Moten are, and director nominees Messrs. Beck and Fife, if elected, would be, independent directors under the applicable rules of Nasdaq. In particular, the Board considered the following matters:

 

 

 

Mr. Harris was employed by the Company until August 2009, and therefore is not an independent director. Director nominees Messrs. Bellucci and Brooks are employed by the Company or its subsidiary, Pulse Systems, LLC, and therefore are not independent.

 

Each of the members of the Finance and Audit Committee, Compensation Committee and Governance Committee are independent under the Nasdaq rules. In addition, the Board has determined that the members of the Finance and Audit Committee qualify as independent under the rules established by the SEC for audit committee members.

 

The Board has delegated various responsibilities and authority to Board committees and each committee regularly reports on its activities to the Board. Each committee, except the Executive Committee, has regularly scheduled meetings. Each committee operates under a written charter approved by the Board, which is reviewed annually by the respective committees and the Board and is available on the Company’s website under “Corporate Governance” at www.uahc.com. The table below sets forth the membership in fiscal 2010 (and as of the date hereof) and meeting information in fiscal 2010.

 

 

 

 

Finance and Audit Committee.  The Finance and Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. The purpose of the Committee is to, among other things, assist the Board of Directors in fulfilling its oversight responsibilities relating to the integrity of the financial statements, the compliance with certain legal and regulatory requirements, risk management, the qualifications, independence and performance of the independent registered public accountant and the adequacy of accounting and internal control systems. The Finance and Audit Committee has the sole authority and responsibility to appoint, determine the compensation of, evaluate and, when appropriate, replace the Company’s independent registered public accounting firm. See the Committee’s charter for additional information on the responsibilities of the Committee.

 

The Board of Directors has determined that Mr. Francis is an audit committee financial expert as defined by the SEC. The designation of an audit committee financial expert does not impose upon such person any duties, obligations or liabilities that are greater than are generally imposed on members of the Committee and the Board, and such designation does not affect the duties, obligations or liabilities of any other member of the Committee or the Board.

 

Compensation Committee.  The Compensation Committee administers the executive compensation program of the Company. The Committee’s responsibilities include recommending and overseeing compensation and benefit plans and policies, approving equity grants and otherwise administering share-based plans, and reviewing annually all compensation decisions relating to the Company’s executive officers. See the Committee’s charter for additional information on the responsibilities of the Committee.

 

Role of Management.  Mr. Brooks provided meaningful guidance to the Committee with respect to the design and implementation of the Company’s fiscal 2010 compensation program for executive officers. The Committee believes such input is appropriate because Mr. Brooks, based on his experience in his executive officer role with the Company, has the most involvement in and knowledge of the Company’s business goals, strategies and performance, the overall effectiveness of the management team and each person’s individual contribution to the Company’s performance.

 

Generally, Mr. Hall, as Chairman of the Committee, had contacted Mr. Brooks prior to Committee meetings to discuss the proposed agenda, obtain views on compensation recommendations for executive officers (including a summary of current performance and other subjective factors) as well as appropriate performance metrics to consider in such evaluations. Mr. Brooks also was invited occasionally to attend Committee meetings.

 

The Committee retains the discretion to modify the recommendations of Mr. Brooks and reviewed such recommendations for their reasonableness based upon individual and Company performance as well as market

information. The Committee also meets regularly in executive session to discuss compensation issues generally outside the presence of management, as well as to review the performance of and determine the compensation of the Company’s executive officers.

 

Role of Compensation Consultants.  The Committee has the sole authority to engage outside advisors and establish the terms of such engagement, including compensatory fees. The Committee determined to re-engage Towers Watson as its compensation consultant with respect to fiscal 2010 executive compensation program generally.

 

The Committee solely determines the responsibilities of Towers Watson and directs its work product. With respect to the fiscal 2010 executive compensation program, the Committee engaged Towers Watson to provide the following services: (A) discuss best-practices and market trends in compensation, particularly in light of the economic recession in fiscal 2010 and (B) provide a recommendation as to executive compensation levels for fiscal 2010 in light of the change in the Company’s activities.

 

The Committee regularly reviews and approves the director compensation program. However, the Committee did not re-engage Towers Watson to assess the Company’s fiscal 2010 director compensation program.

 

Governance Committee.  The Governance Committee is responsible for identifying and nominating individuals qualified to serve as Board members, recommending directors for each Board committee and overseeing corporate governance policies. See the Committee’s charter for additional information on its responsibilities and activities.

 

The Committee has not established specific, minimum qualifications for recommended nominees or specific qualities or skills for its directors to possess. Generally, the Committee will re-nominate incumbent directors who it believes will continue to make important contributions to the Board and who consent to continue their service on the Board. The Governance Committee does not have a specific diversity policy underlying its nomination process, although it seeks to ensure the Board includes members with diverse backgrounds, qualifications, skills and experience, including appropriate financial, governance, capital market, healthcare and other expertise relevant to the Company’s business. If a vacancy on the Board occurs, the Committee will review the experience, mix of skills and background, independence and other qualities of a nominee to assure appropriate Board composition after taking into account the current Board members and the specific needs of the Company and Board. The Committee generally relies on multiple sources for identifying and evaluating nominees, including referrals from the Company’s Board and management.

 

The Committee does not solicit director nominations, but will consider nominee recommendations by shareholders with respect to elections to be held at an annual meeting, so long as such recommendations are timely made and otherwise in accordance with the Company’s Bylaws and applicable law. Such recommendations will be evaluated against the same general criteria used to evaluate other nominees. Shareholder recommendations for nominees to be considered by the Governance Committee should be submitted to the Chairman of the Governance Committee at 300 River Place, Suite 4950, Detroit, Michigan 48207-5062. See “Additional Information — Shareholder Proposals and Nominations at Next Annual Meeting” for additional information on making shareholder nominations and proposals for the next annual meeting.

 

Executive Committee.  The Executive Committee generally is permitted to exercise all of the powers and authority of the Board, except as limited by applicable law, the Company’s Bylaws or as otherwise expressly delegated by the Board to the other standing committees.

 

The Committee and Board believe that directors should receive a mix of cash and equity. The compensation program for non-employee directors is intended to encourage directors to continue Board service, to further align the interests of the Board and shareholders and to attract new directors with outstanding qualifications. Directors who are employees of the Company do not receive any additional compensation for Board service. All directors are reimbursed for expenses reasonably incurred in connection with Board service.

 

Effective January 1, 2010, compensation for non-employee directors has been reduced by 50%. The following table sets forth the fiscal 2010 compensation program for non-employee directors.

 

 

Director Compensation Table for Fiscal 2010

 

The following table sets forth the compensation of each non-employee director in fiscal 2010.

 

 

 

 

 

Narrative Disclosure of Director Compensation Table

 

As noted previously, effective January 2010, the Board reduced compensation for non-employee directors by 50%. Annual chair fees are paid annually at the end of each calendar year. The annual chair fees reflected in the director compensation table were paid in the last quarter of the 2009 calendar year before the 50% reduction was effective. Annual board fees are paid on a quarterly basis. The directors that were not up for re-election as of January 2010 (those directors whose terms expire at the 2010 annual meeting and the 2011 annual meeting) received stock awards, except for Bruce Galloway, who waived receipt of any director fees. The incumbent members of the Board that were up for re-election as of January 2010 (those directors whose terms expire at the 2009 annual meeting) are eligible to receive stock awards retroactively if elected to the Board at the upcoming annual meeting.

 

Upon his resignation as an employee of the Company in August 2009, Mr. Harris began receiving compensation as a non-employee director of the Company in the amounts set forth in the table above.

 

The Board and management are committed to responsible corporate governance to ensure that the Company is managed for the benefit of its shareholders. To that end, the Board and management periodically review and update its corporate governance policies and practices as appropriate or required by applicable law, the Nasdaq listing standards or SEC regulations.

 

The Company has adopted a Code of Business Conduct and Ethics that applies to all of its employees, officers and directors, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics is available in the Corporate Governance section of the Company’s website at www.uahc.com. Waivers from the Code of Business Conduct and Ethics that relate to the Company’s executive officers or directors, if any, will be made by the Board of Directors and will be publicly disclosed in the Corporate Governance section of such website.

 

A copy of the Company’s committee charters and Code of Business Conduct and Ethics will be sent to any shareholder, without charge, upon written request sent to the Company’s executive offices: United American Healthcare Corporation, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062, Attention: Secretary.

 

Any shareholder or interested party who desires to communicate with the Board, any Board committee or any specific director(s) may write to the Board at the following address: Board of Directors, United American Healthcare Corporation, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062, Attention: Secretary. The Secretary will filter out communications that the Secretary or his designee deems not appropriate for the directors, such as spam and communications to buy or sell products or services, and will forward the remainder of the communications to the appropriate directors.

 

Shareholders, Company employees, officers, directors or any other interested persons who have concerns or complaints regarding accounting or auditing matters of the Company are encouraged to contact, anonymously or otherwise, the Chairman of the Finance and Audit Committee (or any director who is a member of the Finance and Audit Committee) at the above address. Such communications will be treated confidentially.

 

The following table sets forth the total compensation paid or earned by the named executive officers during the years shown below.

 

 

 

 

Narrative Disclosure of Summary Compensation Table

 

Compensation for key executives is determined by the Compensation Committee. Salaries, bonuses and other compensation of key executives generally are based upon a subjective analysis of profitability, revenue growth, return on equity and market share. In fiscal 2010, compensation was also based on performance with respect to the strategic alternative process and wind-down of existing operations. The Compensation Committee believes that compensation of key executives should be sufficient to attract and retain highly qualified personnel and also provide meaningful incentives for measurable superior performance. During fiscal 2010, the compensation program of named executive officers consisted of a base salary.

 

Bonus.  No bonus amounts were earned in fiscal 2010.

 

Mr. Brooks.  Mr. Brooks is party to a retention and severance agreement pursuant to which he was paid $80,000 in fiscal 2010, but such amount has yet to be earned under the agreement. See “— Potential Payments Upon Termination or Change-in-Control as of June 30, 2010 — Retention and Severance Agreements” below for additional information.

 

The following table provides information on the holdings of option awards by the named executive officers as of June 30, 2010. Ms. Davis and Mr. Dennis do not have any outstanding option awards as of such date. There are no unvested or unearned stock awards held by named executive officers as of June 30, 2010.

 

 

 

 

 

 

 

 

 

Retention and Severance Agreements

 

The Company entered into retention and severance agreements, dated and effective October 31, 2008 (each, a “Retention Agreement”), with William C. Brooks and Stephen D. Harris to incentivize their continued service to the Company. Mr. Brooks continues to be a party to such agreement. The Compensation Committee authorized these agreements in response to the April 2008 notice that the Company would no longer be authorized to provide managed care services as a TennCare contractor when its TennCare contract expired on June 30, 2009. The TennCare contract was a substantial majority of the Company’s business and the discontinuance of such contract had a material adverse effect on the Company’s operations, earnings, financial condition and cash flows. The Compensation Committee determined that Messrs. Brooks and Harris were critical to the Company’s search and evaluation process for prospective acquisitions, managing the Company’s funds in the best interests of shareholders, and to manage the remaining operations of the TennCare business and the contract with the Centers for Medicare & Medicaid Services to act as a Medicare Advantage qualified organization, which the Company elected not to renew as of December 31, 2009.

 

Pursuant to his Retention Agreement, Mr. Harris received a payment of $46,000 in July 2009. Due to Mr. Harris’ resignation in August 2009, Mr. Harris forfeited all amounts earned under the retention provisions and was not entitled to any additional severance or other termination payments specified in his Retention Agreement. As of June 1, 2010, Mr. Harris had repaid all of the aforementioned $46,000 payment.

 

With respect to Mr. Brooks, in addition to any payments due under his current pay arrangements, his Retention Agreement provides that the Company will pay a Retention Payment of $320,000 (equal to his then-current annual base salary), provided that he is still employed by the Company through a 2-year retention period ending October 31, 2010. 25% of his Retention Payment was to be paid to him in cash within 30 days after the earlier of (i) expiration of the existing TennCare contract and (ii) the date the State of Tennessee releases statutory reserves currently required by such TennCare contract. Pursuant to the agreement, Mr. Brooks received a payment of $80,000 in July 2009. Thereafter, the unpaid balance of his Retention Payment is to be paid to him in cash within 30 days after October 31, 2010. Mr. Brooks has since voluntarily surrendered his right to receive the remaining $240,000 under the agreement.

 

If Mr. Brooks Involuntarily Separates from Service for Cause (as defined in the Retention Agreement), or voluntarily resigns from the Company, before the completion of his retention period, his right to his Retention Payment will be forfeited and any amounts paid must be returned to the Company. If Mr. Brooks Separates From Service (as defined in the Retention Agreement) with the Company on account of death or Disability (as defined in the Retention Agreement), or upon his Involuntary Separation from Service with the Company other than for Cause, before the end of his retention period Mr. Brooks, or his designated beneficiary, as applicable, is entitled to his Retention Payment on a pro-rata basis.

 

In addition to the above described retention payments, Mr. Brooks’ Retention Agreements provides that in the event of his Involuntary Separation From Service, other than for cause, that is not on account of a change-in-control event (“CIC Event”), Mr. Brooks is entitled to a cash Severance Benefit equal to 12 months of his base salary. Beginning on the first payroll date of the seventh month immediately following the date of Separation from Service,

this Severance Benefit will be payable every other Friday on the same schedule and in the same manner as his monthly compensation was paid while he was employed by the Company.

 

The Retention Agreement also provides that in the event of his Separation From Service on account of a CIC Event, Mr. Brooks is entitled to the amount due under the Company’s Supplemental Executive Retirement Plan (the “SERP”) to be paid in a lump sum on the first day of the seventh month immediately following his Separation From Service date. Nothing in the Retention Agreement modifies Mr. Brooks’ entitlement to benefits to which he is otherwise entitled under the SERP.

 

For purposes of this Agreement a “CIC Event” occurs when one person, or more than one person acting as a group, (i) acquires control of stock which, when combined with stock already held by such person or group, constitutes more than 50% of the total fair market or total voting power of the Company’s stock, (ii) acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition of stock by such person or group, ownership of stock in the Company possessing 30% or more of the total voting power of the Company’s stock, or (iii) acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group, Company assets having a gross market value equal to or greater than 40% of the total gross fair market value of the assets of the Company immediately before such acquisition or acquisitions.

 

In the event of Involuntary Separation from Service other than for Cause (if not a CIC Event) or an Involuntary Separation from Service due to a CIC Event, Mr. Brooks will receive (1) a pro rata payment of annual incentive compensation based on actual achievement, (2) any outstanding long-term incentive plan awards, subject to the existing applicable terms of the LTIP, (3) an insurance policy covering him and his family for medical, dental, vision and prescription drug expenses on a comparable basis for up to three years (subject to termination as specified therein), (4) life insurance payments for up to 6 months and (5) six months of outplacement services up to $5,000.

 

In consideration for the foregoing payments, Mr. Brooks agreed to the non-competition, non-solicitation, non-disparagement, non-disclosure, confidentiality and other related provisions set forth in his Retention Agreement. In addition, Mr. Brooks will be required to execute a general release of claims against the Company in consideration for the severance payments described above.

 

Employment Agreements

 

The Company entered into an Employment Agreement dated and effective August 28, 2009 with Ms. Davis in connection with her appointment as Chief Financial Officer. Ms. Davis resigned from her position as Chief Financial Officer and Treasurer of the Company on January 15, 2010 and received no severance benefits from the Company.

 

The Company entered into an Employment Agreement dated and effective January 16, 2010 with Mr. Dennis in connection with his appointment as Chief Financial Officer. Mr. Dennis is entitled to an annual base salary of $150,000 and to participate in the standard benefit package available to all employees. The agreement may be terminated by the Company at any time (a) for cause, in which conduct is seriously prejudicial to the Company, upon two weeks notice (or compensation in lieu thereof) or (b) without cause, upon six months notice (or compensation in lieu thereof). The agreement may be terminated by Mr. Dennis at any time upon four weeks notice. Following the termination of the agreement, Mr. Dennis will be subject to non-solicitation and non-competition restrictions (within the state of Michigan) for one year and confidentiality provisions. Effective April 1, 2010, at his request, Mr. Dennis’ base salary has been reduced by 5%.

 

Amended and Restated 1998 Stock Option Plan

 

The Company has an Amended and Restated 1998 Stock Option Plan, under which options (nonqualified options and incentive stock options) may be granted to officers, directors and key employees or those of the Company’s subsidiaries. Under most of the option agreements governing options held by Mr. Brooks, (1) outstanding options will vest with respect to all shares upon (A) a sale of all or substantially all of the assets of the Company or (B) a sale of 80% or more of the outstanding stock of the Company, and (2) such person’s right to exercise options until the 10-year expiration date will not be impaired or affected in any way in the event such employment is terminated for any reason. Under certain other option agreements, all outstanding options terminate

upon the earlier of (1) the date of termination of employment, if the employment is terminated voluntarily by Mr. Brooks or by the Company for cause, (2) on the 61st day following termination of employment, if the employment is terminated by the Company without cause, (3) on the first anniversary following termination of employment, if the termination is a result of the death or permanent disability of Mr. Brooks, or (4) the 10-year anniversary of the option grant.

 

The Board of Directors has adopted a written Related Party Transactions policy. The Company has posted it on the Company’s website at www.uahc.com. In general, it is the Board’s policy to avoid related-party transactions. If a “Related Party Transaction” is offered that appears to be in the Company’s best interests, then the policy provides a process to review and approve the transaction. Under this policy, a Related Party Transaction will be consummated or will continue only if:

 

 

For purposes of this policy, “Related Party” has the same meaning as “related person” under Item 404 of Regulation S-K promulgated by the SEC, and includes:

 

 

For purposes of this policy, a “Related Party Transaction” is a transaction in which the Company is a participant and in which any “Related Party” had or will have a direct or indirect material interest (including any transactions requiring disclosure under Item 404 of Regulation S-K), other than:

 

 

Management will present to the Finance and Audit Committee for approval by the next regularly scheduled Finance and Audit Committee meeting any Related Party Transactions proposed to be entered into by us, including the proposed aggregate value of such transactions, if applicable, or Related Party Transactions may preliminarily be entered into by management subject to ratification by the Finance and Audit Committee. The Finance and Audit Committee will review and approve or disapprove such transactions, and at each subsequent regularly-scheduled Finance and Audit Committee meeting, management will update the Finance and Audit Committee as to any material change to the approved transactions. If such transactions are not ratified, management must make all reasonable efforts to cancel or annul the transaction.

 

The policy also covers opportunities that are presented to an executive officer or director that may be available to us, either directly or by referral. Before the executive officer or director may consummate such an opportunity, it must be presented to the Board of Directors for consideration.

 

The policy also requires that all Related Party Transactions be disclosed in the Company’s filings with the SEC to the extent required by the SEC’s rules, and that they be disclosed to the Finance and Audit Committee and, if material, to the full Board of Directors.

 

See the discussion of the Standstill Agreement, as amended, under “Proposal 1 — Election of Directors — Background to Proxy Solicitation — Agreement with St. George Investments, LLC, John M. Fife and Related Persons”, “Proposal 1 — Election of Directors — Background to Proxy Solicitation — Amendment of the Standstill Agreement and Joinder by The Dove Foundation” above.

 

See also the discussion of the Company’s acquisition of Pulse Systems, under “Proposal 1 — Election of Directors — Background to Proxy Solicitation — Acquisition of Pulse Systems, LLC” above.

 

The Finance and Audit Committee is responsible for monitoring the integrity of the consolidated financial statements, the system of internal controls, risk management, the qualifications, performance and independence of the independent registered public accounting firm, and compliance with certain legal and regulatory requirements. The Finance and Audit Committee has the sole authority and responsibility to appoint, determine the compensation of, evaluate and, when appropriate, replace the Company’s independent registered public accounting firm.

 

The Finance and Audit Committee is not professionally engaged in the practice of accounting or auditing and does not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or generally accepted accounting principles or as to auditor independence. The Finance and Audit Committee relies, without independent verification, on the information provided to it and on the representations made by the Company’s management and the independent registered public accounting firm. Management is responsible for the financial reporting process, including the system of internal controls, for the preparation of consolidated financial statements in accordance with generally accepted accounting principles and for the report on the Company’s internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s annual consolidated financial statements and expressing an opinion as to their conformity with generally accepted accounting principles and, to the extent required by applicable law, for expressing an opinion as to the Company’s internal control over financial reporting.

 

In connection with the Company’s Annual Report on Form 10-K for fiscal 2010, and the financial statements to be included therein, the Finance and Audit Committee has:

 

 

 

 

Based upon these reviews and discussions, the Finance and Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Annual Report on Form 10-K for fiscal 2010 filed with the SEC.

 

Members of the Finance and Audit Committee

 

Darrel W. Francis (Chairman)
Richard M. Brown, D.O.
Ronald E. Hall, Sr.

 

The Finance and Audit Committee’s charter affirms its responsibility to approve in advance audit and non-audit services to be performed by the independent registered public accounting firm. In accordance with Section 10A(i) of the Exchange Act, before UHY LLP is engaged to render audit or non-audit services, the engagement is approved by the Finance and Audit Committee. All of the audit-related, tax and other services described in the table below were approved by the Finance and Audit Committee pursuant to Rule 2-01(c)(7) of Regulation S-X.

 

The following table sets forth the fees the Company was billed for audit, tax and other services provided by UHY LLP in fiscal 2010 and 2009. All of such services were approved in conformity with the pre-approval policies and procedures described above. The Finance and Audit Committee, based on its reviews and discussions with management and UHY LLP noted above, determined that the provision of these services was compatible with maintaining UHY LLP’s independence.

 

 

Audit Fees.  Audit fees include services rendering in reviewing quarterly financial information and auditing the annual consolidated financial statements for fiscal 2010.

 

Tax Fees.  Tax fees relate to preparation of the federal, state and local income tax returns with supporting schedules.

 

All Other Fees.  Other service fees include services to provide agreed upon procedures and the audit of the 40lk plan.

 

UHY LLP leases all its personnel, who work under the control of UHY LLP partners, from wholly-owned subsidiaries of UHY Advisors, Inc. in an alternative practice structure.

 

The Board of Directors recommends that the shareholders vote FOR the ratification of UHY LLP as the Company’s independent registered public accounting firm for fiscal 2011.

 

The Finance and Audit Committee has the sole authority and responsibility to appoint, determine the compensation of, evaluate and, when appropriate, replace the Company’s independent registered public accounting firm. In August 2010, the Audit Committee appointed UHY LLP to be the Company’s independent registered public accounting firm for fiscal 2011. UHY LLP has served as the Company’s independent registered public accounting firm since November 2004, and such appointment has been ratified by the Company’s shareholders at each annual meeting since 2005. See “Additional Finance and Audit Committee Disclosure” and “Report of the Finance and Audit Committee” for a description of fees and other matters related to UHY LLP’s provision of services to the Company.

 

Although shareholder ratification of the appointment is not required by law and is not binding on the Company, the Finance and Audit Committee will take the appointment of UHY LLP under advisement if such appointment is not ratified by the affirmative vote of a majority of the votes cast at the annual meeting. Even if the shareholders ratify the appointment of UHY LLP, the Finance and Audit Committee may in its sole discretion terminate such

engagement and direct the appointment of another independent registered public accounting firm at any time during the year, although it has no current intention to do so.

 

The Company expects that representatives of UHY LLP will be present at the annual meeting and will be available to respond to appropriate questions. Such representatives will also have an opportunity to make a statement.

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, its executive officers and persons who beneficially own more than 10% of a registered class of the Company’s equity securities (“insiders”) to file reports with the SEC regarding their pecuniary interest in any of the Company’s equity securities and any changes thereto, and to furnish copies of these reports to the Company. Based on the Company’s review of the insiders’ forms furnished to the Company or filed with the SEC, no insider failed to file on a timely basis a Section 16(a) report in fiscal 2010, except (1) a late Form 4 was filed for each of Dr. Brown, Mr. Hall and Mr. Harris related to the director’s annual stock grant in February 2010; (2) a late Form 4 was filed for Mr. Galloway related to three purchase transactions; (3) a late Form 3 was filed for Mr. Fife related to the Fife Group becoming a beneficial owner of greater than 10% of the Company’s common stock; (4) three late Form 4s were filed for Mr. Fife related to an aggregate of 43 open market purchase transactions by the Fife Group; (5) a late Form 3 was filed for Ms. Davis related to her appointment as Chief Financial Officer of the Company on August 27, 2009; and (6) late Form 4s have yet to be filed for a number of exempt equity grants by the Company to various officers and directors under the 1998 Stock Option Plan.

 

The following table sets forth certain information as of June 30, 2010 concerning our equity compensation plans:

 

 

 

 

 

The cost of preparing, assembling and mailing this proxy statement and all other costs in connection with this solicitation of proxies for the annual meeting will be paid by the Company. The Company estimates that the total expenditures relating to its current proxy solicitation (other than salaries and wages of officers and employees) will be approximately $500,000, of which approximately $330,000 has been incurred as of the date of this proxy statement. The Company may conduct the solicitation by mail, personally, telephonically, through the Internet or by facsimile through its officers, directors and other persons identified on Appendix A, none of whom will receive additional compensation for assisting with the solicitation. The Company may also solicit shareholders through

press releases issued by the Company, advertisements in periodicals and postings on the Company’s website. The Company will request banks, brokers, and other nominees to send the proxy materials to, and to obtain proxies from, the beneficial owners and will reimburse such record holders for their reasonable expenses in doing so.

 

The Company has also retained Georgeson Inc. to assist in the solicitation of proxies, for a fee estimated to be approximately $103,000 plus out-of-pocket expenses. In addition, the Company has agreed to indemnify Georgeson against certain liabilities arising out of or in connection with the engagement. Georgeson has advised the Company that approximately 10 of its employees will be involved in the proxy solicitation by Georgeson on behalf of the Company.

 

Any shareholder proposal intended to be included in the Company’s proxy statement and form of proxy for the next annual meeting must be received at the Company’s principal executive office, United American Healthcare Corporation, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062, Attention: Secretary, by the close of business on May 13, 2011 and must otherwise be in compliance with the requirements of the SEC’s proxy rules; provided, however, if the annual meeting date is changed by more than 30 days from the anniversary of this annual meeting, then the deadline is a reasonable time before the Company begins to print and send its proxy materials, which would be disclosed in the Company’s reports filed with the SEC. As the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.

 

Any shareholder director nomination or proposal of other business intended to be presented for consideration at the next annual meeting, but not intended to be considered for inclusion in the Company’s proxy statement and form of proxy relating to such meeting (i.e. not pursuant to Rule 14a-8 of the Exchange Act), must be received by the Company at the address stated above not less than 90 days prior to such meeting. However, if public announcement of such meeting date is made to shareholders less than 100 days prior to such meeting, then notice will be timely if received no later than the close of business on the 10th day following the date of such public announcement.

 

The above-mentioned proposals and nominations must also be in compliance with the Company’s By-Laws and the proxy solicitation rules of the SEC, including but not limited to the information requirements set forth in the By-Laws. The Company reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with the foregoing and other applicable requirements.

 

The annual report of the Company for fiscal 2010, including the financial statements included in the annual report on Form 10-K for the year ended June 30, 2010 audited by UHY LLP, is being furnished with this proxy statement. If you did not receive a copy of such annual report, you may obtain a copy without charge at the Company’s website, www.uahc.com, or by contacting the Company at (313) 393-4571 or United American Healthcare Corporation, 300 River Place, Suite 4950, Detroit, Michigan 48207-5062, Attention: Secretary.

 

The Company may elect to send a single copy of its annual report and this proxy statement to any household at which two or more shareholders reside, unless one of the shareholders at such address notifies the Company that he or she desires to receive individual copies. This “householding” practice reduces the Company’s printing and postage costs. Shareholders may request to discontinue or re-start householding, or to request a separate copy of the fiscal 2010 annual report or this proxy statement, as follows:

 

 

 

See http://www.envisionreports.com/UAHC for a copy of this proxy statement and fiscal 2010 annual report.

 

Your cooperation in giving this matter your immediate attention and in voting your proxies promptly will be appreciated.

 

By Order of the Board of Directors

 

William C. Brooks
President and Chief Executive Officer

 

September 9, 2010

 

INFORMATION CONCERNING PARTICIPANTS IN
THE COMPANY’S SOLICITATION OF PROXIES

 

The following tables (“Directors and Nominees” and “Officers and Employees; Other”) set forth the name, principal business address and the present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which their employment is carried on, of the Company’s directors, nominees, officers, employees and other persons who, under the rules of the SEC, are considered to be “participants” in the Board’s solicitation of proxies from the Company’s shareholders in connection with the annual meeting of shareholders.

 

John M. Fife’s related affiliates, Iliad Research and Trading, L.P., Fife Trading, Inc., Iliad Management, LLC and St. George Investments, LLC, may be deemed to be considered “participants” in the Board’s solicitation of proxies as a result of the Voting and Standstill Agreement, as amended, and related transactions, entered into between the Company and St. George Investments, LLC (collectively, the “Standstill Agreement”). For information relating to the Standstill Agreement, see “Proposal No. 1 — Background to the Solicitation — Agreement with St. George Investments, LLC, John M. Fife and Related Persons.” Chicago Venture Partners, L.P. may be deemed to be considered a “participant” in the Board’s solicitation of proxies as an affiliate of Mr. Fife and substantial shareholder of the Company. Additional information pertaining to Mr. Fife’s related affiliates is listed below under “John M. Fife and Related Persons”.

 

Directors and Nominees

 

The principal occupations of the Company’s directors and nominees, all of whom are considered “participants” in the Board’s solicitation, are set forth under the section above titled “Proposal No. 1 — Election of Directors” of this proxy statement. The name and business addresses of the organization of employment of the directors and nominees are as follows:

 

 

Officers and Employees; Other

 

The principal occupations of the executive officers and employees who are considered “participants” in the Board’s solicitation of proxies are set forth below. The principal occupation refers to such person’s position with the Company, and the business address for each person is 300 River Place, Suite 4950, Detroit, Michigan 48207-5062:

 

 

See “Potential Payments Upon Termination of Change-in-Control as of June 30, 2010” for information regarding employment and severance arrangements with Messrs. Brooks and Dennis.

 

Ms. Davis, 38, is currently a Manager at Haynes, Maufus & Davis, PLLC and serving as a consultant to the Company. Ms. Davis also had served as a financial reporting consultant to the Company in a similar capacity prior to her appointment as Chief Financial Officer and Treasurer of the Company. On January 17, 2010, the Company entered into a letter agreement with Haynes, Maufus & Davis, PLLC for the provision of certain accounting and financial reporting services to the Company, including SEC compliance, month-end reporting obligations and the preparation of statutory filings. Under the agreement, fees are billed at a rate of $100 per hour and are based upon the work completed.

 

Ms. Davis resigned as Chief Financial Officer and Treasurer of the Company in January 2010. Prior to such resignation, she had served as Chief Financial Officer since August 2009 and as Treasurer since November 2009. Ms. Davis had 14 years of accounting and finance experience prior to her role at the Company. Since 2005, she was the managing member of full-service accounting firm Haynes, Maufus & Davis, PLLC. From 2003 to 2005, she served as controller of a real estate development company. Earlier in her career, Ms. Davis held positions in accounting and finance, with a focus on SEC reporting, at a large public accounting firm and a Fortune 500 automotive supplier. Ms. Davis holds a bachelor’s degree in accounting from Michigan State University and is a Certified Public Accountant.

 

Mr. Bellucci is currently the President and a Chief Operating Officer of Pulse Systems, LLC. Mr. Bellucci is party to an employment agreement with Pulse Systems, dated July 24, 2007, which is effective until terminated in accordance with its terms. Mr. Bellucci is entitled to an annual base salary of $225,000, an annual performance bonus and standard benefits available to all employees. The agreement may be terminated by Pulse Systems or Mr. Bellucci at any time, with or without cause and with or without notice. If Pulse Systems terminates Mr. Bellucci’s employment other than for disability or cause (defined therein), or if Mr. Bellucci terminates his employment for good reason (defined therein), and if he executes a general release, he is entitled to severance constituting six months of his base salary, subject to set off.

 

Additional Information Regarding John M. Fife and Related Persons

 

John M. Fife’s related affiliates, including Iliad Research and Trading, L.P. (“Iliad”), Fife Trading, Inc., Iliad Management, LLC (“Iliad Management”), St. George Investments, LLC (“St. George”) and Chicago Venture Partners, L.P. may be deemed to be considered “participants” in the Board’s solicitation of proxies.

 

Mr. Fife serves as President of CVM, Inc., an Illinois corporation, which is the manager of Chicago Venture Management, LLC, a Delaware limited liability company. Chicago Venture Management, LLC is the general partner of Chicago Venture Partners, L.P., an Illinois limited partnership and private equity fund based in Chicago, Illinois. Mr. Fife has served as the President of CVM, Inc. since 1998. Since March of 1997, Mr. Fife has served as the President, Chairman and sole shareholder of Fife Trading, Inc., which is engaged in the investment management business for the proprietary account of Mr. Fife. Mr. Fife is also the sole member of Iliad Management and St. George.

 

Iliad, a Delaware limited partnership, is engaged in the investment management business for the proprietary account of Mr. Fife. Iliad Management, a Delaware limited liability company, is the general partner of Iliad Research and Trading, L.P. and is engaged in the business of serving as the manager of Iliad. Fife Trading, Inc., an Illinois corporation, is in the business of investing in securities and is the manager of Iliad Management and St. George. St. George, an Illinois limited liability company, is in the business of making investments in public companies. All of the capital invested by St. George is from Mr. Fife’s proprietary accounts.

 

The principal business address for each of Mr. Fife’s related affiliates is: 303 E. Wacker Drive, Suite 311, Chicago, IL 60601.

 

Information Regarding Ownership of the Company’s Securities by Participants

 

The common stock beneficially owned or held as of September 1, 2010 by the persons listed above under “Directors and Nominees”, “Officers and Employees; Other” and “John M. Fife and Related Persons” is set forth in

the section titled “Security Ownership of Certain Beneficial Owners and Management” of this proxy statement. Except as described in this proxy statement, common stock owned of record by each participant are also beneficially owned by such participant.

 

Information Regarding Transactions in the Company’s Securities by Participants

 

The following table sets forth all transactions that may be deemed purchases and sales of common stock by the individuals who are considered “participants” between September 1, 2008 and September 1, 2010. Unless otherwise indicated, all transactions were in the public market or pursuant to the Company’s equity compensation plans.

 

 

 

 

 

 

 

 

 

 

Additional Information Regarding Bruce R. Galloway

 

Although Mr. Galloway is deemed a participant in this solicitation on behalf of the Company due to his position as a director of the Company, Mr. Galloway is also a participant in the solicitation of proxies made by the Strategic Equity Group. See the proxy statement of Strategic Equity Group filed with the SEC for a detailed description of additional participant information regarding Mr. Galloway and related persons as it relates to such solicitation. The Company was not involved in the preparation of Strategic Equity Group’s proxy statement.

 

Miscellaneous Information Regarding Participants

 

Except as described in this Appendix A or the proxy statement, to the Company’s knowledge, (i) during the past ten years, none of the participants has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), (ii) none of the participants beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, any common stock or other securities of the Company or any of its subsidiaries, and none of the participants owns any securities of the Company which are owned of record but not beneficially, (iii) none of the participants has purchased or sold any of securities of the Company within the past two years, (iv) none of the participants’ associates beneficially owns, directly or indirectly, any of the Company’s securities, (v) none of the participants has any substantial interests, direct or indirect, by security holding or otherwise, in any matter to be acted upon at the annual meeting, (vi) none of the participants is or has been within the past year a party to any contract, arrangement or understanding with any person with respect to any of the Company’s securities, including, but not limited to, joint ventures, loan or option agreements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits or the giving or withholding of proxies, (vii) none of the purchase price or market value of the securities of the Company owned by any participant is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities, (viii) none of the participants or any of their associates has had or will have a direct or indirect material interest in any transaction or series of similar transactions since the beginning of the Company’s last fiscal year or any currently proposed transactions, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party in which the amount involved exceeds $120,000, and (ix) none of the participants or any of their associates has any arrangements or understandings with any person with respect to any future employment by the Company or its affiliates or with respect to any future transactions to which the Company or any of its affiliates will or may be a party.

Annual Meeting Proxy Card

▼ IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

UNITED AMERICAN HEALTHCARE CORPORATION

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card are available at
http://www.envisionreports.com/UAHC

▼IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼