SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Amendment No. 1
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
USCS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE.
- --------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee paid:
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/ / Fee paid previously with preliminary material:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 is to correct a typographical error
contained in the Company's definitive proxy statement filed with the Securities
and Exchange Commission on April 1, 1998 (file no. 000-28268). The typographical
error related to the number of shareholders of record and shares of the
Company's Common Stock outstanding as of March 10, 1998. The correct number of
shares of the Company's Common Stock outstanding as of March 10, 1998 is
23,109,269, and the correct number of shareholders of record as of such date is
226.
[USCS LOGO]
April 17, 1998
Dear Stockholders,
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of USCS International, Inc. which will be held at the Lake Natoma Inn, 702 Gold
Lake Drive, Folsom, California, on May 20, 1998, at 10 a.m. I look forward to
seeing you at the meeting.
Details of the business to be conducted at the annual meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
Whether or not you attend the meeting, it is important that your shares be
represented at the meeting. Therefore, I urge you to sign, date, and promptly
return the enclosed proxy in the enclosed envelope. If you decide to attend the
annual meeting and vote in person, you will of course have that opportunity.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company.
Sincerely,
/s/ James C. Castle
--------------------------------------
James C. Castle
Chairman and Chief Executive Officer
USCS INTERNATIONAL, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
------------------------
To the Stockholders:
The 1998 Annual Meeting of Stockholders of USCS International, Inc. will be
held at the Lake Natoma Inn, 702 Gold Lake Drive, Folsom, California, on May 20,
1998, at 10 a.m. for the purpose of considering and acting upon the following:
1. To elect three Class II directors.
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for fiscal 1998.
3. To transact such other business as may properly come before the meeting.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement accompanying this Notice. Stockholders of
record at the close of business on April 8, 1998 are entitled to notice of, and
to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Terry Kaufman
--------------------------------------
Terry Kaufman, Acting Corporate
Secretary
Rancho Cordova, California
April 17, 1998
IMPORTANT
The presence in person or by proxy of stockholders representing a majority of
the shares entitled to vote at the Annual Meeting shall constitute a quorum.
Whether or not you expect to attend in person, you are urged to sign, date, and
return the enclosed proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING AND RETURNING THE
PROXY WILL SAVE THE COMPANY THE EXPENSES AND EXTRA WORK OF ADDITIONAL
SOLICITATION. An addressed envelope is enclosed for that purpose. Sending in
your proxy will not prevent you from voting your stock at the meeting if you
desire to do so, as your proxy is revocable at your option.
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CALIFORNIA 95670
------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
This Proxy Statement, which was first mailed to stockholders on April 17,
1998, is furnished in connection with the solicitation of proxies by the Board
of Directors of USCS International, Inc. (the "Company"), to be voted at the
1998 Annual Meeting of the Stockholders of the Company, which will be held at
10:00 a.m. Pacific Time on May 20, 1998 at the Lake Natoma Inn, 702 Gold Lake
Drive, Folsom, California, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders, as follows:
- To elect three Class II directors.
- To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for fiscal 1998.
- To transact such other business as may properly come before the meeting.
Stockholders who execute proxies retain the right to revoke them at any time
prior to the exercise of powers conferred thereby, by delivering a signed
statement to the Acting Secretary of the Company at or prior to the Annual
Meeting or by executing another proxy dated as of a later date. There are no
appraisal or similar rights of dissenters associated with any matter to be acted
upon. The cost of solicitation of proxies is to be borne by the Company.
Stockholders of record as of the close of business on April 8, 1998 will be
entitled to vote at the 1998 Annual Meeting on the basis of one vote for each
share held. On March 10, 1998, there were 23,109,269 shares of Company Common
Stock outstanding, held of record by 226 stockholders.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Pursuant to the First Amended and Restated Certificate of Incorporation of
the Company, effective June 21, 1996, upon the closing of the initial public
offering of the Company's Common Stock, the directors of the Company were
divided into three classes, designated Class I, Class II and Class III. The term
of office of the Class I directors will expire at the Annual Meeting of
Stockholders to be held in 2000, the term of office of the initial Class II
directors will expire at the 1998 Annual Meeting of Stockholders, and the term
of office of the initial Class III directors will expire at the 1999 Annual
Meeting of Stockhold-ers. At each Annual Meeting of Stockholders, commencing
with the 1997 meeting, each of the successors elected to replace the directors
of a Class whose term expired at such Annual Meeting is elected to hold office
until the third Annual Meeting next succeeding his or her election and until his
or her respective suc-cessor shall have been elected and qualified.
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TERM OF SUBSEQUENT TERMS OF
DIRECTORS IN CLASS DIRECTORS IN CLASS DIRECTORS IN CLASS
------------------------- ------------------------------ --------------------
Class I Directors James C. Castle Until Annual Meeting 2000 3 years 2000-2003
John W. Clark
Charles D. Martin
Class II Directors James L. Hesburgh 3 years 1998-2001
Thomas A. Page
Larry W. Wangberg
Class III Directors George L. Argyros, Sr. Until Annual Meeting 1999 3 years 1999-2002
Daniel R. Hesse
Michael F. McGrail
Three Class II directors are to be elected at the 1998 Annual Meeting, to
hold office until the third Annual Meeting after their election and until their
respective successors have been elected and qualified. The accompanying proxy
will be voted in favor of the nominees listed below to serve as Class II
directors unless the stockholder indicates to the contrary on the proxy.
Management expects that each of the nominees will be available for election, but
if any of them is not a candidate at the time the election occurs, it is
intended that such proxy will be voted for the election of another nominee to be
designated by the Board of Directors to fill any such vacancy.
NOMINEES
JAMES L. HESBURGH, 64, became a Director of the Company in 1998. He is
President and CEO of James L. Hesburgh International, Inc., an international
consulting and export management company, as well as President and CEO of
Battley, Inc., a subsidiary of a French holding company. He serves as a Director
of both companies and was a Director of Logicon until 1997. Previously, Mr.
Hesburgh was Chairman of the Board of Hiller Aviation, Inc., a manufacturer of
helicopters, and President, Director and Member of the Executive Committee of
Intercole Automation, Inc. Mr. Hesburgh is a Director of First Federal Bank of
California, First Fed Corporation, Toastmaster Inc., Sinto America, Robert Sinto
Corporation, Fremont Funding, Inc., Chief Executives Organization, Inc. and
DocuSource, Inc. He is also a member of the Business Advisory Council of the
University of Notre Dame, and a director emeritus of Saint John's Health Center
Foundation.
THOMAS A. PAGE, 65, became a Director of the Company in 1998. He recently
retired as Chairman of Enova Corporation and San Diego Gas and Electric (SDG&E).
Enova Corporation is the parent company of SDG&E and six other U.S.-based
subsidiaries involved in energy-related services and investments. He is the
former CEO of SDG&E serving in that capacity from 1981 to 1995 and continued as
chairman of Enova and SDG&E through 1997. Mr. Page will continue as a Director
of Enova and SDG&E until their 1998 annual meetings. Prior to joining SDG&E in
1978, Mr. Page was executive vice president and a member of the board of Gulf
States Utilities, and treasurer and controller of Wisconsin Power and Light
Company. Mr. Page is currently a Director of Burnham Pacific Properties, a
member of the Board of Overseers at U.C. San Diego and a director of the
California Chamber of Commerce.
LARRY W. WANGBERG, 55, has been a Director of the Company since 1996. Mr.
Wangberg is President and CEO of ZDTV (Ziff-Davis TV). Prior to joining
Ziff-Davis, he was Chairman and CEO of StarSight Telecast, Inc., an interactive,
on-screen TV guide and navigator software service company. Mr. Wangberg
previously served as Chairman and CEO of Times Mirror Cable Television, Inc., a
provider of broadband-based network and cable broadcast services. Mr. Wangberg
simultaneously served as Senior Vice President of the parent The Times Mirror
Company, a major information provider. In 1995 he engineered the merger of Times
Mirror Cable Television into Cox Communications. Mr. Wangberg is a past chairman
of the National Cable Television Association (NCTA), and has served as vice
chairman of the National Academy of Cable Programming. He previously served on
the boards of C-SPAN and Cable Labs and Zilog, Inc.
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PROPOSAL NO. 2: INDEPENDENT ACCOUNTANTS
On February 27, 1998, the Board of Directors appointed Price Waterhouse LLP
as independent accountants for the Company for fiscal 1998. The stockholders
will be asked to ratify this appointment at the 1998 Annual Meeting. Price
Waterhouse LLP has been the independent accountants for the Company since 1993.
Representatives of Price Waterhouse LLP will be present at the 1998 Annual
Meeting and will be available to respond to appropriate questions. The Company
is not legally required to obtain stockholder ratification of the appointment of
the Company's independent accountants, but it has been the Company's practice to
seek such ratification. If the specified vote is not obtained, the matter will
be returned to the Board of Directors for consideration of alternatives.
OTHER MATTERS
The Board of Directors does not intend to bring other business before the
meeting, and so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the notice of the meeting. However, as
to any other business matter which may properly come before the meeting, it is
intended that proxies, in the form enclosed, will be voted in respect thereto in
accordance with the best judgment of the persons voting such proxies.
VOTING TABULATION
Under the Delaware General Corporation Law, the election of the Company's
directors requires a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote, and the other
proposals described in the accompanying Notice to Stockholders require the
affirmative vote of the majority of the shares present in person or represented
by proxy at the meeting and entitled to vote. Votes cast by proxy or in person
at the 1998 Annual Meeting will be tabulated by ChaseMellon Stockholder Services
LLP. If a broker indicates on a proxy that such broker does not have
discretionary authority as to certain Common Stock to vote on a particular
matter, such shares will not be considered as present and entitled to vote with
respect to that matter.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors, and
regular and supervisory and executive employees of the Company, none of whom
will receive any additional compensation for their services. Also, the Company
may engage the services of a proxy solicitation firm. Such solicitations may be
made personally, or by mail, facsimile, telephone, telegraph, or messenger. The
Company may pay persons holding shares of Common Stock in their names or in the
names of nominees, but not owning such shares beneficially, such as brokerage
houses, banks and other fiduciaries, for the expense of forwarding solicitation
materials to their principals. All the costs of solicitation of proxies will be
paid by the Company and the total cost of such solicitation is expected not to
exceed the amount normally expended by the Company in connection with its Annual
Meeting of Stockholders.
ACTIONS TAKEN SINCE 1997 ANNUAL MEETING OF STOCKHOLDERS
There were no stockholder actions taken since the 1997 Annual Meeting of
Stockholders.
PROPOSALS OF STOCKHOLDERS FOR 1999 ANNUAL MEETING
Proposals of stockholders to be presented at the 1999 Annual Meeting of
Stockholders must be received by the Company no later than January 30, 1999 to
be included in the Company's Proxy Statement and form of proxy related to that
meeting.
3
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Company's Board of Directors has an Audit Committee and a Compensation
Committee. There is no standing nominating committee.
Messrs. Argyros (Chairman), Clark, Hesse and Page serve on the Audit
Committee. The responsibilities of the Audit Committee include selection of the
Company's independent accountants, review of the independent accountants' report
to the Audit Committee, and review of the Company's financial reporting and
accounting systems. The Audit Committee met twice in fiscal 1997.
Messrs. Argyros, Hesburgh, Martin (Chairman) and Wangberg serve on the
Compensation Committee. The responsibilities of the Compensation Committee
include administration of the Company's employee benefit plans, including stock
option and stock purchase plans, the setting of compensation levels for the
Company's officers and employees and, for purposes of the reporting requirements
of the Secu-rities Exchange Act of 1934, the Compensation Committee is
responsible for the preparation of the Compensation Committee Report as required
by Item 402 of Regulation S-K, which includes, among other things, disclosure of
the specific relationship of corporate performance to executive compensation.
The Compensation Committee met four times during fiscal 1997.
The entire Board of Directors met 11 times in fiscal 1997.
In fiscal 1997, no director attended fewer than 75% of the total number of
meetings of the Board and the total number of meetings of the committees of the
Board on which they served, except Mr. Wangberg, who attended 64% of the
meetings of the Board.
Messrs. Castle and McGrail receive no cash compensation for serving on the
Board except for reimbursement of reasonable expenses incurred in attending
meetings. The other seven directors are entitled to payments of $20,000 per year
plus $1,500 for each Board meeting personally attended ($250 per Board meeting
for telephonic attendance) and $1,000 for each committee meeting attended on a
day other than a Board meeting day; however, Messrs. Argyros, Martin and Clark
have each signed agreements to waive these fees until such time as they elect to
withdraw their waiver in writing.
BENEFICIAL OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS, AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by the Company's directors, the
Company's Chief Executive Officer and the four other highest paid executive
officers ("Named Executive Officers"), and the Company's directors and executive
officers as a group.
The Company is not aware of any person who, on March 10, 1998, was the
beneficial owner of 5% or more of the Company's outstanding Common Stock, except
for George L. Argyros and Massachusetts Financial Services Company. As of March
10, 1998, the USCS International, Inc. Employee Stock Ownership Trust had
distributed all of its 3,907,805 shares to participants in the plan. The
following table sets forth certain information known to the Company with respect
to beneficial ownership of the Company's Common Stock as of March 10, 1998. The
number of shares beneficially owned by each director or executive officer is
determined under SEC rules. Under such rules, beneficial ownership includes any
shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of March 10, 1998 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power with respect to the shares set forth in the
following table.
4
SHARES BENEFICIALLY OWNED AS OF MARCH 10, 1998
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
OF COMPANY'S
COMMON STOCK AS OF PERCENT OF
NAMES MARCH 10, 1998 CLASS(1)
- ------------------------------------------------------------------------- -------------------- -----------------
George L. Argyros, Sr(2)................................................. 7,707,963(3) 33.35%
Charles D. Martin(4)..................................................... 499,700(5) 2.16%
Daniel R. Hesse(6)....................................................... 0 0
Larry W. Wangberg(7)..................................................... 6,333(8) *
James L. Hesburgh........................................................ 0 0
John W. Clark(9)......................................................... 46,938(10) *
Thomas A. Page........................................................... 0 0
James C. Castle, Ph.D(11)................................................ 505,410(12) 2.19%
C. Randles Lintecum(11).................................................. 142,864(13) *
Michael F. McGrail(11)................................................... 137,508(14) *
Douglas L. Shurtleff(11)................................................. 55,020(15) *
Claudia D. Coleman(11)................................................... 39,900(16) *
Executive Officers and Directors as a group (12 persons)................. 9,141,636(17) 39.36%
Massachusetts Financial Services Company................................. 1,260,400 5.45%
- ------------------------
* Less than 1.0%
(1) Applicable percentage of ownership is based on 23,109,269 shares of Common
Stock outstanding as of March 10, 1998. The number of shares of Common Stock
beneficially owned and calculation of percent ownership, in each case, takes
into account those shares underlying stock options that are exercisable
within 60 days after March 10, 1998, but that may or may not be subject to
repurchase rights.
(2) Mr. Argyros' business address is: Arnel & Affiliates, 949 South Coast Drive,
Suite 600, Costa Mesa, CA 92626.
(3) Consists of 7,591,736 shares held by Mr. Argyros, 60,000 shares held by
Argyros Children's Trust, 25,000 shares held by HBI Financial, 1,360 shares
held by GLA Financial, 26,534 shares held by the Argyros Foundation, and
3,333 shares issuable pursuant to stock options exercisable within 60 days
of March 10, 1998. On June 16, 1997, Mr. Argyros received a distribution
from Westar Capital, a California limited partnership, of 7,551,270 shares.
Westar Capital, LP distributed its remaining 1,167,006 shares to Westar
Capital Associates, LP. On August 19, 1997, Mr. Argyros received 12,363
shares as a distribution from Westar Capital Associates. On August 22, 1997,
GLA Financial received 1,360 shares as a distribution from Westar Capital
Associates. Mr. Argyros disclaims beneficial ownership of the shares held by
the Argyros Children's Trust and the Argyros Foundation.
(4) Mr. Martin's business address is: Enterprise Partners, 5000 Birch St., Suite
6200, Newport Beach, CA 92660.
(5) Consists of 496,367 shares held by Mr. Martin and 3,333 shares issuable
pursuant to stock options exercisable within 60 days of March 10, 1998. On
June 16, 1998, Westar Capital, a California limited partnership, distributed
all of its 8,718,276 shares; 1,167,006 were distributed to Westar Capital
Associates, one of its general partners. Mr. Martin is a general partner of
Westar Capital Associates. In August, 1997, on various dates, Westar Capital
Associates distributed all of its 1,167,006 shares to various entities,
including 449,633 shares to Mr. Martin.
(6) Mr. Hesse's business address is: AT&T Wireless Services, 5000 Carillon
Point, Kirkland, WA 98033.
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(7) Mr. Wangberg's business address is: ZDTV: Your Computer Channel, 650
Townsend Street, San Francisco, CA 94103.
(8) Consists of 3,000 shares held by Mr. Wangberg and 3,333 shares issuable
pursuant to stock options exercisable within 60 days of March 10, 1998.
(9) Mr. Clark's business address is Westar Capital, 949 S. Coast Drive, Suite
650, Costa Mesa, CA 92626-7737.
(10) Consists of 46,938 shares Mr. Clark received as a distribution from Westar
Capital Associates, a general partner of Westar Capital, on August 12, 1997.
(11) The business address for Messrs. Castle, McGrail, Lintecum, Shurtleff and
Ms. Coleman is: USCS International, Inc., 2969 Prospect Park Dr., Rancho
Cordova, CA 95670.
(12) Consists of 327,468 shares held by Dr. Castle and 177,942 shares issuable
pursuant to stock options exercisable within 60 days of March 10, 1998.
(13) Consists of 106,703 shares held by Mr. Lintecum and 36,161 shares issuable
pursuant to stock options exercisable within 60 days of March 10, 1998.
(14) Consists of 137,508 shares issuable pursuant to stock options exercisable
within 60 days of March 10, 1998.
(15) Consists of 16,200 shares held by Mr. Shurtleff and 38,820 shares issuable
pursuant to stock options exercisable within 60 days of March 10, 1998.
(16) Consists of 39,900 shares issuable pursuant to stock options exercisable
within 60 days of March 10, 1998.
(17) Includes 440,330 shares issuable pursuant to stock options exercisable
within 60 days of March 10, 1998.
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INFORMATION REGARDING EXECUTIVE OFFICER COMPENSATION
CASH COMPENSATION
The following table sets forth the total compensation for the three fiscal
years ending December 31, 1995, 1996 and 1997 by the Company's Chief Executive
Officer and the four other Named Executive Officers:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- -------------
OTHER ANNUAL SECURITIES
SALARY BONUS COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR $ $ $ OPTIONS (#) COMPENSATION
- --------------------------------------------- --------- ------------ --------- -------------- ------------- ---------------
James C. Castle, Ph.D........................ 1997 348,000 207,493 33,173(1) -- 59,319(2)
Chairman of the Board and Chief Executive 1996 326,191 231,215 9,490(3) 420,000 39,434(4)
Officer; Director 1995 300,000 102,337 57,146(5) 94,500 23,623(6)
Michael F. McGrail........................... 1997 219,713 155,058 50,998(7) -- 609(8)
President of CableData, Inc; Director 1996 205,000 148,178 50,382(9) 154,770 30,500(10)
1995 168,311 97,033 100,484(11) -- 11,732(10)
C. Randles Lintecum.......................... 1997 220,374 104,891 9,750(3) -- 14,446(12)
President of International Billing Services, 1996 205,000 145,660 9,490(3) 117,810 12,738(13)
Inc. 1995 171,223 51,048 9,230(3) 18,900 11,012(14)
Douglas L. Shurtleff......................... 1997 211,097 111,881 9,750(3) -- 38,418(15)
Senior Vice President, Finance and Chief 1996 201,045 120,627 96,176(16) 43,050 25,825(17)
Financial Officer 1995 111,000(18) 43,652 84,399(19) 94,500 2,243(20)
Claudia D. Coleman........................... 1997 168,000 66,864 29,505(21) 8,355 14,248(22)
Vice President, Corporate Development 1996 160,000 73,440 22,862(23) 21,000 12,286(24)
1995 (25) -- -- 63,000 --
- ------------------------------
(1) This amount represents $23,423 in lieu of paid time off and a $9,750 car
allowance.
(2) The amount represents a contribution by the Company of $13,708 to the
Company's 401(k) Plan, $44,490 in imputed interest payable on deferred
compensation, and payment by the Company of a $1,121 life insurance premium.
(3) The amount represents a car allowance.
(4) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, $26,313 in imputed interest payable on deferred
compensation, and payment by the Company of a $1,121 life insurance premium.
(5) The amount represents a $24,839 relocation payment, $23,077 in lieu of paid
time off and a $9,230 car allowance.
(6) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, $10,699 in imputed interest payable on deferred
compensation, and payment by the Company of a $924 life insurance premium.
(7) The amount represents $34,126 of relocation expenses and $16,872 in imputed
income with respect to a leased vehicle.
(8) The amount represents a payment by the Company of a life insurance premium.
(9) The amount represents $35,132 of relocation expenses and $15,250 in imputed
income with respect to a leased vehicle.
(10) The amount represents contributions by the Company to Mr. McGrail's
self-funded pension plan.
(11) The amount represents $77,289 of relocation expenses, $15,780 in imputed
income with respect to a leased vehicle and $7,415 in lieu of paid time off.
(12) The amount represents a contribution by the Company of $13,708 to the
Company's 401(k) Plan and payment by the Company of a $738 life insurance
premium.
(13) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan and payment by the Company of a $738 life insurance
premium.
7
(14) The amount represents a contribution by the Company of $10,536 to the
Company's 401(k) Plan and payment by the Company of a $476 life insurance
premium.
(15) The amount represents a contribution by the Company of $13,708 to the
Company's 401(k) Plan, $23,986 in imputed interest payable on deferred
compensation, and payment by the Company of a $724 life insurance premium.
(16) The amount represents a $86,686 relocation payment and a $9,490 car
allowance.
(17) The amount represents a contribution by the Company of $11,693 to the
Company's 401(k) Plan, $13,408 in imputed interest payable on deferred
compensation, and payment by the Company of a $724 life insurance premium.
(18) Mr. Shurtleff joined the Company in May 1995. Salary represents amounts
actually paid to Mr. Shurtleff during 1995.
(19) The amount represents $79,145 of relocation payments and a $5,254 car
allowance.
(20) The amount represents payment by the Company of a $333 life insurance
premium and $1,910 in imputed interest payable on deferred compensation.
(21) The amount represents a $19,755 relocation payment and a $9,750 car
allowance.
(22) The amount represents a contribution by the Company of $13,708 to the
Company's 401(k) Plan and payment by the Company of a $540 life insurance
premium.
(23) The amount represents a $13,914 relocation payment and a $8,948 car
allowance.
(24) The amount represents a contribution by the Company of $11,746 to the
Company's 401(k) Plan and payment by the Company of a $540 life insurance
premium.
(25) Ms. Coleman joined the Company in late December 1995.
COMPENSATION PURSUANT TO STOCK OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during 1997.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER OPTION TERM(5)
OPTIONS EMPLOYEES IN SHARE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1997(2) ($/SH.)(3) DATE(4) 5% 10%
- ---------------------------------------- --------------- --------------- ----------- ----------- ---------- ----------
Claudia D. Coleman...................... 8,355 1.3% $ 19.31 3/5/07 $ 101,476 $ 257,160
- ------------------------
(1) All options listed are incentive stock options granted pursuant to the 1996
Stock Option Plan and have ten year terms. The options vest over five years.
(2) In 1997, the Company granted options to purchase an aggregate of 666,930
shares.
(3) The exercise price may be paid in cash, check or shares of the Company's
Common Stock.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee is terminated or upon the optionee's death or disability.
(5) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the stock. There can be no assurance that the amounts
reflected in this table will be achieved.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the value of such officers' unexercised
options as of December 31, 1997.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(2)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------ ----------- ------------- ------------ -------------
James C. Castle.......................... 102,082 $ 1,645,587 87,430 416,640 $ 462,712 $ 2,687,689
Claudia D. Coleman....................... 0 $ 0 19,950 72,405 $ 217,125 $ 672,376
C. Randles Lintecum...................... 0 $ 0 118,302 101,808 $ 1,485,400 $ 565,380
Michael F. McGrail....................... 0 $ 0 96,033 134,337 $ 1,038,013 $ 757,456
Douglas L. Shurtleff..................... 7,000 $ 96,542 35,210 91,140 $ 374,284 $ 878,251
- ------------------------
(1) Market price at exercise less exercise price.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the options at December 31, 1997 and the exercise
price of the Named Executive Officer's option. The fair market value on
December 31, 1997 was 17 1/2, the average of the high and low prices on
December 31, 1997.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has an employment agreement with James C. Castle, Ph.D., the
Company's Chairman of the Board and Chief Executive Officer, terminable at will
by either the Company or Dr. Castle. The agreement may be terminated at any time
by either the Company or Dr. Castle upon 30 days' notice. If Dr. Castle is
terminated without cause he will receive one year's salary, which will cease to
be paid upon Dr. Castle starting new employment. The Company will provide a
gross-up of any excise taxes payable by Dr. Castle in the event termination
without cause or a change of control trigger accelerated vesting of his stock
options.
The Company has entered into an agreement with Michael F. McGrail, President
of CableData, Inc. and a Director of the Company. The Company may terminate Mr.
McGrail's employment upon 12 months' notice, with or without cause. The Company
shall have the right to pay salary in lieu of any notice. Mr. McGrail may
terminate his employment with the Company at any time, with or without cause.
The Company will provide a gross-up of any excise taxes payable by Mr. McGrail
in the event termination without cause or a change of control trigger
accelerated vesting of his stock options.
The Company has entered into severance agreements with C. Randles Lintecum,
Douglas L. Shurtleff and Claudia D. Coleman, the President of IBS, the Company's
Chief Financial Officer and the Company's Vice President, Corporate Development,
respectively, pursuant to which Mr. Lintecum, Mr. Shurtleff and Ms. Coleman are
entitled to receive certain benefits in the event of termination without cause
following a change of control. Benefits consist primarily of a lump-sum payment
of one year's compensation. Change of control is defined as sale of
substantially all assets, merger or upon 50% of outstanding stock of the Company
becoming held by a person or entity other than Westar, Enterprise Partners, the
ESOP or any employee stock purchase plan. The Company will provide a gross-up of
any excise taxes payable by Messrs. Shurtleff and Lintecum in the event
termination without cause or a change of control trigger accelerated vesting of
their stock options.
In addition, all the Named Executive Officers are eligible for bonuses under
the Company's Management Bonus Plan.
9
COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee, consisting of Messrs. Martin (Chairman),
Argyros, Hesburgh and Wangberg, establishes salaries, incentives and other forms
of compensation for officers and other employees of the Company and administers
the incentive compensation and benefit plans of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is party to a letter agreement with Westar pursuant to which
Westar provides financial management and strategic advisory services to the
Company for a monthly fee of $35,875 plus out-of-pocket expenses. The agreement
may be terminated at any time, with or without cause, by either the Company or
Westar. The Company paid Westar approximately $400,000 for advisory services
during 1997. George L. Argyros, a Director of the Company, is sole stockholder
of GLA Financial, which is a general partner of Westar Capital Associates, which
is the general partner of Westar. John W. Clark, a Director of the Company, is
the managing partner of Westar Capital Associates, and Charles D. Martin, a
Director of the Company, is a general partner of Westar Capital Associates.
REPORT OF THE USCS INTERNATIONAL, INC.
BOARD OF DIRECTORS COMPENSATION COMMITTEE
The Company's compensation policy is to offer a package including a
competitive salary, competitive benefits, and an efficient workplace
environment. The Company also encourages employee ownership of the Company's
Common Stock through stock option plans in which selected employees are eligible
to participate and through an Employee Stock Purchase Plan in which all
employees are eligible to participate.
The Company's compensation policy for officers is similar to that for other
employees and is designed to promote continued performance and attainment of
corporate and personal goals.
The Compensation Committee of the Board of Directors (comprised entirely of
non-employee directors) reviews and approves individual officer salaries, bonus
plan financial performance goals, bonus plan allocations, and stock option
grants (excluding stock option grants to non-employee directors, which grants
are automatic under the terms of the 1996 Directors Stock Option Plan). The
Committee also reviews guidelines for compensation, bonus and stock option
grants for non-officer employees.
Officers of the Company are paid salaries in line with their
responsibilities. These salaries are in general structured to be within the
median range of salaries paid by competitors in the telecommunication and other
relevant industries. Competitors selected for salary comparison purposes differ
from the companies included in the Index which is used in the Performance Graph
that follows this report. Officers also participate in the Management Bonus
Plan. Each officer is eligible to receive a discretionary bonus of up to 45% of
base salary, based on position level, individually established performance
goals, a graduated formula which takes into account predetermined corporate
profit goals and other factors, including revenue growth, and, in the case of
officers with profit and loss responsibility, group profit goals. The
Compensation Committee establishes aggressive profit and other goals as an
incentive for superior individual, group, and corporate performance. Likewise,
stock option grants to officers promote success by aligning employee financial
interests with long-term stockholder value. Stock option grants are based on
various subjective factors primarily relating to the responsibilities of the
individuals, their expected future contributions and prior option grants.
The Company's compensation policy is primarily based on the practice of
pay-for-performance. Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of non-performance-based compensation in excess
of $1 million paid to Named Executive Officers. The Committee currently believes
that the Company should be able to continue to manage its executive compensation
program for Named Executive Officers so as to preserve the related federal
income tax deductions.
10
The Compensation Committee annually reviews and approves the compensation of
James C. Castle, the Chief Executive Officer. Dr. Castle also participates in
the Management Bonus Plan, with his bonus tied to corporate profits and other
factors, including revenue growth. The Committee believes Dr. Castle is paid a
reasonable salary, and his bonus is based on the same corporate financial goals
as the other officers of the Company. In addition, Dr. Castle is a stockholder
of the Company, and to the extent his performance as CEO translates into an
increase in the value of the Company's stock, all stockholders, including him,
share the benefits.
COMPENSATION COMMITTEE
George L. Argyros, Sr.
Charles D. Martin, Chairman
James L. Hesburgh
Larry W. Wangberg
11
PERFORMANCE GRAPH
Total Cumulative Stockholder Return*
June 21, 1996 through December 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USCS NASDAQ (US) NASDAQ COMPUTER & DATA PROCESSING INDEX
21-Jun-96 100.00 100.00 100.00
31-Dec-96 99.26 109.64 106.98
31-Dec-97 100.00 134.55 131.42
DECEMBER 31,
--------------------
JUNE 21, 1996 1996 1997
------------- --------- ---------
USCS............................................................................ 100.00 99.26 100.00
NASDAQ (US)..................................................................... 100.00 109.64 134.55
NASDAQ Computer & Data Processing Index......................................... 100.00 106.98 131.42
- ------------------------
* Return for USCS International, Inc. is based on its initial public offering
price of $17.00.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's Common Stock to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. The Company believes, based solely on its review of
filings furnished to the Company, that during the calendar year ended December
31, 1997, its officers, directors and beneficial owners of more than 10% of the
Company's Common Stock complied with all Section 16(a) filing requirements,
except that: (a) one Statement of Change in Beneficial Ownership on Form 4 was
filed one day late reporting six open market purchases of Common Stock by George
Argyros, a director and greater than 10% beneficial owner of the Company's
Common Stock, and (b) the USCS Employee Stock
12
Ownership Plan (ESOP) failed to report on a timely basis one purchase of Common
Stock and seven distributions of Common Stock to ESOP participants pursuant to
the liquidation of the ESOP.
DATED: April 17, 1998.
A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1997, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE UPON REQUEST. PLEASE WRITE TO:
INVESTOR RELATIONS DEPARTMENT
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CALIFORNIA 95670
13
- -------------------------------------------------------------------------------
PROXY
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS OF USCS INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JAMES C. CASTLE and DOUGLAS L. SHURTLEFF and
each of them, with full power of substitution, as proxies top vote the shares
which the undersigned is entitled to vote at the 1998 Annual Meeting of
Stockholders of USCS International, Inc. to be held at 702 Gold Lake Drive,
Folsom, California, on May 20, 1998, at 10 a.m. and any adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED, AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
Please mark your
votes as indicated
in this example[X]
This proxy when properly signed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 and 2.
1. ELECTION OF THREE CLASS II DIRECTORS
James L. Hesburgh
Thomas A. Page
Larry W. Wangberg
[ ] FOR
[ ] WITHHOLD
[ ] FOR EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE LISTED IN THIS
SPACE:
------------------------------
2. RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE, LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 1998.
[ ] FOR
[ ] NOT FOR
[ ] ABSTAIN
Signature(s) Date
-------------------------------------------- --------------
Print Name(s):
--------------------------------------------
IMPORTANT--PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
14